India today has the proud distinction of being the world's largest democracy. A remarkable Constitution, well-developed democratic institutions and true participation by the people in social governance are the hallmarks of this democracy. Faith in the democratic process is nurtured as well as protected by an independent judiciary, an alert and free media and active non-governmental organisations. The symbols of a vibrant democracy are all around us.
A functioning democracy is one where every individual is able to find his place in society, seek his rights and pursue a vocation in tune with his abilities. India's multi-party democracy is the successful embodiment of this very process. India has held freely contested elections at regular intervals since independence. The scale of the electoral process is immense: 620 million voters requiring 4.5 million election officials. While ballot boxes have to be transported on elephant-back to some remote rural areas, other places have Electronic Voting Machines as welcome innovations. The strength of India's democratic traditions was shown once again by the people of Jammu & Kashmir in October 2002, when 44% of the voters came forth and exercised their choice at the hustings despite the terrorist threat.
What also makes India a vibrant democracy is the assimilative nature of its society. Age old traditions have dovetailed with the modern concept of democracy. Outsiders have been welcomed, cultural influences seen as enriching; proactive inclusiveness has led to the development of a successful democracy in modern India.
A melting pot of cultures, India is home to people of all major faiths of the world. Secularism is not only a way of life - it is a philosophy embedded in India's history. Diversity abounds - in geography as well as in culture. In this land of mighty mountains and spectacular deserts washed by the waters of three oceans, a billion people live together -people who speak 18 major languages, worship different Gods and celebrate different festivals. They also celebrate unity and their unique Indianness.
SECOND FASTEST ECONOMY
The second fastest growing economy in the world and fourth largest in terms of Purchasing Power Parity (PPP), the Indian economy is on a high growth trajectory. In a stable political and macro-economic environment, marked by forward looking policies aimed at global integration, the GDP growth in 2005-05 was 6.9%.
The 400 million strong Indian middle class with its ever increasing purchasing power is driving demand, competition and productivity like never before. Ongoing expansion and modernisation in Indian manufacturing is fueling demand for imports of capital goods and technology. The educated, skilled Indian work force has engineered a remarkable change in the sectoral composition of the GDP with services now accounting for almost half of India's GDP. India's increased global competitiveness can be attributed to continuing progressive economic reforms.
Access to finance on easy and affordable terms has whetted the appetite of the Indian consumer and also propelled growth across sectors like housing, automobiles and consumer durables.
The total volume of foreign trade was US$142 billion in 2003-04. Exports have responded well to the establishment of a large number of Special Economic Zones (SEZs) with world class infrastructure and attractive tax incentives and stood at 10.4% of the GDP in March 2003.
FOREIGN EXCHANGE RESERVES
India's foreign exchange reserves are over US$ 140 billion and exceed the forex reserves of USA, France, Russia and Germany.
India's external debt to GDP ratio has improved consistently and stood at 17.4% in March 2005 - one of the lowest among developing economies.
Rated as the 7th most attractive destination for FDI in the world in 2001, India's foreign direct investment flows in 2004-05 was US$ 3.754 billion.
The Indian economy has consistently managed to keep inflation levels under control and the average annual inflation rate was 3.8% in 2003-04.
India is one of the world's largest food producers with an annual production of 600 million tonnes. India ranks first in the world in production of milk, tea and sugarcane. It is the second largest producer of fruits, vegetables, rice, wheat and groundnuts and is among the top five producers of coffee, spices, cereals and oilseeds.
By far the most richly endowed nation in Asia, India has a tenth of the world's arable land. As the planet's most irrigated land mass, India is currently initiating a massive infrastructure project to further boost agricultural performance through the inter-linking of all major Indian rivers.
A new Food Chain Revolution that aims to double the average income of the Indian farmer by 2010 is currently underway in the country and has already resulted in the following:
- Buffer stock of foodgrains (wheat and rice) of nearly 50 million tones.
- Neary 14.2 % share of agriculture in total exports.
- World's second largest exports of rice and fifth largest exports of wheat. Introduction of futures trading in edible oil and foodgrains.
Representing 6.3 % of the GDP, the food processing industry ranks 5th in size and accounts for 13% of the country's exports and 6% of total industrial production. Industry size is estimated at US$ 70 billion, including US$ 22 billion of value added products.
The food processing sector continues to remain a major investment attraction for global giants of the industry.
Towards World Class Infrastructure Roads & Highways
With a total length of approximately 3.3 million km, India has the second largest road network in the world, India is currently implementing the world's largest infrastructure project -the National Highway Development Programme (NHDP). It entails upgrading and 6-laning of 6000 km of highways connecting the four major metropolitan cities of Delhi, Mumbai, Chennai and Kolkata.
In addition, 7000 km of highways connecting the North-South (from Srinagar to Kanyakumari) and East-West (from Silchar to Porbandar) corridors are being developed.
To provide a continued impetus to development of roads and highways, the government has undertaken several policy initiatives, including:
FDI up to 100% under automatic route in projects for construction and maintenance of roads, highways, vehicular bridges and toll roads.
Private'sector participation in this sector is under the Build, Operate and Transfer (BOT) concept
National Highway Act amended for expeditious land acquisition and project clearance
With a view to provide port facilities of global standards to our trading partners and enhance connectivity, considerable private investment has been attracted. A quick run down on facts and initiatives for growth:
India currently has 12 major ports and 184 minor or intermediate ports spread across the 7517 km coastline.
The current handling capacity of major ports in the country is around 350 million tonnes. This has been achieved through the construction of a new port at Ennore and a mechanized coal handling facility at Paradip. These facilities entailed an investmentof US$ 394 million.
100 % foreign investment has been permitted for construction and maintenance of ports and harbours and in projects providing support services to water transport.
The government is offering various fiscal incentives to private investors including a 10 year tax holiday in port development, operation and maintenance.
India ranks among the top ten countries in the world in terms of its telecommunications network, and is one of the most deregulated telecom markets in the world. At the end of 2005 India had 48.93 million fixed telephone connections, growing at 9 % in 2005 and 75.92 million cellular phone connections, growing at 58 percent in 2005!
The telecom network in the country comprises over 35,000 exchanges with a switching capacity of over 47 million, 427 digital trunk automatic exchanges and over 326,271 route km of optic fibre network.
The government has significantly relaxed foreign investment norms in this sector. Foreign equity participation of up to 100% is permitted for ISPs and manufacturers of telecom equipment, while 74% is permitted in Internet services and up to 49% in telecom services. . Private investments, both foreign and domestic, have been in excess of US$ 2.4 billion. Other initiatives pushing growth in the sector include:
- Introduction of Internet telephony.
- Reduction of over 60% in the tariff for National Long Distance Telephony to push volumes.
- Facilitating growth of Public Calling Booths that continue to mushroom across the country, increasing access and boosting employment.
India is the sixth largest power generator in the world. Economic reforms are being increasingly introduced at the State level in the power sector which is evolving rapidly from focusing on power generation to providing a strong impetus to distribution and transmission.
With grants for 57 private sector projects totalling up to 30, 000 MW, introduction of an independent central regulatory authority and foreign investment opportunities totalling nearly US$ 73 billion, the power sector will continue to be a thrust area for reforms.
- Major investors include CMS Energy, Unocal, Woodside Petroleum, Siemens, ABB, AES Transpower, Powergen, CLp, PSEG, Tractabel.
- 18,000 MW of new generation capacity and 35,000 ckm of H.T. transmission lines have been added.
- Over 3712 MW of power generating capacity using renewable energy sources has been installed.
Competitiveness in Manufacturing
India has a two-fold advantage that has been increasing its competitiveness in manufacturing - availability of quality talent and low costs.
- A McKinsey study quotes from the IMD World Competitiveness Yearbook 2001 that India has the highest availability of qualified engineers.
- The same study says that compensation for manufacturing workers is US$ 0.6 per hour in India compared to over US$ 20 per hour in countries like Germany and Japan and even lower than in Brazil, Mexico and the Czech Republic.
The Automobiles & Auto Ancillary and Pharmaceuticals sectors are at the forefront of this new wave of manufacturing competitiveness.
AUTOMOBILES AND AUTO ANCILLARY
Global auto companies have begun to use India as a sourcing base for fully built vehicles.
- Hyundai has nominated India as the global sourcing base for its small cars.
- Ford exports more cars from India than it sells in the domestic market; and exports components to China from its India facility.
- Auto Policy announced by the government in 2002 has opened the automobile sector to 100% FDI and removed the minimum c?pital investment norm for fresh entrants.
- Total auto ancillary exports have risen from US$ 330 million in 1997-98 to an estimated US$ 800 million in 2003.
- The sector has grown by 20% annually over the past half-decade as Toyota, Delphi, Visteon and others have set up operations.
Growth over the last five years has been more than 20%, twice the world rate; India's pharma exports stood at US$ 2.5 billion in 2002-2003.
The Indian pharma industry has the highest number of plants approved by the FDA outside the USA. It also has the largest number of DMFs filed which gives it access to the high growth generic bulk drugs market in the USA.
- Generic drug manufacturing will be the main growth driver in the future -the world market is expected to exceed US$ 55 billion by 2005. India is gearing itself to capture a large portion of this market, leveraging its inherent skills in technology, R&D facilities and trained human capital.
- In accordance with WTO stipulations, India will grant product patent recognition to all New Chemical Entities from 2005.
- To facilitate the sector's growth, the government announced exemptions from import licences to foreign pharmaceutical units setting up their manufacturing units in Special Economic Zones.
Emerging Knowledge Leader
Well developed technical and tertiary education infrastructure, a large English speaking work force and a strong demographic advantage places India in a unique position to leverage opportunities in a knowledge driven economy.
The Prime Minister's National Task Force on Information Technology constituted in 1998 has propelled the speedy development of this sector.
- Exports of software services logged in a 26% growth during 2002-03; along with electronics hardware exports, this sector accounted for 18% of India's total exports.
- India is home to 42 SEI CMM level 5 companies of the world, which is more than half of the world total.
- Information Technology Act 2000 seeks to create key infrastructure for electronic authentication and a legal framework for prevention of cyber crimes. India will soon become the 3rd country after the USA and Australia to have a Convergence Act.
- Software Technology Parks of India act as a 'single-window' in providing services to software exporters and incubation infrastructure to SMEs.
IT, IT enabled Services (ITES) and Business Process Outsourcing (BPO)
The Indian IT-ITES industry is broadly categorised into IT services and software, ITES-BPO and Hardware segments.
The industry continues to chart remarkable double-digit growth, with industry aggregate revenue for 2004-05 expected to reach US$ 28 billion. Industry export in financial year (FY) 2004-05 was US$17.9 billion, growing at a rate of 34.8 %.
The industry's contribution to the national economic output has nearly tripled - from 1.2 percent in FY 1997-98 to 3.5 percent in FY 2003-04. This sector is forecast to grow at nearly 31 percent this fiscal to account for an estimated 4.1 percent of the national GDP in FY 2004-05.
India offers a strong value proposition in the ITES segment for the following reasons:
- A vast pool of English speaking and skilled manpower, which rates high on qualification, capabilities, quality of work and work ethics.
- World class telecommunications and physical infrastructure that is fast approaching parity with other countries.
- Traditionally strong emphasis on quality.
- Certain centres have outs cored most international competitors in productivity levels.
- Unique geographical location enables 24x7 service.
ITeS exports from India grew 44% during 2002-03 to touch US$ 2.16 billion; these are likely to grow at 50% in 2003-04 to touch US$ 3.24 billion. 190 Fortune 500 companies outsource IT to India. According to PricewaterhouseCoopers, India will emerge as the biggest 'call centre market', overtaking Australia by 2004.
India enjoys significant comparative advantages in this fast emerging sector in terms of knowledge, skills, R&D facilities, costs and institutional infrastructure. The Indian biotechnology market is expected to grow to US$ 204 million by 2003 and US$ 408 million by 2007 due to the following:
A separate Biotechnology Policy for States.
- 50 R&D labs in the public sector, providing high quality R&D. Over 20 are conducting research in specific areas of biotechnology.
- Establishment of various biotechnology parks in different states.
- Investment opportunities of US$ 500 million during 2003, spread across Agri-Biotech, Diagnostics and Vaccines.
Science & Technology
In 2002, the Council of Scientific and Industrial Research (CSIR) won 145 US patents and topped the Patent Co-operation Treaty listing of the top 50 entities in the developing world. As India emerges as a globally competitive powerhouse, Science & Technology will continue to provide the foundation on which the 2181 century nation is built.
Multi-disciplinary research in centres of excellence under the Department of Atomic Energy has led to the development of the nuclear power programme and applications in agriculture, medicine, biotechnology, electronics and metallurgy.
Currently eight nuclear stations are producing 8 billion kilowatt of electricity. Four more nuclear stations designed in India are in the pipeline.
India is among a select select group of six nations with specific satellite launch capabilities and is at the forefront of nations bringing the benefits of space technology to development.
The Indian Space Research Organisation (ISRO) recently launched the country's third "remote sensory" satellite and its first one dedicated purely to geographical mapping. It will join the 11 Indian satellites already in orbit.
Over 250 universities, 1500 research institutions and over 10,000 higher education centres churn out 200,000 engineers and 300,000 non-engineering post graduates every year. In addition, there is an annual increment of 5000 PhDs and 21 ,00,000 other graduates. All trained not to just speak in English but also think in English.
Over the past few years, more than 100 MNCs have set up R&D centres in India at a cumulative investment of over US$ 1 billion. GE has its biggest technology centre outside the United States in Bangalore. Among other leading companies who have set up R&D centres in India are Bell Labs, Cummins, DuPont, Daimler Chrysler, Eli Lilly, General Motors, Hewlett Packard, Intel, Honeywell, Qualcomm and Whirlpool.