June 13, 2013

Even though the world hasjust discovered it, the India

growth story is not new!

It is continuing for over 25 years

India among Top 15 countries in terms of GDP at constant prices

Third largest economy in the world in terms of GDP at Purchasing Power Parity (PPP) (After US & China)

India has recently overtaken Japan in 2013 (GDP – PPP)

Has huge manpower base (1.2 bn) ,diversified natural resources &relatively strong macro-economic fundamentals

Fast -growing educated motivated young population (urban and rural) ; median age 27 yrs; consumption well below optimum levels

Straddles traditional Sea routes through Indian Ocean connecting Asia / Europe / Middle East

Enjoys relatively high cost arbitrage for manufacturing & services industries in developed world

1.0

3.5

6.0

8.9

Average annual GDP growth

0

2

4

6

8

10

1900-1950 1950-1980 1980-2002 2002-2007

(%)

GDP growth forecast in 2012-13 is 6.0% & 2013-14 at 7.2%

Sources: 1900-1990: Angus Madison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001)

1.0

2.22.1

1.81.5

0

0.5

1.0

1.5

2.0

2.5

1901-1950 1951-1980 1981-1990 1991-2000 2001-2010

(%)

Source: The Consuming Class, National Council of Applied Economic Research, 2002

65

220

368

8%22% 32%

0

100

200

300

400

1980 2000 2011

(m)

46

26

16

1% of India’s population(10 million)

has been crossing poverty line each year

for 25 years

Equals ~ 250m

0

10

20

30

40

50

1980 2000 2010

(%)

Source: World Bank

US$ ppp

Source: Census of India (2001)

17

52

65

80

0

20

40

60

80

100

1950 1990 2000 2010

(%)

Growth fell to 6.7% in 08-09; 7% in 09-10, still 6% in 2012GDP growth predicted at 6.9 to 7.2% in 2013-2014Growth is still in positive integers Pain has been less than in China Competitive companies have recovered faster. Risk of protectionism has receded Recovery has been among the global front-runners

• Strong domestic consumption linked with buoyant international trade in goods & services . (52 % growth 2011-12) @US$160 Bn exports

• Indian products with cost advantage adds an edge to Indian companies

• Imports by India include petroleum products, minerals machinery and electronic goods

• India ranks 21 in leading global exporters (2009) & 14 among global importers

• In commercial services trade India is at 12th rank in global exporters India exported 87 bn $ of commercial services in 2009

•FDI inflow for the period April 2000- August 2011 reached $ 219billion •UNCTAD’s World Investment Prospects Survey 2010-12 ranks India second most favored investment destination (after China, Brazil, United States & Russian Federation) •Singapore (9%), USA (7%), UK (5%), Netherlands (4%), Cyprus (4%), Japan (4%), Germany, France & UAE are among the top ten investors •Ranked third in A.T. Kearney FDI Confidence Index 2010 •Construction (including Roads & Highways, Housing & Real Estate) are among sectors attracting high FDI equity (7%)

Professor David CrystalCambridge Encyclopedia of the English Language

India no. 2 in 2050

India’s GDP will exceed that of

Italy, France, Germany & Japan by 2040

2,100 3,050

5,800

16,800

37,000On a ppp basis

2000 2005 2020 2040 2066

0

10

20

30

40

($000)

50% 50%

8%

22%

32%

1980 2000 2010 2020 2040

West of theKanpur-

Chennai line

East of theKanpur-

Chennai line

Kanpur-

Parameter India Turkey Factor

Population millions 1240 78 15.9x

Population growth % 1.4% 1.19% 1.17x

Area million sq kms 3.29 0.78 4.21x

GDP Billion US$ 1850 773 2.4x

GDP growth 2011-12 6.9% 8.5% 0.81x

Inflation rate 2011-12 9.55% 6.33% 1.51x

Labor force millions 487 27 18x

FDI 2011-12 Bn US$ 46.8 15.7 3x

Per capita USD 1388 10362 0.134x

US$1= 55 INR 1.78 TRY

Roads Quality Rail Road Quality

Quality of overall infrastructure

Planning Commission Data on Infrastructure Investment in India

Parameter 10th Plan 2002-07 11th Plan 2007-12 12th Plan 2012-17

Infrastructure Spending

US$225 Bn US$ 500 Bn US$ 1 trillion

Growth over prev plan

127% 100%

Sector Planned

Power generation 100 GW

Highways 57,000 kms

Power 10 UMPPS, total 100 GW

Renewable Solar Energy 22,000 MW by 2022

Wind energy 49,000 MW by 2022

Railways MRTS in major cities and 22 stations in PPP

Ports 24 capacity expansion projects, mega container terminals, mechanized berth

Airports 18 new ones on EPC basis

Oil & Gas 60.3 MMTPA refining capacity. 26.3 MMTPA LNG capacity

National Highway Dev ProgramExpresswaysState Highway DevelopmentRemaining NHs

Total

205276,35510,00020,529

57,411

High growth in

construction sectors

Availability of skilled

manpower

Easy availability of raw material

Strong government

focus

High growth

potential

Modern technology

Advantage India

The Union Budget 2012-13 has allocated US $883 billion (INR 50 Lakh crore) to the infrastructure sector, reflecting the Government of India (GoI)’s strong focus on the development of India’s infrastructure.

Government expenditure on infrastructure is likely to result in increased construction expenditure of nearly US$ 253. 94 billion (INR 12,189 billion) between 2008–09 and 2012–13).

India produces more than 0.4 million engineers every year. Moreover, India’s cost of skilled labour is the lowest in the world, with an entry-level engineer available at an average cost of about US$ 8,000 per annum.

India is the fifth-largest producer of crude steel in the world (2008), with a production volume of 54.5 million tonnes.

Construction sector has been growing at CAGR of 11.1% over the last eight years consistently

Construction sector accounts for 9% of GDP today

All values in Billion USD

Category No. of million man years required

Engineers 3.72

Technicians 4.32

Support Staff 3.65

Skilled Workers 23.35

Unskilled/ semiskilled workers 56.96

Total manpower 92

To sustain the growth of construction India needs an additional 4 million workforce

• Increased Government expenditure on infrastructure will result in increased construction expenditure of ~ US$ 253.94 billion in 2008–13.

• Growth of construction materials industry directly linked to Indian economy, growing with investments in infrastructure/ related sectors.

• Construction equipment market divided into 4: - earth-moving equipment, material-handling equipment and cranes, concrete equipment and road-building equipment.

• 200 Indian manufacturers service construction equipment market. • Production of cranes &lifts/escalators is to rise by 20.3% and 11.9%, respectively

in 2012-13• Equipment sales expected to grow by 26% over previous year.• Currently, the equipment market is largely import driven, with India importing

construction machinery worth US $181 million in 2009, up by 55 per cent over 2008.

CONSTRUCTION – POLICY AND REGULATORY FRAMEWORK•The GoI has permitted 100 per cent FDI in construction and development projects to attract more investment. Some of the key specifications are US$ 2 million limit on lump sum payments under the automatic route.

•Royalty to be levied as 5 per cent on domestic sales and 8 per cent on exports, net of taxes.

•The depreciation on general plant and machinery is proposed at about 15 per cent.

•Specific initiatives by the GoI that positively impact the engineering sector are Tariff protection on capital goods has been removed.

•Various initiatives are focussed on infrastructure development and construction.

•The GoI has also introduced initiatives to increase power generation and improve the quality of power supply.

•Custom duties on various equipment have been reduced.

•The roads and bridges sector will continue to be a major demand driver for the construction industry, with the National Highway Development Program (NHDP) expected to generate orders worth US$ 55 billion over the next five years.

•In addition, the maintenance of national and state highways and other roads is likely to create demand for road construction and maintenance-related equipment and materials.

•Increased government focus on the development of greenfieldports and airports and capacity expansion at existing ports is expected to maintain a consistent demand for construction equipment and materials.

•Other demand drivers include water and irrigation projects, urban infrastructure development, urban transportation projects, and water supply and sanitation projects.

•Capacity expansion in the steel, cement, oil refining and power sectors to meet growing infrastructure investments in India, is also expected to generate demand for construction equipment.

•The equipment rental business is another opportunity driver, with the industry expected to double in size to 16 per cent by 2015.

•The export opportunity is expected to grow on the back of rising cost pressures on developed countries and due to the emergence of low-cost competitive suppliers and original equipment manufacturers (OEMs) in India.

CONSTRUCTION - OPPORTUNITIES