Zinnov | 1

August 2014

This report is solely for the use of Zinnov client and Zinnov personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Zinnov

“Modi”fied India:

Putting India Back in Business

Zinnov | 2

One of the world’s leading management consulting firms with a focus on helping organizations globalize and expand their business

• Started in 2002 with a focus on helping technology organizations globalize their operations• Currently Headquartered out of Bangalore with operations in Silicon Valley,

Houston, Delhi, Beijing and Singapore

Evolution

Service offering

Customer Type

Focus AreasProduct

Engineering & R&D services

Outsourced Software product

development

Engineering Analytics

Start-Ups

Hi-TechCompanies

Engineering & R&D Companies

Service Providers

Private Equity &VC firms

Globalization Advisory

Market Expansion Advisory

Globalization Accelerator Platform

Service Provider Advisory

Innovation

Zinnov | 3

India has traditionally been a vibrant economy with strong economic fundamentals to support growth

Expected increase in India’s share of global middle class consumption by 2020

Largest Consumer Market

13t

h

~3X

Consumption as % of GDP

60%

Share of services in GDP

57%

Growth of Services Sector

12%

Largest Labor Force2nd

Investment as % of GDP35%

$ 1 Tn

Infrastructure investment during the 12th Five-Year Plan

Consumption Driven Economy

Services Led Economy

Big Investments in Infrastructure

Rank in FDI Confidence Index Survey

2nd India’s Trade to GDP ratio growth in last decade

2x

Government’s perennial focus on improving the infrastructure has driven growth of Indian Economy

High level of consumer spending ensures continued demand from the domestic market

 India’s open-economy policy, initiated in 1991, has transformed India to a flourishing economy

A large workforce and Services led economy have augured well for India’s growth

Source: World Bank Data | AT Kearney FDI Survey 2012

Open Indian Economy

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Over the past half decade, Indian economy has however struggled to sustain the growth

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

9.3% 6.7% 8.6% 9.3% 6.2% 4.9%

8.4%

10.9%12.0%

8.9% 9.0%9.9%

Real GDP GrowthCustomer Price Inflation Index1

Real GDP Growth and Consumer Price Inflation (YoY Change)

2011 2012 2013

-2%

-13%

-8%

Foreign Direct Investment (USD Billion)

INR Depreciation vs. USD

1Continuous rise in food prices and supply chain bottlenecks has led to Inflation

20082009

20102011

2012

43.435.6

27.436.5

24

Source: World Bank Data

Global economic conditions and internal issues such as policy indecision, corruption and subsidies

have hampered the “India Growth” story…

Loss of confidence among the foreign investors and MNCs resulted in

decrease in FDIs and foreign exchange rates

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The primary reason behind the economic struggle has been a weak government in the past 5 years

Governance Related Factors

Global Economic downturn affected India’s exports and services business

Global Slowdown

No strong figurehead emerged from the coalition government

Leadership Crisis

Slowdown of economic reforms made India an unsuitable destination to run business

Policy Paralysis

Improper action plan and poor allocation of funds resulted in delayed projects that led to overruns of 15 BN

Implementation

Bottlenecks

Government accused of multiple scams such as $5bn Telecom Spectrum scam, $29bn Coal mine scam, etc.Corruption

Source: Primary Interviews, Zinnov Analysis

Zinnov | 6

Disappointment with previous government led to an unprecedented mandate for a stable government

180

Million

Highest votes to a single party ever

1st Time

Since 1984 -Single partymajority

9.1 Seats

to vote share

Since 1984 Highest seats won by a party

Ideology similarity

Faster decision

making

Higher

Accountability

More Stability

Heterogeneous

representation

Greater policy

scrutiny

SINGLE PARTY COALITION

Non – coalition (single party) government at the center will allow for swifter policy making and reduce stakeholder confrontation leading

to a stable government

Electorate’s mandate for a Stable Government Empowered Government

Source: Election Commission of India website, Zinnov Analysis

Zinnov | 7

Modi’s governance model has a proven track record of being decisive, reform-oriented and business-friendly

Source: RBI data, Ministry of Commerce and Industry

1/5th of India’s total FDIs in the past 3 years

Unemployment Rate against India ‘s 3.8 %

Among all states in Economic Freedom Index*

Manufacturing Jobs created in India

$17.5

billion

1%

26%

1st

Among states in number of SEZs4th

Smart Grid in India1st

Infrastructure Build Up

• Urban Development

• Gujarat WAN• Roads• Ports

Industry & Investments• Industrial

Clusters/Estates• Pro – Industry Policies• Skill Development • Investment Summits

• Technology Investment

• Finance • Alternative Sources • Governance

Power Sector Reforms

Healthcare

• Childcare • Maternity Services • Universal

Coverage • Health Care

Centers The unprecedented mandate and the positive track record has instilled hope of an economic turnaround among the citizens and

the investors

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Modi government has identified “5 Growth Levers” to accelerate India’s economic growth…

Digital India “IT( Information Technology) + IT ( Indian Talent) = IT (India of Tomorrow)”

India as the Innovation Hub“I am confident that India will become the world’s innovation hub in ICT”

Next Gen Infrastructure“Focus in infrastructure needs to shift from highways to "iways" and optical fibre networks”

Enhance Ease of Doing Business“Maximum governance and Minimum government”

Revive Manufacturing“We should become a Global Manufacturing Hub”

5India’s

Growth LeversAs identified by

Modi

Source: BJP Manifesto, Narendra Modi Interviews

1

2

3

4

5

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The “Growth Levers” present a massive potential opportunity for the Technology MNCs

Source: Primary Interviews, Zinnov research and analysis; All figures are in USD and estimates for the year 2014-15

Total Opportunity Size for Technology

Companies

Digitization $7B

Infrastructural Improvements

$11B

Push for Manufacturing

$7.3B

Technology in Healthcare & Agriculture

$0.7B

Year 2014-

15

Government Investments in technology (Year

2014-15)

Opportunity by Technology Areas

$26

Billion

Communication

Technology$4 BN

Computing & Storage

$2.6 BN

Software

$4.2 BN

Engineering & Machinery

$6.6 BN

IT Services

$5.9 BN

IoT

$2.7 BN

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Digitization across government functions offers a multi billion dollar opportunity for technology MNCs

Source: BJP Manifesto and UIDAI portal

Digital India

Digitization of Agriculture and PDS data

Enabling e-Governance & m-Governance

National Rural Internet & Technology Mission (Telemedicine & m-Healthcare

Use of IT for agriculture for real time information

Digitization of all government files

Increasing the penetration and usage of broadband across the

country

$7

Billion

Telecom

IT Services

High Performance Computing

Medical Devices

Software Developm

ent

SMAC

2014-15

Government’s Action Plan

Government’s Action Plan

USD 6.1 BillionInvestment

In the past, multiple MNCs have been engaged by the Government for implementation of digitization projects

Opportunity for Technology MNCs1

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Government has defined a 3-pronged strategy for an Innovation-fuelled India…

Source: BJP manifesto & Zinnov Talent Study

India as the Innovation Hub

1) Skill Enablement

Increasing IITs and IIMs Institute of Big Data Research Revising curriculum as per

industry needs for higher studies

2) Innovation accelerators

Ministry of Entrepreneurship Establish an Intellectual

Property Rights Regime Tax incentives for

investments in R&D

3) Innovation infrastructure

Autonomous technology transfer organizations

Facilitating multi country and inter-disciplinary research

Est. world class research centers”

Government Accentuators of

Innovation

• 3500+ Startups

• 400 VCs & 2500 Angel Investors

• USD 1.6 billion invested in 2013

Startups• 3500+ MNCs• 850+ R&D

GICS • 85+ India

Service Providers

MNCs • 400+ Universities

• 770K Engg Grads

• USD 1.5 billion invested in 2013

Universities • 300+

National Laboratories

• 300 R&Ds in public sector

Government

Matured Ecosystem

Innovation-Fuelled

India

2

Zinnov | 12

…which will provide a robust R&D ecosystem & diverse growth opportunities to MNCs

Source: Primary Interviews; Ingersoll Rand website

India as the Innovation Hub

MNCs will be able to harness diverse benefits of

an innovative India

MNCs have been leveraging the Indian innovation ecosystem to develop products for the Indian customers

Access to high quality talentInnovative ecosystem will produce high quality research outputs and researchers

Innovate for India from IndiaProximity to customers will accelerate and improve India centric product development

India Innovates

Emergence of Industry consortiums for joint R&D Innovative ecosystem will allow joint R&D efforts across industries for accentuated product development

Cooperation with Academia for ResearchIndustry, Academia and Government collaboration for high end researchReverse Globalization

Successful Indian products can be taken to similar markets globally

Access to a rich start up ecosystemPossibility of acquisition of disruptive innovations from start-ups

Ingersoll Rand’s India R&D center (IRETC) developed a new refrigerated transportation

solution to address the problem of large scale wastage of perishable farm produce

$316Million

Cold Storage Transportation

Market

2

Zinnov | 13

3Next Gen Infrastructure

Government has identified key focus areas to drive next wave of infrastructural growth backed by technology

Source: Primary Interviews ,BJP Manifesto, Zinnov Research & Analysis

National Optical-

Fibre Network

Diamond Quadrilat

eral project

100 smart cities

National solar

mission

National Gas Grids

High-speed digital

highways

Restarting stalled

Infra projects

Government Investment in

Technology

$ 11 Bn investment

Technology MNCs have, so far, played a crucial role in the establishment of next gen infrastructure

1.5 MN

Digital Meters Installed

1st Micro Grid

Implementation

$90 BN

Total Government investment in DMIC

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4Enhance Ease of Doing Business

Government has planned for simpler and well defined Tax policies to aid businesses

Source: World Bank – Doing Business report series, BJP manifesto

Expected introduction of Goods & Services Tax (GST) and Direct Tax Code (DTC) BJP has committed to bring on board all states for implementing the GST GST would simplify & often lower taxes, broaden collection and spark

spending DTC reforms will remove complexities and bring stability to the economy by

increasing investments, creating jobs and boosting exports

Easier tax policies for MNCs Review of the retrospective tax laws introduced in 2012-13 Higher incentivisation of R&D investments, geared towards indigenization of

technology and innovation

Expected increase in foreign direct investment limits FDI will be allowed in sectors wherever needed for job and asset creation,

infrastructure and acquisition of niche technology and specialized expertise

Increase of FDI limit in multiple sectors including railways, construction; with 49% limit in Defense

#134189

Ease of Doing Business

World Bank’s Ease of Doing Business Survey

#179189

Ease of Starting a Business

The new government will embark on rationalization and simplification of the tax regime to make it non-adversarial and conducive to investment, enterprise and growth

Zinnov | 15

India is already home to the most prestigious manufacturing companies globally

Source: World Bank – Doing Business report series, BJP manifesto

5Revive Manufacturing

World’s 3rd largest

Motorcycle manufacturer

One of the largest Aluminium Rolling

companiesBiggest producer of

Primary Aluminium in Asia

World’s largest producer of

polyester yarn and fibre

World’s 5th largest Wind Turbine manufacturer

World’s largest Motorcycle

manufacturerLargest Oracle Siebel

CRM Implementation in India

World’s 2nd largest producer of Viscose Rayon

Fibre

Zinnov | 16

5Revive Manufacturing

With Modi’s impetus on “Zero Defect” manufacturing, India will soon be the global hub for MFG (1/2)

Source: World Bank data, BJP manifesto

2007 2008 2009 2010 2011 2012

152 191 185 203 246 249

8921141

1460 14771813

2342Manufacturing, Value Added

(USD billion)

India China

2014 2020

14% 20%

Execution Plan

FDI in Defence Sector

Labor Intensive Industries

Investment along the Dedicated

Freight & Industrial Corridors

NIMZs* outside DMIC

Region

Clear Tax Policy

Manufacturing, Value Added ( as %

of GDP)

*NIMZ : National Investment and Manufacturing Zones  | DMIC : Delhi-Mumbai Industrial Corridor

Modi aims at cranking up the share of manufacturing in India’s Gross Domestic

Product

Zinnov | 17

Opportunity in Machinery and

Engineering

5Revive Manufacturing

With Modi’s impetus on “Zero Defect” manufacturing, India will soon be the global hub for MFG (2/2)

Source: Zinnov Research and Analysis

Government’s push for manufacturing

Increasing adoption of IT in manufacturing in India

Increasing IoT relevance in manufacturing

MNCs setting manufacturing base in IndiaGrowth of India based manufacturing companies

Wider deployment of SCADA,MES,ERP systems across small scale factories

Growing use cases of IoT in factoriesDeploying cloud-based services with intelligent analytics

2013 2014 2017

2.5 BN 2.7 BN

1.4 BN

Indian Manufacturing In-dustry present a $ 8 BN op-portunity for the ICT sector

by 2017 Added

opportunity because of government

reforms

USD

3 BN

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The “5 Growth Levers” will be executed by a focus on 3S – “Skill, Scale and Speed”…

Source: Zinnov Research and Analysis

Skill• 70% population is below

35, indicating a vast talent pool that needs to be empowered

• E-education for widespread skill development

• Setting up vocational training centers in field of IT and manufacturing

Scale Speed

Propelled by Technology

• E & M Governance will enable better outreach for the government policies

• Technology to connect with citizens

• Nation-wide Internet connectivity to enhance business outputs in every city

• Need to eliminate tardiness in decision making & policy implementation

• Need to use technology for real time information & analytics across industries such as PDS, agriculture & transport

Smart Grids, E – Governance, TelemedicineIoT

Cyber Security, Health Informatics, HGC HPC

PDS, Agro-analyticsAnalyti

cs

UID, E- Files, GI-Cloud Cloud

Zinnov | 19

… and enabled by India’s robust fundamentals

Source: Zinnov Talent Study, National Portal of India

1 2 3 4

Talent Availability

Strong Democratic

Fiber

“Entrepreneurial Indian”

Mindset

Communication

Infrastructure

Talent Availability

• 85,000: Graduates from Top tier Engineering institutes

• 1.2 Million: Total engineers graduated in 2014

• 80 Million: Vocationally Trained labors

India’s 4 Growth Pillars

Strong Democratic Fiber

• Strong parliamentary democracy

• Well defined electoral processes

• Diversified representation in Lok Sabha – 16% - SC, 9% - ST

• 33% Women representation in various government levels

Communication Infrastructure

• >200 Mn internet users; 3rd Largest in the world

• 2nd largest number of telecom users (18.94 Mn users added each month)

• 73.32% India’s teledensity• 13 Mn broadband subscribers

“Entrepreneurial Indian” mindset

• 40+ first generation billionaire

• 4000+ active technology startups

• 150 Start up incubators• 49 Million SMEs/ SMBs

operating in India

Zinnov | 20

The first 100 days of the government has already demonstrated positive impact

Let us script a glorious future…

IT+IT=IT; Indian talent + Information technology = India Tomorrow

Don't compromise in manufacturing; Stress on Zero defect, Zero effect

A son of a poor man is standing in front of you today. This is the

strength of a democracy.Source: Hindustan Times, TOI, ET, DNA, Mint, YourStory; 1NCAER: National Council for Applied Economic Research, 2under Jan Dhan Yojana

5.7% GDP Growth Apr-Jun - highest in nine quarters

Aim to lower fiscal deficit to 4.1% of GDP by Mar 2015

13% Rise in NCAER’s1 quarterly Business Confidence Index in June 2014

INR 7,060 crores allocated to build Smart Cities

1.5 crore bank accounts opened in 1 day2

49% FDI limit in Defense and Insurance

14 # of IITs, IIMs and AIIMs to be setup

Modi’s 100-Day Impact

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• Planning Commission to pave the way for a Think-Tank

• GoMs/EGoMs1 scrapped for National Data Litigation Grid for quicker disposal of legal cases

• MyGov Portal for citizens to directly interface with the government

• SIT2 formed to locate estimated INR 50,000 crore in black money stashed in tax havens abroad

1Groups of Ministers (GOMs) and Empowered Groups of Ministers (EGOMs), 2Soecal Investigative Team,

• Jan Dhan Yojana - financial inclusion with 1.5 crore bank accounts opened on the 1st day

• 1st phase target of 7.5 crore accounts by Jan 2015

• National Food Grid to connect deficient areas with surplus producing regions, reduce wastage and contain food inflation

• Broadband in 2.5 lakh villages by 2019• Wi-fi in 2.5 lakh schools, all universities• 4 lakh public Internet access points• Trainings in small towns/villages for jobs in IT

sector• Spend of INR 1 lakh crore on current schemes• INR 13,000 crores for new schemes

• Relationship building with Asian nations such as Bhutan, Nepal and China

• Modi’s recent visit to Japan led to Japan investing $35 billion in India

• Modi setting up Special Management Team under PMO to facilitate business from Japan

The stage is all set to create long term sustainable growth and reposition India on the global map

'Minimum Government, Maximum Governance‘

Empowering the Poor

Digital India “Looking East”

Zinnov | 22

India’s successful Mars Orbiter Mission has showcased India’s expertise and efficiency in Space Research

India’s first Interplanetary Mission4th in the world to succeed

INR 450 Crores1/10th of the cost of a similar US mission

1/4th of the tiome taken by NASA for a similar mission

As small as TATA NANO car1350 kgs- equal to the weight of a mid sized car

`

MANGALYAAN

Low cost due to involvement of Indian companies likeCentnum ElectronicsGodrej & BoyceHindustan Aeronautics

Vajra RubberAvarsarala TechnologiesWalchandnagar

2/3rd of MANGALYAAN’s parts were manufactured in India

Technology Transfer

ISRO offers the know-how of their technology to entrepreneurs in India

Also provides technical consulting services to industries & R&D institutions in diverse areas of expertise

Enhanced Visiblity

Enhanced global visibility for smaller organizations involved with the programmePotential for export orders in areas of defence, aeronautics etc.

Impact on the Local Ecosystem

Zinnov | 23

Modi has focused on re-energizing bilateral relations through an emphasis on forging investment partnerships

Japanese government’s promise of investing $35 billion (3.5 trillion yen) into infrastructure projects in India 

Areas of partnership include rejuvenation of Ganga, smart cities, transport systems, skill development and next generation infrastructureTarget to double Japan’s FDI and the number of Japanese companies in India within five years

 Beijing committed investment of about $20 billion in India over the next five years Setting up of two Chinese industrial parks in Maharashtra and Gujarat

 China will play a role in development of high speed railways in India and the first project will focus on upgrading some of the existing railway lines and stations in India

JapanChina

USA

Five-year Trade and Economic Development Plan’ that seeks to reduce the bilateral trade imbalance and strengthen investment cooperation 

USIBC (US-India Business Council) has identified investments worth $ 41 billion by its members into India in the next 3 years

Zinnov | 24

Swachh Bharat or Clean India Mission

Driving a non-political movement driven by patriotism to make India clean by October 2, 2019

Interactive website that seeks to foster participatory governance and also aims to keep citizens who volunteered to support government programs engaged.

MyGov Portal for citizen’s participation in governance

Make in India CampaignCampaign to put India prominently on the global manufacturing map and, in turn, facilitate the inflow of new technology and capital

UIDAI based Biometric Attendance System across government office to provide a real time transparent track of government employees attendance

Biometric Attendance System

Modi Government has already started diverse initiatives to improve governance and develop India as the place to be

Zinnov | 25

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