Emerging Markets: India

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Emerging Markets India
Bankers Association for Finance and Trade 17th
Annual Conference on International Trade
Tarun SharmaResident Representative
(Americas)Export-Import Bank of India
October 25, 2007Chicago
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• The time has come,
• the Walrus said,
• to talk of many things...

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Emergence of Developing Economies
exhibiting higher GDP Growth than High-Income
Countries
Annual GDP growth ()
Developing countries (DCs) constitute the most
dynamic sector in global production and trade.
During most of the 1990s and beyond, GDP growth
of DCs has outpaced developed country growth by a
healthy amount. Most developing regions posted si
gnificantly higher growth rates than in previous
years. Though GDP growth in DCs is projected to r
educe marginally, it will still be significantly
higher than the developed economies.
forecast
Source Global Development Finance, World Bank
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Indian Economy Snapshot
KEY MACROECONOMIC INDICATORS
e estimates
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Indian Economy Potential
from Emerging to Surging
Global Competitiveness Report 2006-07 World
Economic Forum Indias Growth Competitiveness In
dex (GCI) in 2006 43 (up from 45 in 2005),
above that of China (54), Russia (62) Brazil
(66) IMD World Competitiveness Index 2006 India
s ranking has jumped 10 places to 29 in 2006
(from 39 in 2005) India has emerged as a favourit
e investment destination AT Kearneys Global Ret
ail Development Index 2007 India ranked the most
attractive destination for the third year in a
row First in Global Survey of Business Confidence
in 2006 Grant Thornton Companies that enter In
dia now can build advantageous positions that
will be very expensive for latecomers to
duplicate McKinsey Quarterly
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Indias Merchandise Trade
Trade-GDP ratio has sharply increased from 20 in
2001-02 to 35 in 2006-07
(US bn)
Source MOCI, GOI
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Indias Merchandise Trade
Exports are almost comparable with non-oil
imports
Source MOCI, GOI
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Indias Trade Global Comparison
Source World Trade Organization
In 2006, India contributed 1.5 of the increment
in global exports
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Indias Trade Shifting Southwards
Indias Export Market FY 2001 (US45 bn)
Indias Export Market FY 2007 (US126 bn)
Direction of exports moving towards the Southern
countries, particularly Asia. Share of Asia Oce
ania increased from 39 to 49 during 2001
2007. Future trade flows to be geared towards the
developing nations.
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Indias Major Trading Partners
Top Import Sources (FY 2007, US bn)
Top Export Markets (FY 2007, US bn)
Total US 190.6 bn
Total Exports US 126.3 bn
Exports do not include services such as software
Source Ministry of Commerce Industry
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Indias Trade Basket
Top Import Items (FY 2007, US bn)
Top Export Items (FY 2007, US bn)
Total US 126.3 bn
Total US 190.6 bn
Source Ministry of Commerce Industry (MOCI)
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Indias Services Exports
Total Trade in Services (US bn)
Comparison with Emerging Markets
CAGR 36.6 28.6 33.3
Source Reserve Bank of India
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Trend in Software Exports
One of the Fastest Growing Export Items (US bn)
Source NASSCOM
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Software Exports Role of Exim Bank
Trans National Corporations(TNCs) in India are
primarily serving the local market rather than
exporting. Exim Bank associated with development
of Indian software industry since 1986
Comprehensive financing / service package for
software industry including - project / equipm
ent finance working capital finance
- overseas investment finance
- obtaining product / process certification
- export marketing export product
development Establishment / expansion of software
training institutes Facilitates setting up of so
ftware technology parks (STPs)
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Indias Investment Scenario
Attracting investment through enabling
politico-economic environment

• Economic and Political Stability
• Policies enabling fiscal, monetary and exchange
  rate policies
  
• Effective regulatory framework
• Free and vibrant press
• Independent Judiciary
• Sophisticated legal and accounting system
• User friendly intellectual infrastructure.
• Capacity upgradation in infrastructure,
  industrial base intellectual capital
  
• Good network of research development
• Local market size and cost of operations

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Indias Foreign Investment Inflows
An increasing trend particularly in direct
investment inflows

• Total Foreign investment inflows increased from
  US 6.8 bn in FY 2001 to US 24.7 bn in FY 2007.
  
• Encouraging fact is that rise has largely been on
  account of Direct Investment Inflows which
  increased from US 4.0 bn to US 17.7 bn.
  
• FII inflows, on the other hand, rose from US 1.8
  bn to US 3.2 bn during this period.

US bn
Source Reserve Bank of India
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FDI and Exports
Exports primarily fuelled by local industry
rather than TNCs
Trans National Corporations(TNCs) in India are
primarily serving the local market rather than
exporting. Proportion of exports produced by TNCs
in India rose only marginally from 3 in 1985
to 5 in 2001 and is currently less than 10.
As against this, share of TNCs in Chinese exports
52, Hungary 80, Mexico 31, South Korea
15 However, indirect benefits of FDI are manifes
ted in increased exports from India.
In India, FDI has acted as a competitive spur for
domestic exporters forcing them to innovate.
Competitive pressure has enabled Indian firms to
also become competitive in export markets, thus
boosting exports.
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Indias Overseas Investment
An increasing trend both in terms of approvals
actuals
US mn

• More Indian companies are going global, as
  reflected in the the rising trend in Indian
  overseas direct investments both in terms of
  approvals and actual outflows.
• Approved ODI rose from US 1.7 bn in FY 2000 to
  US 6 bn in FY 2007.
  
• Actual outflows shot up over 10 times from US
  319 mn to US 3.3 bn mn during the same period.

Apr Oct 2006
Source Ministry of Finance
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Indias Overseas Investment
Regional ODI stock evenly distributed across
countries

• Destinational analysis of Indian approved ODI
  stock reveals that regional distribution is
  evenly spread.
  
• Russia and USA were the largest destinations.

Cumulative Total US 22.1 bn (Apr 96 Oct 06)
Source Ministry of Finance
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Exim Bank of India

• SET UP BY AN ACT OF PARLIAMENT IN SEPTEMBER 1981
• WHOLLY OWNED BY GOVERNMENT OF INDIA
• COMMENCED OPERATIONS IN MARCH 1982
• APEX FINANCIAL INSTITUTION
• OBJECTIVES
• for providing financial assistance to
  exporters and importers, and for functioning as
  the principal financial institution for
  coordinating the working of institutions engaged
  in financing export and import of goods and
  services with a view to promoting the countrys
  international trade
• shall act on business principles with due
  regard to public interest
  
• (Export-Import Bank of India Act, 1981)

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Evolving Vision
Product Centric Approach
To develop commercially viable relationships
with a target set of externally oriented
companies by offering them a comprehensive range
of products and services, aimed at enhancing
their internationalisation efforts
Export Credits
1982-85
Export Capability Creation
1986-94
Comprehensive Range of Products And Services
All Stages of the Business Cycle
Customer Centric Approach
Exim Bank TODAY
Leadership and Expertise in Indias Export Finance
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Range of Products Services
Presence Across All Stages of Business Cycle
Value Based Services
FINANCING, FACILITATING INDIAS TWO WAY TRADE
INVESTMENT
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Operational Philosophy
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Financing Programmes
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Lines of Credit Programme
Lines of Credit (LOCs)
Exim LOCs to economically strong developing
countries and regional development banks
Sovereign LOCs to developing countries in Asia/
Africa/ Latin America with a long-term
perspective. Exim raises the resources and funds
disbursement.
Status of LOCs (As on October 2007)
No. of LOCs operative 81 No. of countries cove
red 84 Total amount of LOCs sanctioned US
2.6 billion
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Project Service Exports
Pioneering Role in Promoting Project Exports

• Exports of projects and services, broadly
  categorised into Civil engineering construction
  projects, Turnkey projects, Consultancy
  services.
• Over the past two decades, increasing number of
  contracts have been secured by Indian companies
  in West Asia, North Africa, Sub Saharan Africa,
  South South East Asia, CIS and Latin America.
• Such projects have supplemented the efforts of
  the host country governments in achieving their
  developmental objectives.

Projects Currently Under Execution with Exim Bank
Support No. of Contracts 175 Value of Contra
cts US 9.7 bn No. of Countries 34 No of
Indian companies 41
MENA region accounts for 75 of contracts (by
value) currently under execution.
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Promoting Investment
Supporting two-way investment
Comprehensive assistance Pre investment advisory
services Finance through debt and equity Finan
ce available for Greenfield projects Brownfi
eld expansion Overseas acquisitions directly or
through special purpose vehicles
Direct equity participation in Indian ventures
abroad Joint investments by Indian and overseas c
ompany in third country markets in addition to
facilitating investments into India.
Supported over 175 ventures in 54 countries
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Promoting Investment
Supporting two-way investment
Select overseas investments financed by Exim Bank
during the year Acquisition of Spanish company
mfg branded generic formulations
large home textiles company in the UK
SEAs largest Design Build / EPC Company in
Singapore Indonesian Company with mining rights
in coal mines agrochemical company in the Netherl
ands oil drilling company in Norway largest int
egrated pulp and paper mill in Malaysia, with
large forest concessions setting up a wholly ow
ned subsidiary in Sharjah, UAE for manufacture of
liquid packaging (HDPE Drums)
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Research Analysis
Knowledge Building Research Publications
Research Studies on products, sectors, countries,
macro economic issues relevant to international
trade and investment Sector Studies assessing exp
ort potential. Bilateral Trade and Investment Stu
dies. International Trade Related Studies. Exim
Newsletters Export Advantage (bilingual) Agri Ex
port Advantage (in English, Hindi and 10
regional languages) Indo-China Newsletter (biling
ual) Indo-Africa, Indo-Latin America and Indo-CIS
Magazines (all bilingual) Contribution to Public
Policy formulation
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Financial Performance
ALL ROUND GROWTH (Rupees in Million)
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Promotional Activities
Exim Bank as Consultant
Setting up an Exim Bank in Malaysia
Feasibility study for setting up the Afrexim
Bank Designing of Export Financing Programmes
Turkey, South Africa Export Development Project
Ukraine, Vietnam, Armenia Mauritius Study on
Projecting Mauritius as an Investment Hub for
Indian Firms Establishing an Export Credit Guaran
tee Company in Zimbabwe Blueprint for establishin
g Exim Bank in Zimbabwe Feasibility study for est
ablishment of an export credit and guarantee
facility for Gulf Cooperation Council countries
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Exims Catalytic Role
Exim Bank promoting Indias integration into the
global economy
Set up Global Trade Finance Ltd in 2001 joint
venture with IFC, Washington West LB (replaced
by FIM Bank,Malta) for providing export factoring
facility Set up Global Procurement Consultants Lt
d. in 1996 - joint venture with Indian private
public sector enterprises to take up overseas
assignments in procurement advisory services (has
done World Bank funded assignments in 25
countries in Africa, CIS, Latin America).
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Regional Cooperation
EXIM BANK
Asian Exim Banks Forum

• Initiative of Exim Bank of India in 1996
• 12th Annual Meeting of Asian Exim Banks Forum
  held in Tokyo.
  
• Theme Partnership in an Era of Globalisation and
  Regional Integration.
  
• Meeting attended by the nine member institutions
  with Asian Development as permanent invitee.
  
• Discussions included collaboration in capacity
  building, consolidation of regional energy
  security and conservation promotion of SMEs /
  supporting industries and partnerships in
  promoting trade and investment with third
  countries.
• The Forum in discussion on a proposal for
  creation of a Pan-Asian EXIM Bond to utilise
  regional capital markets to raise capital by
  bundling Asian bonds.

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Trade Facilitation Network
EXIM BANK
Global Network of Exim Banks and DFIs (G-NEXID)

• Joint initiative of Exim Bank of India and
  UNCTAD. Launched in March 2006 in Geneva
  
• Annual meetings deliberate upon measures to
  facilitate and foster long-term relations, share
  experience and strengthen financial cooperation
  
• Such cooperation expected to promote South-South
  Trade and Investment by
  
• providing a common platform for Exim Banks and
  DFIs
  
• reducing transaction costs making financing
  available to new innovative businesses.
  
• G-NEXID granted observer status by UNCTAD
• Exim Bank of India invited to OECD meetings as
  observer

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Grassroots Business Initiative
Contributing to revitalizing local communities
creating employment
Creation of Export Capability in Grassroots
Enterprises. Enhance purchasing power of bottom
of the pyramid. Spin off benefit to other sector
s of economy. Poverty reduction through export li
nkage
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EXIM INDIA
THANK YOU
www.eximbankindia.in