INDIA

Delhi

Calcutta

Mumbai

Bangalore
Chennai

Namrata Gurung
FIN 444 Brian Dalton
Final Presentation Kris Kohtz
April 4, 2007 Rachel Oleniacz  
Suresh Lee Krishnamoorthy
 India - Introduction
• History

– India’s Economic Reform

– Foreign Direct Investment

– Centralized v. Market Based Economy

 DELHI
Namrata Gurung
Delhi
• Capital of India

• Parliament of India,
District Administration
of Delhi, Financial
Institutions situated in
Delhi

• Center of Supervisory
Power
Urbanization of Delhi
• Four Satellite Suburbs
• Gurgaon is the most developed
– Hub for outsourcing and off-
shoring business
• Increase workforce and
businesses
– Increasing middle-class
families.
• Increase in Net domestic
Product - Delhi
 Delhi – Policies
• India’s economic growth by 10% this year.

• State Bank of India raised the prime-lending rate from

11.5% to 12.25%
– 2nd time in two months

• Central bank raised the interest rate by a quarter-point to

7.5%
– control the rapid credit expansion
– Help stem inflation

*Tightening the Money supply

 Delhi – Politics
• Decision-making
– Congress is the largest party in the coalition but other left
leaning parties and the Communist party play a vital role

– The decision of raising the futures price of wheat and rice –

primary sustenance of the poor farmers

• The government was forced to freeze the futures price

– Affects the farmers as well as the NCDEX
 Delhi – Politics cont……
• Recently Congress Party lost 2 local elections
– Chances of ruling coalition to become unstable
– Policies remain undecided
– E.g. 1999 Parliament election
MUMBAI, Economy, Financial

Brian Dalton
Mumbai
• Formerly known as Bombay
• Most populous city in India (over
25 million people)
• Financial and entertainment
capital of India
• National Stock Exchange of
India (NSE)
• Bombay Stock Exchange (BSE)
• Reserve Bank of India (RBI)
• Bollywood
 Indian Economy: Introduction
• In terms of PPP, India is
the fourth largest
economy in the world
• Economy has been
growing at around 8% per
year for the past four
years
• 2007 growth is estimated
at ~ 9%
• Total nominal GDP is
expected to surpass $1
trillion USD in 2008
• Rapid growth has been
leading to concerns over
inflation
Indian Economy: Introduction
• …But with over a billion
people, it is no wonder that
the World Bank still
classifies India as a “Low
Income” country
• Nevertheless, it is still
remarkable how far India
has come over the past
few decades
 Indian Economy: Brief History
• Pre-1757: India ruled by various warlords, clans,
and empires.
– Rich in “exotic” goods desired by Europeans
– Extensive world trade
– In 1700, it is estimated that the amount of world income
controlled by India was nearly as great as all of Europe
• 1757 – 1947: Colonial Era
– The great wealth and natural resources entices
Britain to colonize much of India
– Britain exploits the country’s resources
– Britain makes some positive contributions to India,
however. The develop roads, institute standard
currency, property rights, capital markets,
transportation and communication networks. They
also emphasize education.
Indian Economy: Brief History
• 1947 – Present:
Independence
– 1947- 1970s: Isolation and
Socialism leads to extreme
poverty and stagnation
– Beginning in the 1980s and
through the ‘90s India began to
liberalize its economy, and start
the move towards a more
capitalist-type economy
– Today India is the second fastest
growing larger economy and the
fourth largest economy in the
world.
 Indian Economy: Industries,
Exports and Trading Partners

• Most Indians still work in agriculture-related jobs, but services are becoming
and increasing important sector
• Unlike countries like China, India is not so well known for its manufacturing
exports.
• Exports include textiles, natural resources like tea and cotton
• And of course the cultural exports like food and Bollywood
• India has recently become associated with its service exports (outsourcing),
and this is becoming a very important part of the economy
• India is a net importer
• Main trading partners include: US, China, EU, Russia and Japan
 Banking System
• Reserve Bank of India
(RBI): The Central Bank
– Controls currency (Rupee)
– Manages foreign exchange
– Supervises and regulates the
financial system
– Promotes economic
development
– Bank of the central
government
– Headquarters in Mumbai, and
22 regional branches
 The Rupee
• The Rupee is relatively confined
to India, and is not used
extensively in any other country
• Later years of British colonial
rule: Pegged to gold standard
b/w of British Pound
• 1966: de-pegged from the British
pound; pegged to the US dollar
• 1971: de-pegged from US dollar
(b/c USD was tanking)
• Today, the RBI conducts a
managed float on the INR/USD
exchange rate; INR/EUR and
INR/JPY are market determined
 Financial Markets
• The Securities and Exchange
Board of India regulates India’s 22
financial exchanges
• The largest financial exchanges in
India are:
– The National Stock Exchange of India
(NSE)
– The Calcutta Stock Exchange (CSE)
– The Bombay Stock Exchange (BSE)
– The Delhi Stock Exchange (DSE)
• The two most important
exchanges to foreign investors are
the NSE and BSE, both located in
Mumbai
SEBI Mumbai Offices
National Stock Exchange of India
(NSE)
• The third largest stock
exchange in the world
(number of transactions/day)
• Traditionally, the first
exchange to introduce new
technology and trading
advancements
– First to create a clearing
corporation
– First to begin internet trading
– First to trade ETFs
Bombay Stock Exchange (BSE)
• Oldest stock exchange in
Asia
• Smaller than the NSE,
but to foreigners, often
the more important
exchange
• BSE Sensex index
closely followed by
international investors
• Many of the largest
Indian companies list on
the BSE (Wipro, Infosys,
Tata Group)
 Forex
• Indian forex market tightly
regulated by the RBI
• RBI often directly intervenes
in INR/USD trade to stabilize
the rupee
• Forex market is small, but
growing rapidly
• Currency derivatives market
is larger than the spot market
• Most of the trade is in
INR/USD
 Bonds
• Government bonds
– T-bills (91-day and 364-day) sold by RBI
– Many investors don’t like them because they offer no tax benefits
– Foreigners are allowed to purchase
– Government market is growing as a result of increased liquidity
in Indian market
• Corporate bonds
– Regulated by the SEBI
– Corporate debt placements have increased by over 40% in the
past two years
– Companies are required to be rated as “investment quality” to
issue public debt
– Debt market primarily limited to wholesale orders
– No market for junk bonds, but probably will be developed in the
near future
 Bollywood
• India’s Hollywood
– Largest film industry in the
world
– Puts out more than 1000
films/year (most are crap,
but some are worthwhile…
kinda’ like Hollywood)
– Many films funded by foreign
investors, Indian banks, and
Mumbai’s criminal
underground
– Important part of the Mumbai
economy and Indian culture
Bengalūru

Kris Kohtz
 Basics
• Capital of Karnataka
• Population of 7 million
• $6460 per capita
income
• Fastest growing
market
 Strengths
• Business Process
Outsourcing (BPO)
– Comparative
Advantages
• Software exports
• Information
Technology
 Challenges
• Infrastructure
• Regulations
• Expansion into China
 CHENNAI
Also known as Madras

Rachel Oleniacz
 Demographics
• City of 6,400,000
– Fourth largest metropolitan
• Second largest exporter of IT & services
• Connected by the Golden Quadrilateral
Project
Culture & Roots
• Tamil Nadu ~ The
Province
• Tamil ~ The
Language
• Bharatanatyam
– Kalakshetra
• Carnatic music
– Music Season
• Hindu Temples
 Nomenclature & History
• The city with two names
– Madras Patnam by The East India Company
– Chennaipuri by the locals
• Foreigners’ role in the then town
– Port and trade

ெெனைை
 Commerce & Trade
• Chennai port
– General industrial (containers)
– Automobiles
– Shift to green & clean
• Ennore port
– Coal
– Ore
– Bulk cargo
 Automobiles
• Detroit of South Asia
• Potential as one of top three automobile
giants in the world
• Ford, Hyundai, Mitsubishi, TVS, Ashok
Leyland, & BMW
CALCUTTA

Suresh Lee Krishnamoorthy

 CALCUTTA
-14 million inhabitants
-Manufacturing centered
-Faced major productivity crisis
-Political instability
 RECOVERY ISSUES
• Strong focus on certain industries
• Major devaluation of the rupee
• High associated inflation
• Currency trading and speculation
could not be controlled
 RECOVERY AVENUES

• Major growth in the IT sector

• Calcutta Stock Exchange

QUESTION?