The Indian Tiger Widens Its Territory Rob Ruhl Ing


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Catching the Indian Tiger

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The Indian Tiger Widens Its Territory Rob Ruhl Ing

  1. 1. The Indian tiger widens its territory: Robert Rühl Head of Business Economics Economics Department Brussels 12 November 2009
  2. 2. 10/11/2009 16:45 The Indian tiger widens its territory: How liberalisation of financial markets will affect your business Content •1. Liberalisation of financial markets •2. Impact on macro economic developments •3. Impact on your business environment •4. Opportunities for the services sector •5. ING Vysya Bank •With thanks to Deepali Bhargava, Economist ING Vysya Bank, Mumbai
  3. 3. Base case – fragile and erratic global recovery October 2009 – Page 2 Since WW2 ‘V’- shaped recoveries have been the norm… …and we have seen policy stimulus of unprecedented scale… BUT there are huge uncertainties about the private sector’s ability to take up the running: 1. Credit creation is still dysfunctional 2. Household deleveraging to continue 3. Creditor nations are reluctant to spend 4. Fiscal and monetary consolidation further volatility and subdued trend growth in economic activity and risk asset prices
  4. 4. GDP growth in India will likely manage the 6% handle • Revival in manufacturing growth • Strong growth in services • Partly offsets the monsoons damage, GDP will likely register a growth of 6% in FY10 • Budget policy less stimulative • RBI will exit its accommodative monetary policy only after sustained pick up in credit, investment and GDP Rate hike expected in Q1 2010 • Bond yields will likely stay elevated October 2009 – Page 3
  5. 5. 10/11/2009 16:45 Liberalisation process (domestic) Gradual approach to liberalise financial markets. Domestic money and capital markets Market for short term investment instruments is deepening, as instruments like FRN become more RBI steadily deregulated interest rates, widely available currently only on savings deposits, some export credits and loans under - RBI working towards world class Rs.200,000 to SME's and priority payment and settlement system. sectors Important for management receivables New products introduced by foreign banks; consumer-durables financing, - 48% of Indian population access to electronic banking, currency and financial services. Compared with 59% interest-rate swaps, cash management in Sri Lanka and 97% in Germany systems and custodial services
  6. 6. 10/11/2009 16:45 Liberalisation process (international) Current account transactions - Liberalised - Companies exploring global liquidity management solutions Capital flows - Last items for capital flows 2009-2013 - Bank loans - Easing capital norms ECB and NRI deposits will boost capital flows - Portfolio investments - ECB rules eased for companies in SEZ, - Foreign direct investments non-banking, infrastructure projects - Still certain limitations FDI - New norms on indirect foreign shareholding Government decided to take a break - Plans to liberalise the regime for foreign banks are on hold indefinitely
  7. 7. Capital flows, Current account balance and international reserve 6 accumulation India 100 Current Account Balance 80 Increase international reserves 60 Private capital flows US$ bn 40 20 0 -20 -40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fiscal years Source: IIF
  8. 8. 10/11/2009 16:45 INR guided by global risk appetite • Improving global risk appetite • Integration in intern capital markets (Gross external assets plus liabilities in % of GDP: 68% in 2006; 48% in 2000) • Relatively high domestic interest rates • Global liquidity will chase markets with relatively robust fundamentals like India • The recent drop in INR may have been accounted for by domestic reasons – drought and swine flu scare. • Purchase of 200bn tons of gold from IMF at USD 6.7 bn( 5% of Int. reserves), indicates interest reserve diversification • USD/INR: 12 m 44.00
  9. 9. 10/11/2009 16:45 Impact on liberalisation process Suffering from the global crisis but resurgence of capital inflows seen. - Gradual relaxing, ceilings for ECB debt - Foreign financing of Indian levels and interest rate levels as well as corporations increased (incl. FDI, Bank sectoral restriction. loans and investments) - Foreign and domestic investors interest - External borrowing could grow as well in domestic equity markets. due to low interest rate levels Liberalisation of investment caps - Number of companies that have been - Since 1992 Indian companies listing able to raise ECBs has increased abroad ADRs and GDRs - End 2008 1591 registered foreign - Participation in derivatives markets to institutional investors in India hedge risks - Inflow FDI 0307-0309 USD 77 bn to USD 125 bn . Largest share in services - Government can still tighten sector 23% (financial and non-financial) restrictions if the rupee comes under pressure
  10. 10. 10/11/2009 16:45 Impact on your business environment - Volatility currency rate - Monetary policy to support currency rate - Less freedom domestic policy - Liberalisation improves › Cash management options › Financing options - Government will keep a finger on the pulse
  11. 11. Indian services sector • Services sector increased its strength • Increased openness • Export of services account for 38% of total Indian exports (2006), ten years ago 16% • Output and export of computer services and other business services is growing rapidly, although due to the crisis growth slowed down ` • Mainly computer services exports go to the US, but a rise of exports to EU is expected • India is the most specialises economy among world’ s main exporters of services • A third of FDI in India concerns services • ING survey among Dutch service sector managers active in India: 15% of their business is generated by doing business in India. To grow to 15% in 5 years time.
  12. 12. Opportunities Indian export of 10/11/2009 16:45 services
  13. 13. Indian import of services growth 10/11/2009 16:45 opportunity Total US$ 163 bn Total US$ 38 bn
  14. 14. 10/11/2009 16:45 Focus of Belgium export services sector on Indian growth area Belgium export of services to India in 2008 • Current Belgium export of services fits well with high Royalties and licenses Not specified Computer and fees 6% growth categories of Indian Government Other business information services 3% 3% 0% services imports 31% Communication 4% • Opportunities for re-export of Belgian services to India • Annual growth rate of over 30% of Indian import of services • Increasing share of export of services from Belgium to Travel India in total Belgium exports 24% Transport 29% is almost certain
  15. 15. Conclusions • Liberalisation offers more opportunities • Service sector in Indian trade becomes more and more important • Economy becomes more vulnerable to • Growth rate of import and export of global developments services will continue to outnumber growth figurers of trade in goods • Countries such as Belgium are well • Gradual approach of liberalisation positioned to profit from this market process makes sense development
  16. 16. ING Vysya Bank Overview Key statistics Key financials – FYE March, 2009 Shareholders Equity € 262 mn North Region Branches: 519* Deposits € 3.83 bn # of Branches- 50 # of Employees: 6198 Advances € 2.58 bn Investments € 1.61 bn East Region Total Assets € 4.9 bn West Region # of Branches- 26 # of Branches- 46 Interest Income € 345 mn Interest Expense € 245 mn NII € 100 mn Non Interest Income € 84 mn CAR 11.68% Net NPA 1.23% Credit Deposit Ratio 67.3% South Region # of Branches- 397 INR / Euro – 65 * Data as of 30 June, 2009 Branches include extension counters & outlets th
  17. 17. Key Contacts - India TBA Sanjeev Mittal Head of Wholesale Banking Head of Client Relationships India Products Corporate & Investment Banking Mumbai Mumbai +91 22 6666 6435 + 91 22 6666 6419 Phani Shankar Phani Shankar Head of Banks & Financial Head of Financial Markets Institutions Mumbai Mumbai +91 22 2499 8134 + 91 22 2499 8243 Sanjeev Dhand Janak Desai Pratapsingh Nathani Head of Emerging Corporates Head of Debt Capital Markets Mumbai Country Head Mumbai +91 22 6666 6420 +91 22 6666 6443 ING Wholesale Banking Ramen Ray Mandal V Ravichander Head of Corporate Finance Head of PCM Sales & Products Mumbai Mumbai +91 22 6666 6421 +91 22 2287 5879 Karthik Balachandran (G): +91 80 25005000 Extn:- 2008 Wholesale Banking - European Business Desk India (F): +91 80 2500 5484 ING Vysya Bank Ltd (M): +91 99809 23938 (D): +91 80 25005208 (E):
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