The document discusses opportunities and challenges for doing business in India across various industry sectors. It outlines India's growing economy and sectors driving growth like IT, biotechnology, and clean energy. However, challenges include infrastructure weaknesses, a complex regulatory environment, restrictive labor laws, and cultural differences that companies must navigate. Overall, India presents opportunities for early investors if they develop long-term strategies tailored to the local business environment.

2. The India Opportunity

5. Strong fundamentals Indian economy in a resilient mode in terms of GDP growth… Growth Oriented GDP (%) 1 Source: Indiastat.com Increasing International Trade 3 Increasing share of services in GDP 2 Strong Forex Reserves 4 Source: Central Statistical Organisation … along with rising forex rate and reserves … and has an increasing share in international trade With Services Sector gaining importance….

6. … resulting in a transitioning Indian demography Source: The Marketing Whitebook, 2003-04 by Business World 1994-95 1999-00 2005-06 The Classes Rich (Above USD 4,600; INR.2,15,000) Consuming (USD 970 – 4,600; INR. 45,000-2,15000) Climbers USD 470- 970; INR.22,000 – 45,000) Aspirants (USD 470 - 347; INR.16,000 – 22,000) Destitutes (Less than USD 470; INR.16,000) 24 MILLION households 32 MILLION households 3 MILLION households 6 MILLION households 1 MILLION households 48 MILLION households 32 MILLION households 33 MILLION households 29 MILLION households 66 MILLION Households 75 MILLION Households 66 MILLION Households 78 MILLION Households 48 MILLION households 17 MILLION households

10. The India Challenge

17. Corporate Governance is gaining acceptance, albeit gradually….. Complex group structures – difficult to unwind, ‘hidden’ owners especially other factions of the family -especially true for promoter owned and managed companies Fiefdoms’ – decision making concentrated ‘ Associated companies’ may need to be consolidated which may bring in more liabilities Minority interests may have a disproportionate amount of power Unwinding the Corporate Veil might be a challenge Related party supplier / customer relationships on non-commercial terms No formal arrangements with related parties Funds deployment in non-core activities Sacrifice of shareholders’ interest for promoter gain Non Arm’s Length Transactions with Related Parties/Group Companies Implementation ranges from academic/ cursory to robust, depending on management philosophy Reliability of internal and external audit report may be questionable Statutory audits by small time auditors run the risk of being an eye wash Spirit behind Implementing Corporate Governance Measures may be Questionable

18. Aggressive Tax Positions Continue to Find Favour…. Aggressive tax management (tax planning vs. tax avoidance) Tax litigation is common, Final resolution of issues time consuming This could result in cash outflows at the outset and inflows later if company successfully defends: impacts cash flows given lengthy legal process Continued availability of tax benefits/ incentives post transaction (needs careful analysis)

20. Source: KPMG research Faster implementation of reforms needed Redefinition of roles of public and private sectors. Urgency to revamp infrastructure Sun-rise industries establishing themselves internationally. Reforms consistently moving in the same direction. Indian manufacturing sector becoming globally competitive Investment opportunities driven by: Existence and growth of markets Availability of resources and global competitiveness In conclusion… … India today offers an early mover advantage