India is transitioning to a knowledge economy, with growth in knowledge process outsourcing (KPO) expected to reach $17 billion by 2010. The healthcare, pharmaceutical, biotechnology, and information and communication technology sectors are emerging as growth industries. India offers a highly skilled, low-cost workforce for product development and research and development activities, with investments in these sectors requiring one-fourth the funding as in other countries.

1. INDIA IN THE NEW KNOWLEDGE ECONOMY
The Changing Scenario
Dr. Naresh Trehan
Chairman, CII National Committee on
Healthcare & Executive Director
Escorts Heart Institute and Research
Centre, New Delhi, India

2. INDIA IN THE NEW KNOWLEDGE ECONOMY
Transition from BPO to KPO Destination
Growth of Services sector
Contribution to India’s GDP
8 + %
51 + %
Knowledge Process Outsourcing - To grow 46% to $ 17 Billion by 2010
Emerging Trends in the last two years:
 Silicon Valley VCs setting shop
 US companies relocating up to 95% of R&D work in next generation technologies especially in the
wireless space & optical networking systems.
 Intel, Cisco doing core development work on chip design.
 Texas Instrument has its global centre for wireless LAN & semi-conductors R&D based in India
 Tech Multinationals have filed 1, 700 global patents for product developed out of India
 Automotive engineering design services (AEDS) projects – already executed $ 500 million worth of
Global Contacts – Bosch’s Indian team does major chunk of Diesel systems development in India
PRODUCT DEVELOPMENT REQUIRES ONE – FOURTH THE INVESTMENT IN INDIA

3. INDIA IN THE NEW KNOWLEDGE ECONOMY
 Healthcare
 Pharma & Biotechnology
 Information & Communication
Technology (ICT)

4. Indian Healthcare : The Changing Scenario
Current Healthcare Landscape

5. Indian Healthcare : The Changing Scenario
INDIA SPENDS US $ 22.7 BILLION ON HEALTHCARE
3.7 19
22.7
5.2% of GDP
Total
Healthcare
Market
Pharma
market*
Healthcare
delivery
market
* Retail
Source: National Accounts Statistics 2001; McKinsey analysis

6. Indian Healthcare : The Changing Scenario
THE HEALTHCARE DELIVERY SECTOR PLAYS AN
IMPORTANT ROLE IN THE ECONOMY TODAY
Sector Direct employment Revenues/GDP
Million, 2000-2001 Per cent, 2000-2001
4.0
5.3
1.0
1.2
1.6
0.8
1.7
0.4
5.2
4.8
3.5
3.0
1.8
1.4
0.9
1.7
Healthcare
Education
Retail banking
Power
Railways
Telecom
Hotels, restaurants
Source: National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis
IT
Healthcare is the
largest service
industry in terms
of revenues and
the second
largest after
education in
terms of
employment
By 2012, the sector could account for 7 to 8 per cent of GDP and provide
direct and indirect employment of 9 million

7. Indian Healthcare : The Changing Scenario
IN TERMS OF DELIVERY, PRIVATE PROVIDERS CAPTURE 63%
0F THE US $ 19 BILLION SPEND
63
37
Government and public
employers*
Healthcare provision, 2002
Per cent of total spending
Private providers
(individual, charitable
and for-profit)
100% = US $ 19 billion
* Including government spend (20%), public employers’ spend (11%) and out-of-pocket spend at government providers (6%)
Source: McKinsey analysis

8. Indian Healthcare : The Changing Scenario
INDIA: AN EMERGING HEALTHCARE HUB

9.  Over 60,000 cardiac surgeries done per
year with out comes at par with
international standards
 Multi organ transplants like Renal, Liver,
Heart, Bone Marrow Transplants, are
successfully performed at one tenth the
cost.
 Patients from over 55 countries treated at
Indian Hospitals.
INDIAN HEALTHCARE CAPABILITY
FACT#1: Proven Indian healthcare system

10.  Ayurveda recognized as an
official healthcare system in
Hungary.
 Doctors in the west are
increasingly prescribing
Indian Systems of Medicine
 More than 70% of the
American population prefer
a natural approach to health
 Americans are said to
spend around $25bn on
non-traditional medical
therapies and products *
Source : Los Angeles Times
* Economic times dated 25th
July 2003
Ayurveda
Yoga
Siddha
India’s Gift to the World
DIA HAS THE OPPOURTUNITY TO PROVIDE THE BEST O
THE WEST & EASTERN HEALTCARE SYSTEMS
Indian Systems Of Medicine “ Staging a Comeback”

11. “Physicians, Nurses, Medical Technicians and Other Scientific Occupations
will Become Growth Industries to Rival the IT Sector within the Next Decade”
- India Vision 2020 Report
HEALTHCARE….THE SUNRISE INDUSTRY

12. PROCEDURE COST (US$)
THAILANDTHAILAND INDIA
Heart Surgery
Bone Marrow Transplant
Liver Transplant
Knee Replacement
Cosmetic Surgery
7,500
-------
-------
8,000
3,500
6,000
26,000
69,000
6,000
2,000
USUS
40,000
2,50,000
3,00,000
20,000
20,000
UK
23,000
1,50,000
2,00,000
12,000
10,000
Indian Healthcare : The Changing Scenario
Cost Advantage

13. HUGE GROWTH POTENTIAL – TO GROW BETWEEN
US $ 43 – US $ 60 BILLION IN 2012
* With 6% GDP real growth per year
US $ IN BILLION at 2000-2001 prices
2001
Private
spending
Government
spending
ESTIMATE
2012
Scenario 1:
Baseline
increase in
private spend
2012
Scenario 2:
Baseline with
insurance in
middle class
2012
Scenario 3:
Baseline with
insurance and
high
government
spending
19
43
51.0
60.0
3.76
15.24
8.0
8.0
17.0
35.0
43.0
43.0
Key
Assumption
1% GDP
Government
Spending 1% GDP 2% GDP
Indian Healthcare : The Changing Scenario

14. INDIA OFFERS HUGE POTENTIAL FOR INVESTMENTS IN
HEALTHCARE OVER THE NEXT 10 YEARS
Investment requirements in India (Estimates)
US $ in Billion Next 10 years
Healthcare
Power**
Telecom**
Roads**
22-31
24-33
40-51
95-126
* Estimates based on analysis detailed in Chapter 3 of this report
** Estimates computed by scaling 2002-06 estimates from Rakesh Mohan committee report by a factor of 1.5-2.0
Investment needs
of the healthcare
sector are
comparable to
other infrastructure
sectors
Indian Healthcare : The Changing Scenario

15. India’s Growth Sectors -
Pharmaceuticals & Biotech
INDIA IN THE NEW KNOWLEDGE ECONOMY

16. The Indian Pharmaceutical Industry
has practically achieved
Self sufficiency
&
Global recognition
as a
Low cost producer
of
High-quality bulk drugs & formulations

17. KEY ACHIEVEMENTS
India has the 2nd
highest
number of qualified doctors
in the world. Of every six
medical doctors in the US,
one is Indian
700,000 science and
engineering graduates &
1500 PhDs qualify annually.
Over 15,000 scientists
Investigational New Drug
stage costs about $100 to
150 million in US, but
costs only around $10 to
15 million in India
Indian companies are offering
custom synthesis services at
30-50% cost savings compared
to global costs
While clinical trials cost
approximately $300 to
350 million in US, they
cost only about $25
million in India
India’s huge population
and the prevalence of a
wide spectrum of disease
conditions offer a wide
patient-resource for clinical
trials

18. CHANGING FACE OF INDIAN PHARMA
Players thinking
local
Players thinking
global
Top 5 Companies Sales & Export Revenues
Source: Company reports
Rank Company Sales ($ mn) Exports ($ mn) Exports %
1 Ranbaxy 969 736 76%
2 Cipla 400 163 41%
3 Dr.Reddy's Lab 336 212 63%
4 Aurobindo Pharma 264 128 48%
5 Lupin 210 92 44%
Pharmaceutical exports
increased at a CAGR of 23%
during FY1995-FY2002
Indian pharma companies filed the
largest number of Drug Master Files
(DMFs) for APIs and 23% of ANDAs
with the USFDA during 2003
Ranbaxy acquired RPG Aventis,
France; Wockhardt acquired CP
Pharmaceuticals, UK; Zydus Cadila
acquired Alpharma, France
Export revenues now contribute
over half the total revenues for
the Indian pharma majors

19. CHANGING FACE OF INDIAN PHARMA
MNC-Domestic
Competition
MNC-Domestic
Collaboration
New Drug Research
Glaxo SmithKline's
recent R&D alliance with
Ranbaxy Laboratories
Clinical Trials
Novartis, Astra Zeneca and
Eli Lilly making India a
global hub for clinical trials
Co-marketing
Glaxo-Cipla,
Wockhardt-Bayer,
Ranbaxy-Knoll tie-ups
In-licensing
Ranbaxy licensing
agreement with KSB, UK
for marketing TransMID
Pharma - IT
Novartis processes drug
safety data and is designing
clinical development software
Local research
Astra Zeneca’s $40 million
R&D facility in Bangalore
for TB drug discovery
COLLABORATION
Source: Media Reports, E&Y
CHANGING FACE OF INDIAN PHARMA

20. BIOTECHNOLOGY
INDIA IN THE NEW KNOWLEDGE ECONOMY

21. Market - A Consistent Uptrend
2002-03
2010
25% growth in investment
70% growth in employment
74% growth in R&D
manpower
10% of global industry
1 million skilled jobs
USD 5 billion annual
revenues
Source: Confederation of Indian Industry (CII)

22. SOURCE FROM INDIA
India’s first genetically
engineered vaccine
costs less than half the
price of competing
vaccines
Bio Agri -
India (2nd
largest
producer of food) offers
significant opportunities
to source products
Biogenerics -
$25 billion biological
products going off
patent in 2004. Indian
companies strong in
biogenerics
Biocon was the first
enzyme company globally
to receive ISO certification
in 1993
India: largest producer
of Measles & DTP
vaccines. Vaccine
exports to over 130
countries
Clinton Foundation
sourcing HIV treatment
from four firms - three
of which are from India
Source: Newspaper Reports
One out of every two children in the
world is immunized by a vaccine
made in India
Shantha Biotech-
SHANVAC-B meets
40% of the global
demand of Hepatitis
B vaccine.
GOING GLOBAL IN BIOTECH

23. The India Advantage
Trained manpower
and knowledge base
Rich biodiversity Extensive clinical trials
opportunities
Excellent network
of research laboratories
Well-developed
base industries

24. Information & Communication
Technology (ICT)
INDIA IN THE NEW KNOWLEDGE ECONOMY

25. India : Key IT figures
• Software & services
export(2004-05) ~ US $ 17.5
billion
 Grown from a $150m in 1991-92
 CAGR in last 10 yrs: 35%
 Projected to be US $ 50 b in 2008
• Software & services
domestic(2004-05) ~ US $
4.5 bn
• IT enabled services(2004-05)
~US $ 4.9 bn
• IT domestic hardware(2004-
05) ~ US $ 4.8 bn
Source: McKinsey:NASSCOM
Balanced Portfolio of IT offerings
2.04 2.88
3.8 5.03
6.05
8.67
12.2
13.5
17.1
23.8
31.7
0
5
10
15
20
25
30
35
94-9595-96 96-9797-98 98-9999-0000-01 01-0202-03 03-04 04-
05
US$bn

26. India: Moving up the Value Chain
Source: SSB, Fall 2000
1960 2000Client / Server InternetMainframe
Facilities
management
Unix-based
coding Maintenance
Migration & Re-
engineering
Package
Implementation
Application
development
Web Enabling
legacy
Consulting
Maintenance
Package
Implementation
E-business
applications
Embedded
software
Network
Management
Network
Security
Aligned to Technology Needs

27. Telecom Market
 7th
largest telecom network in the world
 Telecom network growth rate 30%
 Fixed lines (Dec, 2004) 44.76 million
 Wireless connections (Dec, 2004) 48 million
Size (2003) US$ 9 billion
2010 (projected) US$ 23 billion

28. Rising Teledensity & Telephone Subscribers
Sot
• India is targeting 250 million users by 2007
• India needs $30 billion to meet a target of one phone for every five people by 2010
• Total telecom revenues expected to almost triple from USD9 billion in 2002 to
USD 23-25 billion by 2007.

29. 47
Mn
19
Mn 7
Mn
3Mn
5Mn
3Mn
India
Bangladesh
PakistanIran
Brazil
Mexico
Philippines
5Mn
4Mn
Vietnam
2Mn
Turkey
Potential surplus population in working age group (2020)
-10
Mn
China
-6
Mn
Russia
5Mn
Indonesia
1Mn
Malaysia
0Mn
Ireland
Israel
0Mn
Iraq
2Mn
-1
Mn
Czech
Republic
Note: Potential surplus is calculated keeping the ratio of working population (age group 15 – 59) to total population constant;
Source: U.S. Census Bureau; BCG Analysis
4Mn
Egypt
-17Mn
US
-2 Mn
UK
-2 Mn
Italy
-3 MnFrance
-9 Mn Japan
-0.5
Mn
Australia
-3 MnSpain
-3 MnGermany
WORKFORCE SHORTAGES AND
AVENUES OF SUPPLY

30. THANK YOU