INDIA IN THE NEW KNOWLEDGE ECONOMY

The Changing Scenario

 INDIA IN THE NEW KNOWLEDGE ECONOMY

Transition from BPO to KPO Destination

Growth of Services sector 8+%

Contribution to India’s GDP 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
INDIA IN THE NEW KNOWLEDGE ECONOMY

 Healthcare

 Pharma & Biotechnology

 Information & Communication

Technology (ICT)
 Indian Healthcare : The Changing Scenario

Current Healthcare Landscape

 Indian Healthcare : The Changing Scenario

INDIA SPENDS US $ 22.7 BILLION ON HEALTHCARE

5.2% of
GDP
22.7

3.7 19

Total Pharma Healthcare

Healthcare market* delivery
Market market

* Retail
Source: National Accounts Statistics 2001; McKinsey analysis
 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

Healthcare 4.0 5.2

Education 5.3 4.8

Healthcare is the
Retail banking 1.0 3.5 largest service
industry in terms
Power 1.2 3.0 of revenues and
the second
largest after
Railways 1.6 1.8 education in
terms of
Telecom 0.8 1.4 employment

Hotels, restaurants 1.7 0.9

IT 0.4 1.7

By 2012, the sector could account for 7 to 8 per cent of GDP and provide
direct and indirect employment of 9 million
Source: National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis
 Indian Healthcare : The Changing Scenario

IN TERMS OF DELIVERY, PRIVATE PROVIDERS CAPTURE 63%

0F THE US $ 19 BILLION SPEND

Healthcare provision, 2002

Per cent of total spending

100% = US $ 19 billion

Government and public

Private providers
employers*
(individual, charitable
and for-profit)
37
63

* Including government spend (20%), public employers’ spend (11%) and out-of-pocket spend at government providers (6%)
Source: McKinsey analysis
 Indian Healthcare : The Changing Scenario

INDIA: AN EMERGING HEALTHCARE HUB

 INDIAN HEALTHCARE CAPABILITY
FACT#1: Proven Indian healthcare system

 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.
DIA HAS THE OPPOURTUNITY TO PROVIDE THE BEST O
THE WEST & EASTERN HEALTCARE SYSTEMS
Indian Systems Of Medicine “ Staging a Comeback”

 Ayurveda recognized as an
official healthcare system in
Hungary. India’s Gift to the World

 Doctors in the west are Ayurveda

increasingly prescribing
Indian Systems of Medicine Yoga

 More than 70% of the Siddha

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
 HEALTHCARE….THE SUNRISE INDUSTRY

“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

 Indian Healthcare : The Changing Scenario

Cost Advantage
PROCEDURE COST (US$)

US
US THAILAND
THAILAND INDIA UK

Heart Surgery 40,000 7,500 6,000 23,000

Bone Marrow Transplant 2,50,000 ------- 26,000 1,50,000

Liver Transplant 3,00,000 ------- 69,000 2,00,000

Knee Replacement 20,000 8,000 6,000 12,000

Cosmetic Surgery 20,000 3,500 2,000 10,000

 Indian Healthcare : The Changing Scenario

HUGE GROWTH POTENTIAL – TO GROW BETWEEN

US $ 43 – US $ 60 BILLION IN 2012
60.0
US $ IN BILLION at 2000-2001 prices
ESTIMATE
51.0 17.0
43 8.0
8.0

19 43.0
Government 43.0
spending 3.76 35.0
Private
spending
15.24

2001 2012 2012 2012

Scenario 1: Scenario 2: Scenario 3:
Baseline Baseline with Baseline with
increase in insurance in insurance and
private spend middle class high
government
spending
Key Government
Spending 1% GDP 1% GDP 2% GDP
Assumption
* With 6% GDP real growth per year
 Indian Healthcare : The Changing Scenario

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 22-31

Investment needs
of the healthcare
Power** 95-126 sector are
comparable to
other infrastructure
sectors
Telecom**
40-51

Roads** 24-33

* 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
 INDIA IN THE NEW KNOWLEDGE ECONOMY

India’s Growth Sectors -

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

India has the 2nd India’s huge

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

Players Players
thinking local thinking
global
Indian pharma companies filed Export revenues now
the largest number of Drug contribute over half the
Master Files (DMFs) for APIs total revenues for the
and 23% of ANDAs with the Indian pharma majors
USFDA during 2003

Top 5 Companies Sales & Export Revenues

Rank Company Source: Company reports

1 Ranbaxy
Ranbaxy acquired RPG Pharmaceutical exports
Aventis, France; Wockhardt increased at a CAGR of 23%
acquired CP Pharmaceuticals, during FY1995-FY2002
UK; Zydus Cadila acquired
Alpharma, France
 CHANGING FACE OF INDIAN
FACE OF INDIAN PHARMA

MNC- MNC-
Domestic Domestic
Competition Collaboration

Co-marketing New Drug Research

Glaxo-Cipla, Glaxo SmithKline's

Wockhardt-Bayer, recent R&D alliance
Ranbaxy-Knoll tie-ups with Ranbaxy
Laboratories

Pharma - IT Clinical Trials

COLLABORATION
Novartis processes drug Novartis, Astra Zeneca
safety data and is and Eli Lilly making
designing clinical India a global hub for
clinical trials
development software

In-licensing Local research

Ranbaxy licensing Astra Zeneca’s $40

agreement with KSB, million R&D facility in
UK for marketing Bangalore for TB drug
TransMID discovery
Source: Media Reports, E&Y
 INDIA IN THE NEW KNOWLEDGE ECONOMY

BIOTECHNOLOGY
 Market - A Consistent Uptrend

25% growth in investment

70% growth in employment

2002-03
74% growth in R&D
manpower

USD 5 billion annual

revenues
2010 1 million skilled jobs

10% of global industry

Source: Confederation of Indian Industry (CII)
 GOINGSOURCE
GLOBAL IN BIOTECH
FROM INDIA

Shantha Biotech-
SHANVAC-B meets
40% of the global Clinton Foundation
India’s first genetically demand of Hepatitis
sourcing HIV treatment
engineered vaccine B vaccine.
from four firms - three
costs less than half the of which are from India
price of competing
vaccines
India: largest producer
of Measles & DTP
Biogenerics - vaccines. Vaccine
exports to over 130 Biocon was the first
$25 billion
countries enzyme company globally
biological products to receive ISO certification
going off patent in in 1993
2004. Indian Bio Agri -
companies strong in India (2nd largest
biogenerics producer of food) offers
significant opportunities
to source products

One out of every two children in

the world is immunized by a
vaccine made in India
Source: Newspaper Reports
 The India Advantage

Excellent network Well-developed

of research laboratories base industries

Rich biodiversity Extensive clinical trials

opportunities

Trained manpower
and knowledge base
 INDIA IN THE NEW KNOWLEDGE ECONOMY

nformation & Communication

Technology (ICT)
 India : Key IT figures

• Software & services

export(2004-05) ~ US $ 17.5
billion
35
 Grown from a $150m in 1991-92 31.7
30
 CAGR in last 10 yrs: 35%
25 23.8
 Projected to be US $ 50 b in 2008
20
• Software & services 17.1
13.5
domestic(2004-05) ~ US $ 4.5 15 12.2

bn nb $ S U
10 8.67
6.05
3.8 5.03
• IT enabled services(2004-05) 5 2.04 2.88

~US $ 4.9 bn 0
94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-
• IT domestic hardware(2004- 05
05) ~ US $ 4.8 bn

Balanced Portfolio of IT offerings

Source: McKinsey:NASSCOM
India: Moving up the Value Chain

Consulting
Embedded
software
Network
Security
Network
Management
Package
Implementation
Application
development E-business
applications
Package
Implementation Web Enabling
Facilities legacy
Migration & Re-
management
engineering
Unix-based
coding Maintenance Maintenance

1960 Mainframe Client / Server Internet 2000

Aligned to Technology Needs

Source: SSB, Fall 2000
 Telecom Market

 7th largest telecom network in the world

Size (2003) US$ 9 billion

2010 (projected) US$ 23 billion

 Telecom network growth rate 30%

 Fixed lines (Dec, 2004) 44.76 million

 Wireless connections (Dec, 2004) 48 million

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.
 WORKFORCE SHORTAGES AND
AVENUES OF SUPPLY
Potential surplus population in working age group (2020)
Germany-3 Mn
UK
-2 Mn
Czech
Russia
0Mn Republic -6
-1
Ireland Mn Turkey Mn
Iraq 2Mn
-17Mn France -3 Mn China -10
US 2Mn -9 Mn Japan
Israel
Pakistan
Mn
Iran 5Mn
Spain -3 Mn -2 Mn 0Mn 19
3Mn Mn 7
Mn Philippines
Italy 47
5Mn 4Mn Bangladesh
Mn
Mexico Egypt 4Mn
India
Vietnam
1Mn
Malaysia
3Mn 5Mn
Indonesia
Brazil
-0.5
Mn
Australia

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
THANK YOU