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

  2. INDIA IN THE NEW KNOWLEDGE ECONOMY Transition from BPO to KPO Destination 8 + % 51 + % • Growth of Services sector • Contribution to India’s GDP 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 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 Healthcare Education Healthcare is the largest service industry in terms of revenues and the second largest after education in terms of employment Retail banking Power Railways Telecom Hotels, restaurants IT 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

  7. 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 employers* Private providers (individual, charitable and for-profit) * 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. INDIAN HEALTHCARE CAPABILITYFACT#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.

  10. INDIA HAS THE OPPOURTUNITY TO PROVIDE THE BEST OF THE WEST & EASTERN HEALTCARE SYSTEMS Indian Systems Of Medicine “ Staging a Comeback” • 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 * India’s Gift to the World Ayurveda Yoga Siddha Source : Los Angeles Times * Economic times dated 25th July 2003

  11. 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

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

  13. 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 51.0 ESTIMATE 17.0 43 8.0 8.0 43.0 19 43.0 Government spending 3.76 35.0 Private spending 15.24 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 2001 Key Assumption Government Spending 1% GDP 1% GDP 2% GDP * With 6% GDP real growth per year

  14. 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 sector are comparable to other infrastructure sectors Power** 95-126 Telecom** 40-51 24-33 Roads** * 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

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

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

  18. Indian pharma companies filed the largest number of Drug Master Files (DMFs) for APIs and 23% of ANDAs with the USFDA during 2003 Export revenues now contribute over half the total revenues for the Indian pharma majors Players thinking local Players thinking global Ranbaxy acquired RPG Aventis, France; Wockhardt acquired CP Pharmaceuticals, UK; Zydus Cadila acquired Alpharma, France Pharmaceutical exports increased at a CAGR of 23% during FY1995-FY2002 CHANGING FACE OF INDIAN PHARMA Top 5 Companies Sales & Export Revenues Source: Company reports

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


  21. Market - A Consistent Uptrend 25% growth in investment 2002-03 70% growth in employment 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)

  22. GOING GLOBAL IN BIOTECH SOURCE FROM INDIA Shantha Biotech- SHANVAC-B meets 40% of the global demand of Hepatitis B vaccine.   India’s first genetically engineered vaccine costs less than half the price of competing vaccines Clinton Foundation sourcing HIV treatment from four firms - three of which are from India India: largest producer of Measles & DTP vaccines. Vaccine exports to over 130 countries 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 Bio Agri - India (2nd largest 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

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

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

  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 US$ bn Balanced Portfolio of IT offerings Source: McKinsey:NASSCOM

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

  27. 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

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