K.P.

Nanavaty
President
Reliance Industries Ltd., Mumbai
Agra, January 18, 2003
21st Indian Paint Conference
Paint Preserve Prosper
Index
Emerging Scenario
Economic Landscape
Paint Industry
overview, applications, structure
Future Prospects
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Industries Limited
World Chemical Market size 1.6 Trillion USD . . .
Textiles
10%
Petrochemicals
39%
Performance chemicals
16%
Pharmaceutical chemicals
16%
Agrochemicals
11%
Other fine chemicals
1%
Inorganic chemicals
7%
COMMODITIES (56%)
SPECIALTIES (44%)
Source: Chem Systems/ BAG
. . . 3% of which is the global paint industry
Reliance
Industries Limited
Global Economy grows @ 3.4 %
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1
9
7
0
1
9
7
2
1
9
7
4
1
9
7
6
1
9
7
8
1
9
8
0
1
9
8
2
1
9
8
4
1
9
8
6
1
9
8
8
1
9
9
0
1
9
9
2
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
0
5
10
15
20
25
30
35
40
$/bbl
Global GDP growth
Crude oil ($/bbl)
1973-75 cycle:
1st Oil Shock
1979-83 cycle:
2nd Oil Shock
1991-92 cycle:
Gulf War
1997:
Asian Crisis
Decade
Global GDP
(in $ trillion)
1970 3
1980 10
1990 21
2000 31
Despite cyclicality, $10 Trillion has been added
to the global GDP each decade
Sept11th01
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Industries Limited
Dominance by Triad
Source: World Competitiveness Yearbook 2001
0
2
4
6
8
10
GDP
($ Tr.)
Countries
USA W. Europe * Japan China Brazil Mexico Korea India
* Incl. 5 Countries - Germany, UK, France, Italy & Spain
India - 1.45% of global GDP & 13th largest economy
Year - 2000
Global GDP - $ 31 Tr.
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Industries Limited
Regional GDP share - 2000
USA
32%
Rest of
World
28%
Rest of Asia
Pacific
9%
EU
20%
Japan
8%
UK
3%
Developed Countries account for
61% of Global GDP
But Asias short term response mirror Industrialized
countries even though its share is < 10%
Population
(mn)
% share -
Population
GDP $
Billion
% Share in
global GDP
China * 1261 21% 1254 4.0%
India 1014 17% 480 1.5%
S.Korea 47 1% 457 1.5%
Indonesia 225 4% 153 0.5%
Other S.Asia 359 6% 140 0.4%
Thailand 64 1% 122 0.4%
S'pore 4 0% 92 0.3%
Malaysia 22 0% 89 0.3%
Phillipines 81 1% 75 0.2%
Vietnam 89 1% 31 0.1%
Total Asia 3166 52% 2895 9.2%
Global 6080 31300
Source :- World Bank ; *: China incl. Hongkong
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Industries Limited
Asian Economy
(growth in %) 1998 1999 2000 2001 2002e
Industrial Economies3.0 3.2 3.5 0.9 1.5
USA 4.3 4.1 3.8 0.3 2.4
Japan -1.2 0.7 2.8 0.3 -0.5
EU 2.9 2.8 3.5 1.6 1.0
Emerging Markets 3.0 4.2 5.9 3.6 4.0
Asia 3.2 6.4 7.0 5.0 5.9
China 7.8 7.1 8.0 7.3 7.5
India 5.8 6.7 5.4 4.1 5.0
Transition economies -0.7 3.7 6.6 5.0 3.9
World 2.7 3.6 4.7 2.2 2.7
e:estimated
Comparative Growth Scenario
but 2002 also marks the beginning of recovery from the
economic slowdown of 2001 - albeit at a slow pace
Last year, the global economy performed below par
triggered by subdued US, Japanese & EU
economies...
Reliance
Industries Limited
With revival of trade, Asian GDP
growth is expected to resume
%
Growth in Asia in tandem with global economic recovery

Real GDP Growth
Merrill Lynch DrKW Morgan Stanley
(in %) 2001 2002
World 1.8 1.7 2.8 3.4 3.0
G7 1.3 1.3 2.4 1.1 2.1
Japan -0.3 -0.7 1.6 0.0 0.7
Asia (ex. Japan) 3.1 5.4 5.6 5.0 5.3
India 5.4 5.4 5.7 5.3 5.1
China 7.5 7.8 8.0 6.8 7.1
Hong Kong 2.3 2.0 3.0 2.1 2.2
Singapore 0.6 3.0 4.3 3.3 3.9
S. Korea 1.0 6.1 5.0 4.3 4.0
Taiwan 1.5 3.4 3.7 2.8 3.8
Source : Dresdner Kleinwort Wasserstein, Merrill Lynch, Morgan Stanley Global Eco Forum
2003 Forecasts
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Industries Limited
-4
-2
0
2
4
6
8
2002 2003 2004
Benign Intermediate Worst No war
Real US GDP (Annual % Change)
Source: Thomson Datastream, CSIS
However, the possibility of a war with
Iraq poses a major downside risk...
which can drastically reduce economic growth in the US,
& subsequently the world, & can even result in negative
US GDP growth in the worst case scenario
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Industries Limited
China will overtake US in the global output

India to become he 3rd largest economy in the world ahead of
Japan & Germany

The value of global output would have increased from 30 trillion
dollars to 95 trillion dollars

China will account for 26% of global product

US will remain at the same level of 21%.

The two elephant economies of Asia - China & India would have
increased their global output from only 16 % to 40% by 2025.


Source :
Future New World Economic Order
Asian economic leaders would not be
fast running tigers but stampeding elephants
Mr. Javed Burki - World Bank Expert
( ~next 25 years)
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Industries Limited
The Indian Economy
Reforms in last decade brought
Paradigm Shift ...
Restrictions to capacity growth removed
Foreign capital flow enhanced
Business-friendly fiscal structure
Liberalized external trade policies
Emphasis on infrastructure development
Market determined exchange rate
Ownership of foreign stocks allowed
Withdrawal of Govt. participation from non-core area
In the offing
Capital a/c convertibility
Patent Bill in line with international norms
and recharged the Indian Economy
Reliance
Industries Limited
Sectoral composition of GDP
A Stable well diversified Economy
GDP (2001) : $ 484 bn
26%
25%
22%
13%
14%
Agriculture Manufacturing Trade etc.
Financing etc. Pub Adm etc
Source: Economic Survey 2001-02
Over the years, the services sector has emerged
as the single largest contributor to GDP
(% of GDP) Agriculture Industry Services
1950-51 to 1959-60 53.7 17.7 28.7
1960-61 to 1969-70 45.8 22.9 31.3
1970-71 to 1979-80 41 25 34
1980-81 to 1989-90 36.5 24.9 38.7
1990-91 to 1999-00 29.2 27 43.8
2001-02 26.3 26.5 47.2
Source:Economic Survey
Changing composition of GDP
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Industries Limited
Decade of Reforms : 2nd highest
economic growth
Real GDP growth (AARG; 1990-00)
-6 0 6 12
Russia
Italy
Japan
Germany
France
UK
Canada
Mexico
Brazil
US
India
China
% of World GNP at PPP* ($38.8 tr in 2000)
Russi a
2%
Ital y
3%
Japan
8%
Germany
5%
France
3%
UK
3%
Canada
2%
Mexi co
2%
Brazi l
3%
US
22%
Indi a
6%
Chi na
11%
Rest of Worl d
30%
. . . India - 4th Largest economy at USD 1.6 tr.
( PPP basis)
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The emerging face of India
Year 2001 2006

Population (mln.) 1012 1087


Population 546 565
<25 years of age

Urbanization (%) 28 31
. A growing country with opportunity
Source: DSP Merrill Lynch
Half the population is below 25 years of age
Young, Mobile, Brand conscious generation
Reliance
Industries Limited
Indian economy today is fundamentally
strong & resilient
Bulging food reserves

Increasing foreign trade with globalisation of the
economy

Comfortable foreign exchange reserves

Soft interest rates

Low inflation
With further reforms, the Indian economy is now at a take-off
stage - planned 8% targeted growth very much feasible
provided reforms are carried out in the right spirit
Reliance
Industries Limited
Per capita income at current prices ($)
98
228
317
494
1
9
7
0
/
7
1
1
9
8
0
/
8
1
1
9
9
0
/
9
1
2
0
0
0
/
0
1

Source:Economic Survey 2001-02, Ministry of Finance,
Govt. of India; FY 2000 forecast by CPMA
Per capita income quadrupled in the
last 2 decades
..with the maximum increase of ~US$ 200 coming in
the last 10 yrs providing additional purchasing power
Per capita income at 1993-94 prices
4000
6000
8000
10000
12000
1
9
8
1
-
8
2
1
9
8
3
-
8
4
1
9
8
5
-
8
6
1
9
8
7
-
8
8
1
9
8
9
-
9
0
1
9
9
1
-
9
2
1
9
9
3
-
9
4
1
9
9
5
-
9
6
1
9
9
7
-
9
8
1
9
9
9
-
2
0
0
0
Reliance
Industries Limited
Consumer goods, (esp. the durables) registered
double digit growth in the post reform era . . .
Consumer Durables: High double Digit Growth
2.0
3.0
6.0
3.0
7.0
-0.1
10.0
12.0
23.0
27.0
18.0
6.0
-1
4
9
14
19
24
A
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c
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s
W
r
i
s
t

w
a
t
c
h
e
s
(
%
)
1989-93 1993-01
Source: CII/ASCON
. . . and have been the prime mover for
economic growth
Reliance
Industries Limited
Investments in highways to fuel growth . .
+ + e`
BANGALORE
_
CHENNAI
Surat
Vadodara
Ahmedabad Bypass
MUMBAI

Vijayawada
_

Eluru
Bhubaneshwar
Varanasi

Sikandara
:
:

KOLKATA
DELHI
Barwa Adda
Panagarh
Amer
Manor
Krishnagiri
Jagatpur
Jaipur Bypass Ph.II
Neelamangala

Nellore Bypass
Dharwad
Hathipali
Vishakhapatnam
Khurda
Agra
Pune

Kokhraj
Allahabad bypass
Kolaghat
Bhadrak
Palasa
Nellore
Katraj
Wather
Hubli
Pallikonda
Ph.I
Chittorgarh
Himmatnagar
Chiloda
Jaipur
Etawah
Gowthami
Sira
_:
Palanpur
PORBANDAR
Rajkot
`

Udaipur
Kanpur
Siliguri
SILCHAR
Samakhiali
Shivpuri
Guwahati
Purnea
Muzaffarpur
Gorakhpur
Lucknow
l
l:
._
.

l
. l :
_
Islampur
KANYAKUMARI
l
Madurai
l
Kurnool
l
Hyderabad
l
Lakhnadon
l
:
Jhansi
.
.
SRINAGAR
Dindigul
Karur
.
Jammu
Jalandhar
Gwalior
Nagpur
Salem
Kochi

_l
Thrissur
Coimbatore
Dankuni-NH-2/NH-6 Near Kolkata
LEGEND:
Under Implementation
Already Completed
Project Preparation Taken Up
Balance for Award
N. H. Number
S
E
N
W
Status as on August 31, 2002
Total length(km)
Completed Total till date (km)
Under Implementation
Financial (Rs. Crs.)
Contracts to be awarded
GQ
5,846
1,159*
95
15,951
1,688
6,286
136
4
4,551
(Handia)
. . . through multiplier effect on the economy
Reliance
Industries Limited
Soft interest rate regime expected to
continue...
Interest rates - Softening
16.5
14.75
14.0
12.5
12.25
11.5 11.5 11.5
10
11
12
13
14
15
16
17
1
9
9
5
-
9
6
1
9
9
6
-
9
7
1
9
9
7
-
9
8
1
9
9
8
-
9
9
1
9
9
9
-
0
0
2
0
0
0
-
0
1
2
0
0
1
-
0
2
2
0
0
2
-
0
3
% p.a
Nominal PLR
Source: Economic Survey, 2001-02
The ET ,Dec 23rd 02
. . . boosting housing demand & creating a conducive
environment for industrial growth & demand for paints
(in Million) 1991 2001
%
change
Urban
Population 218 291 33%
Urban
Housing
shortage 46 62 35%
Source: National Inst of Urban Affairs
Urban Profile of India
Reliance
Industries Limited
Housing sector given top priority by
the Govt...
Current shortage of dwelling units : 20 mn

Govt. targets Housing for All by end of Xth Plan

Golden Jubilee Rural Housing Finance Scheme coverage increased from
1.7 lakh to 2.25 lakh units

Indira Awas Yojana allocation increased by 13% to Rs 1725 crs.

Housing finance disbursement increased by 35% after 28% rise in 02

Corporate space absorption likely to go up by 50% in 03
which is likely to boost demand for construction
and associated sectors incl. paints
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Industries Limited
The Indian Opportunity
Increasingly affluent middle class
Middle Class Households(2001-02) (million no.)
32.8
40
13
7.5
6.7
Low Income
Lower middle income
Middle income
Upper income
High income
71%
73%
85%
5%
Own PC
Own vehicle
75% have an annual household income
between $1000 and $3000
Middle Class Monetory profile
Own flat/house
Own colour TV
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Industries Limited
The Indian Opportunity
Growing disposable incomes
2001
1.6
32
60
62
44
Million
Households
Million
People
8
10
110
85
14
8
Million
Households
Million
People
58 The Rich
The Consuming Class
The Climbers
The Aspiring
The Destitute
2010
62
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Industries Limited
Growth in telecom sector will have
profound multiplier effect...
Cellular & Fixed Line subscribers Ringing in Better
Times !
3.6
6
19
33
40
66
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2
0
0
1
2
0
0
2
2
0
0
5
mn no.s Cel l ul ar subscri bers
Fi xed l i ne networks
Source: NASSCOM
...on the economy in sustaining high growth in the
future
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Industries Limited
Average penetration levels in India are way
below global averages in sectors like IT,
telecom & consumer electronics . . .
Penetration per 1000 Population
210
75
225
60
3
20
100
22
125
0
50
100
150
200
250
World 2001 India 2001 India 2008 Target
TV Computers Fixed telephones
Source:Dept of Information Technology, Govt of India
. . . pointer to Indias immense growth potential
Reliance
Industries Limited
As normalcy returns in the economic
environment, outlook for the Indian economy
is bright
(Real GDP growth in %) 2003 2004
World Bank 5.6 5.8
Asian Develeopment Bank 6 6.3
IMF 5.7 6
Merrill Lynch 5.7 5.8
DrKW 5.3 4.7
Morgan Stanley 5.1 5.8
Source:Respective Economic Outlook Forecasts
Growth Forecasts for India
The overall quantum of economic activities
& the demand situation in the country is forecasted
to improve implying a better year for different
sectors of the economy incl. paints
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Industries Limited
WTO is providing market access across the
globe for Indian manufacturers...
Increased market access to erstwhile inaccessible overseas
markets

Exposure to global industry best practices & latest
technology

Competition with global giants would make the Indian
producers more price & quality conscious

Low quality producers will perish with availability of cheap,
high quality imports
..& an opportunity to speed up domestic reforms to
become globally competitive which nations like
China are pursuing
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Industries Limited
The Indian Paint Industry
Demand for paints in the Asia Pacific is predicted to
rise from the current level of 7.9 MMT to 11.1 MMT
by 2005.
1860
825
410
620
106
200
116
218
86
278
290
2486
-400
100
600
1100
1600
2100
2600
C
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(000 MT) 2000 2005
Rest of Oceania 46
Northeast Asia 5705 8300
Southeast Asia 994 1200
Indian sub-continent 794 1200
Oceania 336 370
ASIA PACIFIC 7829 11100
on the back of significant demand growth
in NE Asia & Indian sub-continent
Source:Asian Chemical News, Nov, 2002
Reliance
Industries Limited
Per Capita Paint Consumption (Kgs)
0.6
2.9
4.0
8.8
15.0
19.0
22.0
24.5
26.8
1.6
0
5
10
15
20
25
30
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At 0.55 Kgs, annual per capita consumption of
paints in India is way below the global average of 15
kgs & SE Asian average of 4 kgs..
an indicator of the paint industrys tremendous
future growth potential, capable of sustaining a
10% CARG in the period 2003-06 Reliance
Industries Limited
Even if per capita paint consumption in India
reaches the current SE Asian average of 4 kgs from
the current level of 0.55 kgs...
Current @ 0.55 kgs Future @ 4 kgs
Population (million nos.) 1027 1108*
Total paint consumption (MT) 564850 4432000
Addl paint consumption
when per capita
consumption is 4 kgs (MT)
3867150
Per cent increase in total
paint consumption 685%
*population no. for the year 2007
Per capita paint consumption in India
Impact of increase in per capita paint consumption in India
it would translate to a ~700% increase in paint
consumption - an achievable target in view of high
growth in end-user sectors
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Industries Limited
Paint Industry : Burning Issues
Housing prime mover - How to create more
housing ?

Shabby building exteriors - Is legislation making
exterior maintenance mandatory the solution ?

Customized R&D for meeting needs of countries
like India
Need for introspection!
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Industries Limited
New Paradigms
for the coming Decade
Issues & Strategies
Issues Strategies
Scale Consolidation
WTO Globalisation
Investment Asset Renewal
Technology Innovation
Man Power Training
Market Aspirations Total Solution Provider
Reliance
Industries Limited
Thank You!