India continues on its path of high economic growth, drawing on the strong foundation of economic activity in the country. This is reflected in our economic performance during fiscal 2007, a year which was marked by increases in domestic inflation, asset prices and both domestic and international interest rates. Our GDP growth rate is estimated to have been at 9% and above for the second year in succession - no mean achievement, and a testimony to the impact of 15 years of economic reform.

Our movement to a high growth trajectory has been propelled by the knowledge economy, which has established a completely new growth paradigm in India. Knowledge sublimates the entire process of wealth creation by directly leveraging human capital. This is now extending from information technology and related services to financial services, healthcare, analytics, engineering, design and other similar knowledge-based sectors. The development of a knowledge-centric and people-centric economy not only generates direct employment, but also has a multiplier effect on various sectors of our economy given the boost it gives to retail, infrastructure, real estate and other sectors. The only challenge is to equip our young people with skills relevant to this new economic reality, so that our unique demographic advantage is fully realized.

The explosive growth of the knowledge economy and the favourable demographic profile continue to drive consumption demand. This will lead to a market for a wide range of financial products and services for consumers - a mortgage to finance a house; a loan for a car; a credit card for ongoing purchases; a bank account; a long-term investment plan to finance a child’s higher education; a pension plan for retirement; a life insurance policy, and many others. The increase in incomes leads to higher demand not only for financial and other services, but also for manufactured goods, thereby spurring increased manufacturing activity as companies step up production to meet the growing demand. Already we are in a position where companies are operating at near peak capacities and sustained demand growth will require a rapid build up of production capacities and infrastructure. Power, airports and ports, urban rejuvenation and rural infrastructure are all areas where infrastructure investment will scale up rapidly over the next few years. Our estimates show that by 2010 over US$ 500 billion of investments would be required to fund capacity expansion and infrastructure building. These domestic growth trends combined with the global expansion of Indian businesses present a diverse range of growth opportunities for the financial sector.

The ICICI Group is well positioned to participate in and contribute to this process. We were among the first to recognise the opportunity presented by the retail market and are today positioned as market leaders across the spectrum of retail products. In the insurance sector, we continue to maintain our leadership position among both life and general insurers. We are among the two largest asset management companies in India in terms of assets under management. We have continued to deepen our relationships with corporate clients and have developed a wide suite of products to cater to their requirements. Going forward, we expect that the demand for financial services in the retail sector will continue to act as a significant growth driver. Given the strong investment pipeline and the rapid scale-up of Indian corporates in international markets, we expect the demand for financial services from the corporate sector to grow exponentially. We will continue to expand our international presence and focus on the international operations of Indian companies, demand for financial services from the large Indian diaspora and the opportunity to leverage our technology platform to gain competitive advantage in overseas markets.

We view rural India as a major untapped opportunity and are focusing on this aspect as part of our core business of banking and financial services. Our strategy is based on identifying the needs of all segments of the rural population – farmers, traders, entrepreneurs and the poorest of the poor, designing products and services to meet their specific requirements and creating a distribution network that delivers these efficiently and at an affordable cost, while ensuring that our operations are sustainable. Rural India offers us the opportunity to leapfrog brick and mortar structures and use handheld devices and smart cards to provide banking services. While these initatives are at an early stage, we hope to build on these to develop a large-scale rural banking platform in the years ahead.

Looking ahead, we believe that India will sustain high growth rates for the foreseeable future, driven by the knowledge economy and industrial resurgence, to which rural growth could bring an additional new dimension. As an Indian financial services group, we seek to facilitate and participate in this growth process by making a wide range of financial products and services available on a large scale, accessing capital to support growth when necessary. Achieving size and scale aligned to the needs of a fast growing modern economy, with relevance in the global context, will be a key success factor as India grows and globalizes. We look forward to your continued support in this endeavour.