Investment Opportunities in India

1. National Emblem of India
The national emblem of India is an
adaptation from the Sarnath Lion Capital of
Ashoka. In the original, there are four lions,
standing back to back, mounted on an Taj Mahal, Agra
abacus with a frieze carrying sculptures in
high relief of an elephant, a galloping horse,
a bull, and a lion separated by intervening
wheels over a bell-shaped lotus. Carved out
of a single block of polished sandstone, the
Capital is crowned by the Wheel of the Law
(Dharma Chakra).
Portfolio Investment Opportunities in India
In the state emblem, adopted by the David M. Darst, CFA
Government of India on January 26, 1950,
only three lions are visible, the fourth being October 2012
hidden from view. The wheel appears in
relief in the centre of the abacus with a bull
on right and a horse on left and the outlines
of other wheels on extreme right and left.
The bell-shaped lotus has been omitted. The
words Satyameva Jayate from Mundaka
Upanishad, meaning “Truth Alone
Triumphs,” are inscribed below the abacus
in Devanagari script.
Source: www.india.gov.in; Wikimedia Commons.
Red Fort, Delhi Brihadeeswarar Temple, Tamil Nadu Mahabodhi Temple,
Source: Wikimedia Commons. Bodh Gaya
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2. Morgan Stanley Smith Barney
Investment Strategy
Table of Contents
Flag of India
Section 1 Background Page 3
Section 2 Issues for Consideration Page 67
Section 3 Investing Background Page 98
Section 4 Understanding India’s Investment Potential Page 124
Section 5 Overview of Investment Landscape Page 141
Sachin Tendulkar at Bat
During an International Test Against
Australia in 2010 Section 6 Additional Sources and Disclosures Page 149
Mumbai Skyline and the Rajiv Gandhi Sea Link Section of Indian National Highway India’s Geosynchronous
Satellite Launch Vehicle
Source: Indian Space Research Organization (Image of Satellite Launch Vehicle); Wikimedia Commons.
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3. Morgan Stanley Smith Barney
Investment Strategy
“[India is] the cradle of the human race,
birthplace of human speech, mother of
history, grandmother of legend, great-
grandmother of tradition, whose yesterdays
bear date with the mouldering antiquities of
the rest of the nations. Our most valuable
and most instructive materials in the history
of man are treasured up in India only.”
 Mark Twain
Source: www.wikiquote.org
Temple at Khajuraho, Madhya Pradesh
Section 1
Background
Marble screen at Humayun’s Tomb, Delhi
Statue of Lord Shiva Statue of Meditating Mahavira Jawaharlal Nehru and Mahatma Gandhi
Source: Wikimedia Commons.
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4. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
India at a Glance
Emblem of
Uttar Pradesh
• India has undergone a significant Background
transformation since it began moving
toward a free market economy in • After the government of Jawaharlal Nehru formed the first planning commission in 1950 in an attempt to efficiently allocate
1991. resources to various sectors of the economy, Indian real GDP grew at an annual rate of 3.5% through 1980; a relatively
• This transformation has been marked modest level of growth for an emerging economy, it would unfairly become known as the “Hindu rate of growth.”
by substantial growth in India’s real • Coming to power in 1984 after Indira Gandhi’s assassination, Rajiv Gandhi accelerated reforms initiated by his mother,
GDP. including: (i) measures to reduce the industrial-licensing system known as the “License Raj;” (ii) a reduction in tariffs on
• India’s development has important imports; and (iii) a reduction in corporate taxes and income taxes.
implications for world trade, economic • While Gandhi’s efforts to spur reform were seen as a positive step, the reforms did not fundamentally alter the status quo of
growth, global prices, capital flows, the Indian economy, known as a “Caged Tiger,” built upon the ideals of Fabian socialism.
and geopolitics.
• In the late 1980s, an increase in external debt from 10-15% of GNI to 20-25% of GNI, combined with persistent and rising
Political Leaders of India, 1947 - Present government fiscal and current account deficits led to a balance of payments crisis which left India dangerously short of
foreign exchange reserves and at risk of default on its short-term debt obligations.
Cong: Congress NDA: National Democratic Alliance
NF: National Front BJP: Bharatiya Janata Party • After the June 1991 election of the Congress Party’s Narasimha Rao, the third government in 18 months, the crisis was
UF: United Front UPA: United Progressive Alliance stemmed following a double-devaluation of the Rupee and the emergency airlift of 47 tonnes of gold to be held as collateral at
Years
the Bank of England in order for India to raise $600 million.
Prime Minister Party in Office • Rao’s finance minister, Manmohan Singh, quickly pushed India toward a more market-based economy by introducing a wide
Jawaharlal Nehru Cong 1947 - '64 array of economic reforms, including: virtually eliminating the “License Raj;” reducing tariffs on imports; allowing a greater
Lal Bahadur Shastri Cong 1964 - '66 level of foreign direct investment; loosening foreign-exchange controls; lowering income taxes; decreasing public
Indira Gandhi Cong (R) 1966 - '77 expenditures; and reducing India’s fiscal deficit.
Morarji Desai Janata 1977 - '79 • As the reform process continued, Indian real GDP grew at a rate of 6.4% through the remainder of the 1990s and at a rate of
Charan Singh Janata 1979 - '80 7.2% during the 2000-2010 period.
Indira Gandhi Cong (I) 1980 - '84
Rajiv Gandhi Cong (I) 1984 - '89
Post – 2010 Developments
V.P. Singh NF 1989 - '90
• As of mid-2012, India’s GDP growth rate decelerated somewhat as India experienced an unsupportive growth mix of high
Chandra Shekhar NF 1990 - '91
fiscal deficits and declining private investment since the credit crisis of 2008 and a slowed pace of economic reform amid
P.V. Narasimha Rao Cong (I) 1991 - '96
political gridlock. As of September 2012, Morgan Stanley & Co. Research estimated that India’s GDP growth in 2013 and
Atal Bihari Vajpayee UF 1996 - '96 2014 would be approximately +5.1% and +6.1%, respectively.
H.D. Deve Gowda UF 1996 - '97
• In August 2012, with the Indian economy in the midst of a period of slowed growth, Prime Minister Manmohan Singh
I.K. Gujral UF 1997 - '98 reiterated his commitment to overcoming the lack of political consensus on reforms that would “increase the pace of economic
Atal Bihari Vajpayee NDA (BJP) 1998 - '99 growth, take steps to encourage new investment, and improve the management of Government finances.”
Atal Bihari Vajpayee NDA (BJP) 1999 - '04
• In September 2012, PM Singh defended the government’s decisions during the month to reduce government subsidies by
2004 - hiking diesel prices and to reinitiate efforts to further open India’s fragmented retail sector to greater foreign direct
Dr. Manmohan Singh UPA/Cong
Present
investment, potentially opening the Indian market to multi-brand retailers such as Walmart.
Source: Know India: National Portal of India; India: A History, John
Keay, Grove Press, 2000; Wikimedia Commons.
Source: Central Statistical Office; Prime Minister’s Office; World Bank; “Survey of India: Bold Plans for Reform/Policies for Trade and Industry,” by John Elliot, Financial Times, June 3, 1985;
“How India Micro-Managed its Way to Failure,” The Economist, May 4, 1991; “India Buys Back Gold Pledged for Loans,” Reuters, Nov. 22, 1991; “India’s Retail Reform,” The
Economist, Jan. 12, 2012.
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5. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Country Statistics
Emblem of
Maharashtra
Top Nations by GDP per Capita General Information
Purchasing Power Parity GDP per capita ($US) in 2011
1 Qatar 102,943 • Language: Hindi, English, and 20 other official languages including Bengali, Telugu, Tamil, Urdu, and Gujarati.
2 Luxembourg 80,119 • Exchange Rate: Managed Floating; US$1.00= INR 53.06 (as of Dec. 30, 2011)
3 Singapore 59,711 • 2011 Population: 1.21 billion
4 Norway 53,471 • FY2012 Economy by Sector (as % of GDP): Agriculture, 16.1%; Industry, 24.9%; and Services, 59.0%
5 Brunei Darussalam 49,384 • 2011 Main Cities and Populations: Mumbai (18.4 million), Delhi (16.3 million), Kolkata (14.1 million), Chennai (8.7 million),
6 Hong Kong SAR 49,137 Bangalore (8.5 million).
7 United States 48,387
8 United Arab Emirates 48,158 Source: Census of India, Ministry of Home Affairs; Bloomberg. Data are as of December 30, 2011.
9 Switzerland 43,370
10 Netherlands 42,183
11 Austria 41,822 India: Economic Forecast Summary India Real Gross Domestic Product
12 Kuwait 41,691 $US Billion, unless otherwise indicated Year-over-Year % Change, Fiscal Year Ended March 31
13 Canada 40,541 Fiscal Year Ended
12.0%
14 Sweden 40,394 March 31 2010 2011 2012 2013E 2014E
15 Australia 40,234
Nominal GDP 1,361.5 1,684.0 1,847.5 1,797.0 2,098.0
16 Ireland 39,639
17 Iceland 38,061 10.0%
18 Germany 37,897 Exports 182.4 250.5 309.8 325.0 380.0
19 Belgium 37,737
20 Taiwan Province of Chin 37,720 Imports 300.6 381.1 499.5 503.0 574.0
93 China 8,382 8.0%
128 India 3,694 Trade Balance (118.2) (130.6) (189.8) (177.0) (194.0)
Source: World Economic Outlook, by the International
Monetary Fund, April 2012.
Current Acct. Balance 6.0%
(2.8) (2.7) (4.2) (3.4) (3.0)
(% of GDP)
Indian GDP by Sector
FY1951 – FY2012 Foreign Investment 50.4 39.7 39.2 22.0 30.0
% 4.0%
60 59.0% Capital Inflow
3.8 3.7 3.7 2.5 3.3
50 (% of GDP)
40 Foreign Currency Reserves
11.1 9.6 7.1 6.6 6.0
30 (as no. of months imports) 2.0%
24.9%
20 External Debt
19.2 18.2 18.7 20.6 19.0
16.1% (% of GDP)
10
0 Fiscal Deficit 0.0%
9.4 8.1 8.7 8.7 8.1
(% of GDP) '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13E '14E
'51 '61 '71 '81 '91 '01 '11
Agriculture Industry Services Source: Reserve Bank of India; Central Statistics Office; Budget Documents; Morgan Stanley Source: Central Statistics Office; Morgan Stanley & Co. Research.
& Co. Research. Estimates are as of September 2012. Estimates are as of September 2012.
Source: Central Statistics Office.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a
solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
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6. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
The Indian Subcontinent
Emblem of
Bihar
Map of the Indian Subcontinent The Indian Subcontinent - Geographic and Demographic Detail(1)
Country Area Area % of Population % of Total
Desert
Kabul (sq. km) (sq. miles) Total Area (Millions) Population
Kunlun Mountains
Afghanistan Pakistan 796,095 307,374 18.54% 190.3 12.02%
Indian Claim
India 3,287,263 1,269,219 76.57% 1,210.2 76.45%
Kandahar Islamabad
Lahore
Qing Zang Gaoyuan Bangladesh 143,998 55,598 3.35% 161.1 10.18%
Mt.Everest
(highest point in the world
Pakistan Hi
m 8850M)
Sri Lanka 65,610 25,332 1.53% 21.5 1.36%
al
New Delhi a ya Total 4,292,966 1,613,916 100.00% 1,583.0 100.00%
s Lhasa
Jaipur Nepal
Karachi Lucknow Bhutan The Indian subcontinent represents a peninsular landmass of the Asian
Kathmandu Thimphu continent occupying the Indian Plate and extending into the Indian Ocean,
Ahmadabad
Kanpur
Ganges Brahmaputra bordered on the north by the Eurasian Plate. The region is known as a
Bangladesh
subcontinent because its geography and geology are distinct from the rest
India Dhaka
of the continent.
Gujarat
Kolkata
(Calcutta)
Mandalay The Indian Subcontinent consists of four countries: Pakistan, Bangladesh,
Mumbai
Pune
Nagpur
Burma
India, and Sri Lanka. The subcontinent is surrounded by three bodies of
(Bombay)
Deccan water: the Bay of Bengal, the Indian Ocean, and the Arabian Sea.
Historically, the Indian subcontinent was known as Bharat in ancient (pre-
W es
Hyderabad s
at
Gh 1000 CE) times and Hindustan (Persian for “Land of the Hindus") in
tern
Arabian Sea n
er Rangoon
Ea
st medieval times, following the presence of the Mughals. The region came
Gha
to be known as "British India" or simply "India," during the British Raj
ts
Bay of Bengal
Chennai
Bangalore
(Madras) period.
Lakshadweep
Andaman
Until the end of the 19th century, the Indian subcontinent along with
(India)
Islands
Andaman
Southeastern Asia was collectively known as the East Indies by European
(India)
Sea colonists and traders. The Indian subcontinent was referred to as Hither
Jaffna
India (India Citerior) while Southeastern Asia was known as Further India
Laccadive Sea Sri Lanka (India Ulterior).
Nicobar
Colombo Islands
Maldives
Male (India)
Source: Morgan Stanley Smith Barney Investment Strategy. Sri Lanka Bangladesh Pakistan India
Note:
1. Population data estimates as of July 2011 from CIA World Factbook except for India, which is as of 2011 Census data
Source: CIA World Factbook; Census 2011, Ministry of Home Affairs; Wikimedia Commons.
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7. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Night-flowering
Jasmine The Dynasties of India
State Flower of
West Bengal
Map of the 16 Mahajanapadas Dynasties
600 BC Length of
Dynasty (or period) Extent of Period Period (Years) Significant Achievement
Stone Age 75,000 – 3300 BC 71,700
Mehrgarh Culture 7000 – 3300 BC 3,700 Earliest known farming settlements
Bronze Age Civilizations 3300 – 1000 BC
Indus Valley Civilization 3300 – 2600 BC 700 Domestication of crops, first urban centers
Mature Harappan Culture 2600 – 1500 BC 1,100 First urban sanitation systems, creation of municipalities
Vedic Culture 1200 – 600 BC 600 Composition of the Vedas, the sacred texts of Hinduism
Iron Age Kingdoms 1200 – 270 BC 930
Mahajanapadas 700 – 300 BC 400 Transition from tribal structure to political structure
Magadha Kingdoms 550 – 26 BC 524 Founder of Buddhism, Gautama Buddha, is born
Maurya Empire 321 – 181 BC 140 Ashoka the Great reigns over most of the Indian subcontinent
Middle Kingdoms 230 BC – 1279 AD 1,509
Satavahana Empire 230 BC – 220 AD 450 Responsible for continuing development of trade routes
Kushan Empire 60 – 260 AD 200
Golden Age of science, mathematics, astronomy, religion, and
Gupta Empire 320 – 510 AD 190
philosophy
Pala Empire 750 – 1043 AD 323 Last major Indian dynasty to espouse Buddhism
Chola Empire 846 – 1279 AD 433 Spread Indian influence through Malaysia
Hoysala Empire 1193 – 1343 AD 150
Led by Rani Rudrama Dev, one of the few ruling queens in Indian
Kakatiya Empire 1162 – 1323 AD 161
history
Source: Wikimedia Commons.
Invasion by Turks, Persians, and Afghanis in the region leads to
Islamic Sultanates 1206 – 1526 AD 320
Mahajanapadas (महाजनपद) literally means "Great Clan Territories,” Islamic reign for three centuries
from the Sanskrit Maha meaning “great” and Janapada meaning Delhi Sultanate 1206 – 1526 AD 320 Repulsed Mughal invasions of 13th century
“foothold of a clan.” Ancient Buddhist texts make frequent reference to Bahmanid (Deccan)
1347 – 1518 AD 171
these sixteen great kingdoms and republics which evolved and Sultanate(s)
flourished in the northern/north-western parts of the Indian Vijayanagara Empire 1336 – 1565 AD 229 Primary Hindu resistance to expansion of Islamic Sultanates
subcontinent prior to the rise of Buddhism in India. The Mughal Era 1526 – 1857 AD 331 Construction of the Taj Mahal
Mahajanapadas existed between 600 and 300 BC, forming early Maratha Empire 1674 – 1818 AD 144 Last major Indian dynasty to espouse Hinduism
communities and marking the inception of the country’s transition from
Colonial Era 1757 – 1947 AD 190
a tribal culture to a more political one. The sixteen Mahajanapadas
were: Kasi, Kosala, Anga, Magadha, Vrijji (or Vajji), Malla, Chedi, Modern States 1947 – Present 65
Vatsa (or Vamsa), Kuru, Panchala, Machcha (or Matsya), Surasena,
Assaka, Avanti, Gandhara, and Kamboja. Source: India: A History, John Keay, Grove Press, 2000; www.wikipedia.org.
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8. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Political Map of India
Emblem of
Andhra Pradesh
Political Composition of India Political Map of India
With Select States Circled in Red
India is comprised of 28 states and 7 union territories, the latter of which are
ruled directly by the national government rather than by a state legislature.
India – States JAMMU AND
(Listed in Descending Order of Population) KASHMIR
Area Area Population
State Capital (sq. km) (sq. mi) (Millions)
Uttar Pradesh Lucknow 241,040 93,066 199.6
Maharashtra Mumbai 307,871 118,870 112.4
Bihar Patna 94,197 36,370 103.8 PUNJAB
West Bengal Kolkata 88,773 34,276 91.3
Andhra Pradesh Hyderabad 274,888 106,135 84.7
Madhya Pradesh Bhopal 307,617 118,772 72.6
UTTAR
Tamil Nadu Chennai 129,980 50,186 72.1 RAJASTHAN PRADESH
Rajasthan Jaipur 341,398 131,815 68.6
Karnataka Bangalore 191,632 73,990 61.1
Gujarat Gandhinagar 196,051 75,696 60.4
Orissa Bhubaneswar 155,938 60,208 41.9
Kerala Thiruvananthapuram 38,868 15,007 33.4
MADHYA PRADESH
Jharkhand Ranchi 79,629 30,745 33.0
Assam Dispur 78,512 30,314 31.2
Punjab Chandigarh 50,371 19,448 27.7 GUJARAT
Chhattisgarh Raipur 135,133 52,175 25.5
Haryana Chandigarh 44,246 17,084 25.4 MAHARASHTRA
Jammu & Kashmir Srinagar (Summer Capital) 101,201 39,074 12.5 ORISSA
Jammu (Winter Capital)
Uttarakhand Dehradun 53,528 20,667 10.1
Himachal Pradesh Shimla 55,744 21,523 6.9
Tripura Agartala 10,489 4,050 3.7
Meghalaya Shillong 22,455 8,670 3.0 ANDHRA
Manipur Imphal 22,309 8,614 2.7 PRADESH
Nagaland Kohima 16,644 6,426 2.0
Goa Panaji 3,700 1,429 1.5 KARNATAKA
Arunachal Pradesh Itanagar 81,330 31,402 1.4
Mizoram Aizawl 20,981 8,101 1.1
Sikkim Gangtok 7,066 2,728 0.6
India – Union Territories TAMIL NADU
(Listed in Descending Order of Population)
Area Area Population
Union Territory Capital (sq. km) (sq. mi) (Millions)
NCT of Delhi Delhi 1,483 573 16.8
Pondicherry Pondicherry 479 185 1.2
Chandigarh Chandigarh 114 44 1.1
Andaman & Nicobar Islands Port Blair 8,260 3,189 0.4
Dadra & Nagar Haveli Silvassa 491 190 0.3
Daman & Diu Daman 112 43 0.2
Lakshadweep Kavaratti 32 12 0.1
Source: Census 2011, Ministry of Home Affairs. Source: Wikimedia Commons.
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9. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Topographical Map of India
Emblem of
Andhra Pradesh
Topography of India - Detail Topographical Map of India
India contains a veritable kaleidoscope of terrains. Its overall
area encompasses just over one million square miles, yet the
country offers a rich topographical diversity of varied climatic
and ecological zones. The country possesses the highest
snowbound mountain range in the world, the Himalayas to the
north, the wettest spot on the planet, the Garo Hills of Meghalaya
on the east coast, humid tropical forests in the southwest, the
fertile Brahmaputra valley in the center, the low-lying mangrove
swamps of the Sunderbans, and the Thar desert with its ambient New Delhi4
sand dunes toward the west.
India’s terrain underscores its mystic and ethereal qualities, as
prehistoric crystalline rocks and lava created plateaus and rivers
that flow through the uneven western lands, forming beautiful
lagoons and backwaters, and traversing cliffs and coastal vistas,
all of which set a tantalizing backdrop for the aspirations and Kolkata
development of human society.
Source: Bureau of Indian Tourism.
Mumbai
Topography of India - Facts
Description Metric Hyderabad
Total Area 1.22 million sq. mi / 3.17 million sq km
Length of Coastline 4,670 mi / 7,516.5 km
Length of Mountain Range Himalayas, 1,490.4 mi / 2,398.1 km
Coordinates of New Delhi 28°36′50″N - 77°12′32″E
Bangalore Chennai
Highest Elevation Point Kanchejunga, 28,209 ft 9000
Lowest Elevation Point Kuttenad, -7.2 ft 6000
4000
Land Area Percentage 90.4%
2000
Water Area Percentage 9.6%
1000
Longest River Ganges-Brahmaputra, 1,557 mi / 2,505 km
250
Source: India 2011 – A Reference Annual, Publications Division, Ministry of Information and 50
Broadcasting; CIA World Factbook; www.wikipedia.org
Source: Wikimedia Commons.
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10. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Linguistic Map of India
Emblem of
Tamil Nadu
Ceiling stone
carvings, Vellore Fort
A Popular Sanskrit Verse Temple, Tamil Nadu
and its English Translation:
On this earth there is no better Source: Wikimedia Commons.
treasure than the donation,
No worse enemy than the temptation, Sanskrit and the Languages of India
No better jewelry than the beautiful
character and nature, Sanskrit is the oldest language in the world. The
No better wealth than the word Sanskrit literally means “perfected language”
contentment.
Source: www.tri-murti.com/ancientindia/index.html.
or “language brought to formal perfection.” The
Sanskrit alphabet is called “devanagari” and
literally means “cities of the gods.”
As of early 2012, the Indian constitution recognized
22 official languages and the Indian census
recorded over 200 different mother tongues.
States whose boundaries are based on languages
include: Kerala for Mayalam speakers, Tamil Nadu
for Tamil speakers, Karnataka for Kannada
speakers, Andhra Pradesh for Telegu speakers,
Maharashtra for Marathi speakers, Orissa for Oriya
Source: Wikimedia Commons.
speakers, West Bengal for Bengali speakers,
Quran inscriptions, Bara Gumbad
Gujarat for Gujarati speakers, Punjab for Punjabi
Mosque, Delhi speakers, and Assam for Assamese speakers.
Source: Wikimedia Commons.
Source: Bureau of Indian Tourism.
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11. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Select Versions of the Indian National Flag
Emblem of In Use Between 1612 and 1947
Rajasthan
Many aspects of India’s recent history
are reflected in its flags. The first flag
shown here is that of British India, in
use between 1612 and 1855. The
juggernaut of revolutionary freedom
bursts into stars, lotus flowers,
Devanagari script reading “Hail the
Motherland,” and pictures of the sun
and moon in the second two images.
Inscribed symbols of the British Empire British India 1906 1907
on the first two flags in the second row
underscore the country’s path toward
sovereignty. The spinning wheel
introduced by Gandhi as a national
symbol of non-violence and humility
takes root in the next three flags, as
India addressed different approaches to
creating and maintaining an
independent state in the pre-World War
Two era. The final flag, officially 1916 1917 1921
heralded in 1947, bears the twenty-four
spoked wheel known as the Ashoka
Chakra in the center. Official
specifications require that the flag be
made of “khadi,” a special and
exquisite type of hand-spun yarn.
The spectrum of colors in these flags
reflects the rich ethical cultures of
India: green, as the sacred color of the
1931
Muslims; red, as the holy pigment of 1931 1947
the Hindus; and golden saffron, as
revered by the Buddhists and the Sikhs.
Source: Our National Flag, by K.V. Singh, Ministry of Information & Broadcasting, Government of India, 1991; www.wikipedia.org.
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12. Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Introduction to Indian History
Although isolated from the rest of Asia by oceans on three sides and mountain ranges to the north, India has experienced a near-constant
influx of differing cultural influences, entering primarily via far northwest. As a result, India reflects wide regional diversity in cultures,
languages, foods, and customs.
Pre-History (30,000 – 1200 BC): Paleolithic (primitive stone tools) sites in India are scattered across the Indian subcontinent and date from
30,000 to 10,000 BC. The earliest Neolithic sites have been dated to 7000 BC and represent a transition toward agriculture, the
domestication of animals, wheel-thrown pottery, and a more sedentary population. The Nal Culture and the Kulli Culture of this era were
precursors to the Indus Valley Civilization also known as the Harappan Culture. The Harappan Culture represents the subcontinent's first
attempt at urbanization.
Early History (1200 – 600 BC): The Vedic Culture and its accompanying Vedic Texts mark the beginning of Indian history (defined as the
beginning of written accounts) and represent the first historical influx of foreign influence, in this case migrants known as Aryans thought to
originate from Central Asia. During this Vedic period, the Caste structure and the beginnings of the subcontinent's second and permanent
urbanization emerged.
Ashoka Pillar at Vaishali The Rise of States, Kingdoms, and Empires (600 BC – 1200 AD): As the urbanization of the Ganges River Valley progressed, kingdoms,
known as the Mahajanapadas began to form. Magadha, a Mahajanapada based in present-day Bihar, West Bengal, and Bangladesh, launched
The Maurya Empire was the Indian
the subcontinent’s first experiment in imperial administration, the Maurya Empire. While several empires followed, including the Gupta
subcontinent's first experiment with
Empire and the Buddhist Pala Empire, the Indian subcontinent was largely characterized by regional kingdoms that waxed and waned, with
imperial administration. The central
none attaining the level of the Maurya’s uniform authority throughout the subcontinent until the British Raj.
administration communicated its message
of laws and conduct through edicts The Islamic Sultans and Mughals (1200 – 1800 AD): Originating from Afghanistan, a Turkish, Afghan, and Arab army founded the
inscribed on conveniently located rock Islamic Sultanates that introduced Muslim influence throughout the culture of the Indian subcontinent. Another foreign invader, the
surfaces throughout the subcontinent and Mughals, originating from the Central Asian steppes but at the time ruling a kingdom in Afghanistan, reinforced this Muslim influence, and
more notably, through magnificent the fusion of cultures occurring during this period was physically manifested through original styles of art and architecture.
sandstone pillars polished to a remarkable Arrival of the European Trader (1500 – 1947 AD): Portuguese, English, French, and Dutch traders arrived on the Indian subcontinent to
luster. The Ashoka Pillar at Allahabad capitalize on the trade in spices already traversing the Arabian Sea and Indian Ocean. This trade grew to include other raw materials and
(not shown here), is noteworthy for eventually, the European powers expanded from their trading “factories” to acquire land and revenue rights. The British Crown maneuvered
inscriptions from not only the Maurya to become the dominant European presence and subsequently came to govern the entire Indian subcontinent.
Empire, but also from the Gupta Empire
and the Mughal Empire. Post-Independence India (1947 – Present): After a decades-long effort notably marked by Mahatma Gandhi’s non-violent and civil
disobedience demonstrations, the independent nation of India was born as the world’s largest democracy.
Historical Timeline of Select Indian Cultures, Kingdoms, and Empires
Date Indicates Approximate Start of Period
Mature Harappan Culture (p. 13) Mahajanapadas (p. 15) Gupta Empire (p. 17) Delhi Sultanates (p. 19) Maratha Empire (p. 21) Post-Independence India
ca. 2600 BC ca. 1200 BC ca. 600 BC ca. 320 BC ca. 320 AD ca. 750 AD ca. 1205 AD ca. 1525 AD ca. 1675 AD ca. 1755 AD 1947 AD
Vedic Culture (p. 14) Maurya Empire (p. 16) Pala Empire (p. 18) Mughal Empire (p. 20) Company Rule and British Raj (p. 22)
Source: Morgan Stanley Smith Barney Investment Strategy; The Wonder That Was India, by A. L. Basham, Picador, 2004; Early India: From The Origins to AD 1300, by
Romila Thapar, University of California Press, 2004; India: A History, by John Keay, Grove Press, 2000; www.wikipedia.org; Wikimedia Commons. 12
Please refer to important information, disclosures, and qualifications at the end of this material.

13. Please See Page 7 for a Complete List of Dynasties
Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Bronze Age: Mature Harappan Culture
(2600 – 1500 BC)
Brief History Symbols, Art, and Culture
• Centered around the two cities of Mohenjo-Daro and Harappa in the • Harappan Seals
present-day provinces in Pakistan of Sindh and Punjab, respectively, the Often made of Steatite, small, flat, square and oblong-shaped seals
Harappan Culture extended its influence to cover an extensive region, with are thought to be identifying tokens for authorities and trade. The
sites as far North as Shortugai in the Pamirs (present-day Northern seals depict human and animal figures accompanied by an inscription
Afghanistan) and trade activity with Mesopotamia. in a language as yet undeciphered, with the only consensus being that
• The Harappan Culture represents the first attempt at urbanization in the it should read from right to left. The presence of Harappan seals in
Indian subcontinent, as trade in the cities was driven by activity in the various parts of the ancient world are tangible indicators of the extent
countryside to provide surplus food and raw materials such as copper, semi- of Harappan trade.
precious stones, lapis, and timber.
• Carnelian Beads
• The decline of the Harappan Culture was initially attributed to invading An extensive bead-making industry developed in Harappan cities,
Aryans; with little archeological evidence to support the large-scale with beads made from various materials such as gold, copper, shell,
invasion theory, it appears more likely that urban decline was driven by semi-precious stones, steatite, and ivory. Etched beads of carnelian, a
environmental changes, small-scale migration of Indo-Aryan speakers and brownish-red mineral, were a characteristic Harappan object.
rural squatters, and generalized de-urbanization.
Harappan Cities of Mohenjo-Daro and Harappa • Bronze “Dancing Girl,”
• The two cities of Mohenjo-Daro and Harappa are the largest excavated While utilitarian architecture and an absence of monumental
cities of the Indus civilization. Some of the larger cities cover an area of sculpture suggest a society less focused on artistic pursuits, several
approximately 100 hectares (247 acres), and it has been suggested that examples of Harappan artworks exist on a small scale, including
Mohenjo-Daro covers an area of 200 hectares (494 acres). seals, impressively naturalistic models of animals, and striking
• Harappa and Mohenjo-Daro were built on a similar plan, with a raised figurines such as the bronze “dancing girl” shown here.
citadel in the west which housed essential civic institutions.
• The street grid was oriented approximately to the cardinal directions with Accomplishments
some as wide as 30 feet. • Urbanization: The Harappan Culture embarked on the Indian subcontinent’s first
attempt at urbanization and successfully designed cities on a grid pattern with
• The majority of houses followed
impressive uniformity throughout the Harappan sphere of influence.
a similar plan, often of two stories
or more, 30 feet square, with a • Sewerage System: A city-wide sewerage system funneled waste water from in-house
central courtyard surrounded bathrooms into soak pits via sewers built underneath the main streets and covered
by rooms. with kiln-fired brick. This design is considered to be the most-efficient drainage
Mohenjo-Daro, system until that of the Romans.
The Great Bath
Source: The Wonder That Was India, by A. L. Basham, Picador, 2004; Early India: From The Origins to AD 1300, by Romila Thapar, University of California Press, 2004;
India: A History, by John Keay, Grove Press, 2000; www.wikipedia.org; Wikimedia Commons. 13
Please refer to important information, disclosures, and qualifications at the end of this material.

14. Please See Page 7 for a Complete List of Dynasties
Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Bronze Age: Vedic Culture
(1200 – 600 BC)
Brief History Symbols, Art, and Culture
• The history of the Vedic Culture consists primarily of information gleaned • Music and Leisure
from the sacred texts of which this civilization is attributed authorship, the As illustrated by numerous references to a variety of musical
Vedas. The earliest Vedas often refer to the Sapta-Sindhu (“The Land of instruments in the Vedic texts and the knowledge of sound, tone, and
the Seven Rivers”). These rivers are commonly believed to be tributaries of
pitch essential to the chanting of the Samaveda, music played a
the Indus River, suggesting that the earliest Vedic people, or Aryans as they
significant role in the Vedic Culture. Aside from music, leisure time
are often called, settled near the present-day Indo-Pakistan frontier.
was spent singing, dancing, and gambling (with the casting of dice
• The Doab, the crescent of land between the Yamuna River and the Ganges apparently an especially favored pastime).
River, figures prominently in later Vedic texts, suggesting further migration
eastward. • Emergence of a Caste System (“Varna”)
• It is commonly assumed that this migration continued eastward and as the The Vedic texts illuminate the beginnings of a Caste system which was commonly
people of the Vedic Culture settled in the Ganges River Valley, they believed to be an institutionalized way of maintaining social order prior to the
eventually followed the path of the Harappa towards an urbanized society, development of states and their accompanying laws. The initial four Castes included:
laying the foundation for the Mahajanapadas (“Great Clan Territories”) to – Brahmans: The priesthood to which were attributed crucial mystic powers,
follow. through their monopoly of knowledge of the Vedic texts and the rituals which
• Based on the Vedic texts, earlier theories from historians suggested that the had become a central part of Vedic Culture, including those necessary for the
Aryan migration eastward was accompanied by pitched battles, with the validation of Rajas (“chiefs”)
Aryans conquering all villages in their path atop their mounted chariots, a – Ksatriya: Warrior families from which a Raja would be chosen
weaponry system new to the subcontinent. However, more recent opinions – Vaisya: Those employed in wealth-generating pursuits including agriculture,
hold that the Aryan expansion was more consistent with multiple waves of trading, and industry; this wealth was to be generated in support of the
small-scale migration. Brahman and Ksatriya Castes
• The Aryans were believed to initially be pastoralists, interacting with the – Sudra: Those expected to furnish labor; initially, mainly consisting of those of
indigenous, sedentary communities in mixed encounters, some indigenous descent, referred to as dasa in the Vedic texts
confrontational, others negotiated.
Accomplishments
• Eventually, clans settled in fixed geographic areas and a process of • The Vedas: The Vedic Culture orally composed and later compiled in written form
assimilation ensued, with the Vedic-equipped Aryans coming to govern the earliest known literature on the Indian subcontinent, the Vedas. The Vedas, the
over the indigenous populations, as illustrated by the Caste system that earliest of which was the Rigveda, thought to have been composed sometime in the
developed during this time. As the process of assimilation matured, the second half of the Second millennium BC, were the sacred texts of Vedic
Caste distinctions changed from being based on language, ritual, and Brahmanism of the time and are the oldest canonical texts of the Hindu religion. The
custom to being based on a more simplified premise of certain groups being four Vedas include (See Page 33 for more detail):
entitled to respect and other groups being obligated to subordination.
– Rigveda – Samaveda
– Yajurveda – Atharvaveda
Source: The Wonder That Was India, by A. L. Basham, Picador, 2004; Early India: From The Origins to AD 1300, by Romila Thapar, University of California Press, 2004;
India: A History, by John Keay, Grove Press, 2000; www.wikipedia.org; Wikimedia Commons. 14
Please refer to important information, disclosures, and qualifications at the end of this material.

15. Please See Page 7 for a Complete List of Dynasties
Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Iron Age Kingdoms: Mahajanapadas
(600 – 300 BC)
Brief History Symbols, Art, and Culture
• Toward the end of the period of the Vedic Culture, a second wave of • Emergence of New Religious and Philosophical Sects
urbanization in the Indian subcontinent, the first being that of the Harappan As urbanization and its accompanying social changes began to have
Culture, began to spread across Northern India spurring the growth of an effect on society, new philosophies emerged to address issues
kingdoms and republics, sixteen of which would come to be known as the insufficiently addressed by traditional Vedic Brahmanical ideas.
Mahajanapadas (“Great Clan Territories”). Parks and groves on the outskirts of towns, known as kutuhala-
• The Mahajanapadas included Kasi, Kosala, Anga, Magadha, Vrijji (or shalas, literally, the place for creating curiosity, attracted audiences
Vajji), Malla, Chedi, Vatsa (or Vamsa), Kuru, Panchala, Machcha (or who observed philosophers debate competing ideologies, a distinct
Matsya), Surasena, Assaka, Avanti, Gandhara, and Kamboja. feature of urban living and a sharp contrast from the private
discourse of Vedic thought among Brahmans. Buddhism and Jainism
• After subjugating the rival kingdoms of Kasi and Kosala as well as the are two sects from this period which developed into international
Vrijji confederacy of republics, the Mahajanpada of Magadha came to religions.
dominate the Ganges plain, capitalizing on control of the increased trade
activity along the Ganges and Yamuna rivers to lay the foundations for the • The Fall of Republics and the Rise of Kingdoms
subcontinent’s first imperial power, the Mauryan Empire. Prior to the proliferation of kingdoms, a form of governance characterized by a
centralized government with the ruler’s sovereignty as its basis, it is believed that the
clan-based Vedic Culture led to the development of gana-sanghas, chiefdoms and
Important Personages
oligarchies considered to be republics. One of the more notable examples was the
• Siddhartha Gautama • Mahavira (ca. 599 – ca. 526 BC) Vrijji confederacy, a collection of allied gana-sanghas which eventually succumbed
(ca. 566 – ca. 486 BC) Considered by Jains to to the Magadha kingdom. Within the new construct of kingdoms, loyalty shifted from
Also known as Gautama clan to Caste and king. A peasant economy began to emerge as those who produced
Buddha, or Buddha, Siddhartha
be the 24th and last
tirthankara (“prophet”), and those who ruled were no longer connected through kinship ties and voluntary
Gautama is considered the
responsible for the tributes to those in power became compulsory taxes collected to support a
founder of Buddhism after
achieving enlightenment and present-day form of professional administration and army.
discovering the “Middle Path.” Jainism. Accomplishments
• Urbanization and Enabling Technologies: During the time of the Mahajanapadas,
• Bimbisara (ca. 558 – ca. 493 BC) • Mahapadma Nanda urbanization gained a permanent foothold on the Indian subcontinent. A key enabler
(ca. 450 – ca. 362 BC) of urbanization is the presence of a surplus in food production which is believed to
The first Magadha king of
have been brought about by technological advancements including: (i) the
importance, Bimbisara, through The founder of the Nanda Dynasty of
introduction of wet-rice cultivation (enabled by improved irrigation), which yielded
strategic marriages and successful the Magadha Kingdom and the first
a substantially larger harvest than previous methods; and (ii) the wider introduction of
conquests, initiated the Kingdom of king drawn from the Sudra Caste.
higher quality iron tools which not only led to more effective agricultural
Magadha’s rise to prominence.
implements but also extended into various other construction and craft activities.
Source: The Wonder That Was India, by A. L. Basham, Picador, 2004; Early India: From The Origins to AD 1300, by Romila Thapar, University of California Press, 2004;
India: A History, by John Keay, Grove Press, 2000; www.wikipedia.org; Wikimedia Commons. 15
Please refer to important information, disclosures, and qualifications at the end of this material.

16. Please See Page 7 for a Complete List of Dynasties
Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Iron Age Kingdoms: Maurya Empire
Key
Dynasty (321 – 181 BC)
Brief History Symbols, Art, and Culture
• The Mauryan Empire began to coalesce into existence upon • Dhamma and Ashoka’s Pillar and Rock Edicts
Chandragupta’s conquest of the outlying provinces of the Nanda Dynasty, After consolidating the Mauryan Empire’s control over the Indian
the then torchbearer of the Magadha Kingdom. Eventually, Chandragupta subcontinent, Ashoka set out to instill a group of unifying principles,
besieged the traditional Magadha heartland and successfully installed known as dhamma, across his empire which would represent a
himself as the new leader of Magadha-based Kingdoms. common thread uniting the diverse populations under his rule. The
• After defeating the hostile kingdom of Kalinga on India’s eastern coast concept of dhamma, above all, emphasized tolerance toward people
(present-day Odisha), Chandragupta’s grandson, Ashoka, also known as and their beliefs and ideas. While Ashoka’s effort fell short of
Ashoka the Great, renounced further conquests and turned his attention to creating a universal social attitude where the ethical behavior of one
person toward another was the primary concern in any social
effectively governing the diverse cultures within the Mauryan Empire, from
interaction, the mere attempt of such a feat is notable and unique.
the Persian-Hellenistic population in the Northwest, to the Kalingans in the
The Lion Capital
East, to the Tamil-speaking population in the South, among others. of a Pillar Edict The means by which Ashoka communicated his message of dhamma
was through the Minor and Major Rock Edicts, edicts inscribed on
• The vastness of the Mauryan Empire demanded strong central leadership
strategically located rock surfaces (boulders and cave walls), and the
from its king; however, after the death of Ashoka, a series of ineffective Pillar Edicts, edicts inscribed on well-polished sandstone monolithic
rulers led to the quick decline of the Empire as outlying areas succumbed to pillars surmounted with an animal capital. The Pillar Edicts, meant to
foreign control or rebellious local leaders, and control of the Magadha draw attention to their message, also represent an artistic statement
heartland was usurped by the newly-formed Sunga dynasty. by the Empire, and reflect the advances in stone-cutting, carving, and
A Rock Edict polishing techniques.
Important Personages on a Boulder
• Ashoka The Great (304 – 232 BC)
Ashoka, also known as Ashoka the Great, was the third ruler of the Accomplishments
Mauryan Empire, and the last leader of any importance. Ashoka ruled for • Unification and Administration of the Indian Subcontinent: The Mauryan Empire
37 years and maintained relative peace on the Indian subcontinent. After embarked on the first experiment of imperial governance in India. While
witnessing the suffering caused by his conquest of Kalinga, Ashoka acknowledging that the centralized government described in the Arthashastra was
became a practicing Buddhist and renounced further conquests. Ashoka is likely more of an ideal than a reality, it is generally believed that the Mauryan Empire
notable as a historical figure for his commitment to distilling a social employed a complex administrative system to effectively manage, and expand, the
ethic, transcendent of any one religion, throughout his empire. empire’s resources. The predominantly agrarian economy of Northern India was
expanded and then taxed on the area of land cultivated as well as the produce. The
• Kautilya (ca. 370 – ca. 280 BC) State encouraged the expansion of various craft associations and commercial
According to tradition, Kautilya, also known as Chanakya, is the author of exchange, with the accompanying increases in tolls and duties flowing to the treasury.
the famous Indian treatise on statecraft, Arthashastra. Kautilya is also Entire communities were relocated to found new settlements and, ideally, became a
believed to have been Chandragupta’s mentor and guide in acquiring the greater source of revenue. These efforts represent a proactive attempt to restructure
throne from the Nanda Dynasty and subsequently in maintaining and the economy, a hallmark of any empire that needs to maximize revenue to support the
expanding the Mauryan Empire. empire’s administration.
Source: The Wonder That Was India, by A. L. Basham, Picador, 2004; Early India: From The Origins to AD 1300, by Romila Thapar, University of California Press, 2004;
India: A History, by John Keay, Grove Press, 2000; www.wikipedia.org; Wikimedia Commons. 16
Please refer to important information, disclosures, and qualifications at the end of this material.

17. Please See Page 7 for a Complete List of Dynasties
Morgan Stanley Smith Barney BACKGROUND
Investment Strategy
Middle Kingdoms: Gupta Empire
Key
Dynasty (320 – 510 AD)
Brief History Symbols, Art, and Culture
• Thought to originate as a principality in the Western Ganges Plain, the • Literature
Gupta family began its ascension to power when the patriarch of the During the Gupta period, Classical Sanskrit became the popular language of the
dynasty, Chandra Gupta I married into the Lichchhavi family which government and the elite continuing as such through until the early Second
controlled a kingdom in present-day Nepal. Millennium AD. A wealth of creative literature was composed during the Gupta
• Samudra Gupta and Chandra Gupta II, the son and grandson, respectively, period and Kalidasa, generally regarded as one of the greatest poets and dramatists
of Chandra Gupta I would, from the empire’s base in Magadha, expand the of the subcontinent, is believed to have composed his famous works including
Gupta Empire to include all of Northern India and to extract homage from Meghaduta, a lyrical poem, and Abhijnana-shakuntala, a drama, during this time,
kingdoms in the Deccan and the South. along with other notable writers including Bharavi, Shudraka, and Vishakhadatta.
• The Gupta Empire began its decline in the mid-Fifth Century AD after the
death of the son of Chandra Gupta II, Kumara Gupta, whose successors • Art
could not defend the Gupta Empire as successfully as Kumara from the Sculpture and painting achieved classical heights as the two
repeated invasions from a branch of the White Huns, the Hephthalites. The professions were increasingly looked upon with great esteem.
court rivalries and breakaway feudatories that often seem to accompany an Sculpture during the period is known as Gupta
increase in pressure from foreign invaders further weakened the empire. Sculpture and is characterized by soft contours,
restrained ornamentation, and dignified repose.
The stylistic quality in painting of the period is
epitomized by the wall painting in the Ajanta
Important Personages Caves, thirty rock cut caves which contain
A Sculpture A Painting
Buddhist art.
• Chandra Gupta II ( Unknown – 415 AD) of Standing Buddha in the Ajanta Caves
Chandra Gupta II ruled from 375 AD through 415 AD • Science
and it is generally considered that the Gupta Empire Mathematics, astronomy, medicine, and astrology, among other disciplines, all
reached its zenith during his reign due to his expansion flourished within the formal education systems extant in Brahman ashramas
of the empire into Western India (present-day Gujarat) (“hermitages”) and Buddhist and Jaina monasteries. Notable achievements include
after conquering the Shakas, and for his generous the remarkably accurate calculation of the solar year (365.3586805 days) and the
A Gold Coin patronage of literature and the arts which set the stage calculation of pi to four decimal places (3.1416).
from Reign of
for a classical period on the Indian subcontinent wherein
Chandra Gupta II Accomplishments
even the minted gold coinage could be described as a
• Fostering a Classical Period: Under the rule of the Gupta Empire and with the
miniature piece of sculpture.
support of its patronage, literature, art, and science on the Indian subcontinent
achieved impressive heights, leading the period to often be described as a classical
epoch of Indian history.
Source: The Wonder That Was India, by A. L. Basham, Picador, 2004; Early India: From The Origins to AD 1300, by Romila Thapar, University of California Press, 2004;
India: A History, by John Keay, Grove Press, 2000; www.ccrtindia.gov.in; www.wikipedia.org; Wikimedia Commons. 17
Please refer to important information, disclosures, and qualifications at the end of this material.