The Rise of India in World Trade

The Rise of India in World Trade Chris Callen, Country Manager, DHL Express - Jan 28, 2004

Agenda • India‘s International Trade Situation • DHL Trade Confidence Index • International Logistics • Building “Brand India “ • Becoming World Class in India

India’s International Trade 2002/03 • Exports • US $51.7 billion • Growth 18% • next only to that of China at 22% • second highest among world’s 30 leading exporters in world merchandise trade during the year 2002 • Imports • Growth 17.03% • Share of world trade • 0.8%

Getting Ahead “If the present trend continues, we may reach our often stated goal of achieving 1% of world merchandise tradeahead of the year 2007…” Arun Jaitley Union Minister of Commerce & Industry 31 March, 2003

With the rupee rising against the dollar and the global slowdown in world trade over the past few months, is there cause for concern?

GDP – Regional comparison • India has recorded one of the highest growth rates in the 1990s • Among the largest economies in the world, its GDP is close to US$ 500 billion • Only China has had GDP growth higher than India

10% 23% 9% 36% 18% 44% 117% 39% 57% 101% 142% 45% Merchandise Exports vs GDP • Thailand, Malaysia, Indonesia all export more than India !

India Rising -- Challenges • WTO, Asean Free Trade Agreement (AFTA), Bi-lateral FTAs • Ground Infrastructure • Golden Quadrilateral Highway network • New FTZs and enhanced transhipment facilities • Liberalised air traffic rights • Duty structures – among the world’s highest • Air Express self-handling – elimination of monopolies in statutory service providers

How do exporters view the situation?

Q1 Q2 DHL Trade Confidence Index All India • The DHL Trade Confidence Index (TCI) at an all-India level is 61 (Q2’- Sep03), up from 58 (Q1- Jun03), driven by a very optimistic 72 points in general demand conditions. • Factors contributing to this movement include optimistic demand conditions, better domestic conditions & optimism about the macro-economic state • The factors where no significant change is seen include Attitude of US Customers, Impact of WTO, Exim Policy & Order Expectations • The Exporter view on General Demand conditions, has become more optimistic, with almost 72% rating them as favourable as compared to 53% in the last quarter

Q1 Q2 …DHL Trade Confidence Index Apparel Sector • Confidence among Textile / Garment exporters is even higher: The DHL Apparel Trade Confidence Index has moved up to 63 (Q2 - Sep03), from 58 (Q1-Jun03) • Factors contributing to this upward movement include optimistic Demand conditions, better Domestic conditions, optimism about macro-economic state & Policy context • Factors that seem to have moved down on confidence include Attitude of US Customers & Impact of NTMs • Optimism in Exporter view of the General Demand Conditions, shown here, has moved up to 80% from 60% in the previous quarter

…DHL Trade Confidence Index Analysis • So, the DHL Trade Confidence Index moved up by 5% in Q2-Sep03, despite the fact that month on month, export growth began to slacken. Dr Debroy’s view of the possible reasons for this apparently paradoxical finding include: - Time lag in perceptions reacting to objective reality - Better domestic conditions biasing the results - Exporters are unduly optimistic about seasonal demand conditions • The upward movement in our Index can be ascribed more to better domestic economic conditions & this has negated the impact of certain negative developments internationally • But there is no reason to despair… even if we get 8% growth in 2003-04 it will be respectable… and the target of 1% share of global trade appears fairly modest

Courier Air Express Emerging Trends • Growing cross-border trade • More cross-border production to take advantage of lower costs/new markets • Greater liberalisation of trade policies & tariffs through WTO • Major shift by global companies to source, produce and distribute from emerging economies like India • Greater need for dedicated air express freighters • Less reliance on under- floor space of passenger aircraft & dictated schedules • Enhanced schedules to meet shortened transit times

Air Express Logistics Solutions …Emerging Trends • Challenge of Breaking the Time Barrier Further • Businesses demanding faster and more time-definite deliveries • Need shortest “Time- to- Market” • Shorter Product life cycle • JIT processes and express transport key to supply chain logistics • Lower inventory holdings • Greater outsourcing of logistics services to integrators, 3PL/ 4PLs

The Path Ahead • Is India is at a point of inflection where it can take a significant share and role in world trade? • “There is no better time to be an Indian in this world” • Two things critical for India to go forward strongly : • Position India as a good place to do business in • Position India as a place for manufacturing excellence • These two are not easy-wins since the task is not one of positioning alone – at least in many key sectors • In marketing terms – India is not at the stage for aggressive ‘branding’ – but a stage for solid ‘product development’ • But brand is very important – not at the country level but at the individual company level

Branding • What came first : Sony or Japan, LG or Korea ? • Building world-class brands is the responsibility of each and every business – and the country has a smaller role in it • The country responsibility is In making India an easy and good place to do business with ! (whether it is for Indian companies or MNCs) • Infrastructure, labour reforms, primary education, borderless states, debilitating levels of corruption – all of them need to be managed with a far greater urgency. • Individual companies will get enormous opportunities in the world market – as trade barriers topple around the world.

Quotas in Apparel & textile Trade • China’s growth has been spectacular in areas where quotas have recently been removed by USA (Source : US Intl. Trade Commission) • For example : • Bras & foundation garments (Category 349/649) : 232 % • Knit Fabrics (Category : 222) : 21,976 % • Infant wear (Category : 239) : 826 % • Robes and dressing gowns (Category : 350 /650) : 540 % • Clearly, as trade regimes liberalise worldwide, new opportunities will open up for businesses which have world class manufacturing excellence with vertically integrated skills! • Don’t bother too much about ‘Brand India’, focus on building world class manufacturing excellence in our individual businesses – grow your own brand!

Mature Unique Mid-Level Developing Hong Kong Singapore Japan Australia New Zealand Korea Taiwan China Malaysia Thailand Indonesia Philippines India Sub-Continent Vietnam Cambodia Laos Myanmar Etc Asia-Pacific Logistics Overview Markets • Developed Logistics • High Competition • High Service levels • Lead time pressure • Lower Growth • Rapid Development • Undeveloped domestic • Increasing service levels • High Growth • Developing sophistication • Increasing competition • Increasing service levels • Varied Growth • Poorer infrastructure • Lower competition • Customs • Ownership Issues • High Growth Characteristics

Building a Strong Infrastructure • Four Gateway Strategy – four state-of-the-art Express Handling Units for seamless self-handling of Air Express shipments at major airports • First 26,000 sq ft facility now operational in New Delhi; only dedicated facility of its kind in India • Similar facilities planned in Mumbai, Chennai and Bangalore • 12 Spare Parts Centres across major cities • Modern, technologically superior Service Centres • 300-strong fleet of new vehicles, the largest of its kind in India, linked in real time to our data network. • Globally integrated sophisticated IT infrastructure for real time supply chain management and tracking. • 24-hour country-wide toll-free customer service call centre.

Building a Strong Infrastructure • Like you, many challenges we face are regulatory or bureaucratic – some we have overcome, some we are still battling, most of are unique to India: • On-board-courier • Gateways at Airports • 24-hour Customs in-premise • Indian Post Office (Amendment) Bill, 2002 • Our investments are significant and we hope to provide the kind of logistics support which is truly world class. We’re getting there. • We are leading the way – we have 70% of the international air express market in India, and over 20,000 exporters and importers in our customer base here ! • Invest, excel, promote.

THANK YOU

The Rise of India in World Trade