China Import Forum 2013

1. China Import Forum 2013 Presentation on Indian Industry

2. Introduction • First I will give a brief outline about the overall scenario of Indian Economy followed by a snapshot of the trade between India and China and the investment opportunity. I shall then discuss about some specific promising industries where there exist huge opportunities for growth and investment.

3. Indian Economy • -India’s economy has been one of the fast growing economies of the world. It is the third largest economy of the world in terms of purchasing power parity. From 2004 to 2011, India’s quarterly GDP growth rate averaged over 8%. The overall growth in GDP in 2010-11 was 8.5%. • -India enjoys immense geographical advantage as a hub for serving the South Asian, Middle East, European and African markets. • -The Indian economy is characterized by strong macro-economic fundamentals. We have a well-developed financial system, young and qualified labor force, dynamic private sector and growing savings and investment rate. • -We see both trade and investment to play a big role in driving economic growth, as it has done for China. Trade accounts for 43% of GDP right now. Our objective is faster and inclusive growth.

4. INDIAN ECONOMY- KEY CHARACTERESTICS • 9th largest economy in terms of nominal GDP and 3rd largest in terms of purchasing power parity (PPP)

5. INDIAN ECONOMY- KEY CHARACTERESTICS • 9th largest economy in terms of nominal GDP and 3rd largest in terms of purchasing power parity (PPP)

6. Bilateral Trade • -In so far as the question of bilateral relationship is concerned, India and China have developed stable and close relationship over the last 30 years. A strong component of our partnership is trade and economic relationship between our two countries which has seen spectacular growth over the last few years. The bilateral trade which was US$3billion in 2000 has reached US$ 67 billion in 2012 and the target to realize is to increase the bilateral trade to US$100 billion by 2015.

7. India-China Bilateral Trade (All figures in US$ billions)

8. Overview of Indian Industries • Over the years agriculture has been the major source of livelihood of the Indian population. However, after Independence the founding fathers saw the nation progressing with a decent industrial base. This triggered the formulation of programs and strategies to construct a proper infrastructure for speedy industrialization. • Post 1980s India saw industrial liberalization which achieved further impetus in mid-1991.For formulation and implementation of industrial policy and strategies for industrial development the Department of Industrial Policy & Promotion was established by Government of India in 1995. With progressive liberalization of the Indian economy, initiated in July 1991, there has been a consistent shift in the role and functions of this Department. The DIPP is also responsible for formulation of the FDI policy and facilitation of FDI inflows into the country. • -Since its liberalization policy India has opened several public sector enterprises. India has been successful in achieving autonomy in producing different basic & capital products. • Industry today accounts for 27% of India’s GDP as compared to 47% of China’s.  Manufacturing accounts only for 16%.  • -I shall now discuss about a few industrial sectors which have huge potential of growth and investment

9. Automotive • -The automotive sector in India, comprising of the automobile and auto component sub sectors, is one of the key segments of the economy having extensive forward and backward linkages with other key segments of the economy. • -It contributes about 4% to India’s Gross Domestic Product (GDP) and 5% to India’s industrial production. • -Favorable demographics ( 60% of 1.2 billion people are below 30 years of age), expanding population, abundant availability of skilled talent, and a maturing automotive components segment have propelled India-based automotive companies to play an important role globally. • -While international companies are eyeing India for top line growth, the country also remains a favored outsourcing hub for many automotive multinationals. • -India has a well-developed, globally competitive auto ancillary industry and has established automobile testing and R&D centers. The country enjoys natural advantage and is among the lowest cost producers of steel in the world.

10. Heavy Engineering • At present, the heavy engineering industry, including machine tools contributes 12% to the total manufacturing activity and provides critical input, i.e. machinery and equipment to the remaining sectors covered under the manufacturing activity. • India ranks first in the field of engineering research & development & design outsourcing industry. • -In ER & India has 22% share of global revenues in ER&D • engineering exports constitute 25% of India’s overall exports.

11. Power Equipment • -There are about 675 manufacturers of electrical machinery in India including Heavy electrical power generation Equipment like Boiler, Turbine & Generator sets. Nearly 90% of them are small &medium manufacturers. • -The State-owned Bharat Heavy Electricals Limited (BHEL) is the largest manufacturer of electrical and power equipment. The Product range includes transmission line towers, HT Switchgear, transformers, motors (FHP, LT, HT & DC), AC generators, conductors, capacitors, cables, energy meters, etc. • -The performance of the power equipment industry is closely linked to the addition in power generation capacity. Huge investments have been planned in augmenting the power generation capacity in the country, but, the power equipment manufacturing industry has not kept pace with the overall growth in power production.

12. Textile Machinery • -The Indian Textiles Industry contributes 14% of industrial production, 4% of GDP and 10.63% of country’s export earnings and provides direct employment to over 35 million people. • -Government of India has projected to increase the country’s share of textiles and apparels in world trade from the current level of 4.5% to 8% and reach exports of US$ 80 billion by 2020. • -With the government planning to develop India into a textile hub, the industry will be investing heavily in new textile machinery, particularly in areas like weaving, processing, special process finishing machines (plasma finishing), high-speed knitting and garmenting machineries etc • -The textile machinery industry is a significant component of the capital goods industry. The industry comprises of 1,446 units of which 598 units produce complete machines and about 848 units are producing parts and accessories as well as equipment for testing and monitoring of fibers and textiles.

13. Electronics • -At present about two-thirds of domestic electronic components demand is met through imports. Moreover, India’s electronics hardware production constitutes only around 1.31% of the global production. • -The global electronics industry is one of the fastest growing in the world and demand in the Indian market is expected to touch US$ 400 billion by 2020. • -Since India’s domestic production is projected to account for only US$ 100 billion, the electronics sector provides very a good opportunity for investment. The size of the manufacturing opportunity lies in the gap between the expected demand in the country and the rate of domestic production. • -India’s electronics industry is expected to grow at 22% per year, which is 7 times the global rate. The primary demand drivers are sectors like telecom, defense, IT and e-governance, automotive, consumer electronics, and energy. • -With large pan-India government projects such as the national optical fiber network, the national knowledge network and e-governance programs, the move is expected to open up huge opportunities for domestic production and foreign investment in the electronics sector. • -Moreover, the cable TV digitization, mandated by the government, is expected to spur demand for Set Top Boxes as well as High Definition Television sets. Demand for low cost innovative products such as touch-screen tablets for education and medical devices are other demand drivers.

14. Pharmaceuticals • -The annual turnover of the Indian Pharmaceutical Industry reached US$ 20 billion) during the year 2010-11. • -The share of export of drugs, pharmaceuticals and fine chemicals is more than US$ 8.6 billion. • -By 2020, the Indian pharmaceutical market is expected to touch sales of US$ 74 billion. • -The size of India’s drug formulation market is about US$ 10.3 billion and it ranks third in volume and 10th in value globally. • -India is one of the largest vaccine producers in the world and exports to about 150 countries. It also meets around 40-70% of the WHO demand for DPT (diphtheria, pertussis or whooping cough and tetanus) and BCG (bacilli calmette-guerin) vaccine against tuberculosis and almost 90% of its demand for the measles vaccine. • -The strength of the Indian Pharmaceutical industry is in developing cost effective technologies in the shortest possible time for drug intermediates and bulk activities without compromising on quality. This is realized through the country’s strengths in organic chemicals’ synthesis and process engineering. • -Many Indian companies maintain high standards in purity, stability and international safety, health and environmental protection in production and supply of bulk drugs. This speaks of the high quality standards maintained by a large number of Indian Pharma companies. • -India’s pharmaceutical sector is gaining a global leadership position and Indian generics today constitute nearly a fifth of global supplies. • - Indian drug-makers are looking to building relationships with global Pharma companies for joint research and development and widening distribution networks through marketing alliances. Other potential thrust areas include bio-pharmaceuticals, contract research and manufacturing, and new drug research

15. Food Processing Industry • -The US$ 135 billion food processing industry in India is projected to grow at a compound annual growth rate of 10% to reach US$ 200 billion by 2015. • - Food processing industry in India is supported by a great agro-climatic diversity suitable for round the year cultivation of crops. In terms of production, India is among the world’s major food producers. • -The country accounts for 17% animal, 12% plant and 10% fish genetic resources of the globe; and 16% of cattle, 57% of buffalo, 17% of goats and 5% of sheep population of the world. These numerous advantages and factor conditions like low cost of labor put India in an enviable position to produce a wide variety of food crops and commercial crops for domestic consumption as well as export. • -The Indian Foods & Beverage industry is poised for a significant leap forward. The total food production in India is expected to double in the next ten years and there is ample opportunity for huge investments in food and food processing technologies, skills and equipment. • -An estimated investment of US$ 17.5 billion is required in the food processing industry to achieve the goals projected in India’s Vision 2015. • -Investments are needed in various stage of the supply and value chain, proper research, farm and lab connectivity, up-gradation of technology, skill and manpower training,

16. Rubber Machinery Industry • -There are about 10 units for the manufacture of rubber machinery mainly required for tire / tube industry. • -The fast growth of the automobile industry is driving the growth of the rubber machinery industry. • - The tire market in India is expected to grow at a compounded annual growth rate (CAGR) of 12% between 2011 and 2015. One of the key factors contributing to this market growth is the growing demand for automobile products. The tire market in India has also been witnessing the emergence of tubeless tires and growing demand for radial tires.

17. Initiatives by Government of India • -In October 2010, the Government of India announced India’s new “National Manufacturing Policy” with the objective of enhancing the share of manufacturing in GDP to 25% within a decade and creating 100 million jobs. • -The Policy envisages specific interventions broadly in the areas of industrial infrastructure development through the creation of large integrated industrial townships called National Investment and Manufacturing Zones (NIMZs); improvement of the business environment through rationalization and simplification of business regulations; development of appropriate technologies for sustainable growth • -Indian Government has established several special zone schemes to encourage export-oriented enterprises. These include Special Economic Zones (SEZ), Export Processing Zones (EPZ), Software Technology Parks (STP), and Export Oriented Units (EOU). These schemes are governed by separate rules and granted different benefits. • -SEZs are treated as a foreign territory, allowing businesses operating in SEZs to operate outside the domain of the customs authorities, avoid FDI equity caps, receive exemptions from industrial licensing requirements, and enjoy tax holidays and other tax breaks. • -EPZs are industrial parks with incentives for foreign investors in export-oriented businesses. • -STPs are special zones with similar incentives for software exports.

18. Investment opportunities • -With its large scale investment absorption capacity and with strong economic fundamentals India offers attractive returns to prospective investors. India with its consistent growth, abundant skilled manpower, a well developed banking system, and vast market provides enormous opportunities for investment. • -India welcomes investment by Chinese enterprises in infrastructure and manufacturing and other sectors, where there are tremendous opportunities for Chinese enterprises to investment. • -India is keen to expand rapidly its manufacturing sector, which again presents a vast opportunity for Chinese investors. Almost all the sectors of Indian economy are open for Foreign Direct Investment (FDI) with sectoral limits and stipulations. • -Nearly 100 Chinese companies have established offices/operations in India. Many large Chinese State-owned companies in the field of machinery and infrastructure construction have undertaken projects in India and have opened project offices in India.

19. THANK YOU CONSULATE GENERAL OF INDIA SHANGHAI