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Ways of Developing Business Opportunities in India

12-14 December 2007 -

WORLD SME HONG KONG

India-China Chamber of Commerce & Industry

Dr. S. Ramachandran

India Overview
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ 5,000 year old ancient civilization 325 languages spoken ± 1,652 dialects 18 official languages 29 states, 5 union territories 3.28 million sq. kilometers ± Area (7th largest) 7,516 kilometers - Coastline 1.3 Billion population. 5600 dailies, 15000 weeklies and 20000 periodicals in 21 languages with a combined circulation of 142 million.

Source : Ministry of Tourism

India Overview
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ GDP $700+ Billion. (GDP growth rate 9.4%) Parliamentary form of Government Worlds largest democracy. Largest English speaking nation in the world. Worlds 4th largest economy. World-class recognition in IT, biotechnology and space. 3rd largest standing army force, over 1.5Million strong. 2nd largest pool of scientists and engineers in the World.

Source: Ministry of Tourism

Corporate India. One fifth of the FORTUNE 500 companies have their R&D centres in India. India is the 2nd largest tractor manufacturer in the world. India is one largest automobile component manufacturers. its clients include Honda.. ‡ Bharat Forge has the world's largest single-location forging facility. ‡ ‡ ‡ ‡ ‡ . India is one of largest commercial vehicle manufacturer in the world. 220 of the FORTUNE 500 companies source software from India. Toyota and Volvo amongst others. snapshots.

. under its own name. export and research hub outside Japan.000 Indica cars made by Tata in Europe.Corporate India. ‡Aston Martin contracted prototyping its latest luxury sports car. ‡Hyundai India is set to become the global small car hub for the Korean giant and will produce 25k Santros to start with. ‡By 2010 it is set to supply half a million cars to Hyundai Korea. to an Indian-based designer and is set to produce the cheapest Aston Martin ever.. ‡Suzuki. HMI and Ford. snapshots. ‡The prestigious UK automaker. AM V8 Vantage. MG Rover is marketing 100. which makes Maruti in India has decided to make India its manufacturing.

Petroleum ± BPO. Retail ± Diamond polishing ± Textiles ‡ Major trading partners ± United States ± Japan ± China ± UAE . Pharma.Historically ‡ Historically dependent on agriculture (now reduced to less than 25% of GDP) Newer industries include ± Mining.

1996.0 1994.0 4.3 9.Indian Economy ± An Overview GDP Growth (1993-94-2006-07) 10.2 7.0 8.1997.0 0.2003.2005.2002.0 5.2001.6 7.4 8.0 7.2 .0 3.200695 96 97 98 99 00 01 02 03 04 05 06 07 4.0 2.7 6.1998.2 5.2000.6 7.2004.1995.0 9.7 6.4 9.0 1.0 6.0 3.4 8.1999.1 4.

Expected Growth ± To be 3rd Largest by 2050 .

4 Bn tonnes) ± Iron ore ± 5th largest (13 Bn tonnes) ± Tea ± largest producer (850 Mn Kgs.Advantage India ‡ ‡ ‡ ‡ Demographic Profile Highly Educated & Skilled Workforce English Language Abundant Resources ± Manganese ± 2nd largest (160 Mn tonnes) ± Chromium ± 3rd largest (57 Mn tonnes) ± Coal ± 4th largest (248 Bn tonnes) ± Bauxite ± 4th largest (2.) ± Vegetables ± 2nd largest (90 Mn tonnes) ± Wheat and Rice ± 2nd largest (72 Mn and 85 Mn tonnes) .

.1 billion people are young. the young population will continue till 2050. will have the highest working population in the World ² 700 million people out of 1.Demographic profile of India India..

Demographic Profile .

2003 Source: IMD Competitiveness Yearbook. 2003 .Versatile. Skilled Workforce Source: IMD Competitiveness Yearbook.

Poverty (incidence) 1980s 1990s 2006-07 44% 36% 27% Education (literacy rate) 1980s 1990s 2006-07 44% 52% 68% Health (life expectancy) 1980s 1990s 2006-07 56 60 69 .

telecom.Current Economic Situation ‡ Economic growth reaches 9.4% in 2006/07 reflecting a strong recovery in agriculture. ‡ ‡ . media and IT. Manufacturing is underpinned by strong demand despite international competition. Services have grown. helped by liberalisation of the financial sector.

3 .3 10.8 11. Transport &Communication Services GDP at Factor Cost 2006-07 2.5 12.6% over the past three years. The Finance Minister of India has expressed confidence over the country¶s performance and has stated that it would help in revising the average GDP growth of 8.4 9. Hotels.5 to 9% by the Reserve Bank of India and other economic advisers. Forestry &Fishing Manufacturing Construction Trade.India¶s Gross Domestic Product (GDP) India¶s GDP for 2007-08 has been variously estimated between 8.6 2007-08 3. Sector-wise GDP Growth Rates in First Quarter (% Change over corresponding period)) INDUSTRIES Agriculture.0 9.8 12.7 12.9 10.

80 18.22 .59 46.84 -25.62 TOTAL 95.43 72.42 30.22 Imports 55.65 Trade Balance -15.02 119.External Trade of India APR-JUL 06 US$ bn APR-JUL 07 US$ bn % change Exports 39.

9 Half Year (Jan-Jun) 3.19 bn .4 FDI in 2006 -07 (full fiscal year)US$21.6 11.7 4.External Sector Foreign Direct Investment (FDI-US$ bn) 2006 2007 Fiscal I Quarter (Apr-Jun) 1.

a. . growing at over 25 million p. growing constantly at 20% p. services and manufacturing growing at 12% 100 million telephone subscribers.Domestic Market ± Transformation India has been ranked 2nd by AT Kearney in the Retail Index as potential Gold Mine ‡ ‡ ‡ ‡ 72 million households having annual house-hold income of over $10. Over 8 million TV sets and 4 million refrigerators sold annually.000. Key sectors ± infrastructure.a.

$125 billion ± Includes agricultural goods textiles gems and jewellery software/technology leather Imports ± Total 2006-07 .$186.India increasingly becoming an influential economy ‡ Exports ± Total 2006-2007 .9 billion ± Main import commodities include: ‡ crude oil machinery fertilizer chemicals .

Economic Outlook ± Why India? ‡ ‡ ‡ ‡ ‡ India is world¶s 4th largest economy in terms of PPP only after US. India is one of the fastest growing economies in the world with Growth rate 9. India¶s Foreign exchange reserves of $213 billion in June 2007. (US Dept.3 percent. Japan and China. of Commerce) Sound Economic Fundamentals ± Decreasing interest rates ± Stable inflation rate ± Increasing savings rate ± Increasing forex reserves ‡ .7% India is projected to be the fastest growing economy in the world over next 5 years with average growth of 8-9% per annum. India is among the most preferred Foreign Direct Investment (FDI) destination in the world & also the highest return on Foreign Investment 19.5% for 2006-07 and 10 year average growth of 6.

and Japan by 2032 .Economic Outlook . 2003 ± "Dreaming with BRICs: The path to 2050" India's GDP will reach $ 1 trillion by 2011. India will overtake Italy by the year 2016. Germany by 2023. becoming the 3rd largest economy after USA and China. $ 2 trillion by 2020. $ 3 trillion by 2025. $ 6 trillion by 2032. France by 2019. UK by 2022. and $ 27 trillion by 2050. In terms of GDP. $ 10 trillion by 2038.Why India? Goldman Sachs Report of 1 October.

yRich base of mineral and agricultural resources. choice of technology. investment. yPolicy environment that provides freedom of entry. units in Export Processing Zones and SEZ. yWell-developed financial sector and vibrant Capital Market yWell developed R&D infrastructure and technical and marketing services. . yA long history of stable parliamentary democracy. yTransparent legal and accounting system. yComplete exemption from Customs Duty on industrial inputs and Corporate Tax Holiday for 100 per cent Export Oriented units. A large and rapidly growing consumer base of 300 million people for branded consumer goods. location. import and export.Why Invest in India? yStrategic location access to the vast domestic and South Asian market. production.

BPO Retail Education Pharmaceutical Tourism and Medical tourism .Sectoral Analysis ± Opportunities Galore ‡ ‡ ‡ ‡ ‡ ‡ ‡ Infrastructure Manufacturing IT & ITES.

a.Power ‡ Size & Structure ± Current generation capacity 1. Private participation increased in generation and distribution due to introduction of Ultra Mega Power Plants (UMPP¶s) by the government. ± 5th Largest in electricity generation capacity in the world. Investment opportunity estimated to be over US $200 billion by 2012. ‡ ‡ ‡ ‡ .Infrastructure . Additional 60.000 MW by 2012. ± Generating & distribution companies mostly consists of PSU¶s and State Electricity Board¶s Industry growing constantly at 6 percent p. ± T&D network of 5.7 million km ± 3rd largest in the world.000 km of transmission networks need to be laid.00.000 MW.32. expected to add 1.

3 million kms ± Carries 65% of freight & 80% of passenger traffic ± Highways/Expressways constitute about 66. on highways Private participation increasing. through: ± Construction contracts.a. In all total investment in Infrastructure is estimated to be above $ 500 billion ‡ ‡ ‡ ‡ .Infrastructure .600 kms of National highways in underway. The GOI is spending over $4 billion p.590 km (2% of all roads) and carry40% of the road traffic ± National Highway Authority of India apex body Currently 4 laning of 18.Roads ‡ Size & Structure ± 2nd Largest network ± 3. ± On BOT basis Total estimated investment opportunity of $25-30 billion by 2012.

Casting ± Skilled Labour-intensive components: Machining. 16% exports ± Over 10 per cent annual growth since past 6 years ± Industry highly fragmented. Stampings. Ford. Few than 5 players with revenues over $250 million India amongst the most competitive manufacturers especially in ± Metal intensive components: Forgings. other electrical components ± Hi-tech components: Electronic Fuel Injectors India becoming global component sourcing hub for auto manufacturers like GM. wiring-harness. Opportunity to set up R&D centres in India ± Indian technical skills acknowledged as among the best in the world Potential of over $5 billion for investment in India In all total investment in Manufacturing Sector is estimated to be above $ 135 billion ‡ ‡ ‡ ‡ .Manufacturing ± Auto Components ‡ Size & Structure ± $ 9 billion industry. Toyota Etc.

accounting and drug development and the Indian BPOs are moving up in the value chain. Microsoft. management. legal services. size does matter ± esp. India¶s offshore proposition remains the strongest ± Superior offshore process management and service delivery capabilities ± Talent pool. 80 of 117 SEI CMM Level-5 companies are in India. especially on emerging sectors such as retail. (McKinsey & Co. 2007) The outsourcing includes a wide range of services including design. ± The domestic BPO sector is projected to reach $65 billion by 2010. architecture. companies increasing focus on domestic market. logistics and communications and SME¶s ‡ ‡ ‡ ‡ ‡ . IBM. revenues $35 billion by 2007 ± Expected to grow to $148 billion by 2012.).IT & ITES. There are about 250 call centers in India with a turnover of $2 billion and a workforce of 348 million. BPO ‡ Size ± Leading Destination for IT & ITES. ± Business Environment With Progressive deregulation and rising competition. when you need to scale up. ± IT & ITES exports to reach $80 billion (GOI. Sun Microsystems and many others are making India as its R&D destination.

over 30 percent of GDP in 2006-07 ± Organised Retail constitutes only 3 percent of total retail sales ± 7. Expected to touch $100 billion by 2015 Few medium sized retail chains like Pantaloon.a. Foodworld (RPG Group). Walmart. Westside (Tata Group). ‡ ‡ ‡ ‡ . Mark and Spencer and other international retail chains vying to capture the Indian Market.8 billion approx.Retail ‡ Size ± One of the ten largest retail markets in India ± Retailing is India's largest industry contributing to some 14% of the country's GDP. Target. Metro. ± Sales over $260 billion. ‡ However. The Indian Council for Research on International Economic Relations (ICRIER) has advocated allowing FDI of up to 49 per cent in retail sector. in the last 5 years. Shopper's Stop. µorganised retail¶ growing at over 20% p. The retail sector is projected to grow at 40% per cent a year to reach Rs 100 thousand crore in the next few years. Big Bazaar growing rapidly. Shoprite.

000 technically trained graduates and 150. another 2 million other graduates qualify in India annually.500 research institutions and 11. hires most.Education ‡ With over 380 universities. Besides.000 IT professionals every year. 1. ‡ ‡ . The Indian Institute of Technology (IIT) is among the top three universities from which McKinsey & Company. the world's biggest consulting firm.200 higher-education institutes. India produces 300.000 engineering graduates and another 300.

Its exports are over $2 billion.5 percent of global Biotech Market.Pharmaceuticals ‡ Size & Structure ± The Indian pharmaceutical industry at $10 billion and growing at 12-14% annually. ± India occupies a significant position in the world Pharma market ± especially in the generics segment. Novartis have set-up shop. ‡ ‡ ‡ ‡ ‡ . the local industry has edged out the Multi-National companies whose share of 75% in the market is down to 35%. International players like Monsanto. ± Still in a nascent stage but rapidly growing. ± International players like Pfizer. Sequencing genes and delivering genomic information for big Pharmaceutical companies is the next boom industry in India. $1 billion in revenues in 2006-07. India has the potential to become an global sourcing destination for Pharmaceuticals. There are 170 biotechnology companies in India. ± 1. ± Industry fragmented ± over 3. involved in the development and manufacture of genomic drugs. and is expected to be worth $25 billion by 2010. is the 4th largest pharmaceutical industry in the world. Syngenta and Aventis are already in India and focusing on the Bio-agriculture segment. whose business is growing exponentially. J&J.000 SME¶s. India is among the top five bulk drug makers and at home.

‡ ‡ ‡ ‡ . ITC. ‡ Industry dominated by 4-5 large players ± Taj group. nation-wide occupany rate stands tall at 70% ± 2005. Industry expected to grow to about $80 billion dollars by 2020. ‡ 1. Leela and Bharat hotels.Tourism & Medical Tourism ‡ Size & Structure ‡ Industry Size ± $32 billion.a. 2005-06 (Ministry of Tourism) ‡ 3. increase of over 14 percent over the previous year. over the last five years. in surgeries are 50% less than developed economies. Domestic tourism is expected to increase by 15% to 20% p. Oberoi. constitutes of 3.93 million international tourist arrived in India in 2005.7 percent of GDP.800 hotels across the country. Medical Tourism is getting popular with cost of treatment esp. Foreign tourist arrivals expected to touch 10 million by 2012.

3% vis-à-vis 8. 12.SME¶s in India ‡ Defined as enterprises investing up to $2. ‡ Second Largest Employer of human resource.1 in 2005-06 (Ministry of Small and Medium enterprises) ‡ Exports grew by nearly 28 percent to $ 311 billion in 2004-05. . ‡ Government provides special tax incentives for setting industrial units in backward areas.5 million ‡ Micro and Small enterprises sector accounts for ± 39% of India¶s manufacturing output. ± 30% of the Total GDP ± 45% of Total Exports ‡ Growing at a faster rate than the overall industrial sector.

± Creates an conducive ground for inter-firm co-operation and specialisation as well as of cooperation among public and private local institutions to promote local production.). ± Gives rise to external economies (e.SME¶s of India ± Clusters ‡ Sectoral and geographical concentration of enterprises. Etc. innovation and collective learning. ‡ Facts ± 400 modern SSE and 2000 rural and artisan based clusters exist. administrative and financial services. foundry. not individual firms. ‡ Have a high share in employment generation. ‡ ‡ . ± Favour the emergence of specialized technical. sector specific skills. textiles. Auto-components.Development Approach ± Need based ± Beneficiary led and managed ± Flexible ± To match local dynamic requirements ± Focussed ± On intermediary groups. Three Pillar . which face common opportunities and threats.g. Cluster Development model enhances the competitiveness of the SME¶s ± SME clusters formed in ‡ Leather. gems and jewellery. pumps. specialised suppliers of raw materials. Air cylinders. contribute up to 60% of manufactured exports.

services related to agro and allied sectors. annual growth of over 10% over last 6 years. STP¶s. floriculture. animal husbandry.SME¶s ± FDI Diverse Growth Streams ‡ 100% FDI approval ± Manufacture of automobiles and auto-components. ± Software development. ‡ Other tax incentives ‡ Proposals which do not conform to above guidelines or which licensable electronic industries are considered on a case to case basis from FIPB. aqua culture. development of seeds. . SME¶s contribute to about 70% of auto components. horticulture. psici culture. ± Agriculture. FTZ/EPZ ± Single window clearance. mushroom under cultivated conditions. almost all areas of electronics. ± EOU¶s under EHT¶s. vegetables.

SME¶s . in devising specific marketing strategies ‡ Safeguarding Intellectual Property ‡ Promotion of Small-Scale and Cottage Industries. and regional cluster development ‡ Increasing Exports . for a coherent approach towards emerging trade policy issues ‡ Development of Institutional partnership between private sector and the Govt.Challenges Ahead ‡ Cost-competitiveness thru productivity and efficient supply chain management systems ‡ Enhancing access to Global Markets ± greater policy coordination within Govt.

India and China cannot afford to ignore each other.e. Germany.India AND China: Engines of global growth ‡ ‡ 1/3rd of humanity: Demanding goods and services from the world 1/4th of high-skilled manpower: Providing goods and services to the world In 2025. UK. ‡ . Japan. Canada and Italy). the combined GDP of India and China will be roughly equal to that of G-7 minus US (i. France.

INDIA CHINA TRADE Indian imports from China 2005 Growth% 2006 Growth% Jan-Sep 2007 Growth% 8934.1 Trade balance 833.34 27.84 32.5 14582.2 17050.9 27166.32 .4 24860.43 5.2 10278.99 31.7 Trade Volume 18702.98 37.64 50.5 Indian Exports to china 9768.91 67.2 10115.98 6934.70 4303.41 63.90 52.

45 214.Rare Earth Mt Machinery Salt.13 1.56 244.Slag.35 .61 216.89 -14.91 354.earth.09 US $ Mil 2006 5257.56 282.Metals Plastic Inrog Chemicals.87 658.43 595.70 246.22 229.Ash Cotton+Yarn.53 270.37 274.74 84 25 223.56 217.92 -61.63 16.74 877.52 -11.31 131.14 9.13 287.46 315.Sulphur.25 599.80 239.65 295.Fabric Organic chemicals Copper & Articles Thereof Iron And Steel Precious Stones.11 490.23 419.12 568. Stone 5511.85 341.18 905.India Exports to China HS Description US $ Mil 2005 26 52 29 74 72 71 39 28 Ores.31 265.96 498.60 370.23 20.39 US $ Mil Jan-Sep 2007 5814.64 % change -0.

53 338.India Imports from China HS Description US $ Mil 2005 85 84 29 72 73 39 59 50 87 27 Electrical Machinery Machinery Organic Chemicals Iron & Steel Iron/Steel products Plastic Impregnated Text fabric Silk.83 59.20 195.37 331.22 76.21 2720.35 217.30 43.20 222.40 454.16 609.09 225.49 313.76 715.Silk yarn Fabric Motor Vehicles & parts Mineral fuel.30 263.86 425.89 1711.85 US $ Mil 2006 3639.03 259.19 102.66 508.75 312.92 525.52 1032.22 86.75 .56 1807.06 3.83 354.96 -16.Oil etc 1799.15 3004.61 896.87 7.29 1189.24 241.70 % Change US $ Mil Jan-Sep 2007 4951.45 326.61 1543.91 135.

China.ICCCI ‡ Objective ~ Promote Mutually Beneficial Trade ‡ Exclusive Chamber for bilateral trade ~ 1990 ‡ Participant Countries ~ India.Introduction.Macau . HK.

Manufacturers for various products ± Monthly News Bulletin ~ Opportunities in China /India ± Regulatory Framework & policy ‡ Assistance on ± Business / Govt. Visas etc. Delhi ± Interpretation / Translation. . Pune.ICCCI ± Catalyst & Facilitator ‡ Information on ± Exporters / Importers. Officials Delegations from China ± Meetings between Members & Chinese Enterprises ± Exhibitions ± Opening Business Units in China ± Language Classes ~ Mumbai.