By Ravi V. Patil (Director INDOLINK India)
India got a new government in May 2015. During his election campaign, the new Prime Minister, Narendra Modi, projected a vision of a developed India. He said “Ache Din Ayenge’ (Better days will come) and new government will make all efforts to bring these better days on priority.
Modi is well aware that without industrial growth bringing these “Ache Din” will not be possible, hence soon after assuming the Office he started the”Make in India” campaign: an initiative by Indian Government to boost manufacturing and attract Foreign Direct Investment (FDI) in India. Since its initiation, Government is endorsing it on every possible platform. During his visits to United States, Australia, Singapore, France, Germany and Canada, Modi has enthusiastically and consistently presented the opportunities India offers and the policy changes government is adopting to make business in India easier.
World business leaders are fully conscious of the potential Indian market offers, but some efforts from top were much needed. The Prime Minister’s speeches to attract investment are giving a high level of confidence to the investors, as it is a good indication that the Government is really serious about these initiatives and will try its best to make things move.
In “Make in India” program Government has identified 25 industrial sectors it wants to promote. In its website http://www.makeinindia.com/ information about sectors, live projects and government policies is provided. In following paragraphs we have tried to summarize opportunities various sectors offer.
FDI allowed Sectors with entry route:
100 % Automatic Route:- Automobiles. Automobile components. Aviation (Greenfield airport projects, helicopter services & seaplanes, maintenance and repair organizations; flying training institutes; and technical training institutes), Biotechnology (Greenfield). Chemicals. Construction (FDI is not allowed in real estate business or construction of a farmhouse). Electrical machinery, Electronic system (Design & Manufacturing sector). Food processing (pickles, mustard oil, groundnut oil and bread-items reserved for MSME sector, 24% is allowed under the automatic route). IT & BPM. Leather. Mining. Oil & Gas. Pharmaceuticals. Ports. Railways. Renewable Energy. Roads & Highways. Textiles & Garments. Thermal Power. Tourism & Hospitality. Wellness.
100 % Government Approval Route: – Biotechnology (Brownfield). Chemicals (wax candles, laundry soaps, safety matches, fireworks & incense sticks are reserved for MSME sector in which FDI beyond 24% is permitted under the government route). Media & Entertainment (publishing/printing of scientific & technical magazines/specialty journals/ periodicals, publication of facsimile editions of foreign newspapers)
Up to 74% Automatic Route:- Aviation (existing airport projects) Space (satellites- establishment & operation)
Up to 74% Government Approval Route:- Aviation (existing airport projects, up to 100%, domestic scheduled passenger airlines, Non-Scheduled Air Transport, Service ground handling services 100% for NRIs). Media & Entertainment (Teleports, DTH, cable networks, mobile TV, Headend-in-the-Sky Broadcasting Services),
Up to 49% Automatic Route: – Aviation (domestic scheduled passenger airlines, Non-Scheduled Air Transport, Service ground handling services.
Up to 49% Government Approval Route: – Defence Manufacturing, Electronic System (electronics items for defence).
Up to 26% Government Approval Route:- Media & Entertainment (FM radio, News & Current Affairs TV channels, Print media)
*The FDI is subject to applicable existing policy, regulations and laws of Government of India in the sector
Opportunites by sector:
AUTOMOBILES: It is estimated that more than 6 million vehicles will be sold annually in India by 2020. With the growing middle class population, growth of passenger vehicles is expected to increase at CAGR of 16% during 2015-20. No prior approval is required for foreign investors to invest in this sector. 100% FDI is allowed under automatic route. Opportunities in passenger vehicles (cars, utility vehicles, multipurpose vehicles), scooters & motor cycles, commercial vehicles, low cost electric vehicles.
AUTOMOBILE COMPONENTS: India is located close to key automotive markets such as ASEAN, Korea and Japan. Being looked as an emerging hub for global sourcing of automotive components. During 2008-13 export increased 17%. Increased indigenization of global OEM’s is turning India into preferred designing and manufacturing base. Manufacturing plants of global automobile makers such as Suzuki, Nissan, Piaggio, Volkswagen, Renault, Hyundai, General Motors, BMW, Ford, Toyota, Honda etc and local auto makers as TATA, Mahindra, Bajaj, TVS,… are present in India.
AVIATION: Currently 9th largest civil aviation market and expected to be 3rd largest by 2020. Served 163 million passengers during previous year and trends are growing steadily. Greenfield airports under public private partnership at Navi Mumbai and Mopa (Goa). Airport authorities plan to bring 250 airports under operation by 2020. Plan for spending USD 1.3 Billion on non-metro projects till 2017, for modernization and up gradation.
BIOTECHNOLOGY: USD 3.7 Billion planned to be spent on biotechnology during 2012-17. India is USD 4.3 Billion bio-economy by 2013 and expected to reach USD 100 Billion by 2025. Patient regime in place since 2005. Department of Biotechnology has established Biotechnology parks in various parts of the country to facilitate product development, research and innovation and development of biotechnology industrial clusters. India constitutes @8% of total global generics market, by volume, indicating a huge untapped opportunity in the sector. Hybrid seeds, including GM seeds, represent new business opportunities in India based on yield improvement.
CHEMICALS: India is 3rd largest producer of agro-chemicals and 6th largest producer of chemicals in the world. India’s proximity to the Middle East, the world’s source of petrochemical feedstock, makes for economics of scale. Opportunity include a growing construction industry and adoption of advanced coatings, ceiling and polymer based reinforcing material in construction as well as plastics, paints and coatings for the automotive sector. India exports @50% of agro-chemicals of its current production and exports are likely to be key component of the industry.
CONSTRUCTION: USD 1000 Billion investment in infrastructure sector planned during 2012-17. USD 650 Billion investments in urban infrastructure estimated over next 20 years. Opportunities in residential, retail, commercial and hospitality sectors. Government has taken initiatives for development of smart cities and integrated townships which offer opportunities for technologies and solution providers for such projects. Opportunities for technology for low cost and affordable housings, sustainable and environment friendly construction materials, green building solutions, training and skill development for construction sector workforce, urban water supply, urban sewage and sewage treatment.
DEFENCE MANUFACTURING: Earlier involvement of foreign companies in this sector was prohibited however government has started opening this sector for foreign investment. Upto 49% FDI is allowed after approval from Foreign Investment Promotion Board (FIPB). INR 250 Billion expected to be invested in this sector during 7-8 years. Large number of parts/components, castings/forgings etc. which were requiring industrial license have been excluded from the products list for industrial licensing thereby making them available for industry.
ELECTRICAL MACHINERY: Market is growing > 10% during last 5 years and expected to maintain similar rate. During last 8 years exports have been growing @ 14% annually. Already @ USD 24 Billion size industry. Opportunities due to capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive and consumer durables. Nuclear capacity expansion will provide significant opportunities to the electrical machinery industry.
ELECTRONIC SYSTEMS: Industry has been growing @ 10% during last 4-5 years and likely to maintain the rate. Currently 65% of current demand for electronic products is met through imports, this offers an opportunity for companies planning to manufacture locally. India is expected to be huge consumer of electronic goods by 2020 (Telecom equipment: USD 34 Billion, laptop, desktop, Tablets: USD 34 Billion, LED: USD 35 Billion, Consumer Electronics: USD 29 Billion, Automotive Electronics: USD 10 Billion, Medical Electronics: USD 10 Billion, Set top boxes: USD 10 Billion…)
FOOD PROCESSING: Traditionally India was not a big market for processed food (less than 5% is processed), but because of modernization and influence of foreign culture, growing middle class, effect of television and busy urban life this sector has started showing big potential for almost everything related to food. Looking at the trend government has planned 42 mega food parks with allotment investment of INR 98 Billion. Opportunities in: Fruit & vegetables preservation, food preservation, beverages, dairy, food additives and nutrients, confectionery and bakery items, meat and poultry, seafood, grain processing, food packaging, food processing equipments, supply chain infrastructure, cold chain. Establishment of Food Park could be a unique opportunity for foreign investors to enter into India food processing sector.
INFORMATION TECHNOLOGY (IT) & BUSINESS PROCESS MANAGEMENT (BPM): India has already established a leading position in this sector and it trying to enhance it further. Size of IT and BPM industry during 2014 was USD 118 Billion which is expected to grow to USD 225 Billion by 2020. Sector offer opportunities in: IT Services, software product development, shared service centers, BPM domain services such as Knowledge services, data analytics, legal services, cloud based services, Business process as a Service (BPaaS), IT consulting, software testing, Engineering and R&D in telecom and semiconductors sectors.
LEATHER: Currently USD 11 Billion industry, out of which @ USD 6 Billion in Export, expected to grow @ 24% during next 5 years. Government is providing duty benefits for import of capital goods (against export obligation), reduction in excise duty and other such facilities to promote the sector growth. Government has notified a Mega Leather Clusters (MLC’s) scheme with an objective to create new production centers for the leather industry with all required infrastructure and support services. Opportunity for capacity enhancement, modernization and skill development.
MEDIA AND ENTERTAINMENT: By 2018 the industry is expected to grow at CAGR of 14.2%, reaching INR 1785.8 Billion. Opportunities in subsectors: TELEVISION-India is emerging teleport hub of Asia; PRINT-Newspapers & magazines; FILMS-Digital screens & 3D films, To accelerate joint productions, co-production agreements have been signed with Italy, Germany, Brazil, UK, France, New Zealand, Poland, Spain and Canada; RADIO; MUSIC; ANIMATION &VFX.
MINING: India produces 88 minerals- 4 fuel-related, 10 metallic, 50 non-metallic & 24 minor minerals. 3108 operative mines. Mining leases granted for longer durations of 20-30 years. The demand for various metals & minerals will grow substantially over the next 15 years. India is slated to become 2ndlargest producer of steel by 2015.Opportunities in subsectors: Iron & Steel- hot rolled parallel flange beams and columns rails, plates, coils, wire rods, and continuously cast products such as billets, blooms, beams, blanks, rounds & slabs as well as metallic and Ferro alloy. Coal-anthracite, bitumen & lignite. Aluminium-Chemicals, Primary AL, extrusion & rolled products. Base Metals-lead, zinc, copper, nickel & tin. Precious metals & Minerals-gold, silver, platinum, palladium, rhodium & diamonds.
OIL & GAS: By 2035 demand for primary energy in India is to increase threefold to 1,516 Million Tonnes of Oil. Industries are increasing consumption of natural gas in operations. Opportunities in subsectors: Shale, Underground coal gasification, E & P services & equipment companies, pipeline transportations-35% of product movement happens over pipelines, Refining sector, Technology partnerships in the upstream sector.
PHARMACEUTICALS: By 2020 India is expected to be the 3rd largest pharmaceuticals market. Industry revenues are expected to expand at a CAGR of 12.1% during 2012-20 and reach USD 45 Billion.Opportunities: Contract Research & Manufacturing Services,Formulations industry – India is the largest exporter of formulations with 14% market share and ranks 12th in the world in terms of export value.
PORTS: By 2017 projected increase in cargo capacity of 2289 Million MTs & Container demand is expected to increase to 21 Million T.E.U. 87 new port projects have been sanctioned in the last 4 years. Over 7500 Kms of coastline with 12 major & 60 operational non-major ports are likely to attract- Port development, Port support services-operation & maintenance, Ship repair facilities in ports.
SPACE: India has 30 spacecrafts in differing orbital paths. India’s cost-effective space program has launched 40 satellites for 19 countries to date & has the potential to serve as the world’s launchpad. There is a tremendous scope in contributions to the realization of operational projects, missions & satellite navigation. ISRO provides technical consultancy services to industries & R&D institutions in its expertise. The technologies licensed to industries for commercialization from ISRO.
RAILWAYS:Indian Railway is world’s 3rd largest rail network. Opportunities in Manufacture of components, Infrastructure projects: 1. High speed train & tracks. 2. Railway lines to & from coal mines & ports. 3. Electrification, suburban corridors & freight corridors. 4. Development of railway stations. 5. Power generation & energy-saving. 6. Freight terminals operations. 7. Setting up of wagon, coaches and locomotive units. 8. Gauge conversion. 9. Network expansion.
RENEWABLE ENERGY: India has 5thlargest power generation portfolio worldwide with a power generation capacity of 245 GW. Current renewable energy contribution stands at 31.70 GW. Opportunities-India has vast renewable energy resources. Wind Energy-an estimated potential of 102.8 GW. Small hydro-an estimated potential of 19.7 GW. Bio-power (biomass & bagasse co-generation)-an estimated potential of 22.5 GW. Solar power has potential of 6 GW.
ROADS AND HIGHWAYS: World’s 2nd largest Road network of 4.86 Million Kms. The length of National Highways is expected to grow from 92850 Kms to 100000 Kms by 2017.Public Private Partnership projects (PPP)-100 completed &165 are ongoing. The type of PPP modules used is Build Operate Transfer (BOT) toll and BOT annuity. During Next 5 yrs investments of USD 31 Billion is expected for Highways. Opportunities: Highways, Expressway Projects-Eastern Peripheral Expressway (135 Kms, cost USD 750 Mill); Delhi Meerut Expressway (150 Kms, cost USD 1.0 Bill); Vadodara-Mumbai Expressway (473 Kms, cost USD-4.3 Bill), The Special Accelerated Road Development Programme (SARDP-NE) a 3 phase project; connects of 88 district headquarters in the North–Eastern states. The National Highway Development Project (NHDP), a USD 60 Billion, 7-phase programme one of the largest in the world–focuses on the widening, upgradation and rehabilitation of 47054 Kms of National Highways.
TEXTILE & GARMENTS: India has 63% of the world’s market share,World’s 2nd largest producer of silk & cotton textile manufacturer and producer of silk and cotton. Top in Jute manufacturing. 24% of the world’s spindles. 8% of the world’s rotors. Rising per capita income, favourable demographics changing lifestyles & increasing demand for quality/branded products.Opportunities: Entire value chain of synthetics.Value added and specialty fabrics.Fabric processing set-ups for all kind of natural & synthetic textiles. Technical textiles. Garments. Retail brands.
THERMAL POWER: India is 5th largest producer & consumer of electricity. India has reserves of 123 Billion Tonnes of proven coal & 1355 Billion Mtr3 of proven natural gas. The demand of 1905 TW expected by 2022. Large capacity additions (174.9 GW) are targeted upto 2022. Opportunities: Power Generation, Transmission & Distribution, Power Trading, Power Exchanges.
TOURISM & HOSPITALITY: Sector accounts for 6.8% of the GDP and is the 3rdlargest foreign exchange earner for the country. India offers geographical diversity, attractive beaches, 30 World Heritage Sites and 25 bio-geographic zones. India registered 6.97 Million foreign tourist arrivals in 2013, registering an annual growth of 5.9% over the previous year. Opportunities: cruises, adventure, medical, wellness, sports, MICE, eco-tourism, film, rural and religious tourism.
WELLNESS: INR 490 Billion wellness market. 6200 indigenous herbal plants. 2ndlargest exporter of ayurvedic & alternative medicine in the world.The demand for Ayurveda, Yoga, Naturopathy, Unani, Siddha, Homoeopathy (AYUSH) & herbal products is surging in India & abroad. Opportunities: Ayurveda drug manufacturing (nutraceuticals, food supplements, cosmetics & rejuvenatives). Setting up of specialized treatment centres. Medical tourism for curative & rejuvenation treatments.
