Last update: April 2010
Current Business Opportunities
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Current Business Opportunities
3rd India-UK SME Business Meet (Cardiff, 27 September 2012)
The High Commission of India, London invites you to the third India-UK SME Business Meet and Conference on Thursday 27th September 2012 at Park Plaza Hotel, Cardiff, Wales. After the conference, the High Commission is arranging visits for Indian delegates to industrial clusters and centres of advanced manufacturing and technological excellence in different parts of UK on 28th September which will be pre-arranged by the High Commission. The focus of this year's Business Meet will be collaboration in Advanced Manufacturing and Technology. This event is also intended to provide an excellent opportunity to British companies to invite the Indian companies to their facilities and discuss mutually beneficial partnerships.
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What are the main export opportunities in India
Since the beginning of the nineties, India has successfully achieved several reforms aiming at liberalising and modernizing its economy. This has entailed dynamic performances in numerous sectors such as Food Processing, Information technology, Engineering or Telecommunication. This trend is expected to continue with further trade opening, an amelioration of the infrastructure and an important growth of consumption. Its huge market, stimulated by a relevant part of the population whose consumption is close to European standards, represents an attractive target for European businesses. Its democratic background and its sound domestic and external sector are positive factors that can reassure investors even if infrastructures and trademark protection are still in an early stage.
During the last ten years, the country has finally managed to integrate world trade and investment flows. India is now finishing its reforms to meet the WTO demands, and could be considered as a fair player of global exchanges. It ensures a continuous path toward further trade liberalisation and openness to foreign direct investment. The consolidation of its trade and cooperation with the EU, now catching up with the US influence, will offer numerous opportunities for European companies. The effort of both the European community and the Indian government to enhance those exchanges should benefit businesses that may find support or help in the political process.
Low labour costs, English speaking proficiencies, a solid educational system that forms highly qualified workers, a top Information technology sector, a diversifying and developing domestic market, a relevant share of the population with income comparable to that of Europe (above 35 million), a growing integration into world and regional trade flows, are all major arguments in favour of considering India as a prime location for business operations and investments. Incentives and supports from the government for export-oriented units, as well as a reasonably simplified taxation on profits and dividends, can attract further investment.
With the liberalisation of the Indian economy, there is a growing awareness of imported food products.
Some of the major products/services that have potential demand in India are:
· dairy (butter oil, skimmed milk powder and specialty cheese);
· pulses (mung beans, chickpeas, lentils and field peas);
· fresh fruits (mainly apples followed by pears, grapes, citrus);
· raw cotton;
· bulk grain handling and storage services/expertise;
· processed foods (juices, bakery products and confectionary.
India is moving slowly towards the organised retailing concept of supermarkets; especially in South India.
The World Bank and the Asian Development Bank commit extensive funds each year to development projects in India. The EU's Asia Latin America (ALA) programme also covers India. The World Bank committed over US$1 billion to new operations in India during 1999 and in January 2000 had projects over US$5 billion in the pipeline. The Asian Development Bank expects lending to India to amount to some US$2.35 billion between 2000 and 2001 and will spend US$5.5 million on technical assistance during the same period.
The ALA programme has a total allocation of euros 670 million in its 1999 budget, which includes support for India. Sectors, covered in these programmes, include agriculture (including irrigation), health, environment, education and training, power, public sector management, urban development, water and sanitation, telecommunications, transport, land reclamation, social infrastructure and private sector development. Information about working with these programmes is available from the Aid-funded Business, UK Trade & Investment.
British automobile and auto component makers can look to expand into the growing Indian market. Similarly, the £72 billion British Automobile market is an attractive investment opportunity for Indian companies. Opportunities also exist in the UK's £2.4 billion automotive research and development segment.
India's civil aviation passenger growth, at 20 per cent, is among the highest in the world. The sector is slated to cruise far ahead of other Asian giants like China or even strong economies like France and Australia. The number of passengers who will be airborne by 2020 is a whopping 400 million.
Between April and September 2006, however, amid a flurry of new entrants to the sector, domestic traffic growth accelerated to more than 45 per cent. The Centre for Asia Pacific Aviation (CAPA) predicts that domestic traffic will grow at 25 per cent to 30 per cent a year until 2010 and international traffic growth by 15 per cent, taking the overall market to more than 100 million passengers by the end of the decade. Indian carriers have 480 aircraft on order for delivery by 2012, which compares with a fleet size of 310 aircraft operating in the country today.
As pointed out by Minister of Civil Aviation, Praful Patel, presently, the number of air travelers is about 0.8 per cent of the population. By the time even 10 per cent of the population begins to fly, India will need about 5,000 aircraft.
India, with its GDP approaching US$ 800 billion, being viewed as one of the biggest growth stories among emerging markets explains only part of the attraction for foreign banks. Households earning between US$ 2,250 to US$ 25,000 a year are expected to increase from 52 million in June 2007 to 103 million in 2010. Household income is expected to rise at an average yearly pace of 6.4 percent in 2005-15, according to a forecast by consulting company McKinsey.
Consumption, which today accounts for 60 per cent of India's gross domestic product, is set to quadruple to US$1.5 trillion by 2025, overtaking Germany as the fifth-largest consumer market, according to a forecast made by McKinsey.
According to a PricewaterhouseCoopers (PwC) report, the banking sector in developing economies led by China and India is likely to overtake banks in the currently richest countries of the world by 2050. China and India show the greatest growth potential through organised growth and merger and acquisition (M&A) activities, PWC said. Driven by large capital and global liquidity, the M&As, including inbound and outbound deals, are expected to cross the US$ 100-billion figure in calendar 2007. By May 2007, M&A deals in India had touched the US$ 46.8-billion mark. India's domestic banking market could beat China's in the long-run, the report said, noting that the country has seen major financial sector reforms since 1991 with private and foreign banks gaining market share.
The Government is set to liberalise norms for mutual funds investing in overseas debt/equity instruments. The individual cap of US$ 200 million for fund houses for investments abroad is likely to be hiked. At present, a single fund house can invest up to 10 per cent of its assets under management (AUM) across schemes in overseas equities/debt as on March 31 of the relevant year, subject to a maximum of US$ 200 million. This, in turn, is subject to an overall ceiling of US$ 4 billion for all mutual fund investments abroad. Both caps are being reviewed.
The credit outgo from public sector banks is expected to grow by 25 per cent for 2007-08 while deposits are set to grow by around 22 per cent. In 2005-06, the banking industry registered a credit growth of over 30 per cent while deposits grew at less than 20 per cent.
Investment banks operating in India have earned nearly as much in the first half of 2007 as they made throughout fiscal 2006-07 from underwriting stock offerings and advising on takeovers.
Given the sustained growth in the housing sector, the Government's emphasis on infrastructure (at both the national and the state level) and increased global demand, the outlook for India's cement industry is exceedingly bright.
The demand growth for the current fiscal is expected to be in the region of 10 per cent, which will translate into a demand of 175 mt. To meet this rising demand, many Indian companies are going for capacity expansion. Close to 54 mt of additional capacity is to come up in the next three years, with an investment of around US$ 5.31 billion.
According to a Deutche Bank report, close to 5.1 mt will be added by second half of 2007-08, while 11.46 mt will be added in 2008-09. Around 28.90 mt is likely to be added in 2009-10 and 2.87 mt in 2010-11.
A similar projection by National Council of Applied Economic Research (NCAER) for cement consumption, on a conservative basis, has placed cement demand at 225 mt by the fiscal year 2011. If the Government goes ahead with infrastructure projects as planned, consumption is likely to be much higher at 291 mt.
The Engineering sector benefits from a wide and complete capacity of production. With a growing domestic market and low production costs, it remains an attractive sector for European investment.
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Processed food market is the most important segment of the food industry accounting for over 32 per cent of the total food market. While India has an abundant supply of food, the food processing industry is still nascent: only two per cent of fruit and vegetables; and 15 per cent of milk produced are processed.
Despite this, the processed food industry ranks fifth in size in the country, representing 6.3 per cent of GDP. It accounts for 13 per cent of the country's exports and 6 per cent of total industrial investment. The industry size is estimated at US$ 70 billion, including US$ 22 billion of value added products. This sector has been attracting FDI across different categories.
The sector has been growing at about 7 per cent a year. With rising incomes and demographic pressure, growth may soon register 10 per cent.
One of the segments of the food industry that has been experiencing a growing interest has been food retailing. At present, only 1 per cent of the food items retailed in India flow through the organised retail channel. But this situation is expected to change due to the following reasons: changing lifestyle, increasing number of nuclear and dual income families, changing consumer tastes, increasing disposable incomes among others.
Some of the players that have shown a keen interest in this segment are Reliance, Tatas, ITC Group, Lohias-promoted Indo Rama, Mumbai-based RK Hospitality, Kishore Biyani with his Big Bazaar, RPG group. Currently, the size of the domestic food retailing market is estimated to be US$ 6 billion.
Government purchasing and tenders
Central Governments, State Governments and their undertakings are major buyers, and the usual system is allotment of the contract to the lowest compliant tenderer. Where multilateral institutions are involved, international competitive bidding guidelines are followed.
Health insurance grew by a robust growth rate of nearly 44 per cent during 2006-07. The private sector has been steadily increasing its share over time accounting for 38 per cent of total health insurance by end-March 2007 (as against 24 per cent by end-March 2006).
With less than 10 per cent of the population having some sort of health insurance, the potential market for health insurance is huge. McKinsey-CII estimates the number of potential insurable lives at 315 million. Swiss Re estimates a potential of US$ 7,700 million in health insurance premium by 2015. Private players who have entered the industry to tap the health insurance market include Bajaj Allianz, Royal Sundaram, Iffco Tokio, and Reliance General Insurance among others.
· Apollo Hospital is setting up a standalone health insurance company in association with DKV, a leading European (Germany-based) health insurer.
· US-based Aetna and Cigna Healthcare and UK-based Bupa Healthcare are looking to enter the market.
Information Communication Technologies Sector
The Indian IT sector is one of the world top industries of its domain. It is now looking for extension toward other countries and for the establishment of research and knowledge cooperation.
A good understanding of the local environment, both on a business and on a cultural basis, is crucial in achieving successful investment project. A realistic assessment of the market is also essential to allow a pertinent choice of location, potential partners and forms of investment. Administrative difficulties should also be assessed and considered before starting any operation for a good knowledge of Indian ways may considerably simplify procedures. Variation of states policies and characteristics may add to the complexity of choosing the right location for investment.
Initial procedures (licensing) have been simplified and strengthened to generate more foreign investment, especially for export- oriented operations that benefit from numerous incentives from the government. Difficulties and hurdles may still arise in dealing with local authorities or when trying to reach the domestic market.
Managing the local human resources and dealing with Indian partners require a deep understanding of local conditions and ways of thinking. Still, the general satisfaction of European companies settled in Asia is a significant evidence that, provided those key elements have been taken into account, pay-backs and returns on investment compare favourably with many other potential location for investment.
With the economy liberalising the rules for the entry of domestic and foreign players, this sector is favourably placed to experience rapid growth. In fact, the sector is expected to reach US$ 60 billion in the next four years - a growth rate of 500 per cent in four years.
While, the country already has 27 direct players in the sector (out of which 15 are private life insurance players), there are many others who are planning to make an entry. For example, Principal PNB Life Insurance Company and IDBI Fortis Life Insurance Company have already announced launches. HSBC is also entering the India's fast-expanding life insurance market, in a partnership with public sector banks - Canara Bank and Oriental Bank of Commerce (OBC).
While most of the new foreign players have been concentrating in urban and semi-urban areas, there is ample scope to grow in the rural areas too where insurance penetration as low as 2 per cent. Accordingly, many players (like SBI) are making forays into this segment too, leveraging its spread, through existing and new channels.
The attractions of high quality healthcare facilities at the most competitive cost has been instrumental in a large number of foreign arrivals to access healthcare services in India. Going by the current pace with which this segment has been growing, the CII-McKinsey study estimates that revenues from this segment could touch US$ 2.2 billion by 2012 (from the current figure of US$ 333 million).
The Government has also been proactive in encouraging prospects in this sector with a number of initiatives:
· A new category of visa "Medical Visa" ('M'-Visa) has been introduced which can be given for a specific purpose to foreign tourists coming into India.
· Guidelines have been formulated by Department of AYUSH prescribing minimum requirements for Ayurveda and Panchkarma Centres.
The growth statistics of the sector combined with the Government's decision to increase the foreign direct investment (FDI) cap in the sector to 74 per cent has generated huge interest among global investors. The share of telecom in FDI rose from 3-4 per cent to 12-15 per cent in the calendar year 2006. TRAI has proposed that in view of the convergence of services, cable TV operators be allowed to increase their FDI cap from the existing 49 per cent to 74 per cent to bring them at par with the telecom sector.
India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. Not to be left behind, Indian cellular operators have lined up investments of about US$ 20 billion over the next two years to bring over 80 per cent of the population under mobile coverage. The planned investment for the next couple of years is 50 per cent higher than what has been invested in the last 12 years.
The Telecommunication sector is enjoying a high growth rates both because of a low initial teledensity and of a deregulation of the sector. European participation is demanded mainly for technology and knowledge support, which offers plenty of opportunities for business operation.
Dept of International Development (DFID)
Asian Development Bank
Last update: April 2010
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