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October 2006
Contents
Market Overview
© IMaCS 2006
Printed 21 Jan 2010
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Manufacturing has contributed to India’s economic growth
India’s GDP of USD 691 bn makes it the 10th largest economy in the world and 4th largest in terms of
purchasing power parity
One of the fastest growing economies in the world - growing at over 8 % p.a for the last 3 years
© IMaCS 2006
Source: GoI website, IMaCS analysis Printed 21 Jan 2010
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Indian Manufacturing : A macro perspective
➨ The BPO
India is ranked Indian manufacturing Indian economy migration to
43 in the latest competitively expected to India is getting
GCI index (1) positioned for a high grow at 8% to replicated in the
ahead of other growth rate era 10% over the manufacturing
BRIC (2) next decade sector
economies
(1) Global Competitiveness Index (2) Brazil, Russia, India, © IMaCS 2006
Printed 21 Jan 2010
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Source: National Manufacturing Competitiveness Council, IMaCS analysis Page 4
Key sectors in Indian manufacturing
Auto Industry: The Indian auto industry is a USD Food Processing: A USD 70 bn industry
44 bn industry (Automotives is growing at 9% to 12%
USD 34 bn and Auto components
is USD 10 bn) Gems & Jewellery: A USD 13 bn industry (Gold
growing at 15% p.a and
Chemicals: The size of chemical industry in Diamond growing at 27%
India (Petrochemicals to Paints) is p.a)
USD 30 bn
Leather: Industry size is USD 4 bn
Electronics: The electronics industry is USD
11 bn (consumer electronics to Machine Tools: Industry Size is USD 225 mn
electronic components)
These sunrise sectors(1) of Indian manufacturing is enabling higher growth rates for the manufacturing sector
(1) - list illustrative and not exhaustive Source: IMaCS analysis © IMaCS 2006
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Domestic and Export competitiveness in
manufacturing : Key drivers
© IMaCS 2006
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A handful of sectors contribute to 75% of
India’s manufacturing exports
Chemicals Textiles
India is presently at the cusp of a
© IMaCS 2006
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Where does the advantage arise from.....
) Production design and Savings to the extent of 80% vis-à-vis plants in developed
Process Engineering cost markets
(due to the low cost, high quality engineering talent in India)
) Capital Cost efficiency Savings to the extent of 30% to 60% vis-à-vis plants in developed
markets
(due to local fabrication and labour intensiveness)
) Higher Asset utilization Many manufacturing units in India follow a 3 shift seven day week
(unlike a 2 shift-5 day week in high cost locations)
Market Overview
© IMaCS 2006
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Regulatory Scenario for Indian manufacturers
1) Government of India offers a five 1. Each state & Union Territory (UT)
year tax holiday for offers their unique industrial and
a) Power projects sectoral policy and incentives
b) Firms engaged in exports 2. The policies offered relate to
c) New industries in notified states industrial estates, taxes, power
d) Units in Electronic hardware, Regulatory
software parks advantage tariff, capital investment subsidies
e) EOU’s and Free Trade Zones 3. States and UT in India typically
Better project follow a Single Window Clearance
2) Tax deductions of 100% on export
economics
profits (SWC) mechanism
4. Competition among the states
3) Deduction of 30% on net income for
and UT to attract investment has
10 years for new industries proven to be beneficial for
investors
4) Deduction in respect of certain inter-
corporate dividends 5. Customized packages designed
for capital intensive projects
Indian capital markets are open to FII’s Some of the sectors in which 100% FDI is allowed
Four laning 6000 kms of India’s long coastline (7517 India has 450 airports
highways that link India’s top 4 kms) and the 12 major ports including 11international
metros has been nearly cater close to 90% of India’s airports
completed (Golden foreign trade in volume terms
Quadrilateral) and 70% in value terms India plans to invest USD
5.07 bn in the next five
The project linking the ten major FDI investment upto 100% years
ports of the country to the GQ permitted in the port sector 18
mentioned above is nearing port privatization projects FDI investment upto 100%
completion worth USD 1.39 bn are under permitted in the port sector
way (Private participants are
FDI investment upto 100% P&O, PSA, Maersk, Gammon The privatization of New
permitted in the road sector India, CWC and Dubai Port Delhi and Mumbai airports
Authority) have been completed
Market Overview
© IMaCS 2006
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Attractiveness of India as a manufacturing destination
© IMaCS 2006
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India is transforming from an “attractive labour pool”
to a “preferred manufacturing destination”
➨ Manpower advantage: Over 58 % of the Indian population is under the age of 20 (Approx.
564 mn people)
➨ Market advantage: The 300 million aspirational Middle-class is growing at 5% per annum
➨ Technology Advantage: Around 100 Fortune 500 have their R&D base in India
Over the next few decades India can overtake the economic growth rate of
Brazil, Russia, China (the other fast growing economies)@
© IMaCS 2006
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Key players in India
Illustrative, not exhaustive
Pepsi is one of the biggest FMCG brands in the country. The company plans to
invest around USD 500 Mn in India this year
Ford is one of India’s popular brands in the car market. Ford manufactures around
100,000 cars per annum in India
© IMaCS 2006
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Key players in India
Illustrative, not exhaustive
Coca Cola is one of the largest beverage player in the country. The company has
invested more than USD 1 bn since its entry into India
Present in India for over 50 years. Leading player in the power sector. Employs
over 4,000 people in India; has its global R&D centre in Bangalore
© IMaCS 2006
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The India Brand Equity Foundation is a public-private partnership between the Ministry of
Commerce & Industry, Government of India and the Confederation of Indian Industry. The
Foundation’s primary objective is to build positive economic perceptions of India globally
© IMaCS 2006
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Disclaimer
This presentation has been prepared jointly by the India Brand Equity Foundation (“IBEF”) and
ICRA Management Consulting Services Limited, IMaCS (“Authors”)
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