Launch of The Nordic Indian Business Chamber of Commerce.

Transcription

1 26 th January 2015 Distinguished Guests! Launch of The Nordic Indian Business Chamber of Commerce. I thank Mr Kersi Porbunderwalla, CEO of the Nordic Indian Business Chamber of Commerce for inviting me to speak on this occasion. I think that this is an opportune moment to speak about India, as there have been significant developments on the economic side there in the recent past that merit attention. If there is a narrative for the Indian economy it is the reforms initiated since the 1990s. For over a decade the economy has grown at an average of 8% per annum. Both manufacturing and services have played their role in development. Sectors like IT have had a larger than life image in this process of change. The spread of prosperity has been visible and the population below the poverty line has come down by quarter during the last five years of the previous decade. Rising foreign direct investment figures convey both the potential for business and global confidence in our success. India is also making its presence felt economically abroad through mergers and acquisitions. While optimistic of our prospects we are also objective about the challenges that we face. We are aware that we have lagged behind in social sector investments in areas like primary education and primary health. This leaves us vulnerable to shortage of skills at various levels and creates challenges of employability and social backwardness. There are important supply side constraints including resources, energy, skills, education, science and technology and innovation that need to be overcome, if we are to sustain the high rate of growth in the coming decades. It is no surprise, therefore, that these supply side constraints become the driving force behind establishing a bilateral relationship. Driven so significantly by domestic consumption, India has had to create her own model of growth. There is, moreover no precedent for such a scale of change taking place in a democratic framework. But there is much that we can gain from inter-action with other societies in terms of best practices, improved capabilities and additionality of resources. Emphasis on expanding foreign trade and attracting greater foreign investment flows requires a refocussing of our energies. India has emerged as a R&D hub for sophisticated areas such as network equipment, medical equipment, semi-conductor design, aerospace, automotive design, computation and biotechnology. More than half of the Fortune 500 companies have set up their own R&D operations in India. Foreign and multinationals are leveraging the Indian talent pool for cutting edge development. Further fuelling this success is the vibrant entrepreneurial ecosystem. India has achieved success in bringing out a number of new innovative products and services in the Indian market. Successful examples of technological and business innovation in this area include the Tata Nano car which has 34 design patents and was initially priced at US$ Chotukool, a small refrigerator which weighs 7.5 kgs has an electricity bill of US$ 1 per month and costs US$ 75; an ATM that uses 4% of the energy used in a conventional ATM; a low cost water purifier which incorporates 14 patented innovations and costs US$ 25; and the world s cheapest tablet computer priced at US$ 20.

2 These developments and innovation initiatives will open new opportunities for scientific collaboration and commercial activities between our two countries. We welcome participation by Danish companies in the global R&D hub in India as well as the vibrant innovation arena which serves the bottom of the pyramid in the Indian market and where the scope for new ideas and size of the market is immense. We believe that Danish companies possess expertise, technology and products in a number of areas of interest to India. We look to engage them in areas like wind energy, bio-technology, food processing, pharmaceuticals, shipping, engineering, design and innovation infrastructure projects. Two way trade between our two countries is approx. US$ 3 billion (Commodity US$ 1.2 billion and services US$!.73 billion). Prime Minister of India, Mr Narendra Modi launched the Make in India campaign on 25 September This heralds a new business environment in the country, one that encompasses economic growth orientation, ease of business and less bureaucratic red tape. Digital India, Easy Governance, Effective Governance and E-Governance are the buzz words under Make in India. Make in India envisions India as a manufacturing hub from where the investor can re-export to other countries. It concomitantly entails upgrade and expansion of infrastructure to include ports, airports, highways and informationways, electric grids, optic fibre networks. In addition, it means capacity building for warehouses, cold storage network and logistics. India is one of the fastest developing economies in the world and ranks among the most sought after investment destinations. It is the 3 rd largest economy in terms of purchasing power. The 9th Global Capital Confidence Barometer, October 2013, has reported India is among one of the top five investment destination among emerging and developed markets. India accounts for 5.5% of global FDI in terms of value and 6.3% in terms of projects. India is the fourth most attractive location for FDI for as per UNCTAD Report India ranks 2 nd Most Promising Country for Overseas Business Operations in the Medium Term. India has been rated as Top Investment Destination for the Long Term. India is a 3D investment destination with democracy, demography and demand. It promises low manufacturing cost and high quality manpower. The government places equal emphasis on knowledge, technology, innovation and research and development. In the Mars orbiter Mission everything was indigenously made. India has the second fastest growing services sector with its compound annual growth rate at nine per cent, during the last 11-year period from 2001 to Services share in world GDP was 65.9 per cent. Services constitute a major portion of India s GDP with a 57 per cent share in GDP at factor cost (at current prices) in with robust growth in financing, insurance, real estate, and business services at 12.9 per cent. Big ticket items were software and telecom that gave India a brand image while focus is also shifting to Tourism and hospitality sector, Ports services and Railways that have high manufacturing-sector and employment linkages. India has a favourable demographic dividend, with 65% people less than 35 years of age and 10 million people entering the workforce every year. The new Government has prepared a five pillar strategy to drive India s growth, which offers multiple avenues of collaboration and investments. These are Infrastructure development Manufacturing growth, employment creation and promoting entrepreneurship

3 Energy sufficiency Skill development Business environment improvement Three pillars for bringing out transformation in manufacturing have been defined. These are; Improving Business Environment- through Ease of Doing Business and Delicensing & Deregulation Enabling Manufacturing- through construction of Industrial Corridors, Industrial Clusters, Smart Cities, Nurturing Innovation, Skill Development Opening up Foreign Direct Investment in key sectors like defence, Construction and Railways for FDI Government is focused on improving both the industrial infrastructure( examples-delhi-mumbai Industrial Corridor, Chennai-Bengaluru Industrial Corridor, Vizag-Chennai Industrial Corridor, Bengaluru- Mumbai Economic Corridor, Amritsar-Kolkata Industrial Corridor) as well as the urban infrastructure( smart cities, affordable housing, Swachh Bharat, Digital India) of the country and has announced several high impact projects in the sector. The government passed an ordinance amending the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (LARR) Act 2013 that makes land acquisition for public projects including industrial corridors, infrastructure and social infrastructure, defence easier. Under Section 105 of LARR Act, 13 central laws, including the National Highways Act 1956, the Railways Act 1989, Coal Bearing Areas Acquisition and Development Act 1957, are exempt from the provisions of the Land Act. Policy in Defence sector liberalised and FDI cap raised from 26% to 49%. 100% FDI under automatic route permitted in construction, operation and maintenance in specified rail Infrastructure projects. Easing of norms underway for FDI in the Construction Development Sector India has the potential to offer myriad of opportunities for foreign investors across a wide gamut of manufacturing sectors; Automotive Likely to become 3 rd largest auto market in the world by 2016, accounting for more than 5% of the global vehicle sales India s is 2 nd largest two wheeler manufacturer, largest motor cycle manufacturer and 5 th largest commercial vehicle manufacturer. Expected size by 2016 is USD 145 billion. Passenger Vehicles Two Wheelers Three Wheelers Commercial Vehicles low cost electric vehicles 100% FDI is allowed under the automatic route Auto componentstauto components

4 Worth USD 39.7 billion in FY India s exports of auto components increased at a CAGR of 17% during ; Exports have risen to USD 9.7 billion in Engine & Engine Parts Transmission & Steering Parts Suspension & Breaking Parts Electrical parts 100% FDI is allowed under the automatic route Defense 3 rd largest armed forces in the world. Largest importer of conventional defence equipment 70% of defence requirements are met through imports Defence budget in is USD 38 billion, expected to reach USD 50 billion by 2018 Manufacturing of defence equipment Maintenance, repair and overhaul segment Engineering services outsourcing Up to 49% under the government route and beyond 49% through CCS (in case of transfer of technology) Electrical Equipment Estimated output by 2022 approx. USD 100 billion The market expanded at a CAGR of 10.5 per cent over (FY07 12). Generation Machinery: Boilers, Turbines, Generators 100% FDI is allowed under the automatic route subject to all the applicable regulations and laws. ESDM Worth USD billion in 2012; anticipated to be USD 94.2 billion by 2015; CAGR of 9.88% between 2011 and 2015 Consumer electronics Strategic electronics Medical electronics Avionics Fabless manufacturing Automotive electronics Electronic Manufacturing Services EMCs 100% FDI through automatic route for ESDM except for defence electronics. Pharma Accounts for about 2.4 % of the global pharma industry in value terms and 10% in volume terms Expected to grow at 12.1% during Expected to reach USD250 billion by 2020 from the current USD65 billion Active pharmaceutical ingredients (APIs) Contract research and manufacturing services (CRAMS)Formulations 100% FDI is allowed under the automatic route for Greenfield projects.

5 For brownfield project investment up to 100% is under the government route. Construction Second largest employer and contributor to economic activity, after agriculture sector. Accounts for 2 nd highest FDI inflow after the services sector Worth USD 78.5 billion in FY13; expected to grow to USD 140 billion in FY17. Residential, retail, commercial and hospitality sectors Technologies and solutions for sustainable cities, low cost and affordable housing, Green building solutions, environment friendly building materials Training and skill development of construction sector workers Smart cities Urban water supply; urban sewerage & sewage treatment 100% FDI is allowed under the automatic route subject to conditions Food Processing Industry size is Rs 845 billion in , growing at 8.4% for the last five years ending Value addition of sector as share of GDP manufacturing was 9.8% in Fruits and Vegetables Fermentation products Beverages Dairy Food additives, nutraceuticals Confectionary and bakery Meat & poultry Fish and sea foods processing Grain Processing Food packaging Food processing equipment Consumer food 100% FDI through automatic route for most of the food products except for items reserved for MSME. Leather Industry size approx. USD 11 billion (exports - USD 6 billion and domestic market - USD 5 billion) Exports projected to grow at 24% pa in next five years. Domestic market expected to double in next five years. Tanning and finishing of leather products Manufacturing of leather garments Manufacturing of leather footwear and footwear parts Manufacturing of leather goods, such as harness and saddlery 100% FDI is allowed under the automatic route subject to all the applicable regulations and laws. Petro Chemicals Size of the industry ( ) is around USD 144 billion India accounts for approximately 16% of the world production of dyestuff and dye intermediated

6 The polymer demand is expected to grow by 8-10% with a healthy growth in clothing, automobiles, etc. Petrochemicals Specialty chemicals Agrochemicals Colorants Technical training 100% FDI is allowed under the automatic route subject to all the applicable regulations and laws. Oil and Gas 4 th largest consumer of crude oil and petroleum products in the world (2013) Oil imports constitute 80% of India s total domestic oil consumption (May 2014). At the end of 2013, India had MMTPA of refining capacity, making it the second-largest refiner of crude oil in Asia. Underground coal gasification E&P services and equipment City gas distribution Refinery Technology partnerships in upstream sector FDI is subject to the existing sectoral policy and regulatory framework and varies across the value chain Textiles 2 nd largest textile manufacturing capacity globally Sector contributes 14% to industrial production and 4% to GDP and 13% of country s export earnings Domestic textile and apparel industry is estimated to reach USD 100 bn by 2017 from USD67 bn in Exports are expected to increase to USD 65 bn by 2017 from USD 40 bn in 2014 Entire value chain of Synthetics Values added and speciality fabrics Technical Textiles Garment Retail Brands 100% FDI is allowed under the automatic route in textile sector Improving Business Environment Process of applying for Industrial License & Industrial Entrepreneur Memorandum made online on 24X7 basis through ebiz portal Validity of Industrial license extended to three years States asked to introduce self-certification and 3rd Party certification under Boilers Act Major components of Defense products list excluded from industrial licensing Dual use items having military as well as civilian applications deregulated Services of all Central Govt. Departments & Ministries will be integrated with the E-Biz - a single window IT platform for services- by 31 Dec. 2014

7 Advisory sent to all Departments/ State Governments to simplify and rationalize regulatory environment All returns should be filed on-line through a unified form; A check-list of required compliances should be placed on Ministry s/department s web portal; All registers required to be maintained by the business should be replaced with a single electronic register; No inspection should be undertaken without the approval of the Head of the Department; and For all non-risk, non-hazardous businesses a system of self-certification should be introduced Skill Development for the workforce through the Public Private Partnership Model is to be considered. Solid Waste Management and Waste Water Treatment are envisaged as revenue models through Public Private Partnership mode. India is an investment destination for renewable energy and looks to enhance investments in this sector from US$ 6 billion to US$ 20 billion a year. Today India stands 5 th in the world in overall renewable energy capacity installations with an installed capacity of 32,425 MW. It seeks to add about 100,000 MW in the next 5 years which gives an investment opportunity of US$ 100 billion. Some major policy incentives include accelerated depreciation, generation based incentive, feed in tariffs and viability gap funding. Energy Sufficiency is sought to be achieved through Thermal Power and Renewable Power. The energy sector is full of varied opportunities in the thermal and renewable energy sector. Summing up- Indian PM strongly believes that just as there is Corporate Social Responsibility, there is Corporate Government Responsibility, that India can come down to the first 50 among countries for ease of doing business, that the country s Look East Policy must also Link West and have a Global Vision. Hon ble Prime Minister, in his Speech from ramparts of Red Fort on Independence Day on August 15, 2014 has defined future course of action: I want to appeal all to the people world over. Come, Make In India. Sell anywhere but manufacture here We should manufacture goods in such a way that they carry zero defect, that our exported goods are never returned to us. We should manufacture goods with zero effect that they should not have a negative impact on the environment.