Indo-U.S. Partnership Conclave 1

Transcription

1 Indo-U.S. Partnership Conclave 1

2 Research paper prepared by About Madras Consultancy Group Founded in 1985, MCG offers a wide range of management consulting services to Indian and international clients. MCG provides market intelligence services and assists clients in developing market entry strategies. MCG conducts industry studies, B2B market research, feasibility studies and offers marketing advisory services. MCG s consulting and market research services have been utilised by a large number of Indian and International companies. Apart from industry studies, MCG also conducts macro level studies that help fostering economic development. Such developmental studies have been undertaken for Indian industry associations/ groups. For further information, please contact: admin@mcg.in 2 Indo-U.S. Partnership Conclave

3 Indo US Partnership Conclave The march towards US$ 500 billion trade India: Trade scenario The United States of America and India, the two leading democracies of the world, with similar economic interests and strategic goals are marching towards a strong and enduring trading relationship. At US$ 109 billion (2015), the Indo- American bilateral trade relations is now recognized as a key aspect of the growing strategic partnership between the two countries. Bilateral trade in goods and services between the two countries has more than doubled over the last decade and the target for 2025 has been set at US$ 500 billion. India is currently among the top 15 suppliers of goods and services to USA with imports from India valued at around US$ 69 billion during Total export of goods and services from USA to India stood at US$ 40 billion (2015). Bilateral trade in services totaled to US$ 43 billion with export of services from India to USA reaching US$ 25 billion during While trade in goods between India and USA has grown at a CAGR of 8.6% since 2006 to reach US$ 66.6 billion in 2015, service trade has grown at a CAGR of 13% during the same period and was valued at US$ 40.9 billion in Some of the major goods exported from USA to India include machinery, optic & medical instruments, organic chemicals, aircraft and plastics. Key goods exported from India to USA include gems & jewellery, textiles & apparels, machinery, iron & steel, pharmaceuticals and mineral fuel. USA: Export and Import of Goods & Services to India US $ Billion Export Import Source: US Bureau of Economic Analysis Indo-U.S. Partnership Conclave 3

4 USA: Export to India (2015) Total export: US$ 38.9 bn Conclave: Sectors of focus Services 44.2% USA: Import from India (2015) Total import: US$ 68.6 bn Goods 55.8% Some of the promising sectors that the conclave will focus on include Automotive, Defense & Aerospace, Life sciences & Healthcare and Water & Solid waste management. These sectors, amongst others, have the potential to deepen the trade relations between India and USA by offering investment opportunities and enhancing trade. The ensuing sections provide an overview of the four sectors that will be deliberated upon during the conclave. Services 34.5% Goods 65.5% Automotive Sectors of focus Defense & Aerospace Source: US Bureau of Economic Analysis Life sciences & Healthcare Water & Solid Waste Management With a focus on creating value for stakeholders, the corporate sector remains the backbone of the strengthening trade relations. USA accounts for around 6% of total foreign direct investments in India with cumulative FDI inflows from USA to India totaling US$ 18 billion during the period April 2000 to March As one of the fastest growing economies, India is an attractive investment destination across a wide range of sectors. The country s thriving SME sector with a large appetite for state-of-the-art technology has appealed to the interest of big and small companies across the US. The Indo- US strategic partnership has now embarked on an exciting phase of growth to tap the mutual benefits arising out of the greater economic co-operation between the two nations. Major goods exported: USA to India Major goods exported: India to USA Tamil Nadu: At a glance Tamil Nadu, located at the Southern part of India, covers an area of 130,058 sq. km and has a coastline of 1,076 km. The population in the State has increased from 62.4 million during 2001 Census to 72.1 million in 2011 Census. Of the 72.1 million people in the State, around 48.5% reside in urban areas making it one of the most urbanized States in India. Tamil Nadu is also well connected by road, rail, air and sea. Tamil Nadu has emerged as the second largest economy in the country, next only to Maharashtra and the GSDP of the State was estimated at US$ 83 billion in , accounting for 7.8% of India s GDP. The State government is focused on the manufacturing sector in order to enhance the production of value added products. Machinery Electrical machinery Optic & medical instruments Gems & Jewellery Textiles Machinery 2nd largest contributor to India s GDP (7.8%) Excellent port logistics; home to 3 Major ports Home to the highest number of factories (17%) Organic chemicals Aircraft Plastics Iron & Steel Pharmaceuticals Mineral fuel Accounts for 16% of India's industrial workfforce Ranks 3rd in terms of FDI inflows (6%) Tamil Nadu Contributes to 28% of India's renewable energy capacity Contributes to 11% of India's Industrial output 4 Indo-U.S. Partnership Conclave

5 Tamil Nadu is one of the most industrialized states in India with the highest number of factories (17% of the total number of factories in India) and highest number of industrial workers (share of 16%). During April 2000 to December 2014, Tamil Nadu received a cumulative FDI investment of US$ 16.0 billion. The state is home to many industries such as automobiles, textiles, electrical & electronics, heavy engineering, petroleum, petrochemicals, power generation, cement, fertilizers, sugar, iron & steel, mineral processing, IT & ITeS, printing and leather. The major industrial regions in the State are Chennai, Coimbatore, Cuddalore, Erode, Madurai, Sivakasi, Trichy, Tirupur, Tuticorin and Virudhunagar. Chennai, the capital city has emerged as the automobile hub of India with many major heavy engineering and vehicle manufacturing companies being located in and around the city. The state is also known for its textile industry which is a major contributor to the country s economy. The region around Coimbatore, Tirupur, Karur and Erode is known as the Textile Valley of India. Tamil Nadu also boasts of leading in manufacturing electrical & electronic goods and also has a significant presence of mineral based industries. The State is also one of the leading bases for small scale industries. Tamil Nadu: Trade scenario Tamil Nadu continues to remain one of the prime contributors to India s trade and accounted for around 8.6% of the country s export in with the value of export from Tamil Nadu estimated at US$ 26.9 billion. Engineering goods, computer software & electronic goods, textiles & readymade garments, leather goods, pharmaceutical products, agricultural & processed food, tobacco & manufactured tobacco, marine products, spices, ores & minerals and chemicals were some of the major commodities of export from Tamil Nadu seaports. Petroleum and crude are the leading imports into the State. Tamil Nadu: Key initiatives in the sectors of focus Automotive industry Tamil Nadu is renowned for automobile manufacturing with Chennai known as the Detroit of India. The State has emerged as one of the top 10 global automobile manufacturing centers and some of the key drivers enabling this include good port logistics, availability of skilled labour, good infrastructure, strong auto components base, and presence of testing & certification facilities. At present, there are seven major car manufacturers located around Chennai, viz, Ford, Hyundai, Nissan, Renault, Daimler, BMW and Mitsubishi. Chennai has an installed capacity to produce over 380,000 cars per year. Tamil Nadu also has one of the largest auto components industry base and has over 80 automobile component manufacturers accounting for a turnover of US$ 1.3 billion in The State is the largest manufacturer of tyres in India accounting for 40% of the country s tyre manufacturing output. The State accounts for 21% of India s automobile exports. The State Government has formulated an Auto and Auto Component Policy aimed at addressing the gaps and issues faced by the automobile industry and enhancing the industry s competitive edge. Some of the initiatives that can create investment opportunities include; Indo-U.S. Partnership Conclave 5

6 Forming an Automotive Industrial Development Centre (AIDC) Setting up an Auto City, a state-of-the-art industrial park catering to both domestic and global auto manufacturers Establishment of Auto Suppliers Park to improve logistics Promoting new Auto Clusters in the State Defense & Aerospace Tamil Nadu aims to garner 30% of the Indian aerospace business by 2020 and several projects are being undertaken to achieve this target. Tamil Nadu s competitive advantage in this sector includes availability of skilled manpower, presence of around 64 colleges offering courses in Aeronautical engineering and being the only State in India with four international airports. Tamil Nadu is planning to create an integrated ecosystem which will enable all the global players to manufacture in the State. Some of the proposed developments include Tamil Nadu Investment Development Corporation of India (TIDCO) is establishing an Aerospace & Logistics Park (3,000 acres) in Vellore with an investment of US$ 500 million. It will be a delineated region, which will cover design, engineering, manufacturing, servicing and maintenance of aircrafts in the State The Government has planned to set up a Maintenance, Repair and Overhaul (MRO) facility near Chennai Airport spread over 50 acres The State Government plans to develop an aerospace components manufacturing park (300 acres) in Sriperumbudur Special Purpose Aviation Resource Cluster SEZs (SPARCS) are also being developed by the Government one such park planned at Perambalur SEZ Life sciences & Healthcare Tamil Nadu is known as the healthcare capital of India with a robust network of over 300 multi-specialty hospitals and over 12,500 doctors. The State is considered as one of the best in terms of health infrastructure. Going forward, the State plans to focus on promotion of preventive healthcare, continuously reduce the incidence of life style diseases, ensure complete availability of tertiary healthcare and achieve 100% health insurance coverage. The Government has planned several projects to improve the healthcare facilities in the State which pave way for investment opportunities. Some of them include; Opportunities for investment in the Aerospace sector include Development of Greenfield airport MRO facilities development Intergrated Aerospace park Up-gradation of existing airports Manufacturing of aircraft parts & assembly Skill development in aerospace sector 6 Indo-U.S. Partnership Conclave

7 Key initiatives facilitating investment Two medical cities are planned in Southern and Western Tamil Nadu Medical colleges are planned across the State Strengthening of PHC/UHC/CHC Five world class nursing training institutes Cancer cure centres Preventive management for non-communicable Diseases have access to 100% covered piped water supply and 99% sewerage facilities, they need to be augmented in the extended areas that have been recently added to the Chennai Corporation limits and also in the rest of the State. While the demand for water in the State is around 1,895 TMC, the availability is around 1,578 TMC. Fresh water demand is being met through desalination plants in the coast and treated water demand needs to be met through Tertiary Treatment Reverse Osmosis (TTRO) plants. Though Tamil Nadu has been a pioneer in solid waste management since the 1990s, efforts pertaining to safe disposal and processing of waste have been insignificant. Around 12,500 tonnes of solid waste is generated in the State per day, of which only around 600 tonnes per day is treated. To address these needs and facilitate better management of water supply and waste disposal, Tamil Nadu Government has undertaken several initiatives which can garner foreign investments. Water & Solid waste management The cities in Tamil Nadu are expanding rapidly with the peripheries of large Corporations and Municipalities exhibiting faster growth. Though core areas of Chennai Thus, Tamil Nadu provides major opportunities for investment and trade in the four core areas of deliberation, in this conclave, viz. Automotive, Defense & Aerospace, Life sciences & Healthcare and Water & Solid waste management. These sectors are discussed in further detail in the ensuing sections of this paper. Formation of water supply grid between Chennai and Bangalore Ponneri and Hosur to be the key nodes for water supply for industries along the industrial corridor Popularise new water technologies like forward osmosis Set up desalination plants Tap the potential of Tertiary Treatment Reverse Osmosis (TTRO) plants Setting up of waste treatment and disposal facilities and waste-to-energy plants Indo-U.S. Partnership Conclave 7

8 Automotive Industry Overview Indian automotive industry is growing well and is expected to be amongst the global top three within the next decade, given the Government s pro-active policies, infrastructure upgradation and the emergence of the country as a preferred destination for investment. Initiatives such as Auto Mission Plan 2016 to 2026 and Make in India are providing an impetus to the vehicle and components industry. The automotive industry contributors to about 7% to the country s GDP and its share is expected to rise significantly in the coming decade largely owing to the Government s Make in India initiative. Auto Mission Plan 2016 to 2026 a roadmap for Indian Auto industry To make automotive industry a key driver for the manufacturing sector under the Make in India program To increase the automotive industry s contribution to GDP from the current 7% to over 12% and to account for over 40% of manufacturing sector by 2026 Production of passenger vehicle to increase between 9.4 to 13.4 million vehicles, more than three times the current level Global production of cars stood at 68.5 million in 2015, growing at a rate of 3.3% annually over the last five years. India s production of passenger vehicles (passenger cars, utility vehicles & vans) was 3.4 million in , increasing at an annual rate of 2.7% since Within the passenger vehicles segment, passenger cars account for around 70%, followed by utility vehicles at around 20%, and the rest by vans. The demand for passenger vehicles has been marginally shifting from passenger cars to utility vehicles and several companies have introduced new models of utility vehicles in the recent years. Passenger cars and utility vehicles grew at a rate of 4.9% and 5.3% respectively from FY14 to FY15. Currently, the used car market is more than that of the new cars market. Considering the growing demand for used cars, many OEMs have set up used car retailing centres with quality assurance and easy financing; some also provide exchange offers. India is considered as a hub for small cars manufacturing as around 31% of the small cars sold globally are manufactured in India (as of ). Passenger vehicle: Production trend, FY11 to FY16, in million nos FY11 FY12 FY13 FY14 FY15 FY16 Source: SIAM 8 Indo-U.S. Partnership Conclave

9 In the passenger vehicles segment, Maruti Suzuki India is the market leader with a share of around 46% in total passenger vehicles sales in 2015, followed by Hyundai Motor India, Mahindra & Mahindra, Honda Cars India, Tata Motors, Toyota Kirloskar Motors, etc. India is also a major exporter of automobiles and the export of passenger vehicles stood at 0.65 million vehicles in , growing at a CAGR of 8.0% since India also produced about 1.7 million commercial vehicles and three wheelers in The state governments and the private operators are paying increasing attention to the quality of the bus ride and the population of these vehicles is expected to grow at a healthy pace in the coming decade. Growth drivers of automobiles in India Improved road infrastructure, growing working population, expanding middleclass population, availability of low cost labour, proactive Government policies are some of the drivers of growth of the automobile sector in India. India has the second biggest road network with 4.7 million km. The value of road and bridge infrastructure is projected to grow from US$ 6.9 billion to US$ 19.2 billion by Around 13,000 km of National highways, 1,000 km of Expressways have been sanctioned in the budget. Improved road infrastructure will significantly increase the demand for vehicles with new technologies like navigation system and safety technologies Easy financing options have increased the two wheeler demand over the last few years and there is a huge scope for expansion of the two wheeler market in the rural areas. Production of two wheelers witnessed an annual growth of around 7% over the last five years According to the Auto Mission Plan , the passenger vehicles market is expected to triple to 9.4 million units by 2026 driven by the Make in India initiative The Government s focus on agricultural mechanisation and the increase of farm credit for farmers are expected to boost the tractor demand. The demand for both <20 HP and <50 HP are together steadily increasing at 8-10% annually and there is a market potential for international brands in the coming years The new technology-driven commuting business model (taxi aggregators) in cities has led to a new category of technically upgraded passenger vehicle buyers. This model has already gained popularity in several Indian cities where many prefer cost effective and comfortable mode of transit than ownership of a vehicle Rising demand for passenger vehicles with more safety features like air bags, side impact bars, ABS, ESP, etc. Indo-U.S. Partnership Conclave 9

10 Auto components sector in India Indian auto component industry has come a long way from being a component supplier to system/ module supplier. The industry had a turnover (including supplies of OEMs, aftermarket sales, exports) of US$ 38.5 billion in , of which export accounted for around 29%. The industry has the potential to grow to US$ 180 to 200 billion by The auto components market exhibited a growth rate of 11% since and will continue its double digit growth over the next decade on the backdrop of demand from both domestic and export market. Of the total production of auto components, engine parts accounted for around 31%. Around 45% of the components manufactured in the country catered to the passenger vehicles segment. The domestic players have started building their capacity and upgrading the technology to meet stringent global standards. Domestic players export components to North America and Europe and cater to the aftermarket in Middle East, Africa, and Australia. Some are building strong sales team in these regions while some are setting up Greenfield projects in the targeted markets. Export of auto components stood at around US$ 11.2 billion in , exhibiting an annual growth rate of around 29% since USA is one of the leading export destinations accounting for around 22% of the total exports from India. Around two-third of the auto components exported are mechanical parts and around 10% are value added products such as high-end safety and advanced electronic components. Most of the designs for components are provided by the OEMs. The country has become a global centre for the manufacture of small engines. Equipment 10% Suspension & braking parts 12% Auto Components production: Break-up by type (%), Electrical parts 9% Body & chassis 12% Others 7% Source: ACMA Engine parts 31% Drive transmission & steering parts 19% Emergence of India as an automotive hub & mushrooming R&D activities India is emerging as an automotive hub in Asia with the presence of several automotive clusters, availability of skilled workers along with technological competence. Auto hubs are being grouped into clusters for ease of doing business, and these clusters are Delhi-Gurgaon-Faridabad in the North, Mumbai-Pune-Nashik-Aurangabad in the West, Chennai-Bengaluru-Hosur in the South and Jamshedpur- Kolkata in the East. Apart from manufacturing facilities, the country is also setting foot on research and development (R&D) activities. The Central Government in collaboration with several State Governments and Indian automotive industry players initiated the National Automotive Testing and R&D Infrastructure Project (NATRiP). Around seven test centres have been finalized across India so far. Some of the global OEMs also have set up their R&D centres in the country and these include Hyundai Motors in Hyderabad (Telangana), Maruti Suzuki in Rohtak (Haryana), General Motors in Talegaon (Maharashtra), Mercedes Benz in Bangalore (Karnataka). With the Indian R&D activities trending towards global standards and with strong engineering base, cost benefits and tax incentives, many more global players are expected to invest in R&D activities in India. 10 Indo-U.S. Partnership Conclave

11 Role of global players in the Indian automobile industry Multinational OEMs have a huge presence in the Indian automobile industry, especially in the two wheelers and passenger vehicles categories. Commercial vehicles have been the forte for Indian companies with over 80% market share. Companies from USA, Japan, Italy, France, Germany, Sweden and South Korea have set up manufacturing facilities here and have outsourced a good share of auto components manufacturing to local players. 100% FDI is allowed under automatic route in the auto sector. Among the manufacturing sectors, automobile received the highest FDI in FDI in automobile sector was around US$ 2.42 billion during the period April-February (FY15), an increase of 89% over the last period. Many global OEMs are using their Indian operations for their export market. Ford is currently amongst the top ten players in India. They have sprawling facilities in Chennai, Tamil Nadu and Sanand, Gujarat where it manufactures and exports vehicles and engines. The combined installed capacity of these two plants is 610,000 engines and 440,000 vehicles and so far the company has invested around US$ 2 billion in India. The company has recently announced that by 2017, they will manufacture engines named Panther for India made SUVs and Dragon for small cars. The company plans to invest around US$ 800 million for this project and expand the Chennai facility. General Motors has manufacturing plants in Halol, Gujarat and Talegaon, Maharashtra. The company is planning to close its Halol plant and expand its Talegaoon plant. The company is planning to invest around US$ 1 billion by 2020 to double the production capacity of Talegaon plant. US based Fiat Chrysler is planning to invest around US$ 513 million in a new facility in Ranjangaon, Maharashtra to manufacture the Jeep Grand Cherokee. The company already has a plant in this area. BMW and Mercedes Benz have assembly plants in India. On the auto component front, there is an increasing penetration of electronic components in cars, especially in the recent models and the imports for these components could rapidly grow in the coming years. Air bag suppliers like TRW Automotive Inc. (Michigan, USA) and other players are either setting up or expanding their capacity in India. Indo-U.S. Partnership Conclave 11

12 Defence and Aerospace Industry Overview India has the third-largest armed forces in the world, and its defence budget is about 1.9% of its GDP. Globally, India is ranked 9th globally in military spending and imports 60% of its requirement and is one of the largest importers of conventional defence equipments. Capital expenditure has risen marginally to around 40% of total expenditure in from 39% in The Government plans to invest around US$ 250 billion in this industry in the next 7-8 years and at the current 30% offset requirement, the minimum opportunity available for the domestic players is at around US$ 75 billion. Since 2007, around US$ 4.3 billion worth of offset contracts have been signed and launched. US $ billion Capital Expenditure (US$ Billion) The aerospace industry in India is witnessing growth due to the rapid development of the civil aviation sector; India recorded an annual growth of 41% in passenger traffic over the last two years. Owing to the rapid growth, the onus is now on improving the affiliated infrastructure. The Government opened this sector to private and foreign investment in The Government s emphasis is currently to build a domestic industrial base targeting 70% indigenisation and also to make India a leading exporter of defence related equipment to ensure this, the Government has made transparent global bidding guidelines in the Defence Procurement Procedure (DPP), which is revised annually and it also lays out the guidelines governing the Defence Offset Policy. As of June 2016, the Government has cleared for 100% FDI in this sector (49% through the automatic route and above 49% is subject to Government s approval on a case-to-case basis) Capital Expenditure (US$ Billion) 12 Indo-U.S. Partnership Conclave

13 Growth drivers Some of the key drivers for the defence and aerospace industry are: Better Manufacturing capabilities Improved involvement from overseas suppliers and domestic manufacturers Joint venture and transfer of technologies Young populace and availability of workforce (skilled) Better Infrastructure Major stakeholders Defence manufacturing in India is dominated by Defence Public Sector Undertakings (DPSU) and Ordnance Factories Board (OFB) with a total share of around 80-90%. However, various private sector companies have been involved in a way with several defence projects over the past years. Larsen & Toubro (L&T), Tata Group, Reliance Defence and Engineering Limited (previously Pipavav Defence and offshore engineering company), amongst others, have tied up with global defence majors and have created infrastructure required to take on bigger roles in the defence space. In order to take advantage of the easing up of the rules on foreign investments in the defence sector and also the opportunity to fulfil the offset obligations, various Indian private companies and research laboratories are looking for international partners. Hindustan Aeronautics Limited (HAL), a fully owned unit of the Government of India, is the premier aerospace company in the country. It plays a major role in the Indian Defence aviation sector through design, manufacture and overhaul of fighters, trainers, helicopters, transport aircraft, engines, avionics and system equipment. Some of the other key stake holders in this industry are Indian Space research Organisation (ISRO), Defence Research Development Organisation (DRDO), Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL), Bharat Earth Movers Limited (BEML Limited), Ordnance Factory Board (OFB), Mishra Dhatu Nigam Limited (MIDHANI) and BrahMos Aerospace. Any company doing business in the defence and aerospace industry in India is required to comply with five key policies, including: DPP and Offset policy Industrial licensing policy FDI policy Foreign Trade policy Tax Policies Role and opportunities for USA in the Defence and Aerospace industry USA is one of the key suppliers of defence system to India along with Russia and Israel. Over the past few years, US based OEMs have had success in this industry selling about US$ 10 billion in major systems. Some of them include the Boeing C-17, P-8I aircrafts and Lockheed martin s C-130 aircrafts. US based companies have shipped US$ 1.2 billion worth of defence products/ systems in CY With the Government opening up the sector to foreign investment, large Indian private players such as the Tata group, Mahindra group have entered into joint venture with defence firms in the USA while L&T and Kalyani group continue to be the major players in this industry. Some of the new entrants into this industry are the Reliance group and Adani group Reliance group has obtained the licence and contract to build warships, making them a potential partner for US based companies specializing in warships. The Government raised its FDI limit from 26% to 49% in this sector (with up to 100% possible if there is high-technology transfer and subject to government approval on a case-to-case basis). Major Indian manufacturers are in search of suitable US suppliers/partners to take advantage of the recently opened up defence & aerospace industry and also fulfil the offset obligations stipulated by the DPP and offset policy. Both the Indian and the US Governments have in principle three agreements in place: Logistics Exchange Memorandum of Agreement (LEMOA) Communications Interoperability and Security Memorandum of Agreement (CISMOA) Basic Exchange and Cooperation Agreement for Geo- Spatial Cooperation (BECA) Both the Governments are also set to conclude an agreement to improve maritime domain awareness with an arrangement to improve sharing of data on commercial shipping traffic. Indo-U.S. Partnership Conclave 13

14 Opportunities across most defence sub-sectors: Land systems: There are a number of opportunities in this segment require focus on the artillery guns, air defence guns and anti-tank guided missiles. In this segment, Tata Motors have tied up with Bharat Forge Ltd. and US based General Dynamics Land Systems Inc. (GDLS) for the Future Infantry Combat Vehicle (FICV) program which has a requirement of 2,600 vehicles. Maritime systems: Demand for fast patrol craft and submarines are expected to increase and plans are in place to begin the construction of India s second indigenous aircraft carrier INS Vishal in design stage this provides a number of opportunities to the US based design firms to enter the Indian market. The Navy also has increasing requirements for fixed and rotary wing aircraft paving way for American companies to provide their offerings to the Indian market. Aerospace systems: Opportunities exist in the light weight helicopters, attack helicopters segment of the air force. In the unmanned aerial vehicle segment (UAV) US companies are looking for apt opportunities to cater to India. In the UAV segment, Boeing and Tata Advanced Systems (TASL) have joined hands to develop UAVs for the Indian defence sector. TASL are already on contract to manufacture aero-structures for Boeing s CH-47 Chinook and AH-6i helicopters. Lockheed Martin and Tata Advanced Systems joint venture, Tata Lockheed Martin Aerostructures Ltd (TLMAL), is currently manufacturing major aerospace structural components for the worldwide C-130J fleet in India. TLMAL is now providing the tail empennage for all C-130Js, which are assembled in Lockheed s USA (Marietta, Georgia) facility. During the Defence Expo 2016, Lockheed Martin showed interest in manufacturing its Javelin missile systems, F-16 fighter aircrafts and helicopters for the Indian Navy to support the government s Make in India initiative. Maintenance, Repair, and Operations (MRO): Requirement for more MRO capabilities is increasing with aging systems in all services and the purchase of more advanced systems. Aerospace Parks: There are ample opportunities for the US companies to invest in the concept of Aerospace Parks many Indian companies in collaboration with various State Governments plan to execute this concept. Reliance Industries have received the go-ahead to invest US$ 1 billion in setting up an aerospace park in Madhya Pradesh. Other aerospace parks are planned in Ahmedabad, Bangalore, Chennai and Hyderabad. Trade with US in the Defence and Aerospace industry (in US$ 000) Total Imports (direct only) 4,827,143 6,066,508 Imports from the U.S. (total) 1,431,787 1,600,763 Exchange Rate: 1 US$=INR Indo-U.S. Partnership Conclave

15 Healthcare and Life Sciences Industry tapping latent potential Overview Healthcare and life sciences industry in India has expanded at a fast pace and the output of the industry is estimated at US$ 130 billion in The increasing incidence of chronic illness such as cardio-vascular, diabetes and obesity together with increased affordability and awareness have forged a lucrative market for the healthcare and life sciences industry in India. Demand for specialty and super-specialty therapies and drugs are witnessing higher growth than the demand for mass therapies. Public health care expenditure in India is still among the lowest in the world- estimated at around 1% of the country s GDP. Life sciences sector in India has a large presence of private players who offer high quality niche services and has significant potential for advanced technologies and is attracting global MNC players. Healthcare delivery and diagnostics remains the largest segment accounting for over 70% of the healthcare and life sciences industry in India. Corporate hospital chains and other private players have been instrumental in infrastructure developments in the healthcare delivery sector. The number of hospital beds is estimated to have crossed 2 million nos in 2015 with private hospitals accounting for around 70% share. Tertiary care hospitals which are the forte of private sector have caught the interest of global players. Health infrastructure per 10,000 people India USA Hospital beds 9 30 Nurses and midwife personnel Physicians Source: IBEF; WHO World Health Statistics 2013 In a bid to increase penetration in tier 2 / 3 cities, established players are attempting newer healthcare delivery models through increased use of technology such as telemedicine. Healthcare industry in India: Key segments US$ bn Healthcare delivery Pharma Medical technology & others Source: Indo-U.S. Partnership Conclave 15

16 Buoyed by the availability of skilled healthcare professionals and high quality care at affordable prices, medical tourism has picked up pace in India adding an interesting dimension to the Indian healthcare sector. Valued at around US$ 3.5 billion, the arrival of medical tourists in India stood at around 270,000 during Medical tourism market in India is expanding at 20% per annum. India is now an emerging hub for healthcare services and presents a range of opportunities from hospital design to supply of advanced technology products and services. Financing and administration of super specialty hospitals is yet another opportunity which can be addressed through FDI investments in the healthcare delivery. MNC pharmaceutical majors are evincing keen interest in India with a view to address their challenges concerning increasing costs and saturation in domestic markets. Ensuring quick turnaround of drug approvals by US regulatory authorities coupled with encouraging transfer of technology into India will provide the much needed fillip to the Indo-US trade in life sciences industry. Drugs & pharmaceuticals are a key constituent of growing trade between India and the US. Valued at US$ 4.2 billion, drugs and pharmaceuticals accounted for around 10% of the total merchandise exports from India to USA. India has the leading number of USFDA compliant plants outside US accounting for 22% of overall United States Food and Drug Administration (USFDA) approved plants. USA is the leading importer of drugs and pharmaceuticals from India accounting for 28% of the total exports from India. Indian companies are seeking USFDA approvals in niche segments such as anti-infective and cardiovascular groups. The experience of addressing stringent norms in highly regulated markets has improved prospects for future expansion in pharma trade between the two countries. India: Healthcare sector status 2015 Rural vs Urban ratio Population: 1.2 billion Urban:Rural 70:30 Hospital ~ 55,000 Nos. Urban:Rural 65:35 Doctors: 0.9 million Urban:Rural 67:33 Hospital beds: 1.6 million Urban:Rural 70:30 India s approvals received from US pharmaceutical regulatory body No. of companies DMFs filed with USFDA (companies) (As on 31st March 2015) 238 No of Sites (Bulk drugs + Formulations) Registered with USFDA (as on 15th April 2015) 605 Total No Of DMF s (Type II Active) Filed from India (as on 31st March 2015) 2911 ANDAs(As on 15th April 2015 ) 3070 Formulation companies with USFDA approvals. 43 Source: Pharmexcil DMF- Drug Master Files ANDA- Abbreviated New Drug Application 16 Indo-U.S. Partnership Conclave

17 Low cost of production and R&D are the hallmark of the rapid expansion of the pharmaceutical industry in India- currently accounting for around 10% of the global pharmaceutical production by volume. India is a strong contender in the global API/ bulk drug market with the presence of around 600 firms catering to both branded and generic drugs. With cost of production being significantly lower than developed countries in the Western world, India accounts for 20% of the global trade in generics. India is also a noted player in the pharmaceutical formulations sector. In addition to the immense export potential, the rapid growth of the domestic healthcare sector is driving the expansion of the pharmaceutical industry. Valued at US$ 30 billion (2015), the Indian pharmaceutical industry accounts for around 2.5% of the global pharmaceutical industry. who have now emerged as global players. Sun Pharma which completed acquisition of another homegrown firm Ranbaxy Ltd is evolving as a global player focusing on high-value complex generics and branded products. Other leading players such as Cipla, Piramal, Dr. Reddy s laboratories, Aurobindo Pharma and Mankind Pharma are aggressively expanding their markets outside India and have developed expertise in servicing regulated markets. R&D expenditure in the pharmaceutical sector has also increased manifold in the recent years with a focus on biosimilar drugs. Around 341 formulations were released in the domestic market during India is well poised to gain from the surging demand for biosimilar drugs that are made available at a fraction of the price of innovator. Relative cost of production of drugs and pharmaceuticals with US cost as base Pharmaceutical industry is India is forecast to reach around US$ 55 billion by 2020 witnessing a growth of around 13% per annum. Policy support through opening up of the sector to 100% FDI and formulation of Pharma Vision 2020 to make India a global leader in the Pharmaceutical industry have boosted investor confidence. Indian pharma sector which was once a stronghold of MNC players has witnessed the growth of domestic players USA 100% Source: Secondary research India 40% Indo-U.S. Partnership Conclave 17

18 Opportunities for MNCs The domestic pharmaceutical industry has witnessed consolidation through several mergers and acquisitions. Foreign Direct Investments in the drugs and pharmaceutical industry in India accounts for around 5% of total FDI inflows and amounted to US$ 13.8 billion during the period April 2000-March The recent opening up of FDI in Pharma to allow 74% in brownfield projects through the automatic route and 100% in greenfield projects augurs well for further expansion of the sector. Health insurance which was estimated to have covered 440 million population during 2014 is expected reach a penetration level of 45% by backed by Government sponsored programme as well as private insurance coverage. This facet is set to aid the expansion of domestic pharmaceutical market and per capita pharmaceutical spending is expected to witness growth with an increase in demand for high-end drugs. India is a promising market for clinical trials owing to its genetically diverse population and the segment is expected to witness investments in the coming years. Contract Research and Manufacturing Services (CRAMS) is yet another potential segment in the life sciences sector. The market was valued at around US$ 8 billion during 2015 and is fragmented with the presence of over 1000 players. Medical devices market in India has a small 5% share of the healthcare and life sciences industry in India and was valued at around US$ 6 billion during India is heavily dependent on import for medical devices mainly across hitech products such as cancer diagnostics, medical imaging and ultrasonic scans. USA is a noted supplier accounting for 14.5% of medical devices import in India during The growing demand for diagnostic equipment like Cardiac imaging, CT scans, X-ray, Molecular Imaging, MRI and Ultrasound-imaging including hand - held devices as well as life support systems such as ventilator and automated external defibrillator are attractive opportunities for MNC players. Given the fast paced developments in the healthcare and life sciences sector, some of the key segments which augment trade potential include medical infrastructure, medical and surgical instruments, medical imaging, electro medical equipment, orthopedic and prosthetic appliances, cancer diagnostics, ophthalmic instruments and appliances, orthodontic equipment s and dental implants and point of care testing (POCT) diagnostic devices. Surgical instruments 14% Disposables & consumables 15% Medical devices: Imports by segments ( ) Total: US$ 3.1 billion IVD reagents 9% Implants 8% 8 Source: Department of pharmaceuticals, Government of India Electronics & equipment 54% 18 Indo-U.S. Partnership Conclave

19 Environment, Water and Solid Waste Management Overview: India India s sustained economic growth, rising population and urbanization have posed significant challenges in the management of air, water and waste. Of the total population of 1.21 billion, around 377 million dwell in urban areas. The urban population is forecast to reach 600 million by 2031, registering an annual growth rate of 2.1%, almost double the growth rate of China. Going by the present growth rate, the country will have to address a high level of pollution, water treatment and solid waste management in the years to come. Urban population to grow 2.1% annually from million in million in 2031 With rapid urbanization, industrialization and rising vehicle population; both the pollution levels and generation of waste in India have increased over the last decade. With increasing population and decreasing space for landfill, adoption of new technologies for efficient management and disposal of waste has become imperative. Solid waste management is the key area where the country is trying to resolve issues and devise efficient waste management solutions. The country generates around 62 million tonnes of waste annually which is expected to increase to around 165 million tonnes by 2030 and to 436 million tonnes by Indo-U.S. Partnership Conclave 19

20 India: Major sources of municipal solid waste Residential Street sweeping Commercial Horticulture Construction & Demolition Institutional Electricity from the municipal solid waste can also be generated through the various technologies present for energy recovery. According to the Central Pollution Control Board there are 13 waste-to-energy plants in India. The current energy recovery potential from municipal solid wastes is estimated to be around about 1,500 MW according to the Ministry of New and Renewable Energy (MNRE). Some of the commonly used technologies in India include: Thermal Incineration Biochemical Bio-methanation Thermochemical Pyrolysis Electrochemical conversion Municipal Solid Waste. Solid waste generation to grow at around 7% annually in the next 15 years Around 43 million tonnes per annum of solid waste is collected, of which only 22-28% of the waste is processed and treated and the remaining is dumped in landfill sites. As of , there were around 644 plants that treat solid waste in the country. 62 million tonnes in million tonnes in million tonnes in 2050 Type of solid waste treatment plants, Type of Plant No. of Plants Compost and vermin compost plants 553 Bio-methanation plants 56 Refuse Derived Fuel (RDF) plants 22 Waste to energy plants 13 Source: CPCB Biodegradable waste with high moisture content accounts for a major share of municipal solid waste (MSW) but with rapid urbanization and increasing population the composition of waste will undergo a major change in the years to come. The Swach Bharat Abhiyan has given the fillip to the solid waste treatment program revamped by the Government which will be imposed beyond municipal areas and can benefit an additional 30 million people. Several cities have taken the initiative of involving the community for segregation of waste at the source but all these measures are far below the level of waste to be treated. 20 Indo-U.S. Partnership Conclave

21 Role of MNC in Environment, water and solid waste management India s pollution control equipment sector is mostly with small scale industrial firms with low standard technology. There are a few medium and large scale engineering companies who offer turnkey engineering services that include pollution control equipment. The demand for the equipment is equally split between public and private enterprises as private players have also started including high standards in controlling pollution. Since the production of pollution control equipment is limited, the country is importing around 30% of its demand from countries like USA, UK, Japan, Canada, Germany, Australia, Netherlands, Italy, etc. Thermax India, Apzem India Engineering, ISGEC Heavy Engineering Ltd., Unimax Pollution Control (I) Pvt. Ltd., Ionisation Filtration Industries Pvt. Ltd., Duncon, etc. are some of the players in the air pollution control equipment market. Global water companies mainly focus on large scale water treatment plants in the Indian market. India has a reasonably well established, cost effective water treatment equipment industry but lacks capabilities to design large scale plants. Apart from chemicals and demineralization, Decentralized Water Treatment Systems with aerobic treatment and Membrane Bioreactors (MBR) are the upcoming technologies which can be adopted across the country; MBR has a small market but has a great scope in large scale plants. The global companies have huge opportunities in the waste water space in terms of collaboration with Indian companies to offer integrated wastewater treatment solutions, design, production and installation of wastewater systems, etc. Under solid waste management segment, around 3 million tonnes of plastic and 3.2 million tonnes of e-waste is generated every year. The e-waste management market is regularized compared to other waste management categories and is forecast to grow at a rate of around 30% between 2014 and The waste management system in India is controlled by various laws enforced by the Ministry of Environment, Forests and Climate Change along with State Pollution Control Boards, State Governments and Municipalities. Indo-U.S. Partnership Conclave 21

22 Opportunities for USA US players have a good scope in India by providing complete end-to-end solutions and equipment for the various segments of waste management. Some of the major opportunities for the US companies to supplement the existing Indian infrastructure with respect to waste-toenergy are listed below: Supply of machinery and equipment for energy recovery technologies Decentralization of technology installations Power generation and sale of power Production and sale of processed organic feed stock from MSW US companies may consider the following options to enter the Indian market Partnering with existing Indian WTE plant; promoters to initiate joint ventures Establish contact with MoEF and CPCB, to create awareness about the technology and services that US companies can provide in relation to waste-toenergy With respect to waste water treatment, there are 522 operational sewage treatment plants in the country. Current capacity of these plants is only 23 billion litres per day whereas around 62 billion litres per day of sewage is generated in urban areas alone. Of the total sewage treatment plant capacity, only around 81% of the capacity is currently utilized and thus around 70% of the sewage generated in the urban area is not treated. Waste water treatment plants in India are technologically obsolete and designed to treat only biological waste and not the chemical waste this paves way for the US companies to enter the Indian market and provide the required solutions for the treatment for waste water for both biological and chemical waste. 22 Indo-U.S. Partnership Conclave

23 About IACC The Indo-American Chamber of Commerce (IACC), established in 1968, is the apex bilateral Chamber synergizing India-US Economic Engagement. It was started by Ambassador Chester Bowles along with the then Industry leaders and visionaries like Mr. S L Kirloskar, Mr. Harish Mahindra, Mr. H. P. Nanda, Mr. Ambalal Kilachand, Mr. A. M. M. Arunachalam, Mr. Frederick Fales and Mr. John Oris Sims for enhancing US India Economic Engagement. Today IACC has pan India presence with 2400 members at 12 locations, representing cross section of US and Indian Industry. The major objective of IACC is to promote Indo-American business, trade and economic relations. IACC promotes bilateral trade, investment and technology transfer, facilitates business collaborations, joint ventures, marketing tie-ups and strategic alliances through a set of proactive business-oriented initiatives. IACC acts as a catalyst for sustainable growth of business between India and the US. In its four decades of existence, IACC has established operational connectivity with a host of business, research and developmental institutions in India and US in order to leverage each other s capabilities for enhancing Indo-US business relations. The Chamber continuously interacts with the Indian and US Governments, and provides them feedback on bilateral issues relating to trade and investment. In essence, IACC also acts as a forum for its member companies to interact with senior functionaries of both the Governments. IACC member companies are involved in a cross-section of business domains such as manufacturing, engineering, construction, consumer goods, electronics, IT, pharmaceuticals, consulting, travel and tourism, etc. The geographical spread of IACC is unique as it operates through 12 offices located throughout the country. These are in Ahmedabad, Bangalore, Bhubaneswar, Chennai, Cochin, Delhi, Hyderabad, Kolkata, Mumbai, Pune, Varanasi & Patna. Indo-U.S. Partnership Conclave 23

24 24 Indo-U.S. Partnership Conclave