EXPORT-IMPORT BANK OF INDIA
OCCASIONAL PAPER NO. 182
POTENTIAL FOR ENHANCING EXPORTS FROM ANDHRA PRADESH
EXIM Bank’s Occasional Paper Series is an attempt to disseminate the findings of research studies carried out in the Bank. The results of research studies can interest exporters, policy makers, industrialists, export promotion agencies as well as researchers. However, views expressed do not necessarily reflect those of the Bank. While reasonable care has been taken to ensure authenticity of information and data, EXIM Bank accepts no responsibility for authenticity, accuracy or completeness of such items.
© Export-Import Bank of India March 2017
1 2 CONTENTS
Page No.
List of Tables 5 List of Exhibits 7 List of Boxes 9 Executive Summary 11 1. Introduction 24 2. Economic Scenario 36 3. Export Potential 54 4. Investment Scenario 88 5. Strategy for Export Promotion 99 Annexures Annexure 1: Classification of Products 1 1 3 Annexure 2: Generic and Sector-Specific NTBs 117
Project Team: Mr. S. Prahalathan, Chief General Manager, Research and Analysis Group Mr. Ashish Kumar, Deputy General Manager, Research and Analysis Group Ms. Jahanwi, Manager, Research and Analysis Group
3 4 LIST OF TABLES
Table No. Title Page No.
1 Comparison of Gross State Domestic Product of Andhra Pradesh with the Gross Domestic Product of India (Rs. Cr.) 25 2. Sector-wise Gross Value Added (GVA) for Andhra Pradesh (Rs. Cr.) 26 3. Key Economic Activities under the Agriculture Sector (Value in Rs. Cr.) 28 4. Key Economic Activities under the Industrial Sector (Value in Rs. Cr.) 30 5. Key Economic Activities under the Services Sector (Value in Rs. Cr.) 30 6. Agro-Climatic Zones in Andhra Pradesh 31 7. Total Mineral Resources in Andhra Pradesh (including Telangana) as on 1.4.2010 32 8. Key Indicators of Human Capital in Andhra Pradesh 35 9. Horticulture Production and Area under Production in Andhra Pradesh (2015-16) 39 10. Production Estimates for Dairy and Meat Products in Andhra Pradesh 40 11. Key Aggregate Industry Financials for Select Food Products Companies with Plants in Andhra Pradesh (Value in Rs. Million) 41 12. Index of Industrial Production for Andhra Pradesh (Base: 2004-05) 43 13. State-wise Area, Production and Yield of Cotton (2014-15) 44 14. State-wise Raw Silk Production in India (Values in MT) 45 15. Key Aggregate Industry Financials for Select Textile Companies in Andhra Pradesh (Value in Rs. Million) 46 16. Key Aggregate Industry Financials for Select Pharmaceutical Companies in Andhra Pradesh (Value in Rs. Million) 47 17. Principal Mineral-based Industries in Andhra Pradesh 48 18. Key Aggregate Industry Financials for Select Engineering Goods Companies in Andhra Pradesh (Value in Rs. Million) 51 19. Share of Top 10 States/UTs of India in Number of Domestic Tourist Visits – 2015, in Millions 53
5 Figure No. Title Page No.
20. Top Indian States by Value of Exports (2015-16) 54 21. Status of Operational SEZs as on September 2015 56 22. Number of IEMs Filed in Srikakulam District (2012-13 to 2015-16) 60 23. Number of IEMs Filed in Vizianagaram District (2012-13 to 2015-16) 62 24. Number of IEMs Filed in Visakhapatnam District (2012-13 to 2015-16) 64 25. Top Sectors receiving Greenfield FDI in Visakhapatnam District (January 2003- November 2016) 65 26. Number of IEMs Filed in East Godavari District (2012-13 to 2015-16) 66 27. Top Sectors receiving Greenfield FDI in East Godavari District (January 2003- November 2016) 67 28. Number of IEMs Filed in West Godavari District (2012-13 to 2015-16) 68 29. Number of IEMs Filed in Krishna District (2012-13 to 2015-16) 70 30. Top Sectors receiving Greenfield FDI in Krishna District (January 2003- November 2016) 70 31. Number of IEMs Filed in Guntur District (2012-13 to 2015-16) 72 32. Number of IEMs Filed in Prakasam District (2012-13 to 2015-16) 73 33. Number of IEMs Filed in Kurnool District (2012-13 to 2015-16) 74 34. Number of IEMs Filed in Kadapa District (2012-13 to 2015-16) 75 35. Number of IEMs Filed in Chittoor District (2012-13 to 2015-16) 77 36. Top Sectors receiving Greenfield FDI in Chittoor District (January 2003- November 2016) 78 37. Number of IEMs Filed in Nellore District (2012-13 to 2015-16) 79 38. Top Sectors receiving Greenfield FDI in Nellore District (January 2003- November 2016) 79 39. Number of IEMs Filed in Anantpur District (2012-13 to 2015-16) 81 40. Top Importers in Product Champions Category and their Major Supplier Countries 86 41. Top Industry Sectors Receiving Foreign Capital Expenditure (Value in US$ Mn; January 2003-November 2016) 92 42. Select Sector Specific Policies in Andhra Pradesh 96 43. Cold Storage Infrastructure in Andhra Pradesh 100 44. Geographical Indications in Andhra Pradesh 105
6 LIST OF EXHIBITS
Exhibit No. Title Page No.
1. Top States of India in Terms of GSDP (Value in Rs. Bn; 2014-15) 26 2. Change in the Structure of the Andhra Pradesh Economy 27 3. Monthly Movements in Consumer Price Index (Base: 2012 = 100) 28 4. Gross Value Added by Major Economic Activities (2015-16) 29 5. Production and Area under Cultivation in Andhra Pradesh 37 6. Share of Food Grains in Area under Cultivation and Production (2015-16) 37 7. Category-wise Production in the Fishery Sector 40 8. Indian Textile and Garments Industry: Value Chain 43 9. State-wise Share in Number of Textile Mills (as on 31st March 2016) 46 10. State-wise Share in Pharmaceutical Units 47 11. Production of Petroleum Products in Andhra Pradesh 49 12. Type of Petroleum Products Produced in Andhra Pradesh, 2014-15 50 13. Sector-wise Share in Andhra Pradesh’s Exports (2015-16) 55 14. Key Destinations for Andhra Pradesh’s Exports (2015-16) 55 15. District-wise Focus Sectors 59 16. Potential Export Sectors for Srikakulam 61 17. Potential Export Sectors for Vizianagaram 63 18. Potential Export Sectors for Visakhapatnam 65 19. Potential Export Sectors for East Godavari 67 20. Potential Export Sectors for West Godavari 69 21. Potential Export Sectors for Krishna 71 22. Potential Export Sectors for Guntur 72 23. Potential Export Sectors for Prakasam 74 24. Potential Export Sectors for Kurnool 75
7 Exhibit No. Title Page No.
25. Potential Export Sectors for Kadapa 76 26. Potential Export Sectors for Chittoor 78 27. Potential Export Sectors for Nellore 80 28. Potential Export Sectors for Anantapur 82 29. Identification of Promising Products for Exports from Andhra Pradesh 84 30. Foreign Equity Inflows in Andhra Pradesh (US$ Mn) 89 31. State-wise Foreign Capital Expenditure in India (January 2003-November 2016) 90 32. Foreign Capital Investment in Andhra Pradesh 91 33. Top Source Countries for Foreign Capital Investment in Andhra Pradesh (Jan 2003-Nov 2016) 91 34. Motives for Investment in Andhra Pradesh 93 35. Assessment of Business Reforms- Comparison of Andhra Pradesh with National Average 95 36. State Innovation Index 98 37. Segmentation of Indian Logistics Market (2014) 100 38. Taxation in Proposed CEZs 102 39. Targets for Exports from the State (Value in US$ Mn) 112
8 LIST OF BOXES
Box No. Title Page No.
1. Tirupur Export Knitwear Printers Association (TEKPA) Raw Material Bank 103
2. Exim Bank’s Flagship Financing Programmes 108
9 10 EXECUTIVE SUMMARY
India has long emphasized on the and marketing, trade facilitation role of exports in infusing vitality and development of overall trade to the country’s growth story. This competitiveness is undertaken at the commitment of the Government of State-level. India finds resonance in its economic Set against this backdrop, the current policy. The Foreign Trade Policy Study attempts to draw up a strategy (FTP) 2015-20 forms the guiding for promoting exports from the State of architecture for providing the much Andhra Pradesh, built inter alia on an needed thrust to the export sector. analysis of the current resource base While the strategies outlined in the of the State, its production levels, FTP hopes to fructify the vision of trade and investment profile and its increasing India’s share in global future potential. exports from the current 2 percent ANDHRA PRADESH: A to 3.5 percent, efforts at all levels MACROECONOMIC OVERVIEW of governance will be important for achieving these targets. The global The economy of Andhra Pradesh is export slowdown and fast changing multi-faceted, with the coastal region international scenario further providing requisite environment necessitate multi-faceted intervention for development of manufacturing aimed at improving competitiveness activities – the fertile river plains and capacity creation. supporting agriculture and allied activities, and the districts in While trade and commerce is a subject Rayalaseema being conducive for of the Union List, which empowers mineral based industries. the Parliament the India to make legislations, the building blocks of such The resource diversity is complemented activities which includes agriculture by fairly well developed infrastructure and industries are prerogatives of facilities and a favourable policy the State Government. It is therefore environment. The State has also been essential that the evaluation of export rated as the top State in the country in potential, identification of product the Ease of Doing Business Ranking and market, adherence to technical by the Department of Industrial Policy standards, strategies for branding and Promotion (DIPP) - World Bank
11 Assessment of State-level reforms the exports from the State, but also related to doing business in India. propels growth in exports from the manufacturing sector, as low cost In spite of the challenges on account and high quality services in areas of the State bifurcation, Andhra such as telecommunications, financial Pradesh has emerged as an important services, transport, logistics and investment destination in India and distribution are crucial for enhancing offers conducive environment for the competitiveness of merchandise business to flourish. Investor friendly exports. IT and ITeS, tourism, policy and business environment, healthcare, engineering, procurement, coupled with availability of reliable etc. are some of the key services power, large industrial land banks, segments in Andhra Pradesh. skilled labour, and robust infrastructure have made the State a globally While services sector has been the competitive investment destination. major growth driver for the State, Among its ambitious plans is building agriculture and allied sector remains a world-class greenfield capital city at the bedrock of Andhra Pradesh’s Amaravati. economy. It accounts for nearly 27 KEY ECONOMIC ACTIVITIES percent of the total State output. A favourable agro-climatic condition Andhra Pradesh has consistently been and long coastline have enabled among the top performing States of agriculture and allied activities to play India. The growth in the State’s Gross a key role for Andhra Pradesh in terms Domestic Product (GSDP) has been of contribution to output, employment higher than the growth in the Gross and foreign exchange. Domestic Product of India over the past three years. The growth in Gross Andhra Pradesh is one of the largest Value Added for Andhra Pradesh producers of rice, maize, groundnut, has also been robust, recording a sunflower, and cotton in the country. Compound Annual Growth Rate It also ranks first in the production of (CAGR) of 6.8 percent during the brackish water shrimp and fresh water period FY12 - FY16. This growth can prawn, and second in production of largely be attributed to the services fresh water fish. The State also ranks sector which registered a CAGR of fourth in marine fish production and 10.4 percent during the same period. boasts of a well-developed animal husbandry sector as well. The share of services sector in the State’s GSDP has been growing and The industrial sector is also an stood at 46 percent in 2015 - 16. The important contributor to output and sector not only contributes directly to employment in the State. According
12 to the Annual Survey of Industries EXPORT POTENTIAL 2013-14, Andhra Pradesh accounts for The diverse resource endowments nearly 7 percent of the total number of coupled with robust production and factories in India, with food products value addition networks, position accounting for the largest share of the State at the fulcrum of the 28.9 percent in the total output from exports sector in India. During the State. The other major industries 2015-16, Andhra Pradesh ranked sixth contributing to the total output are among all States by value of exports. coke and refined petroleum products Merchandise exports from the State (share of 15.4 percent), basic metals amounted to Rs. 794.9 billion during (15.1 percent), chemical and chemical the year, accounting for 4.6 percent of products (6.5 percent), other non- the country’s total exports. metallic mineral products (5.8 percent) and textiles (5.6 percent). Vehicles, aircraft, vessels and associated transport equipment was The industrial performance of the the largest sector of exports from State has been improving over the Andhra Pradesh, followed by chemical past two years, especially with regard and allied products, animal and to the manufacturing sector. The animal products, vegetable products, Index of Industrial Production (IIP) pharmaceutical, gems and jewellery is a measure for industrial growth and textiles and garments. The USA estimated monthly by collecting (share of 18 percent), Singapore data pertaining to manufacturing, (10 percent), China (8 percent), mining, quarrying and electricity. Hong Kong (7 percent) and Malaysia After registering consecutive years (6 percent) were the top destinations of decline in 2012-13 and 2013-14, for exports from the State. general index for IIP for the State of Andhra Pradesh increased by While exports from Andhra Pradesh 3 percent during 2014-15. During have registered robust increase in April-October 2015-16, the general the recent past, in order to maintain index for IIP registered a marginal this trend going forward, it might be decline of 0.1 percent. This was essential to identify key products and largely on account of a decline of (-) markets which provide opportunities 8.2 percent in the IIP for mining and for companies to grow and achieve quarrying. As against this, the IIP for economies of scale, as also increase manufacturing sector had risen by 8.0 their efficiency levels. The State has percent during April-October 2015-16, significant comparative advantage as compared to the corresponding in several products, which can be period of previous year. explored for boosting exports.
13 Vegetable products, construction equipment from Andhra Pradesh material, pharmaceutical products, have largely been geared towards the and vehicles, aircraft, vessels and Asian markets of Malaysia, Japan, associated transport equipment have Sri Lanka, and Singapore. This is the maximum potential for exports from at variance with the top markets for Andhra Pradesh, not only because these products. The State can explore the State has comparative advantage opportunities in the yet unexplored but in exports of these products but also major markets of the USA, Germany, because the global import demand for China, the UK and France. these products has been robust. The Government can also improve In the category of vegetable products, the quantum of exports by increasing Andhra Pradesh accounts for 8.4 manufacturing capabilities and percent of India’s exports. The top improving competitiveness in the destinations for exports from the State product categories of Machinery and include Vietnam, Sri Lanka, the USA, Mechanical Appliance; Electrical Guinea and Senegal. The State could and Electronics; Optical, Measuring, consider focusing on exporting to Medical and Similar Instruments major importing countries of vegetable and Parts; and Leather and Leather products such as China, Germany, products. Japan, and the Netherlands. STRATEGIES Andhra Pradesh also accounts for 12.9 percent of India’s exports of The State Government policies construction material, with the USA, formulated after the bifurcation of Turkey, Saudi Arabia, UAE, and the the State are imparting a renewed UK being the top destinations for energy and momentum to export exports. The State could also explore growth. However, there is currently diversifying its exports to top importers no dedicated export strategy for the such as Germany, France, and South State. The following strategies can be Korea. considered by the State Government in formulation of an export strategy: The State’s success in penetrating the top markets for pharmaceuticals Augment Warehouse and Storage has also been limited, except in case Facilities of the USA and Germany. The major Lack of adequate transportation, markets of Belgium, the UK and Japan storage and distribution services is also need to be explored by exporters an issue for exporters across the from the State. country. Specifically, in the context The export of vehicles, aircraft, of Andhra Pradesh, this is a major vessels and associated transport constraint as perishable products
14 account for a significant share of Establishment of Coastal Economic the State’s exports. Agro and food Zones processing and marine products are Fourteen Coastal Economic Zones key export sectors for the State, and (CEZs) have been identified along the the Government is also focusing on coastline of the country in the National incentivizing pharmaceutical exports. Perspective Plan of the Sagarmala These require adequate warehousing Programme. Two CEZs have been and cold storage infrastructure. proposed in the State of Andhra According to the analysis conducted Pradesh – one covering the ports of in this study, the State should have Kakinada, Vizag and Gangavaram; at least 19 million tonnes of storage and the other around the port of space only from the perspective of agro Krishnapatnam. and agro based industries. However, Creation of adequate infrastructure in according to the Andhra Pradesh the CEZs needs to be complemented State Warehousing Corporation, the through incentives from the State currently has only about 1.1 Government for enterprises located million MT per annum of warehousing within these. For export prospects capacity. from the CEZs in Andhra Pradesh to Andhra Pradesh also needs remain positively resolute, key driving substantial expansion of cold storage forces need to be identified. Some infrastructure, which is critical for policy interventions which could be ensuring quality and maintaining considered include the following: shelf life of products. Currently, the • The policy of tax exemption with State has 203 cold storage units, with a sunset clause as in the case of capacity of 584 thousand MT. There is SEZs may not necessarily promote need for more such units to meet the productivity and innovation. growing demand for safe handling of Therefore, overall tax incidence exports. on the units should depend on The State can also develop a multi- the type of enterprise, its stage modal cold-chain network which of development, and the amount shall involve two or more modes of of exports. According to a report transport for facilitating transportation of the Comptroller and Auditor and storage of perishable products. General of India, only 9.6 percent Investment in development of last of the SEZs in the country cater mile connectivity can also serve as to multi-product manufacturing, an objective for this proposed multi- and more than half are engaged modal network. in the IT/ITeS sector. To promote
15 more units in high-technology to exporters. It can also serve as a manufacturing sector, the tax link between the exporters and the incidence on such units should be Government, and help alleviate the comparatively lower. Units at early constraints for export growth. The role stage of business development, of the Council shall, inter alia, include: adjudged by the number of years • Assisting exporters in of operation and nature of industry, understanding and leveraging can also be provided greater tax the export policies and export incentives. This would stimulate assistance schemes of the State entrepreneurship and exports, and Central Government; and as a corollary, will engender • Building a statistical database for employment and economic growth. exports and imports from the State; • Common testing and certification • Providing commercially useful facilities for major export sectors information to exporters through should be provided within the market research, and identification CEZs. Compliance to enhanced of key markets and products. This quality standards will be crucial to can be made available through the keep pace with international trends agency’s website; and expectations. • Providing guidance to exporters on various matters such as standards, • Sales by SEZs to Domestic Tariff certification, export finance, Area (DTA) are subject to tariffs. On insurance, etc.; the other hand, India has signed free trade agreements with several • Providing support for promotional countries, and the tariff levied activities such as external publicity, on goods imported from these participation in fairs and exhibitions, countries are at concessional rates. promotion of exclusive exhibitions To alleviate this constraint in case and trade fairs of specific products; of CEZs, a certain percentage of • Coordinating the working of all sales to DTA should be permitted institutions engaged in supporting at concessional duties. international trade within the State; • Identifying the need for export Setting Up Andhra Pradesh Export related training and capacity Promotion Council building, and liaison with DGFT and Andhra Pradesh Export Promotion industry chambers for facilitating Council (APEPC) can be set up with these. support from the State Government, industry associations and exporters The proposed AEPC can set up Trade for providing information and guidance and Information Centres/ Kiosks at
16 major industrial growth centres of Government of Andhra Pradesh in key the State for providing information to sectors such as textiles, engineering, exporters, conducting buyer-seller and agro and food products. These meet, etc. These centres can provide raw material banks can supply the information pertaining to setting up required raw materials to MSME units export business, market and buyer as and when required on producing identification, channels of distribution, a prescribed requisition form. A price processing of export order, export fluctuation reserve can be maintained pricing and costing, risk mitigation in these banks to ensure that smaller methods, export finance, and labelling, producers are protected against wide packaging and marking of goods. fluctuations in raw material prices. Several raw material banks already Raw Material Banks exist in sectors such as handlooms, Availability and cost of raw material but there is a need for more such banks can be a major constraint for in sectors such as handicraft, agro manufacturers. In the handloom and food products, etc. In this regard, sector, for example, high fluctuations APEPC can make recommendations in raw material prices can affect to the State Government based on capacity utilization and value its assessment of the supply related accruals. In the engineering sector constraints for export oriented as well, there are limited domestic production in the State. capabilities for advanced metallurgy and development of special materials, Branding of Geographical which makes the availability of certain Indications Products materials a constraint. The efficacy Several handicrafts, handloom and of raw material banks in alleviating agricultural products from Andhra supply side constraints to production Pradesh have been conferred has been well established. For Geographical Indications (GI) status. example, a raw material bank for The reference to geographical origin dyes and chemicals in the Tirupur along with the use of traditional Export Knitwear Cluster allows the practices and processing methods, manufacturers to procure dyes and provides substantial marketing chemicals at prices which are at potential. GIs are considered important least 5 percent lower than the market tools for marketing strategies, and prices. function as product differentiators. To ensure timely supply of quality To reap the benefits of GI status, raw materials to producers, raw it is important for the GI brand to material banks can be set up by be recognised as a reliable and the Department of Industries, preferred brand in the market with a
17 distinguished positioning. Products and services. Separate awards can such as Darjeeling Tea have been also be instituted for the MSME units able to gain substantial market share in the State. A selection committee on account of this brand building. comprising officials from key In order to attain similar levels of Government agencies and eminent success, key value proposition needs industrialists can evaluate the to be defined for the products having applications taking into consideration GI status. The logo and name of the the value of exports, ratio of exports to GI brand needs to be developed and sales, level of value addition, adoption marketed, and mechanism needs of best practices, product and process to be devised for ensuring that all innovation, R&D activity, etc. the products marketed under the GI Skill Development and Capacity brand meet the minimum specified Building standards. Initiatives are also needed for identifying more products from Exporters need to have in-depth the State which can be accorded knowledge of the latest global with GI status. In this regard, a brand developments pertaining to equity fund can be setup by the State international trade viz., export finance, Government under the aegis of the insurance, packaging / eco-labelling, Department of Industries. This will be quality, etc. They should also acquaint aimed at building globally competitive themselves with the rules and brands for products originating from procedures of importing countries. the State. The fund can also assist in Hence, there is a need to conduct marketing of these branded products Workshops / Seminars / Conferences in the international arena. Export regularly on different aspects of related brochures, interactive CDs, international trade and across etc. can be created for popularizing different sectors in the State. Industry the products from the State in associations and agencies, along international markets. with the proposed Andhra Pradesh Export Promotion Council can help in Export Awards organizing these programmes. To encourage exports from the State, The Government of Andhra Pradesh Export Awards can be introduced for intends to set up Sector Skill Councils recognizing the efforts of exporters at the State level on the lines of across the key sectors—agricultural National Sector Skill Council. These and allied products, marine products, can also be leveraged for enhancing chemical and allied products, the existing capacity of exporters and engineering goods, textile and creating awareness about important garments, drugs and pharmaceuticals, procedural aspects.
18 Financial Support for Managing related to the plant need to be imported Technical Barriers to Trade / from the developed countries. The Standards installation cost of HACCP plants varies from Rs 10 million to Rs 25 Analysis carried out in the Study million. Further, on an average, an indicates that exports from Andhra export processing firm is estimated to Pradesh have largely been geared spend about Rs 2 million per year to towards developing countries, and maintain a HACCP plant1. its penetration in the developed countries, which are the largest There are several standards and importers for several of the identified certifications in other sectors as well. products, has been fairly limited. The For example, the “Communauté usage of Non-Tariff Barriers (NTBs) Européenne (CE)” marking is essential in developed countries, especially for exports to Europe of products such Technical Barriers to Trade (TBTs) as medical devices, simple pressure discourage exporters from entering vessels, electrical and electronic these markets. products, building materials, gas-fuel- fired equipment, toys, etc. Equipment For Andhra Pradesh, alleviating used in potentially explosive this constraint is even more atmospheres within the EU are also important given that it is one of the required to comply with the ATEX major producers and exporters of directive. Similarly, China requires agriculture and allied products, which certain imported products to have remains one of the most protected Chinese Compulsory Certification. sectors for majority of the trading These include several categories nations. Standards in the sector are of auto-components, electrical stringent, and compliance with these equipment, electronics, etc. In Russia requires significant investment. Many as well, industrial products containing developing countries, including India pneumatic products are required to face the twin challenges of inadequate conform to the standards prescribed research and development facilities by GOST-R. In addition, a certificate as well as good quality lab network of conformity is required at customs services to improve and upgrade clearance. product qualities as per requirements of Good Agriculture Practices (GAP), In order to encourage exporters, Hazard Analysis and Critical Control the State can share a portion of Point (HACCP), etc. The investment the expenses incurred for such requirements for HACCP plants are compulsory certifications. Depending large as most of the capital goods upon the turnover of the exporting unit,
1Export of Horticultural Products from India: Economic Impact of Cost of Compliance for Food Safety Measures; Association of Asia Scholars
19 the State can bear 50-100 percent of For example, under TAFP, applicants the certification / compliance cost. need to carry out a mandatory detailed assessment study by a third party Leveraging Technology Acquisition specialized and accredited agency on Schemes the proposed technology. This is done The Government of India has launched to evaluate the following aspects in several schemes for assisting Indian the context of improving the existing manufacturers to acquire and evolve business proposition — cutting-edge technologies to catalyse • Technical uniqueness of the growth and compete in global market. proposed technology in the context One such initiative is the Technology of area of application vis-à-vis Acquisition Fund Programme (TAFP) other competitive technologies; which is an industry driven initiative • Commercial viability and aimed towards assimilation of appropriate justification for technology in a short span of time. In financial valuation of the “Proposed view of the objectives laid out in the Technology”; 12th Five Year Plan, TAFP mandates to provide funding to offset the higher • Requisite level of details on cost of the best technology available Intellectual Property Rights in globally. The TAFP provides financial relation to context of improving the assistance to Indian Capital Goods existing business proposition. sector to facilitate the acquisition of Prior to the opening of the Request for strategic and relevant technologies Proposal (RFP) cycle of the schemes, and also development of technologies the State Government can invite through contract route, in-house route and review applications from export- or through joint route of contract and oriented units / clusters / consortium in-house. in the State, and provide necessary Similarly, the Technology Acquisition advisory and financial support in and Development Fund (TADF) aims preparation of the application. As at facilitating acquisition of clean and these programs meet only a fixed green technologies by MSMEs across percentage of the cost of technology sectors, and bridge the technological acquisition (25 percent in case of gap at an affordable cost. These TAFP subject to ceiling of Rs. 10 can be leveraged by exporters from Crore), the State Government can Andhra Pradesh to boost high- provide additional financial support on technology exports. a case-to-case basis. In this context, the State government Support from Exim Bank can provide support in submission Several flagship programmes of Exim of applications under the schemes. Bank, such as Lines of Credit, and
20 Buyer’s Credit under NEIA can help Overseas Investment Finance propel medium and long term exports (OIF): While the State has substantial from the State, and create export technology-intensive exports, it will opportunities for Indian companies. need to move up the ladder in terms of technology. Since investment in Lines of Credit (LOC): Benefits from R&D has high gestation period, the the LOC program can accrue to the OIF programme of the Bank can exporters from Andhra Pradesh in help companies get access to high several key areas. For example, in the technology by way of inorganic growth cement sector, Exim Bank has several through the mergers and acquisition operative LOCs in the countries of route overseas. Exporters in Andhra Djibouti, DR Congo, Central African Pradesh can also achieve vertical Republic, and the Republic of Congo. integration through their overseas Exporters from the State can tap such investments which will improve their opportunities. In fact, Andhra Pradesh efficiency and margins. is best placed to take advantage of such opportunities as the State is Buyer’s Credit under the NEIA: among the top exporters of cement Enterprises involved in large scale from India. export infrastructure projects in the energy, resources and port sectors IT and ITeS is also a focus sector for the continue to look at the Export Credit State, and through the LOC program, Agencies to supplement and facilitate mutually beneficial arrangements finance. Exports of projects and can be made by exporters with other services can be broadly categorized countries which require IT training. into (i) civil construction projects, (ii) Currently, Exim Bank has an operative turnkey projects, (iii) consultancy LOC in Senegal for IT training. services, and (iv) supplies, primarily Under the LOC program, several by way of capital goods and industrial manufactures. countries also seek machinery imports, which can be supplied by As noted earlier, there is substantial the exporters from Andhra Pradesh. potential for capital goods exports Project exports from the State can from the State. However, the scope also be enhanced through the LOC of these exports is fairly limited as program. Project exports are vital developing countries are the major conduits for exporting high-value markets for India's project exports, machinery, labour, expertise, and and these countries demand medium- technology, especially since global to long-term credits. With the BC-NEIA merchandise exports remained below product, project exporters from the 3 percent for the fourth consecutive State can venture into new markets year in 2016. and help diversify the exports.
21 Market Development Assistance essential first step, the State needs to develop a mechanism for assessment Marketing Development Assistance of existing clusters in the State. (MDA) Scheme of the Government The assessment can cover aspects of India assists exporters for pertaining to infrastructure bottlenecks, export promotion activities abroad. technological upgradation, access to Entrepreneurs get funding for skilled human resource, environmental participating in trade delegations/ sustainability, etc. Upon assessment buyer seller meets/ fairs/ exhibitions. of the clusters, relevant capacity These initiatives have been proven to building activities can be undertaken assist exporters for export promotion by the Government. The key activities. A State-level MDA scheme elements of capacity building include can also be put in place for further construction of physical infrastructure, encouraging participation of Indian building institutions, and development exporters. The implementation of the of human resources. scheme needs to be made segment specific, with focus on exporters in Export Promotion Performance the high value added and technology Measurement System intensive sectors. A quantitative performance based Capacity Building of Industrial system needs to be developed for Clusters measuring the effectiveness of the strategies for export promotion. The Industrial clusters have been proven parameters for assessment could to have several advantages in include extent of utilization of common promoting the growth of a particular testing and certification facilities, sector or industry. It is recognized number of firms seeking assistance that enterprises can achieve high from the proposed APEPC, training levels of competitiveness if they work and capacity building activities in a cluster environment ensuring undertaken by APEPC, number of complementarities, common facilities, branded products assisted / marketed collective activities, including through the brand equity fund, support collective sourcing and marketing. provided by the State for compulsory The State of Andhra Pradesh has certifications, etc. This performance several industrial clusters spread can be matched with actual trade across an array of sectors. The statistics for the State, and help in development and upgrading of quantification of measurable goals clusters will be an important agenda for the next fiscal and devising the for the State Government. As an action plan.
22 CONCLUSION of the State in national exports shall India expects to increase its share increase from the current 5 percent to in world exports from 2 percent to 7.5 percent by 2020. 3.5 percent by 2020. Contribution from To achieve the aforementioned various States would form the bedrock targets, it will be essential for for achieving this target. Based on the State to focus on enhancing the country’s target, it is projected trade competitiveness, promoting that Andhra Pradesh must achieve innovation, bolstering availability of US$ 25 billion of exports by 2020, export finance, and strengthening under a baseline scenario. For the share of Andhra Pradesh to the institutional capacity for exports, concomitantly increase in India’s among others. The export strategies exports, exports need to further outlined in the current Study can help increase to US$ 39 billion by 2020. devise the roadmap and action plan Under this optimistic scenario, share for achieving the desired results.
23 1. INTRODUCTION
OVERVIEW Rayalaseema being conducive for the mineral based industries. Andhra Pradesh is the eighth largest State of India in terms of geographical The State boasts of fairly well area and the tenth largest in terms developed infrastructure facilities of population. It has a 974 km long which is favourable for most forms coastline on the east, and shares of economic activities. It has six borders with the States of Odisha, operational ports, with 250 MMT Chhattisgarh, Telangana, Karnataka, capacities. This is supplemented by Puducherry and Tamil Nadu. 46,000 km of road network, of which The State consists of 13 districts more than 90 percent are National namely, Srikakulam, Vizianagaram, Highways; 888 km of National Visakhapatnam, East Godavari, Waterways for inland water transport; West Godavari, Krishna, Guntur, and 7,040 km of rail network. Prakasam, Sri Potti Sriramulu Nellore, Apart from the infrastructural facilities, YSR Kadapa, Kurnool, Anantapur and the State also has a favourable policy Chittoor. Of these, nearly nine districts environment which has enabled it to fall under the Coastal Andhra Pradesh, emerge as a favoured destination for while Anantapur, Chittoor, Kadapa and investors. On account of the investor- Kurnool are part of the Rayalaseema friendly initiatives, it has been rated region of Andhra Pradesh. as the top State in the country in the Spread over an area of 1,60,205 sq. Ease of Doing Business Ranking by km, the State has diverse topography the Department of Industrial Policy ranging from the hills of Eastern Ghats and Promotion (DIPP) - World Bank and Nallamallas to the coast of Bay of Assessment of State-level reforms Bengal. Owing to this diversity, the related to doing business in India. economy of the State is multi-faceted, with the coastal region providing MACROECONOMIC PROFILE requisite environment for development Gross State Domestic Product of manufacturing activities; the fertile (GSDP) is an important indicator to river plains supporting agriculture and measure the growth and economic allied activities, and the districts in development in a State, and gauge the
24 structural changes in a State economy. States of India. The growth in Andhra It is equal to the income generated by Pradesh’s GSDP has been higher the production of goods and services than the growth in the Gross Domestic within the geographical boundaries of Product (GDP) of India over the past a State. The estimates of value added three years (Table 1). Andhra Pradesh without any adjustments for the capital had the eighth highest GSDP in 2014- depreciation/ consumption is termed 15. Rajasthan and Madhya Pradesh 1 as Gross Value Added (GVA) . had GSDP in similar range as that of Andhra Pradesh (Exhibit 1). The GSDP of Andhra Pradesh at constant (2011-12) prices registered The growth in GVA for Andhra Pradesh a growth rate of 11.0 percent in has also been robust, recording 2015-16 to reach Rs. 4,93,641 Cr, a CAGR of 6.8 percent during the reflecting positive economic progress period FY12-FY16. This growth can in the State. The per capita income (Net largely be attributed to the services State Domestic Product) at constant sector which registered a CAGR of (2011-12) prices also registered a 10.4 percent during the same period. 10.1 percent growth during 2015-16 The GVA at constant (2011-12) prices to reach a level of Rs. 87,487. is estimated to be Rs. 455484 Cr. in In fact, the State has consistently 2015-16, of which services accounted been among the top performing for the largest share (Table 2).
Table 1: Comparison of Gross State Domestic Product of Andhra Pradesh with the Gross Domestic Product of India (Rs. Cr.)
Andhra Pradesh India GSDP at GDP at GSDP at GDP at Year Growth Constant Growth Constant Current Growth% Current Growth% % (2011-12) % (2011-12) Prices Prices Prices Prices 2011-12 379230 379230 8736039 8736039 2012-13 410961 8.37 379623 0.1 9951344 13.9 9226879 5.6 2013-14 468494 14.0 411886 8.5 11272764 13.3 9839434 6.6 2014-15 532922 13.75 444752 7.98 12488205 10.8 10552151 7.2 2015-16* 603376 13.22 493641 10.99 13567192 8.6 11350962 7.6 *Advance estimates Note: GSDP data for 2014-15 is at slight variance with the data in Exhibit 1 on account of difference in data source Source: Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh
1Central Statistical Organisation
25 Exhibit 1: Top States of India in Terms of GSDP (Value in Rs. Bn; 2014-15)
*Data is for 2013 Source: MOSPI, Government of India, Exim Bank Research
Table 2: Sector-wise Gross Value Added (GVA)^ for Andhra Pradesh (Rs. Cr.)
CAGR Sectors 2011-12 2012-13 2013-14 2014-15 2015-16* (FY12-FY16) Agriculture and 94751 98572 109204 112465 121915 6.5 Allied Activities Industry 111867 96363 100131 109045 121178 2.0 Services 142963 155108 170944 190678 212391 10.4 Total GVA 349581 350043 380279 412188 455484 6.8 ^GVA at constant (2011-12) prices *Advance estimates Note: GSDP = GVA at Basic Prices+ Product Taxes-Product Subsidies Source: Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh
The share of services in the GVA of While economic growth in the State Andhra Pradesh has increased from has been resilient to the global 41 percent in 2011-12 to 46 percent shocks and slowdown in recent times, in 2015-16. On the other hand, the sustained growth and development share of industry has declined from in any economy entails price stability. 32 percent in 2011-12 to 27 percent in There are several inflation indicators 2015-16 (Exhibit 2). which measure the rise in the
26 Exhibit 2: Change in the Structure of the Andhra Pradesh Economy
Source: Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh, Exim Bank Research general price level. Consumer Price (Base: 2012=100) for Andhra Pradesh Index (CPI) measures the changes registered a year-on-year (y-o-y) over time in the level of prices of increase of 7.8 percent. This was goods and services that a reference three percentage points higher than population acquires, uses, or pays for the inflation at an all India level during consumption. the same month. Moreover, the CPI A comparison of CPI at the State and for Andhra Pradesh has been more all India level suggests higher level volatile during the period December of average prices and more volatile 2014 - March 2016, with its standard movements in the case of Andhra deviation being 4.2, as against 2.7 at Pradesh. In March 2016, the CPI an all India level (Exhibit 3).
27 Exhibit 3: Monthly Movements in Consumer Price Index (Base: 2012 = 100)
Source: MOSPI, CMIE, Exim Bank Research
KEY ECONOMIC ACTIVITIES of 18.5 percent during the period Agriculture Sector FY12-FY16 (Table 3). The fishery segment contributes to the economy As far as the contribution to the by way of exports, and is also a major Gross Value Added in the agriculture source of employment with nearly 1.4 and allied activities is concerned, million people directly or indirectly crops (agriculture and horticulture) engaged in the sector. accounted for the largest share Livestock segment has also witnessed (13 percent) in 2015-16, followed by steady growth during FY12-FY16, livestock, and fishing and aquaculture recording a CAGR of 5.9 percent (Exhibit 4). during this period. Nearly half of the Fishing and aquaculture has been households in the State are engaged one of the fastest growing segments in livestock/ livestock related rearing within the sector, witnessing a CAGR activities. Table 3: Key Economic Activities under the Agriculture Sector (Value in Rs. Cr.) CAGR Economic Activities 2011-12 2012-13 2013-14 2014-15 2015-16 (FY12-FY16) Crops (Agriculture and 52041 52583 60811 60499 60690 3.9% Horticulture) Livestock 27588 29247 29723 31217 34719 5.9% Forestry and Logging 3246 3197 3154 3129 3108 -1.1% Fishing and Aquaculture 11877 13546 15516 17621 23397 18.5% Note: Values refer to GVA at constant (2011-12) prices Source: Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh, Exim Bank Research
28 Exhibit 4: Gross Value Added by Major Economic Activities (2015-16)
Total: Rs. 455,484 Cr.
Note: GVA at constant (2011-12) prices Source: Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh, Exim Bank Research
Industrial Sector manufacturing accounted for nearly 10 percent of the total GVA in 2015-16- a Manufacturing and construction are four percentage point decrease from the top economic activities under 2011-12. the industrial sector (Exhibit 4). The contribution of both these activities On the other hand, construction in the GVA declined during FY13, activities, which provide vigour to but has grown steadily since then. economies on account of the multiplier In spite of the secular increase over effect emanating from these activities, the past three years, the GVA at have witnessed recovery over the constant (2011-12) prices for the last three years. The CAGR for GVA manufacturing sector has registered by construction activities during a negative CAGR of 1.6 percent FY12-FY16 period was 3.8 percent during FY12-FY16. Consequently, (Table 4).
29 Table 4: Key Economic Activities under the Industrial Sector (Value in Rs. Cr.) CAGR Economic Activities 2011-12 2012-13 2013-14 2014-15 2015-16 (FY12-FY16) Mining and Quarrying 14162 14284 12063 13587 15079 1.6% Manufacturing 50706 40202 40565 42820 47453 -1.6% Electricity, Gas, Water Supply and Other Utility 10765 7345 11013 14251 16629 11.5% Services Construction 36234 34532 36491 38387 42016 3.8% Note: Values refer to GVA at constant (2011-12) prices Source: Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh, Exim Bank Research Services Sector during FY12-FY16. Community, social and personal Trade and repair services, hotel and services which largely comprises restaurants segment recorded the government spending, was the largest highest CAGR of 12.8 percent during contributor to GVA in the services the period under consideration, sector. The segment registered a indicative of the growing tourism and robust CAGR of 10.4 percent during hospitality industry in the State. In the period FY12-FY16 (Table 5). 2014, the State accounted for nearly Financing, insurance, real estate and 7.3 percent of the total domestic tourist professional services had the second visits. However, the performance in largest share in the services sector, terms of foreign tourist arrivals has and witnessed a CAGR of 9.3 percent been less encouraging. Table 5: Key Economic Activities under the Services Sector (Value in Rs. Cr.)
CAGR Economic Activities 2011-12 2012-13 2013-14 2014-15 2015-16 (FY12-FY16) Trade and Repair Services, Hotel and 26736 29781 35214 38404 43255 12.8% Restaurants Transport, Storage and communication 32569 35521 38849 43412 47266 9.8% and services related to broadcasting Financing, Insurance, Real estate and 42417 47074 50304 55338 60607 9.3% Professional Services Community, Social and 41242 42733 46578 53524 61264 10.4% Personal Services
Note: Values refer to GVA at constant (2011-12) prices Source: Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh, Exim Bank Research
30 RESOURCE PROFILING been further classified into 126 agro- An analysis of the resources profile of climatic zones under the National the State can shed light on the areas Agricultural Research Project (NARP) in which it has competitive advantage. launched by the Indian Council of This can help in identification of the Agricultural Research. latent export potential in the State and Andhra Pradesh falls under two agro- devising strategies for achievement of climatic regions- ‘East Coast Plains sustainable development. and Hills Region’ and ‘Southern Agriculture Plateau and Hills Region’. It has six Identification of agro-climatic zones agro-climatic zones which can support is an essential first step towards diverse crops (Table 6). The high development of strategies for altitude and tribal zone is conducive for increasing agricultural production. In horticulture crops whose contribution 1987, 15 agro-climatic regions were to the State economy has been rising. identified in India on the basis of Major crops such as paddy, cotton soil, temperature, rainfall and captive and groundnut are suited for several water resources. These regions have of the agro-climatic zones. Table 6: Agro-Climatic Zones in Andhra Pradesh
NARP Zone Districts Suitable Crops East Coast Plains and Hills Region West Godavari, Krishna, Guntur and Rice, Cotton, Black gram, Green gram, Groundnut, Krishna/ Part of East Godavari (excluding Fodder, Tobacco, Sugarcane, Chillies, Coconut, Godavari Zone uplands), and Prakasam. Sesamum. Srikakulam, Vizyanagaram, Rice, Black gram, Green gram, Groundnut, North Coastal Visakhapatnam districts and upland Sugarcane, Sesame, Pearl millet, Mesta, finger Zone taluks of East Godavari District. millets, Horse gram. Nellore, Chittoor, southern parts of Rice, Red gram, Groundnut, Pearl millet, finger Southern Zone Prakasam and Kadapa and eastern millets, Horse gram, Sorghum. parts of Anantpur districts. Rice, Groundnut, Pearl millet, finger millets, High Altitude East Godavari Sesamum, Tuber crops, Forestry & Horticulture and Tribal Zone crops. West Godavari, Guntur and Part of Rice, Cotton, Black gram, Green gram, Groundnut, Godavari Zone East Godavari (excluding uplands), and Fodder, Tobacco, Sugarcane, Chillies, Coconut, Prakasam. Sesamum. Southern Plateau and Hills Region Scarce Rainfall Kurnool, Anantpur (except south- Groundnut, Sorghum, Seteria, Rice, Cotton, Zone of eastern part), western part of Prakasam, Coriander, and Pearl millets. Rayalaseema and north-western parts of Kadapa. Source: DACNET
31 Mineral 10 percent corundum, 61 percent ball clay, 20 percent limestone, 41 percent Mineral resources are of paramount mica and 34 percent garnet resources importance in industrial activities. They of the country2 (Table 7). enter the production cycle of several It had the second largest number of industries in the form of raw materials ‘mines reporting mineral production’ and help build up prosperity in an in India during 2014-15. With 444 economy. Andhra Pradesh currently reporting mines in 2014-15, the State has vast tracts of under-tapped and accounted for nearly 13.3 percent of untapped mineral resources. the reporting mines3. The State also Andhra Pradesh is a mineral rich accounted for 8.25 percent of the State and mining activities in 42 country's total mineral production in industrial minerals are currently 2014-15. Andhra Pradesh also had carried out in various districts of the the largest share of 23.5 percent in State. The State accounts for 94 the total value of production of minor percent barytes, 78 percent kyanite, minerals in 2013-14.
Table 7: Total Mineral Resources in Andhra Pradesh (including Telangana) as on 1.4.2010
Share in Minerals Units Quantity Districts India Apatite Tonnes 237862 Visakhapatnam 1% Ball clay Tonnes 51281299 West Godavari 61% Anantapur, Kadapa, Khammam, Barytes Tonnes 68478435 Krishna, Kurnool, Nellore and 94% Prakasam East Godavari and Bauxite Thousand tonnes 615267 18% Visakhapatnam Anantapur, Kadapa, Kurnool and Calcite Tonnes 8798785 42% Visakhapatnam Adilabad, Anantapur, Chittoor, Kadapa, East Godavari, West Godavari, Guntur, Kurnool, China clay Thousand tonnes 74176 3% Mahabubnagar, Nalgonda, Nellore, Rangareddi, Visakhapatnam and Warangal Guntur, Khammam, Kurnool and Copper Ore Thousand tonnes 8248 1% Prakasam
2Data for mineral resources and production in this Study includes the data for the State of Telangana 3Excluding atomic minerals, petroleum (crude), natural gas (utilized) and minor minerals
32 Copper Metal Thousand tonnes 122.82 1% Corundum Tonnes 77121 Anantapur and Khammam 10% Diamond Carat 1822955 Anantapur, Krishna and Kurnool 6% Anantapur, Khammam, Kurnool Dolomite Thousand tonnes 1182453 15% and Warangal Anantapur, Kadapa, West Godavari, Hyderabad, Feldspar Tonnes 21798561 Khammam, Mahabubnagar, 16% Medak, Nellore, Rangareddy and Vizianagaram Adilabad, Chittoor, Kadapa, East Godavari, West Godavari, Fireclay Thousand tonnes 23214 3% Kurnool, Nalgonda and Srikakulam Fuller's earth Tonnes 25523983 Medak and Rangareddy 10% East Godavari, Khammam and Garnet Tonnes 19064747 34% Nellore Gold Ore Tonnes 12275347 Anantapur, Chittoor and Kurnool 3% (primary) Gold Tonnes 35.72 5% Metal(primary) Anantapur, Chittoor, Kadapa, Guntur, Karimnagar, Khammam, Granite (Dim. Krishna, Mahabubnagar, Medak, Thousand cu m 2405890 5% stone) Nalgonda, Nellore, Prakasam, Rangareddy; Srikakulam, Vizianagaram and Warangal Anantapur, Kadapa, Guntur, Iron Ore Thousand tonnes 381477 Khammam, Krishna, Kurnool and 2% (hematite) Nellore Iron Ore Adilabad, Prakasam and Thousand tonnes 1463541 14% (magnetite) Warangal Khammam, Nellore and Kyanite Tonnes 80354228 78% Prakasam East Godavari, Warangal, Laterite Thousand tonnes 26257 6% Rangareddy Lead-zinc ore Thousand tonnes 22689 Kadapa, Guntur and Prakasam 3% Lead metal Thousand tonnes 836.88 7% Zinc metal Thousand tonnes 63.16 0%
33 Adilabad, Anantapur, Kadapa, East Godavari, West Godavari, Guntur, Hyderabad, Karimnagar, Limestone Thousand tonnes 37436378 Krishna, Kurnool, Mahabubnagar, 20% Nalgonda, Nellore, Rangareddy, Srikakulam, Visakhapatnam and Vizianagaram Adilabad, Srikakulam and Manganese ore Thousand tonnes 17598 4% Vizianagaram Mica Tonnes 220786 Khammam and Nellore 41% Kadapa, West Godavari, Guntur, Ochre Tonnes 10883065 8% Kurnool and Visakhapatnam Pyrophyllite Tonnes 1350232 Anantapur 2% Anantapur, Chittoor, Kadapa, West Godavari, Guntur, Hyderabad, Khammam, Krishna, Quartz silica Kurnool, Mahabubnagar, Medak, Thousand tonnes 209032 6% sand Nalgonda, Nellore, Prakasam, Rangareddy, Srikakulam, Visakhapatnam, Vizianagaram and Warangal Kurnool, Srikakulam, Quartzite Thousand tonnes 23583 Visakhapatnam and 2% Vizianagaram Sillimanite Tonnes 9644500 West Godavari 14% Shale Thousand tonnes 15911 East Godavari, West Godavari 100% Slate Thousand tonnes 2369 Kadapa 100% Silver Ore Tonnes 16950000 Guntur 4% Silver Metal Tonnes 128.13 0% Talc/soapstone/ Anantapur, Chittoor, Kadapa, Thousand tonnes 11244 4% steatite Khammam and Kurnool Titanium East Godavari, Krishna, Nellore, Tonnes 76702509 19% minerals Srikakulam and Visakhapatnam Tungesten Ore Tonnes 14802300 East Godavari 17% Contained Tungsten WO3 Tonnes 20262.57 14% Vermiculite Tonnes 354176 Nellore and Visakhapatnam 14%
Districts in italics are now part of Telangana Source: Indian Minerals Yearbook 2014, Indian Bureau of Mines, March 2016
34 Human Capital ratio has been a focus area for the government and currently stands at Andhra Pradesh has a strong human 20.0 percent. capital base to leverage the bountiful natural resources in the State. Higher OUTLOOK education and skill development have received substantial focus which With the exclusion of Hyderabad from is evident by the State’s ranking the divided State of Andhra Pradesh, amongst the top three States in the State faces challenges in terms India in terms of number of colleges of revenue deficit and infrastructural per lakh population. The State has constraints. However, the coalescence several institutions of higher education of proactive policy, vibrant resource offering basic, specialised, and profile, and locational advantages research-focused courses with a total will ensure that the long term growth strength of nearly 11.64 lakh students story for the State remains resolutely (Table 8). The gross enrolment positive.
Table 8: Key Indicators of Human Capital in Andhra Pradesh
Indicator Value / Share Population 4.93 Cr Population growth rate 9.2% Proportion of youth (18 – 23 years) to total population 11.7% Percentage of total State budget allotted to higher education 2.6% Public expenditure on higher education as a percentage of GSDP 0.5% Current student enrolment in higher education 11.64 lakh Literacy rate 67.3% Gross Enrolment Ratio in higher education 20.02% College per lakh population 48* Average enrolment per college 342.7 Number of skill development centres set up in the last 2 years 41 * Refers to data for the undivided State of Andhra Pradesh, other data calculated by taking united state data as proxy indicator Source: Sunrise State of Andhra Pradesh: Knowledge Mission Document, 2015
35 2. ECONOMIC SCENARIO
AGRICULTURE AND ALLIED fish. The State also ranks first in SECTOR combined production of fresh water fish and prawn and fourth in marine Agriculture and allied sector is the fish production. The State boasts of bedrock of Andhra Pradesh’s economy a developed animal husbandry sector as it accounts for nearly 27 percent as well. of the total State output. Alongside, it is also a major source of livelihood Food Grains for the population, especially in the During 2015-16, productivity was rural areas. With six agro-climatic adversely impacted on account of zones and five types of soil, there is drought situations during Kharif potential to grow variety of crops in season and heavy rains in November the State. Currently, nearly 38 percent 2015. While the area under food (62.35 lakh hectares) of the State’s grains production increased by 4.2 geographical area is under net area percent during the year to reach 41.3 sown, of which two-third is under food lakh hectares, production declined by grains. Fishery, dairy, meat and poultry (-) 14 percent to become 137.6 lakh sectors also have a considerable tonnes (Exhibit 5). influence on the economy. Within food grains, paddy accounts Production Scenario for the largest share in area under A favourable agro-climatic condition cultivation (49.9 percent) as well as and long coastline has enabled production (75.7 percent). In fact, agriculture and allied activities to be Andhra Pradesh is referred as “the a key sector for Andhra Pradesh in bejewelled rice bowl of India”. Another terms of output, employment and important food grain produced in foreign exchange. Andhra Pradesh is the State is Maize, which had the one of the largest producers of rice, second largest share in food grain maize, groundnut, sunflower, cotton, production in 2015-16. During the etc. in the country. It also ranks first same year, pulses, which accounted in the production of brackish water for 37.5 percent share in area under shrimp and fresh water prawn, and cultivation, had a share of merely 9.2 second in production of fresh water percent in production (Exhibit 6).
36 Exhibit 5: Production and Area under Cultivation in Andhra Pradesh
Source: Directorate of Economics and Statistics, Andhra Pradesh; Exim Bank Research Exhibit 6: Share of Food Grains in Area under Cultivation and Production (2015-16)
Source: Directorate of Economics and Statistics, Andhra Pradesh; Exim Bank Research
37 Horticulture India (Table 9). Banana, citrus, mango and papaya are the major fruits Indian agriculture has undergone produced in the State, while brinjal, a substantial structural change in tomato, okra, onion and tapioca are the recent years, with horticulture the major vegetables4. emerging as an important sub- segment. A similar trend has been Andhra Pradesh accounted for noted in the agriculture and allied 11.3 percent of fruits, 3.2 percent of sector of Andhra Pradesh, and large vegetables, 6.3 percent of flowers, variety of horticulture products are 14.3 percent of plantation crops, currently grown in the State. 17.8 percent of spices and 0.8 percent of the medical and aromatic West Godavari district of the State plants production of India in 2015-16 has immense potential for growing (Table 9). As compared to the rest cashew, mango, coconut, oil palm, of India, productivity was higher in banana, cocoa, citrus, sapota, guava, all horticultural products other than vegetables, pepper, flowers, medicinal flowers where the State’s share in and aromatic plants. The presence of India’s total horticultural production land, irrigation and other infrastructure was lesser than its share in India’s total facilities provide an enabling area under horticultural cultivation. environment for development of horticulture in the district. The Guntur Animal Husbandry district of the State has extensive There is a close relationship between cultivation of chillies. Other important animal husbandry and agriculture in horticulture crops cultivated in Guntur the rural economy of India. Animals district are banana, sweet orange, not only yield food products, but mango, acid lime, sapota, papaya, also provide manure, fuel, hides guava and turmeric. and skins, etc. Statistics reveal the The overall area under horticultural overwhelming influence of this sector cultivation in the State amounted on the State economy. According to to 14.74 lakh hectare in 2015-16, the Livestock Census 2012, nearly accounting for 6.3 percent of the total half of the households in the State area under horticulture cultivation were engaged in livestock or livestock for the whole of India. Horticulture related rearing activities. The State production in Andhra Pradesh was had 294.0 lakh livestock population 188.22 lakh MTs in 2015-16 (most of comprising 47.2 lakh cattle, 64.6 lakh which was accounted for by fruits). buffaloes, 135.6 lakh sheep, 45.0 This constituted nearly 6.7 percent lakh goats, 1.6 lakh pigs, and 0.1 lakh of the total horticultural production of other livestock. Among all States of
4CII-Yes Bank, Make in India- Opportunities in Food Processing Sector
38 Table 9: Horticulture Production and Area under Production in Andhra Pradesh (2015-16) Share in Share Total Area Area Production in Total Crop Category under (Lakh ha.) (Lakh MTs) Production Cultivation for India for India Fruits 5.76 100.48 9.3% 11.3% Vegetables 2.33 53.26 2.5% 3.2% Flowers 0.17 1.35 6.8% 6.3% Plantation Crops 4.27 22.14 12.1% 14.3% Spices 2.21 10.9 6.7% 17.8% Medicinal and Aromatic Plants 0.005 0.09 0.1% 0.8% Total 14.74 188.22 6.3% 6.7% Source: Horticulture Department, Government of Andhra Pradesh; National Horticulture Board; Exim Bank Research
India, Andhra Pradesh had the largest hectares of fresh and brackish water sheep population. It also ranked third resources provide ample opportunities in the country in terms of poultry for a thriving fisheries sector. The population. sector directly or indirectly provides On account of the abundant livestock employment to nearly 1.4 million population, the State is one of the people and is an important source largest producers of animal products of foreign exchange earnings. The in the country. It ranked second in egg importance of the segment is evident production, fourth in meat production from the fact that fisheries contributed and sixth in milk production. Over nearly 5.4 percent to the gross value the past decade, production of milk added of the State in 2015-16. and meat has grown more or less After witnessing a decline of 1.5 consistently, except for a few bouts percent in 2011-12, the output from of decline. Egg production registered fisheries sector registered double digit a y-o-y decline of 1.1 percent in growth rates in the following three 2013-14, but recovered in 2014-15 years. The production of brackish with production growing by 2.9 percent water shrimp has witnessed the (Table 10). maximum vibrancy during the past Fisheries three years. During April-December The 974 km long coastline of Andhra 2015, fisheries production from the Pradesh, 33,327 square kilometres State amounted to 16.3 lakh tonnes of continental shelf and about 6 lakh (Exhibit 7).
39 Table 10: Production Estimates for Dairy and Meat Products in Andhra Pradesh Milk Y-o-Y Meat Y-o-Y Eggs Y-o-Y Year ('000 MTs) Growth (‘000 MTs) Growth (Lakh Nos.) Growth 2003-04 4727 192 82011 2004-05 5358 13.4% 230 19.8% 107601 31.2% 2005-06 5290 -1.3% 264 14.7% 101077 -6.1% 2006-07 5506 4.1% 272 3.3% 95218 -5.8% 2007-08 6193 12.5% 313 15.0% 105058 10.3% 2008-09 6640 7.2% 310 -0.9% 108925 3.7% 2009-10 7238 9.0% 349 12.6% 113932 4.6% 2010-11 7734 6.9% 384 9.8% 116383 2.2% 2011-12 8402 8.6% 440 14.7% 122440 5.2% 2012-13 8810 4.9% 478 8.5% 128740 5.1% 2013-14 9083 3.1% 489 2.3% 127269 -1.1% 2014-15 9656 6.3% 528 8.0% 130958 2.9% 2015-16 (upto 5153 275 66857 Sep,2015) Source: Animal Husbandry Department, Government of Andhra Pradesh, Exim Bank Research
Exhibit 7: Category-wise Production in the Fishery Sector
Source: Commissioner of Fisheries, Exim Bank Research
Food Processing mills, flour mills, oilseed crushing, Food processing industry is classified spice grinding, etc., the processed into two groups, viz. primary food food segment consist of value added and processed food. While primary manufacturing such as preserved food refers to activities such as rice fruits and vegetables, frozen foods,
40 fish and dairy products, spice blends, in the food products sector in Andhra etc. As per the latest available data, Pradesh was taken to analyse the grain mill products formed the largest key characteristics of this sector. category of registered food processing The aggregate sales of these units in India in 2012-13. companies registered a consistent Andhra Pradesh has been focusing on increase during the period 2010-11 to value addition in the agriculture sector 2014-15. The aggregate profit after and a host of policies are currently in tax, on the other hand, registered a place to provide a boost to the food decline in 2013-14, and thereafter processing sector. On account of the witnessed recovery in 2014-15. The favourable environment, the State average share of exports in total sales possesses the maximum number of the companies recorded secular of registered food processing units decline in this period from 29.3 (5,735 units) in the country, accounting percent in 2010-11 to 17.4 percent in for 15 percent of the total units in 2014-15, reflective of the declining India. Andhra Pradesh is closely export orientation. In line with this followed by Tamil Nadu with 5,161 trend, total foreign exchange earnings food processing units while the newly of these companies also declined formed State of Telangana ranks third during the past two years. On the other with 3,716 units5. hand, the foreign exchange spending reached its highest level in five years A sample of 24 companies engaged in 2014-15 (Table 11).
Table 11: Key Aggregate Industry Financials for Select Food Products Companies with Plants in Andhra Pradesh (Value in Rs. Million)
Parameters 2010-11 2011-12 2012-13 2013-14 2014-15 Total Sales 357027.4 511960.7 564612.4 606575.0 664237.9 Total PAT 7154.2 8638.4 14497.3 12365.9 14394.6 Export/Sales (Avg; %) 29.3 25.1 19.8 19.1 17.4 Raw Material Imports / Raw Material 9.9 6.4 7.3 6.8 6.7 Purchases (Avg; %) Total Forex Earnings 69777.5 93542.2 101404 97241.7 85182.0 Total Forex Spending 91538.8 122282.8 169746.9 155502.9 204013.3
Sample Size- 24 Companies Source: CMIE Prowess; Exim Bank Research
5Ministry of Food Processing Industries, Government of India
41 INDUSTRIAL SECTOR Production Scenario According to the Annual Survey of The Index of Industrial Production Industries 2013-14, Andhra Pradesh (IIP) is a measure for industrial growth, accounts for nearly 7 percent of estimated monthly by collecting the total number of factories in the data pertaining to manufacturing, country, with food products accounting mining, quarrying and electricity. for the largest share of 28.99 percent After registering consecutive years in the total output from the State. The of decline in 2012-13 and 2013-14, other major industries contributing to general index for IIP for the State the total output are coke and refined of Andhra Pradesh increased by 3 petroleum products (share of 15.44 percent during 2014-15. During April- percent), basic metals (15.13 percent), October 2015-16, the general index chemical and chemical products (6.51 for IIP registered a marginal decline percent), other non-metallic mineral of 0.1 percent. This was largely on products (5.78 percent) and textiles account of a decline of (-) 8.2 percent (5.64 percent). in the IIP for mining and quarrying. The IIP for manufacturing sector had The role of manufacturing sector risen by 8.0 percent during April- in economic development and October 2015-16, as compared to the employment generation cannot corresponding period of previous year be overemphasized. The sector (Table 12). invariably looms large on the policy agenda of State Governments. It is Engineering goods registered robust therefore a matter of concern that growth during Apr-Oct 2015-16, the growth of manufacturing sector in with the industry groups of medical, Andhra Pradesh has been lower than precision and optical, electrical the national average6. Moreover, the machinery and parts, other transport industrial sector accounts for nearly equipment, machinery and equipment, 24 percent of gross value added in and office accounting and computing Andhra Pradesh which is lower than machinery witnessing double digit the share of industry in the GDP at the y-o-y growth rates during this period. all India level. Given the crucial role of Food products and beverages which the manufacturing sector in propelling have nearly 16.5 percent weight in the employment generation, it is essential IIP for industries, registered a robust to alleviate the growth constraints in y-o-y growth rate of 12.3 percent the sector. during the same period.
6White Paper on Industry, Infrastructure and Employment, Industries and Commerce Department, Government of Andhra Pradesh, July 2014.
42 Table 12: Index of Industrial Production for Andhra Pradesh (Base: 2004-05) Growth % 2015-16 Segment Weights 2011-12 2012-13 2013-14 2014-15 (Apr-Oct (Apr-Oct) 2015-16) Mining and 212 153 215 178.6 161 396.8 -8.2 Quarrying Manufacturing 631 153 144 145.6 151.9 125.8 8.0 Electricity 157 159 150.4 156.1 178 181.4 6.1 General Index 1000 161 160.1 154.2 158.9 191.9 -0.1 Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh, Exim Bank Research
Textile and Garment knitting stage, yarn is converted to The Textile and Apparel value chain woven or knitted fabrics. Next step in comprises various segments such the value chain is bleaching and dying as ginning, spinning and extrusion, of the fabric to produce processed processing, weaving and knitting, fabric. This processed fabric is then and garment manufacturing. Ginning designed, cut, embellished, stitched, is the process wherein fibres are finished, packaged and sent for separated from seeds. Thereafter, distribution (Exhibit 8). In composite in the spinning process, fibre is mills, spinning, weaving and dying converted to yarn. At the weaving and activities are integrated.
Exhibit 8: Indian Textile and Garment Industry: Value Chain
43 The Indian textile industry consumes a Andhra Pradesh also has the diverse range of fibres and yarn, but is second largest silk production in predominantly cotton based. The agro- the country after Karnataka. With climatic condition in Andhra Pradesh 5086 MT of production in 2015-16, is conducive for the production of the State accounted for nearly 17.9 cotton. In 2014-15, Andhra Pradesh percent of the total silk production was the fifth largest producer of cotton in India. In 2015-16, production of accounting for 6.8 percent of the silk in Andhra Pradesh witnessed a total cotton produced in the country. precipitous decline of (-) 21.6 percent Gujarat, Maharashtra, Telangana (Table 14). On account of the abundant and Karnataka were the other major availability of the silk fibre, the producers of cotton during the year. State has several renowned The yield of cotton in Andhra Pradesh silk handloom weaving centres, was 624 kgs per hectare, which was namely Dharmavaram, Peddapuram, higher than the average yield of 537 Uppada, Venkatagri, etc. for the whole of India but significantly lower than other states like Gujarat, Apart from cotton and silk, the State Tamil Nadu and Rajasthan (Table 13). is also an important producer of wool.
Table 13: State-wise Area, Production and Yield of Cotton (2014-15)
Area Production Yield State (Lakh Hectare) (Lakh Bales) (Kgs per Hectare) Gujarat 30.06 125 707 Maharashtra 41.92 85 345 Telangana 16.51 50 515 Karnataka 7.6 28 626 Andhra Pradesh 7.36 27 624 Haryana 6.39 25 665 Madhya Pradesh 5.79 18 528 Rajasthan 4.16 17 695 Punjab 4.5 14 529 Tamil Nadu 0.7 5 1214 Orissa 1.25 4 544 Others 0.31 2 1097
Grand Total 126.55 400 537
Source: Cotton Advisory Board, Ministry of Textiles, Government of India
44 Table 14: State-wise Raw Silk Production in India (Values in MT)
State 2012-13 2013-14 2014-15 2015-16 (P) Karnataka 8219 8574 9645 9823 Andhra Pradesh 6550 6912 6485 5086 West Bengal 2070 2079 2500 2391 Tamil Nadu 1185 1120 1602 1898 Jharkhand 1090 2003 1946 2284 Assam and Bodoland 2068 2766 3222 3325 Others 2,497 3,026 3,308 3,665 Total 23,679 26,480 28,708 28,472 (P)- Provisional Source: Ministry of Textiles, Government of India Andhra Pradesh was the fourth largest has been undertaken to understand wool producing State in 2014-15, with the performance of companies in the a production of 5 million kg. The State State over the past few years. The accounted for nearly one-tenth of the cumulative sales of these companies total indigenous wool production. have declined intermittently during The large raw material base in Andhra the five-year period 2010-11 to 2014- Pradesh supports the development of 15. The aggregate net profit during textile industry in the State. However, this period turned negative only there remains substantial scope for during 2011-12. In 2014-15, while the further value addition in the textile aggregate sales and net profit dipped, value chain as the natural advantage the aggregate profit after tax remained which the State possesses, in terms positive for the industry. of raw material availability, does Exports as percentage of sales not translate into commensurate has increased for the sample set availability of processing facility, of companies, from 17.2 percent in measured in terms of number of 2010-11 to 18.5 percent in 2014- textile mills. As on march-end 2016, 15. The share of imports in total raw the State had only 5 percent of the material purchases has more than spinning mills, 2 percent of composite doubled during the same period from mills, and 1 percent of the weaving 2.7 percent to 5.6 percent (Table (composite and exclusive weaving) 15). The low share of raw material mills in India (Exhibit 9). imports is indicative of the substantial An analysis of a sample of companies backward linkages of the industry and in the textile sector having their greater integration of the entire value manufacturing units in Andhra Pradesh chain within the State's economy.
45 Exhibit 9: State-wise Share in Number of Textile Mills (as on 31st March 2016)
Source: Office of the Textile Commissioner
Table 15: Key Aggregate Industry Financials for Select Textile Companies in Andhra Pradesh (Value in Rs. Million) Parameters 2010-11 2011-12 2012-13 2013-14 2014-15 Total Sales 32169.1 32081.4 39242.0 47293.8 44965.5 Total PAT 348.5 -1808.5 158.6 1228.7 88.1 Export / Sales (Avg; %) 17.2 15.6 15.7 17.1 18.5 Raw Material Imports / Raw 2.7 3.9 3.3 2.8 5.6 Material Purchases (Avg; %) Total Forex Earnings 11332.6 10250.5 13555.2 18245.9 18090.5 Total Forex Spending 1788.3 2810.0 2785.6 3014.0 2765.3 Sample Size- 10 Companies Source: CMIE Prowess; Exim Bank Research
46 Pharmaceutical of Andhra Pradesh is being considered a potential pharma hub, on account of Andhra Pradesh is home to several its location and a slew of incentives global and national pharmaceutical from the government. The region companies. Parawada, Nakkapalli, already has several pharmaceutical Pydibhimavaram and Ranasthalam companies like Hetero SEZ, Reddy are the key pharmaceutical Labs, Aurobindo Pharma, Hospira manufacturing centres in the State. and Eisai. Prior to its division, the State An analysis of a sample of listed had nearly 6.9 percent of the pharmaceutical companies based in total pharmaceutical units in India Andhra Pradesh indicates that the (Exhibit 10). cumulative sales of the companies After the division, the Northern region have grown at a robust CAGR of 18.8
Exhibit 10: State-wise Share in Pharmaceutical Units
Source: Lok Sabha Unstarred Question No. 1773 Answered on: 22.07.2014
Table 16: Key Aggregate Industry Financials for Select Pharmaceutical Companies in Andhra Pradesh (Value in Rs. Million) Parameters 2010-11 2011-12 2012-13 2013-14 2014-15 Total Sales 134966 157173.9 196788.4 247170.4 269233.9 Total PAT 20978.9 15635.9 25620.8 40300.9 45889.5 Export / Sales (Avg; %) 50 56 59 56 58 Raw Material Imports / Raw 34 37 38 42 37 Material Purchases (Avg; %) Total Forex Earnings 83536.1 105982.3 142645.5 181673.6 196556.4 Total Forex Spending 38404.3 44159.1 54891 67833.1 77737.9 Sample Size- 7 Companies Source: CMIE Prowess; Exim Bank Research
47 percent during the five-year period pulverizing units, stone crushers, FY11-FY15. Concomitantly, the mosaic and ceramic tile units, lime profit after tax registered a CAGR of kilns, and manufactured rocksand 21.6 percent. The export orientation units. Bauxite, heavy minerals, beach of these firms has also increased. sand, limestone, gold, diamond, While in FY11 exports accounted dolomite, oil and natural gas, uranium, for 50 percent of the sales of these garnet, granite, titanium, etc. have companies, its share was 58 percent been identified as the focus minerals in FY15. The intensity of imported in the state, while cement, gas based raw material purchases has also risen thermal plants, oil refinery, cutting and from 34 percent in FY11 to 37 percent faceting, mining and refinery, steel in FY15 (Table 16). and sponge, alumina smelter and aluminium refinery etc. are the focus Mineral based Industries mineral-based industries in the State7. There are several mineral based industries in the State, principal As on 01.04.2014, the total installed among which are cement, steel, capacity of crude/liquid steel in sponge iron, ferroalloys, glass, Andhra Pradesh was 3000 tonnes ceramics, refractories, chemicals, per year. Other than this, the State granite, marble and limestone cutting also has substantial installed capacity and polishing units, slate cutting units, of sinter, pellets, pig iron, saleable gem cutting and faceting units, granite steel, sponge iron and ferro alloys monuments manufacturing units, (Table 17). The State also possesses Table 17: Principal Mineral-based Industries in Andhra Pradesh Industry Capacity (‘000 Tonnes Per Year) Abrasives 5 Aluminium Foil 3 Asbestos Products 760.5 Bleaching Clay 35 Cement 59277 Chemical • Calcium Carbide 23 • Caustic Soda 201.5 • Sulfuric acid 144 • Bleaching Powder 9 • Hydrochloric Acid 24.7 • Chlorine 49.8 • Oleum 15 Ceramic 96.6 (Exclusive of 1.4 million sq mt by Restile Ceramics Ltd)
7Socio Economic Survey 2015-16, Planning Department, Government of Andhra Pradesh 8Indian Petroleum and Natural Gas Statistics 2014-15
48 Fertilizers • Single Super Phosphate 191 • Nitrogen 1254.2 • Phosphorus Pentoxide 927.8 • Sulfuric Acid 78.5 Pesticides 2.4 Glass 10 (Exclusive of 10 million sq m by Triveni Glass Ltd) Iron and Steel • Sinter 8856 • Saleable Steel 2656 • Crude/Liquid Steel 3000 Pig Iron 3835 Pellets 8000 Sponge Iron 616.5 Ferro Alloys 364.5 Refractory 122.1 Zinc 56 Petroleum Refinery 8366 Note: Includes data for Telangana Source: Indian Minerals Yearbook 2014, March 2016; Exim Bank Research substantial installed capacity in the total onshore crude oil reserves and chemical and fertilizers sector. 13.2 percent of the total natural gas Andhra Pradesh also accounted for reserves in India. 1.4 percent of the onshore crude oil Andhra Pradesh has two petroleum production and 7.6 percent of the refineries namely, ONGC, Tatipaka onshore production of natural gas8. and HPCL, Vishakhapatnam. As on 1.4.2014, the State (including Production of petroleum products in Telangana) had 3 percent of the Andhra Pradesh registered a y-o-y
Exhibit 11: Production of Petroleum Products in Andhra Pradesh
Source: Indian Petroleum and Natural Gas Statistics 2014-15
49 Exhibit 12: Type of Petroleum Products Produced in Andhra Pradesh, 2014-15
HSDO- High Speed Diesel Oil; LPG- Liquefied Petroleum Gas; SKO- Superior Kerosene Oil Source: Indian Petroleum and Natural Gas Statistics 2014-15 increase of 13.4 percent during engineering and light engineering. 2014-15, after witnessing two The heavy engineering segment preceding years of decline (Exhibit includes machinery used in power, oil 11). With a production of 8291 refining, mining, metallurgy, oil and gas thousand metric tonnes, Andhra extraction, cement production, textile Pradesh had a share of 3.7 percent production. The light engineering in India. High speed diesel oil was the segment constitutes machines related most important petroleum product, to roller bearing, instruments for the accounting for 44.1 percent of the medical and surgical sector, process production in Andhra Pradesh in control instruments, castings, steel 2014-15. Motor spirit (18.7 percent), forgings, and pipes, among others. furnace oil (8.8 percent) and Superior An analysis of a sample of listed Kerosene Oil (7.5 percent) were engineering goods companies based the other major petroleum products in Andhra Pradesh indicates that the produced in the State during the year cumulative sales of these companies (Exhibit 12). have grown consistently over the years, recording a CAGR of 10.1 Engineering percent during 2010-11 to 2014-15. Engineering is among the largest Exports as percentage of sales also industrial sectors of India. It is diverse increased from 6.1 percent in 2010-11 with a number of segments and can to 11.7 percent in 2014-15. However, be broadly categorized into heavy total forex spending in the sector is
50 Table 18: Key Aggregate Industry Financials for Select Engineering Goods Companies in Andhra Pradesh (Value in Rs. Million) Parameters 2010-11 2011-12 2012-13 2013-14 2014-15 Total Sales 91538.2 101402.4 112715.9 120477.7 134619.6 Total PAT 10482.2 10721.7 12062.4 13563.2 16109.7 Export / Sales (Avg; %) 6.1 7.2 11.3 11.4 11.7 Raw Material Imports / Raw 28.2 32.4 32.4 32.6 31.6 Material Purchases (Avg; %) Total Forex Earnings 4493.8 5370.8 5620.4 6914 8057.8 Total Forex Spending 27565.5 32681.2 37065.9 31370.9 32465.8 Sample Size- 7 Companies Source: CMIE Prowess; Exim Bank Research far larger than the forex earnings. On addition. This is largely attributed to the the positive side, forex earnings have lack of tanning facilities in the State9. grown at a much faster pace than As on July 2014, the State had only forex spending. During FY11 to FY15, 7 of the 1632 tanneries in India. On the other hand, the neighbouring State of while the forex earnings registered a Tamil Nadu had nearly 48 percent of CAGR of 15.7 percent, forex spending all the tanneries in the country10. witnessed a CAGR of 4.2 percent (Table 18). Gems and Jewellery The two major segments of the gems Leather and jewellery business in India are gold As highlighted in Chapter 1, Andhra and diamond jewellery. A predominant Pradesh has substantial livestock portion of gold jewellery manufactured and livestock rearing activities. On in India is for domestic consumption. account of the large raw material The total resources of gold in the base, the State is a natural choice of country as on April 2010 were location for leather industry. According estimated at 493.69 million tonnes. to some estimates, the State provides By States, the largest resources 10 percent of the raw material for in terms of gold ore (primary) are India’s leather industry. However, only located in Bihar (45 percent) followed 5 percent of the raw material produced by Rajasthan (23 percent) and in the State is used for the local leather Karnataka (22 percent), West Bengal industry while the balance 95 percent (3 percent), and Andhra Pradesh and is transported to other States for value Madhya Pradesh (2 percent each).
9White Paper on Industry, Infrastructure and Employment, Industries and Commerce Department, Government of Andhra Pradesh, July 2014. 10Lok Sabha Unstarred Question No. 2480 to be Answered on 25th July, 2014
51 Total diamond resources in India accounted for more than 95 percent are 31.9 million carats, with Madhya of the revenues. Andhra Pradesh Pradesh, Andhra Pradesh and now has a nascent IT sector, Chhattisgarh being the major states largely confined to Visakhapatnam, where these are located. Anantapur Kakinada, Vijayawada and Tirupathi. and Cudapah are important diamond The State already has an elaborate mining centres in Andhra Pradesh. policy framework and incentive The city of Nellore is a key centre for mechanism for promoting the growth handmade jewellery. of these centres. The Government has put in place three policies - IT Policy, SERVICES SECTOR Electronics Policy, and Innovation Services sector has been a major and Startup Policy. This needs to growth driver for the State of Andhra be complemented through setting Pradesh. The sector has made up of adequate physical and social considerable contributions to the infrastructure. State’s income, trade, investments Tourism and employment. The sector’s share in the State’s GSDP has been growing Andhra Pradesh is home to more than and stood at 46 percent in 2015- 300 tourist locations on account of its 16. The sector not only contributes diverse cultural and natural heritage. directly to the exports from the State, Tourism is a significant contributor to but also propels growth in exports the State's GSDP. Development of the from the manufacturing sector as low tourism sector also has a bearing on cost and high quality services in areas the employment scenario. According such as telecommunications, financial to Government of India estimates, services, transport, logistics and every one crore that is invested in distribution are crucial for enhancing tourism sector creates 475 jobs as the competitiveness of merchandise compared to 126 jobs created by exports as well. investment of similar magnitude in the manufacturing sector. IT and ITeS, tourism, healthcare, engineering, procurement are some of The Government of Andhra Pradesh the key services segments in Andhra is investing significantly in the social Pradesh. A robust infrastructure base, infrastructure of the State in order to strong policy support and vast human further bolster the tourism segment. capital has positioned the State as The State aims towards building one of the leading services exporter several signature infrastructure from the country. projects which includes setting up of world class healthcare centre IT and ITeS for promotion of medical tourism, Undivided Andhra Pradesh had a establishment of educational substantial share in the IT revenues institutions, large sports stadium, of the country. However, Hyderabad convention centres, among others.
52 Table 19: Share of Top 10 States/UTs of India in Number of Domestic Tourist Visits – 2015, in Millions Domestic Tourist Rank State Share % Visits in 2015 1 Tamil Nadu 333 23.3 2 Uttar Pradesh 205 14.3 3 Andhra Pradesh 122 8.5 4 Karnataka 120 8.4 5 Maharashtra 103 7.2 6 Telengana 95 6.6 7 Madhya Pradesh 78 5.4 8 West Bengal 70 4.9 9 Gujarat 36 2.5 10 Rajasthan 35 2.5 Total of top 10 States 1197 83.6 Source: India Tourism Statistics at a Glance 2015
Andhra Pradesh accounted for nearly Engineering, Procurement and 8.5 percent of the domestic tourist Construction (EPC) visits in 2015, and was ranked third Construction activities are an among all states on this parameter important development indicator and (Table 19). has multiplier effect on investment Healthcare in other sectors of the economy. The EPC sector in Andhra Pradesh not only Healthcare comprises a vast caters to the domestic demand arising ambit of services encompassing from the large unmet infrastructure hospitals, nursing homes, diagnostic demand, but also has significant centres, medical devices and foreign exchange earnings. According equipment, clinical trials, outsourcing, to data from CMIE Prowess, for a telemedicine, medical tourism sample of 653 companies having their and health insurance. The robust registered office in Andhra Pradesh, healthcare infrastructure network in the exports from EPC companies Andhra Pradesh is supplemented by accounted for more than one-fifth of the presence of 46 medical colleges, the cumulative exports. Even upon and 70799 doctors registered with inclusion of MSME exports, the share the State medical councils / medical of EPC exports from the State is council of India11. estimated to remain sizeable.
11National Health Profile 2015
53 3. EXPORT POTENTIAL
EXPORT SCENARIO Vehicles, aircraft, vessels and associated transport equipment is the The diverse resource endowments, largest sector of exports from Andhra coupled with robust production and Pradesh, followed by chemical and value addition networks, position allied products, animal and animal the State at the fulcrum of the products, vegetable products, exports sector in India. During 2015- pharmaceutical, gems and jewellery 16, Andhra Pradesh ranked sixth and textiles and garments (Exhibit 13). The USA (share of 18 percent), among all States by value of exports. Singapore (10 percent), China Merchandise exports from the State (8 percent), Hong Kong (7 percent) amounted to Rs. 794.9 billion during and Malaysia (6 percent) are the top the year, accounting for 4.6 percent of destinations for exports from the State the country’s total exports (Table 20). (Exhibit 14).
Table 20: Top Indian States by Value of Exports (2015-16)
State Value (Rs. Billion) Share % Maharashtra 4355.9 25.4% Gujarat 3261.3 19.0% Tamil Nadu 1673.0 9.7% Karnataka 1258.6 7.3% Uttar Pradesh 812.2 4.7% Andhra Pradesh 794.9 4.6% Haryana 676.8 3.9% Delhi 608.4 3.5% West Bengal 488.3 2.8% Punjab 366.8 2.1% Source: Lok Sabha Unstarred Question no. 909 answered on 21st November 2016, Exim Bank Research
54 Exhibit 13: Sector-wise Share in Andhra Pradesh’s Exports (2015-16)
Source: DGCIS, Exim Bank Research
Exhibit 14: Key Destinations for Andhra Pradesh’s Exports (2015-16)
Source: DGCIS, Exim Bank Research
55 EXPORT INFRASTRUCTURE, from these SEZs during the first half of POLICIES AND INCENTIVES 2015-16 amounted to Rs. 3354.94 Cr (Table 21). Special Economic Zones Petroleum, Chemicals and To enhance foreign investment and Petrochemicals Investment Region promote exports from the country, and to create a level playing field Government of India formulated for domestic enterprises and the Petroleum, Chemical and manufacturers to be competitive Petrochemical Investment Regions globally, Special Economic Zones (PCPIRs) policy in 2007 for promoting (SEZ) have been promoted by the the petroleum, chemical and Government. The robust infrastructure petrochemical sectors in an integrated facilities and attractive fiscal benefits and environmental friendly manner on offer in SEZ are aimed at fuelling on a large scale. Andhra Pradesh is economic growth and exports. among the four coastal States where In Andhra Pradesh, the Andhra the policy has been implemented. Pradesh Industrial Infrastructure The Andhra Pradesh PCPIR is an Corporation (APIIC) is the agency investment area of 603 square responsible for supervision and kilometres involved in domestic and execution of SEZs. Currently, there export-led production of petroleum, are 19 operational SEZs in the State, petrochemicals and chemicals. With of which four each are dedicated to IT/ITeS, pharmaceutical and a total committed investment of multi-products. As on September nearly US$ 28.97 billion, the region 2015, close to Rs. 14,339 Crore of is set to boost exports of chemical investments were made in these and petrochemicals from the State, SEZs (not including FDI), and a total as also exports from other ancillary of 62,895 jobs were created. Exports industries.
Table 21: Status of Operational SEZs as on September 2015
Investment Physical Exports Number of Employment Description Made in Rs. Cr during First Half SEZs Generated (without FDIs) of FY16 (Rs. Cr) APIIC 6 2564.92 13825 796.94 APIIC JVs 3 2693.14 4977 221.78 APIIC Assisted 5 5983.66 31429 793.91 Private Developers 5 3157.75 12664 1542.31 Total 19 14399.47 62895 3354.94 Source: Andhra Pradesh Socio Economic Survey 2015-16
56 Industrial Corridors Government and Japan International Cooperation Agency (JICA). Under Visakhapatnam - Chennai Industrial this corridor, three potential industrial Corridor (VCIC), Chennai-Bengaluru nodes have been identified in the State Industrial Corridor (CBIC), and of Andhra Pradesh —Krishnapatnam Bengaluru-Kurnool Industrial Corridor in Nellore, Yerpedu in Chittoor, and are the three major industrial corridors Hindupur in Anantapur. In the first which are expected to positively phase of the project, Krishnapatnam influence manufacturing output and node is proposed to be developed, exports from the State. which is expected to promote growth Spread over an area of more than 800 of automobile, machinery, electronics kilometres, VCIC is a part of the East and medical equipment industries in Economic Corridor and is the country’s the State. first coastal industrial corridor. It Ports is projected to attract investments to the tune of US$ 15 billion, With a coastline of over 974 km thereby enhancing manufacturing stretching from Srikakulam to Nellore, output in the region by Rs. 3,000 Andhra Pradesh has a robust port billion by 2025, and generating infrastructure. The State has one major employment for 50,000 people. The port in Visakhapatnam and 14 other industries along the VCIC will be notified non-major ports, providing geographically concentrated in four access to global markets, especially industrial nodes of Visakhapatnam, those in the Asian and South East Kakinada, Gangavaram-Kankipadu, Asian region. Andhra Pradesh also and Yerpedu-Srikalahasti. These has the advantage of having three have been identified based on deep draft ports at Visakhapatnam, factors such as industrial demand, Gangavaram and Krishnapatnam the Government’s vision and state which are critical for movement of bulk development plans. These nodes cargo from East and South East Asian will require necessary infrastructure economies. support, logistic facilities, and skilled The Sagarmala Project of the human resources and research Government of India can propel the and development facilities in order port-led development of the State. With to realize the potential, and spur the objectives of port modernization, industrial progress and economic new port development, port led growth in the region. industrialization, enhancement of port CBIC is also proposed to be developed connectivity to hinterland, and coastal over an area of nearly 80,359 sq. community development, the project km with assistance from Central is expected to result in establishment
57 of a modern and efficient port related to NW. The development of infrastructure. Cost-efficient and NW 4 has already been initiated by the timely logistics shall make exports State Government. A Memorandum of competitive. The first phase of the Understanding has been entered into project includes development of between Inland Waterways Authority stretch comprising Visakhapatnam of India (IWAI) and the Government - Kakinada – Gangavaram – of Andhra Pradesh to develop the Krishnapatnam. Kakinada-Puducherry canal system along with Krishna and Godavari rivers The commitment of the State in Andhra Pradesh through Special Government towards establishment Purpose Vehicle to be formed by the of port infrastructure is evident Government of Andhra Pradesh and from the announcement of plans IWAI. Feasibility studies, including to establish ten new ports in the delineation of land, have already been State – Bhavanapadu, Narsapur, undertaken. Ramayapatnam, Machilipatnam, Kakinada SEZ (captive), Meghavaram Inland Container Depots / Container (captive), Nakkapalli (captive), Freight Stations Nizampatnam, Vodarevu and Inland Container Depots (ICDs)/ Dugarajapatnam. The Government is Container Freight Stations (CFSs) are also encouraging private participation important hubs in the logistics chain. for port development. The State The Government of India has set up Government is planning to construct ICDs at inland points away from sea the new ports of Bhavanapadu and ports in order to enable exporters and Machilipatnam under the public- importers to handle their shipments private participation (PPP) model. near their place of location. CFSs Inland Waterways have been established to speed up trade and help small exporters, whose The State Government is also focusing consignments are less than container on development of inland waterways. loads. These help decongest ports. As Under the National Waterways Act, on November 2016, there were two 2016, 111 inland waterways have functioning ICDs and five functioning been declared as National Waterways CFSs in the state, while another eight (NWs) in addition to the five existing CFSs were under implementation. NWs, across 24 States for utilizing According to the Food Processing them as an environment friendly and Policy of the Government of Andhra sustainable mode of transport. Pradesh, the State intends to set up As per the Union Budget 2015-16, the ICDs at Chittoor and Kakinada port State Government of Andhra Pradesh for handling and temporary storage had proposed taking up the work of import/export loaded containers for
58 food products. The ICDs would also Srikakulam District have facilities for custom clearance, Resource Base and railway tracks linking them with the closest railway network for Srikakulam district has vast reserves transportation. Plug facility for cold of garnet, graphite, Ilmenite, limeshell, storage containers would also be limekankar, manganese, quartzite provided at ICD. and granite. As far as the agricultural base is concerned, paddy and pulses KEY SECTORS are the important food crops, while The districts of Andhra Pradesh groundnut and coconut are the major have diverse resource endowment, non-food crops for the district, in facilitating growth of different terms of percentage share in total manufacturing activities. Department area sown. Important agricultural of Industries, Government of Andhra products from the district, as identified Pradesh has identified key sectors by the Government, are Cashew, in each of the districts (Exhibit 15). Coconut, Tamarind, Timber, Turmeric, Based on a detailed resource profiling, Pineapple, Custard-apple and Adda and taking into consideration the focus leaves. sectors for the State Government, an Industrial Activities analysis of items for potential exports and key markets has been undertaken In India, the promoters willing to in the following section. set up a large scale industry have
Exhibit 15: District-wise Focus Sectors
Source: Department of Industries, Government of Andhra Pradesh; Exim Bank Research
59 to file an application for Industrial The district is home to several paddy Entrepreneur’s Memorandum (IEM), based and coir based industries. unless the items are under the There are also several MSME purview of licensing provisions or are clusters in the district. The cluster exclusively reserved for manufacture development programme under the by small scale industries sector. Data Ministry of Micro, Small and Medium for IEMs filed from 2012-13 to 2015- Enterprises, Government of India, 16 indicates that maximum number has been instrumental in improving of investments in Srikakulam have the productivity and competitiveness been in the sector of granite blocks (7) of MSMEs in India, as well as in and pharmaceutical and API (5) building capacity of such enterprises. (Table 22). Currently, the district has clusters dedicated to coir, rice mills, cashew, As on November 2014, there were 98 jute articles, brass and bell metal, zari large and mega industrial projects in embroidery, carved wood furniture, the district, involving an investment of khadi, etc. Rs. 1,271 Crore and creating 14,408 jobs. Apart from the large scale There is potential for development of industries, Srikakulam district also several industries in the district12. has a significant base of micro, small • The rice milling activity in the and medium enterprises (MSME), district can be substantially scaled with Rs. 464.46 Crore of investment up to match the produce. The by- undertaken by MSME units in the products from rice milling can also district as on November 2014. be put to alternative uses such as Table 22: Number of IEMs Filed in extraction of rice bran oil, cattle Srikakulam District feed, etc. (2012-13 to 2015-16) Number of • The substantial groundnut Sector IEMs Filed production in the district also Granite Blocks 7 presents a case for greater Pharmaceutical and API 5 establishment of oil mills and Cotton Yarn 1 production of greater value added Power Generation 1 products. Ilemnite 1 • Cashew processing can also be Jute Goods 1 encouraged in the district. While Coconut Processing 1 there exists production units for this Total 17 activity in the State, a significant Source: DIPP, Exim Bank Research
12Development Commissioner, Ministry of MSME
60 portion of cashew production is According to fDi Intelligence from the sent to other States for processing. Financial Times13, during the period • Rich concentration of salt fields in January 2003 to November 2016, the district can be used for setting the district received two greenfield up manufacturing units for iodized Foreign Direct Investment (FDI) salt. projects— both in mineral products. • Given the substantial coconut A titanium pigment plant was set by production in the district, coir Trimex Sands, a subsidiary of Trimex based industries can be promoted. Group (Dubai, UAE), and a heavy • Horticulture based industries can mineral processing plant by WGI also be encouraged as there is Heavy Minerals (Coeur d'Alene (ID), substantial horticulture production United States). in the district. Export Potential • Srikakulam is a leading producer of Mesta in the state, and there An analysis of the resource profile of exists scope for development of the district, as also the past investment jute industry in the district. trends indicates the potential for • There is also scope for exports of coir products, horticulture establishment of more number products, pharmaceutical, granite and of units for cutting and polishing, jute products from the district. There quartz grinding, glass and ceramic, exist substantial opportunities for fly ash bricks, etc. MSMEs to tap this potential.
Exhibit 16: Potential Export Sectors for Srikakulam
13fDi Intelligence from the Financial Times tracks cross border investment in a new physical project or expansion of an existing investment which creates new jobs and capital investment. This data differs from official data on FDI flows as company can raise capital locally, phase their investment over a period of time, and can channel their investment through different countries for tax efficiency.
61 Vizianagaram District Bajra, Sugarcane, Mesta, Ragi and Cotton are other major crops grown in Resource Base the district. The northern coastal district of Industrial Activities Vizianagaram has deposits of Garnet, Data for IEMs filed during 2012-13 Graphite, Ilemnite, Limekankar, to 2015-16 indicate the significant Manganese, and Quartzite. Nearly presence of iron-alloy based one-fifth of the total sown area in the industries in the district (Table 23). district is under non-food crops, with Apart from metallurgical industries, groundnut and sesamum being the significant number of IEMs were also major ones. Paddy and pulses are the filed in the food processing segment. major food crops grown in the district. As on November 2014, investments of nearly Rs. 2,807 Crore have gone Table 23: Number of IEMs Filed in into establishment of large and mega Vizianagaram District industrial projects in the district, (2012-13 to 2015-16) generating employment for nearly Number of 32,898 people. Sector IEMs Filed The district had relatively lower Power (Conventional and 7 investment of Rs. 508.16 Crore in Non-Conventional) MSMEs as on November 2014, Ferro Alloys 2 leading to employment for close Cashew and Cashew 2 to 41,757 people. There are few Processing clusters in the district in the segments Iron Ore Beneficiation 1 of food processing, jute articles, Plant musical instruments, mango jelly Pellets 1 bars, etc. There exists potential for Fabricated Structural 1 establishment of new MSMEs in Steel the sectors of steel fabrication, wire Coke Oven Products 1 drawing, cashew nut processing, food Granite Blocks 1 processing, cold storage, dairy, etc. Calcined Petroleum Coke 1 Export Potential Carbon Paste 1 With several iron and steel industries Hydro Carbon Silico 1 Manganese in the district, there is potential for iron and steel exports. High carbon Silico Manganese 1 ferro chrome are currently exported Pet Feeds 1 from the district to countries such as Corn Oil 1 South Korea. Processed food is also Maize Starch 1 an emerging area of exports from the Spun Concrete Products 1 district given the vast availability of Total 24 agriculture and horticulture produce in Source: DIPP, Exim Bank Research the area.
62 Exhibit 17: Potential Export Sectors for Vizianagaram
Visakhapatnam District During the period 2012-13 to 2015- 16, maximum number of IEMs in Resource Base the district were filed in the drugs Visakhapatnam has reserves of and pharmaceutical, and chemical bauxite, garnet, graphite, ilmenite, sectors. The district is fast emerging limeshell, mica, quartz, semi-precious as a pharmaceutical manufacturing stones, and vermiculite. In terms of hub, and nearly half of the State’s agricultural produce, the district ranks pharma companies are located here. the highest among all the districts of The Jawaharlal Nehru Pharma City the State for acreage and production located in Visakhapatnam is a unique of sugarcane. Paddy and millets PPP project and provides a diverse are the important food crops, while range of facilities to pharmaceutical coconut is an important non-food crop grown for the district. The district also companies such as common effluent has substantial marine resources. treatment plant, marine outfall, hazardous waste management, etc. Industrial Activities Currently, nearly 63 companies are The industrial sector contributes to operating here. close to 30 percent of the district GDP. Another novel initiative is the Brandix The district has a robust industrial India Apparel City (BIAC) which is set base comprising oil refinery, zinc, to provide a boost to the textile and fertilizers, steel, dredging, heavy garments sector in the district. BIAC engineering, ship building, and power is a unique, integrated apparel supply generation. There are seven public chain city spread over an area of sector units in the district—Hindustan Shipyard Ltd, Hindustan Petroleum 1000 acres. It is expected to provide Corporation Ltd, Rashtriya Ispat end-to-end apparel solutions and put Nigam Ltd, NTPC Simhadri Thermal into place breakthrough concept of Power Project, Bharat Heavy Plate seamless ‘Fibre-to-Store’ integration, and Vessels Ltd, National Mineral thereby offering unmatched Development Corporation Ltd. and advantages to global apparel chain Ferro Scrap Nigam Ltd. partners.
63 Another important industrial sector Systems Pvt Ltd. was provided license for the district is aerospace and in 2013 for production of navigation defence. While Hindustan Shipyard and guidance systems, stimulators/ Limited is an important manufacturer, test panels, radar subsystems, several others have come up over the etc. In 2015, another license was years. For example, Essen Electronic provided to Avantel Limited for design, development and manufacture of Table 24: Number of IEMs Filed in radio communication systems. Visakhapatnam District The State Government is also focusing (2012-13 to 2015-16) on development of this district as Number of an IT hub. The district has several Sector IEMs Filed prominent IT players such as Wipro, Drugs and Pharmaceutical 23 Tech Mahindra, HSBC, Concentrix, Chemicals 11 IBM and Cyient. The Government has Power Generation set up an incubation centre known (Conventional and 4 as the “Sunrise Startup Village” and Non-conventional) has also proposed setting up of an Textiles and Garments 3 Information Technology Investment Iron and Steel 3 Region in the district. Cashew Kernel 3 Solar PV Cell 2 Data pertaining to IEMs filed also exhibit presence of food processing Granite Cutting and 1 Polishing industries in the district. Three IEMs Densified Biomass Fuel 1 were filed in the district in the cashew Coal Gas 1 sector (Table 24). Buffalo Meat, Fresh And Frozen 1 As on November 2014, the district had 194 mega and industrial projects Diabetic Testing Equipment 1 with investments of Rs. 19,811 Earth Moving Machinery Crore and generating employment Parts, Attachments and 1 for 67,979 people. As compared to Sub-Assemblies this, the MSME sector generated Titania Slag 1 employment of 147,622 in the district, L Saw Pipes 1 with investments of only Rs. 4,207.41 Ossein Plant 1 Crore. Cutting Shaping and 1 Finishing of Stone The district has several MSMEs Fish Feed 1 engaged in the sectors of electronics, Soft Drinks 1 chemical and chemical products, Total 61 and agro based industries. There are Source: DIPP, Exim Bank Research also several clusters in the district
64 in sectors such as food processing, were recorded in the textiles sector leather products, cane and bamboo, (US$ 1,000 of capital investment in jewellery, zari embroidery, wooden one project) (Table 25). toys, lacquerware, etc. Visakhapatnam also has various Between January 2003 and November tourist destinations on account of its 2016, a total of 52 greenfield FDI rich natural and cultural heritage. The 14 projects were also recorded in the tourism potential of the district remains district. These projects represent untapped, and requires development a total capital investment of of a comprehensive tourism plan. US$ 4,435.10 billion. Maximum number of projects were recorded in Export Potential the Software and IT services sector, Marine products are an important while maximum capital expenditure export item for the district. Nearly US$ 1.12 billion of marine products Table 25: Top Sectors receiving Greenfield FDI in Visakhapatnam were exported from the district in District 2013-14, accounting for 22.5 percent (January 2003- November 2016) of India’s exports of these products. Capex Visakhapatnam also has substantial Industry Sector Projects (US$ Mn) export potential in pharmaceutical, Software and IT chemical and allied products, electrical 12 320.0 services and electronics, IT services, tourism, Business Services 6 20.6 textiles and garments, metallurgy Chemicals 5 213.9 and defence items. While the district Pharmaceuticals 5 174.4 already has substantial capacities in Financial Services 4 162.2 some of these sectors, others need Others 20 3,544 to be promoted through an enabling Source: fDi Markets, Financial Times policy mechanism.
Exhibit 18: Potential Export Sectors for Visakhapatnam
14Ibid.
65 East Godavari District fisheries activities such as processing, product development, transport and Resource Base marketing also provide opportunities Bauxite, Fire Clay, Graphite, Ilemnite, for investment and employment in the Laterite, Semi-precious Stones, and district. Tungsten are the minerals available in Data for IEMs filed during the period the East Godavari district. Apart from 2012-13 to 2015-16 indicate that these, the district also has crude oil maximum number of IEMs were filed and natural gas reserves. Availability in the processed food sector, followed of fertile delta lands also allows by marine products. A total of 48 IEMs production of various agricultural and were filed in the district during this horticultural crops. The district also period (Table 26). has abundant marine and fisheries resources. Table 26: Number of IEMs Filed in Industrial Activities East Godavari District (2012-13 to 2015-16) India’s largest offshore gas field Number of Sector is located in the Krishna-Godavari IEMs Filed Basin. Discovery of natural gas has Processed Food 14 led to establishment of gas based Marine Products 7 power plants, fertilizers, petroleum, chemicals and petro chemical, and Power Generation (Conventional and Non- 5 ceramic industries in the district. An Conventional) electronics hardware park is also Rice Milling 3 proposed to be set up at Kakinada, Drugs and Pharmaceutical 3 which is expected to give an impetus to electronics manufacturing and Paper and Paper Products 3 exports from the district. Animal Feed 2 The rich agriculture and horticulture Cotton Yarn 2 resources in the district also facilitate Densified, Biomass Fuel 2 development of processed food Rice 2 industry. The district also has a Fertilizer 1 flourishing animal husbandry sector, Fruits and Vegetable 1 and is one of the State’s leading Ceramic 1 districts for dairy and poultry products. There is considerable production and Tin containers 1 exports of marine products as well. Plastics 1 Fisheries is an important sector of the Total 48 district’s economy, and post-harvest Source: DIPP, Exim Bank Research
66 As on November 2014, Rs. 13,836 leather products, brass and bell Crore were invested in large and metal, zari embroidery, Kuppadam mega industrial projects established sarees, etc. in the district, and Rs. 2,039.85 Crore Between January 2003 and November were invested in MSMEs. Several 2016, a total of 17 greenfield FDI MSMEs in the district are engaged projects were recorded in the district. in food processing, and paper These projects represented a total and paper products industry. East capital investment of US$ 1.74 bn. Godavari has several clusters in the Maximum number of projects were areas of engineering equipment, coir, recorded in the sector of coal, oil food processing, utensils, granite and natural gas, while the largest processing, refractory, rice mills, capital expenditure was in the non- puppets, hand embroidery, jewellery, automotive OEM sector (US$ 375 mn fibre craft, kalamkari printing/painting, in one project) (Table 27). Table 27: Top Sectors receiving Export Potential Greenfield FDI in East Godavari District On account of the natural gas (January 2003- November 2016) availability in the district, chemical and petrochemical, and petroleum Capex Industry Sector Projects (US$ Mn) products have emerged as major Coal, Oil and area for exports. Marine products 3 321.1 Natural Gas and processed food are other key Financial Services 3 151.2 areas where the district already has Alternative/ significant capacities. The State Renewable 2 250.6 Government also intends to develop energy the district into an electronics Others 9 1,006 manufacturing and exports hub. Source: fDi Markets
Exhibit 19: Potential Export Sectors for East Godavari
67 West Godavari District home to ceramic units, sugar and rice mills, oil refineries, carpet, and Resource Base lace industries. The city of Naraspur West Godavari is primarily an agrarian is famous for lace products, and district and contributes to nearly half of the crochet and embroidery cluster the State’s rice production. Oil palm, located here has nearly 50 exporters sugarcane, corn, mango and banana who export to major markets such are some other agricultural produce as the USA, Europe and Japan. The from the district. Ball clay, chromite, other clusters in the district are in the feldspar, graphite, tungsten, oil and areas of rice mills, handloom, carpets natural gas are the key minerals and durries, cane and bamboo, resources in the district. jewellery, puppets, textile hand Industrial Activities painting, woodwork and lacquerware, The district is a hub for agriculture- among others. The district also has based industries. The district is also a few tourism attractions such as the Kolleru Lake and Dwaraka Tirumala. Table 28: Number of IEMs Filed in West Godavari District As on November 2014, the district had (2012-13 to 2015-16) 156 large and mega industrial projects Number of involving investments of Rs. 1,794 Sector IEMs Filed Crore, while the MSME units had Animal Feed 12 cumulative investment of Rs. 889.29 Yarn 9 Crore. According to the data for IEMs Paper and Paper filed in the district during 2012-13 to 4 Products 2015-16, the highest number of IEMs Power Generation were filed in the animal feed sector, (Conventional and Non- 4 Conventional) followed by yarn, and paper and paper products. Several IEMs were Processed food 3 also filed in the processed food and Marine Products 3 marine products sector (Table 28). Alcohol 2 Sanitary Ware 2 Between January 2003 and November Cold Storage 1 2016 two greenfield FDI projects were Ice Blocks 1 recorded in the district, one in building Hydrogen Peroxide 1 and construction materials, and the Vitrified Tiles 1 other in the financial services sector. Rice Milling 1 These two projects represented Total 44 a total capital investment of Source: DIPP, Exim Bank Research US$ 81.80 mn.
68 Exhibit 20: Potential Export Sectors for West Godavari
Export Potential components manufacturing units are also located in the district around The district already has substantial the city of Vijayawada. The district exports from agro-based industries, also has considerable electronics as also of marine products. In fact, production, with Bharat Electronics’s West Godavari district is a leader in Machilipatnam plant being one prawn exports from the State. Apart of the major industrial units. The from this, textile is also a major area Machilipatnam unit designs and of exports from the district. manufactures strategic electronics. Krishna District There is also a plan for establishment Resource Base of new Opto-Electronics facility at Nimmaluru with investment of Rs. 200 Nearly 70 percent of the land area Crore. in the district is irrigated by Krishna River and its tributaries, thereby In the electronics sector, the leading to abundant agro and marine Central Government’s Electronic resources. The district is also famous Manufacturing Cluster (EMC) for its limestone deposits. Other major Scheme supports creation of world- mineral resources in the district are class infrastructure for attracting chromite, diamonds, ilmenite, iron investments in the Electronics ore, mica, and oil and gas. Systems Design and Manufacturing (ESDM) Sector. Krishna has been Industrial Activities designated as a brownfield EMC and Emanating from its resource under the scheme, assistance up to endowments, the district has a 75 percent of project cost subject to large number of food processing a ceiling of Rs. 50 Crore is provided and cement industries. Auto for Brownfield EMCs. An IT hub is
69 also proposed to be developed at toys and paintings, kalamkari printing/ Vijayawada. painting, stone carving, block printing, zari embroidery, etc. Maximum number of IEMs during 2012-13 to 2015-16 were filed in Between January 2003 and November the construction materials sector of 2016, a total of 18 greenfield FDI Krishna District, followed by textile projects were recorded in the and animal feed (Table 29). As on district, all in the city of Vijayawada. November 2014, Rs. 5,175 Crore was These projects represented a total invested in large and mega industrial capital investment of US$ 472.30 projects in the district, generating mn. Maximum number of projects employment for about 31,950 people. and highest capital investment were Alongside, Rs. 1,043.16 Crore was recorded in the financial services invested in the MSME sector. The sector (Table 30). district has clusters in the product categories of auto components, Table 30: Top Sectors receiving foundry, pharmaceuticals, furniture, Greenfield FDI in Krishna District jewellery, food processing, rice mills, (January 2003- November 2016) Capex Industry Sector Projects Table 29: Number of IEMs Filed in (US$ Mn) Krishna District Financial Services 3 142.8 Automotive (2012-13 to 2015-16) 3 11.1 Components Number of Sector Automotive OEM 2 91.3 IEMs Filed Business Services 8 7.2 Construction Materials 7 Others 9 220 Textile 5 Source: fDi Markets Animal Feed 5 Alcohol 4 Export Potential Marine products 4 The potential export sectors for the Drugs and 3 Krishna district are chemical and Pharmaceutical petrochemical; processed food; Power Generation marine products; auto and auto (Conventional and Non- 2 Conventional) components; IT and electronics; Chemicals 2 textile; and construction materials. Oil and Gas Exploration 1 Guntur District Processed Food 1 Resource Base Titanium dioxide slag 1 Total 35 The district is home to several varieties Source: DIPP, Exim Bank Research of granite and also has substantial
70 Exhibit 21: Potential Export Sectors for Krishna
cement grade limestone deposits. In 2012-13 to 2015-16, with more than addition, Guntur has a rich base of one-third being in the textile sector. An iron ores, copper, zinc, silver and other Integrated Textile Park coming up at base metals. The district also has Edlapadu on Guntur-Chennai National reserves of diamonds, quartz, silica Highway is expected to provide a sand, and slate. Nearly one-fourth of further boost to the textile sector of the the total area sown in Guntur district district. Another major sector is that is under non-food crops, of which of construction materials, comprising cotton is a significant produce. Guntur cement, granite, clinkers, etc. with also has the largest area under chilli 11 IEMs field in this sector during the production, among all the districts of period under consideration (Table 31). the State. In fact, the district is the As on November 2014, investments to biggest spot market for chilli in the the tune of Rs. 6,070 Crore were made country. in large and mega industrial projects, Industrial Activities and another Rs. 2,024.20 Crore in MSMEs. The district has clusters for There is a strong presence of textile engineering equipment, furniture, industry in the district which is also stone, food processing, textiles, rice evident from the IEMs filed in the mills, steel, puppets, embroidery, district. A total of 36 IEMs were filed stone carving, lacquerware, etc. in the Guntur district during the period
71 Table 31: Number of IEMs Filed in in the sectors of business services, Guntur District communications, financial services, (2012-13 to 2015-16) software and IT services and Number of transportation. Sector IEMs Filed Export Potential Textile 13 Construction Materials 11 The district already has a well- Power Generation established textile and construction (Conventional and Non- 6 materials industry, and there exists Conventional) substantial scope for exports from Information Technology 1 these sectors. The district is also an Cattle 1 important centre for export of tobacco, Paper and paper products 1 cotton and chilli. Enhancement in Marine Products 1 capacities for greater value addition Animal Feed 1 and processing of agricultural produce Processed Food 1 can improve the prospects for exports Total 36 of processed food from the district. A Titanium dioxide slag 1 healthcare city with an investment of Total 35 Rs. 1000 Crore is also being set up in Source: DIPP, Exim Bank Research Amravati which can contribute to the foreign exchange earnings from the Between January 2003 and November State through medical tourism. 2016, a total of 5 greenfield FDI projects were recorded in the district. Prakasam District These projects represented a total Resource Base capital investment of US$ 180.0 mn. Prakasam has mineral deposits of One FDI project each was recorded barytes, iron ore, kyanite, quartz,
Exhibit 22: Potential Export Sectors for Guntur
72 slate, and granite. More than one-third Export Potential of the total sown area of the district Currently, marine products and granite is under non-food crop. Tobacco, blocks are important export items from cotton and Bengal gram are some of the district. Processed food and textile the major commercial crops grown also have significant export potential. in the district. The district is also rich in inland and marine fish, and prawn Table 32: Number of IEMs Filed in Prakasam District resources. (2012-13 to 2015-16) Number of Industrial Activities Sector IEMs Filed Unlike other district of Andhra Power Generation Pradesh, the industrial investments (Conventional and Non- 5 Conventional) in case of Prakasam is significantly Granite 5 higher for MSME sector than the large Marine Products 3 and mega enterprises segment. While Processed Food 3 nearly Rs. 4,164.5 Crore was invested Paper and Paper 2 in MSME units as on November 2014, Products large and mega enterprises received Chemical and Allied 2 investments of Rs. 1,526 Crore. Products Concomitantly, the employment Quartz 1 generation from MSME sector was Textile 1 significantly higher at 262,081, as Alcohol 1 against 16,014 for the large and mega Agriculture Warehousing 1 enterprises. The district has clusters Total 24 for stone, agarbatti sticks, rice mills, Source: DIPP, Exim Bank Research granite processing, stone carving, Kurnool District embroidery, etc. Resource Base During the period 2012-13 to 2015- Dolomite, diamonds, gold ore, iron 16, a significant number of IEMs ore, lead and zinc, limestone, ochres, were filed in the sectors of granite, quartz, quartzite, silica sand, steatite, marine products and processed marble, and granite are the minerals food (Table 32). The district is set to found in the Kurnool district. The witness an influx of investment in the district has close to 40 percent of its manufacturing sector with the setting total sown area under non-food crops. up of the National Investment and Groundnut, sunflower, tobacco are Manufacturing Zone at Pamuru. some of the non-food crops grown
73 Exhibit 23: Potential Export Sectors for Prakasam
in the district. The district is also a on account of high wind velocity. leading producer of tomatoes and Accordingly, a significant number onions. of IEMs were also filed in the power generation sector. There is also a Industrial Activities strong presence of textile based As per the data for Kurnool district, industries in the district (Table 33). during 2012-13 to 2015-16, maximum As on November 2014, investments in number of IEMs were filed in the MSMEs in Kurnool amounted to Rs. chemical and allied product category. 481.75 Crore, while investments in The district has considerable potential large and mega industrial enterprises for development of solar energy due amounted to Rs. 6,622 Crore. While to high solar insolation in the region, the former generated employment as also for wind power generation for nearly 40,126 people, the latter led to employment of close to 21,217 Table 33: Number of IEMs Filed in people. Between January 2003 and Kurnool District November 2016, a total of 4 greenfield (2012-13 to 2015-16) FDI projects were recorded in the Number of Sector district, with a total capital investment IEMs Filed of US$ 215.60 mn. These projects Chemical and Allied 15 were in the area of financial services, Products alternative/renewable energy and Power Generation (Conventional and Non- 14 business services. Conventional) Export Potential Construction Materials 5 On account of the resource endowments of the district, there is Processed Food 2 substantial scope for exports from the Pig Iron 1 food processing, minerals, and gems Wood and Wood Products 1 and jewellery sector. As the district Iron Ore Concentrates 1 has received substantial investments Plastic and Plastic in the chemical and allied products 1 Products sector over the past few years, there Total 40 exists significant export potential in Source: DIPP, Exim Bank Research this area as well.
74 Exhibit 24: Potential Export Sectors for Kurnool
Kadapa District commercial crops such as turmeric, chilli, coriander and chrysanthemum Resource Base are also important produce from the The Kadapa district has the world’s district. largest and best quality deposits of barytes. The district also has high Industrial Activities grade asbestos of Chrysotile and The industrial base in Kadapa district rare hard mineral Fullerene which is largely concentrated in agro finds application in material science, and food processing, and minerals electronics and nanotechnology. industry. Construction materials is also Kadapa district is one of the only two an important industry for the district places in the world where Fullerene is as the highest number of IEMs were found. The district also has resources filed in this sector during the 2012-13 for construction material industry. to 2015-16 period (Table 34). As on There is substantial limestone deposits November 2014, overall investments suited for cement manufacturing, and eponymous stones known as ‘Kadapa Table 34: Number of IEMs Filed in stone’ which are used in construction. Kadapa District (2012-13 to 2015-16) Nearly half of the total area sown Number of in the district is dedicated to non- Sector IEMs Filed food crop. The major crops grown Construction Material 5 in the district are paddy, red gram, Power Generation Bengal gram, groundnut and cotton. (Conventional and Non- 4 The district also has substantial Conventional) horticultural production, and has Barytes 3 significant production of tomatoes Textile 1 and onions. Fruit crops of mango, Iron Ore 1 banana, melons, papaya, etc. are also Total 14 abundantly grown in the district. Other Source: DIPP, Exim Bank Research
75 Exhibit 25: Potential Export Sectors for Kadapa
in large and mega industrial projects under forest cover. Of the total sown was Rs. 5,960 Crore and in MSMEs area, more than 40 percent is under was Rs. 1,287.63 Crore. The district non-food crops. Chittoor is among the has few clusters in the areas of major producers of mangoes in the handicrafts and handloom. State, which has led to concentration of fruit canning units in the district. Between January 2003 and Gold ore, quartz, steatite, granite are November 2016, a total of 4 greenfield some of the major minerals found in FDI projects were recorded in the the district. district in the sectors of building and construction materials, consumer Industrial Activities products and financial services. These There is a wide array of industries in projects represented a total capital Chittoor district. During 2012-13 to investment of US$ 453.0 mn. 2015-16, nearly 83 IEMs were filed in Export Potential the district - the highest among all the districts of Andhra Pradesh (Table 35). Food processing and mineral based Maximum number of IEMs during this industries in the district have significant period were filed in granite and other export potential. The district has the stones sector, closely followed by largest barytes deposit in the world, processed food. Iron and steel, auto and positions India as one of the and auto components, and capital leading producers and exporters of goods were the other top sectors. barytes in the world. The construction Chittoor also has a strong presence of materials industry comprising cement, textile based industries. clinkers, concrete, etc. is another important industry from an export The district also has a strong base for perspective. electronics industry. During the period under consideration, three IEMs were Chittoor District filed in the electrical and electronics Resource Base sector, while two others were filed The southernmost district of Chittoor for mobile phone production. The Sri has nearly 31 percent of its area Venkateswara Mobile and Electronics
76 Manufacturing hub in Tirupati, As on November 2014, the large and Chittoor has four large Indian mobile mega industrial projects in the district manufacturers. The district has also had an overall investments of Rs. been designated as a brownfield 3,917 Crore, while MSMEs units had EMC. Rs. 950.95 Crore of investments. The Table 35: Number of IEMs Filed in district has clusters in the sectors of Chittoor District auto components, granite, textiles, (2012-13 to 2015-16) food processing, jewellery, metal Number of work, woodwork and lacquerware, Sector IEMs Filed etc. Granite and Other Stones 14 The Government plans to further Processed Food 12 augment the industrial capacities in Iron and Steel 8 the district. A world-class Automotive Auto and Auto 6 Components Suppliers’ Manufacturing Centre Capital Goods 6 (ASMC) is expected to come up in the district, in addition to auto Paper and Paper 5 Products clusters. Proposed to be set up on Power Generation PPP basis, the ASMC is expected (Conventional and Non- 5 to help manufacturers in achieving Conventional) desired product quality, reliability Consumer Goods 5 and cost competitiveness. An ultra- Plastic Products 4 mega food park is also expected to be Electrical and Electronics 3 developed in Kuppam with state-of-art Alcohol 2 infrastructure. Further, the integrated Aluminium Products 2 business city known as Sri City Textile and Garments 2 includes an SEZ for export business. Logistics and 2 Warehousing Between January 2003 and November Mobile Phones 2 2016, a total of 38 greenfield FDI Poultry 1 projects were recorded in the district, Leather and Leather majority of it in Sri City. These projects 1 Products represented a total capital investment Wood and Wood Products 1 of US$ 2.19 billion. Maximum number Drugs and of projects were recorded in the 1 Pharmaceuticals industrial machinery, equipment and Agro Trading 1 tools sector, while the highest capital Total 83 expenditure was recorded in the Source: DIPP, Exim Bank Research metals sector (Table 36).
77 Table 36: Top Sectors receiving Nellore District Greenfield FDI in Chittoor District (January 2003- November 2016) Resource Base Capex Industry Sector Projects Barytes, China clay, copper ore, (US$ Mn) feldspar, gypsum, laterite, limeshell, Industrial Machinery, 7 90.1 mica, quartz, silica sand, and Equipment & Tools vermiculite are some of the key Metals 6 444.4 minerals found in the district. Nellore Consumer has the largest tobacco cultivation 4 160.7 Products in Andhra Pradesh. The district is Food & Tobacco 3 373 also famous for rice production and Automotive 2 61 aquaculture. Components Business Services 2 3.9 Industrial Activities Communications 2 123.8 Financial Services 2 99.4 As on November 2014, the large and mega industrial projects in Nellore Others 10 829.6 Source: fDi Markets district registered investments of Rs. 4,858 Crore, and the MSME Export Potential sector recorded investments of Rs. Owing to the large industrial base in 578.50 Crore. The district has been Chittoor, the district has substantial designated as a brownfield EMC. export potential in the sectors of capital It is also home to several cement goods, electrical and electronics, industries. According to the data for textile and garments, auto and auto IEMs filed in the district, iron and components, food processing, and steel, marine products, construction metal and metal processing. Tourism material, drugs and pharmaceutical, is also an important foreign exchange and chemical and allied products are avenue for the district. some other key sectors for the district Exhibit 26: Potential Export Sectors for Chittoor
78 (Table 37). The State has clusters in Apache SEZ Development India Pvt the area of food processing, leather, Ltd., Andhra Pradesh Investment woodwork, embroidery, kalamkari Infrastructure Corp. Ltd. SEZ, Mas printing/painting, etc. Fabric Park (India) Pvt. Ltd., Bharatiya International SEZ, IFFCO Kisan SEZ. Although there is robust industrial An Aerospace and Defence Park is infrastructure in the district, further expected to come up in the district on development is also planned. The PPP basis. Another ASMC is planned district has several SEZs viz. to be developed on a PPP basis.
Table 37: Number of IEMs Filed in Between January 2003 and November Nellore District 2016, a total of 13 greenfield FDI (2012-13 to 2015-16) projects were recorded in the district, Number of Sector IEMs Filed with a total capital investment of US$ 4.20 bn. Automotive components; Power (Conventional and 8 Non-Conventional) coal, oil and natural gas; and metals Iron and Steel 7 received 2 projects each during this Marine Products 5 period. Highest capital investment Construction Material 5 was in the sector of coal, oil and Processed Food 4 natural gas (Table 38). Drugs and Pharmaceuticals 4 Table 38: Top Sectors receiving Chemical and Allied Greenfield FDI in Nellore District Products 4 (January 2003- November 2016) Gypsum Products 2 Capex Industry Sector Projects (US$ Mn) Auto and Auto 2 Components Automotive 2 405.7 Wind Energy Equipment 2 Components Coal, Oil and Wood and Wood Products 2 2 3000.0 Natural Gas Animal Feed 2 Metals 2 222.4 Capital Goods 2 Others 7 572 Warehousing 1 Source: fDi Markets Packaging 1 Quartz 1 Export Potential Ceramic 1 Based on the resource profile, Plastic Products 1 and existing and upcoming export Textile 1 infrastructure in the district, food Total 55 processing, marine products, leather, Source: DIPP, Exim Bank Research
79 Exhibit 27: Potential Export Sectors for Nellore
textile and garments, auto and auto Andhra Pradesh, and also accounts components, electronics, iron and for 46 percent of total cropped area steel, construction material, and for Mulberry. drugs and pharmaceutical have been Industrial Activities identified as the potential sectors for export. As on November 2014, the district had Anantapur District investments of Rs. 5,212 Crore in large and mega industrial establishments Resource Base and Rs. 536.27 Crore in MSMEs. The district has large deposits of Given the significant potential for dolomite, gold, iron ore, diamond and non-conventional power generation in limestone. It has also been identified the district, several IEMs have been as one of the best areas for wind power filed in this sector. The power sector generation in India. The arid climate accounted for more than three-fourth and high solar insolation also provide of the total IEMs filed in the district great potential for solar energy. during the period 2012-13 to 2015-16 (Table 39). Close to three-fourth of the total area sown in the district is under non- Anantapur also has a concentration of food crops. The district is one of the steel re-rolling mills, and several units largest producers of groundnut in have been coming up in the iron and
80 steel sector over the past few years. the defence capabilities in the country During the period under consideration, and enable manufacturing, integration the second largest number of IEMs and testing of ongoing and upcoming was filed in this sector. projects in the area of Surface-to-Air Missile Systems. The Vittal Innovation The significant mulberry production City in the district also intends to in the district has also led to the set up a dedicated Aerospace and development of the local textile and garments industry. The district is Defence park. famous for the Dharmavaram silk The district has also received some sarees. greenfield foreign investments. Table 39: Number of IEMs Filed in Between January 2003 to November Anantapur District 2016, a total of 3 greenfield FDI (2012-13 to 2015-16) projects were recorded in the district Number of Sector in the sectors of financial services, IEMs Filed industrial machinery, and metals. Power Generation (Conventional and Non- 37 Conventional) Export Potential Iron and Steel 5 The experience gained by local Processed Food 1 companies in the power sector can Electronics 1 be leveraged for exporting high-value Granite 1 machinery, labour, expertise, and Chemical 1 technology packaged as project EPC. Textile and Garments 1 Wind Power Equipment 1 Based on the current industrial Total 48 structure, textile and garments, and Source: DIPP, Exim Bank Research iron and steel emerge as the key export areas. The Government is Establishment of several defence also promoting the aerospace and manufacturing clusters have been defence sector, which can emerge as planned in the district. The upcoming a major foreign exchange earner for Bharat Electronics Ltd. Defence the district. The presence of gold and Systems Integration Complex in the diamond reserves in the district also district is spread over an area of 914 presents potential for development of acres, and aims at further strengthening gems and jewellery industry.
81 Exhibit 28: Potential Export Sectors for Anantapur
MARKET IDENTIFICATION FOR underlying the concept of revealed EXPORTS FROM THE STATE comparative advantage is that trade profile reflects the inter-country While exports from Andhra Pradesh differences in terms of relative costs have registered robust increase in the as well as non-price aspects. As per recent past, in order to continue this Balassa’s (1965) measure, index for trend forward, it might be essential country i, commodity j is— to identify key products and markets (X X) which provide opportunities for ji/ i RCAij = —————— companies to grow and achieve (Xjw/Xw) economies of scale, as also increase their efficiency levels. The State has Where, significant comparative advantage Xji: exports of commodity j from in several products, which can be country i explored for boosting exports. Xi: total exports from country i
Xjw: total exports of commodity j from The present section undertakes an world analysis of the products where the Xw: total exports from world State’s exports have demonstrated comparative advantage. Quantification The RCA index ranges from 0 to of comparative advantage will help in infinity, with 1 as the break-even point. identifying not only products where That is, an RCA value of less than exports from the state have been 1 means that the product does not performing well but also those where have a comparative advantage, while success has been limited. a value above 1 indicates that the product has a comparative advantage. Competitiveness Indicators The normalized revealed comparative advantage (NRCA) index has been Revealed Comparative Indices are demonstrated capable of revealing used to identify categories of exports in the extent of comparative advantage which an economy has a comparative that a country has in a commodity advantage by way of comparison of more precisely and consistently than the country’s trade scenario with the other alternative RCA indices in the world scenario. The basic assumption
82 literature. NRCA can be defined in the for these products. The idea is to following manner- construct a product market matrix for (RCA – 1) products in demand along with the NRCA = ——————ij ij major demand centres (importers), (RCAij + 1) and the key exporters to these regions NRCA ranges from -1 to 1 with 0 (competitors). as the breakeven point. That is, an NRCA value of less than 0 and greater The analysis in this section considers than -1, means that the product has three major determinants of Andhra no export comparative advantage, Pradesh’s performance in overseas while a value above 0 and less than markets, namely the NRCA for 1, indicates that the product has a products at the State level, Annual comparative advantage. The extent of Average Growth Rate (AAGR) for comparative advantage/disadvantage global imports, and the value of can be gauged from the proximity of global imports. On the basis of these the NRCA values to the extreme data three considerations, a four quadrant points, viz. +1 and -1. bubble chart is prepared for product identification. The size of the bubble An attempt has been made to map the represents the relative import demand global demand with Andhra Pradesh’s of the products. The four quadrants export competitiveness, with a view imply the following: to outline a market specific approach • Product Champions (positive for exporters. A generic analysis has AAGR; positive NRCA): These been attempted in order to identify products have the maximum products that have strong capabilities potential, as the import demand for to export. Also analyzed are the these products has shown robust current markets for these exports and AAGR over the period 2011-2015, the key competitors which India faces. while Andhra Pradesh’s exports of These products and markets are the these products to the region are potential growth drivers for Andhra competitive. Pradesh’s exports and need to be • Underachievers (positive suitably targeted. AAGR; negative NRCA): The Study also attempts to identify Andhra Pradesh does not have the products where Andhra Pradesh competitiveness in these products, could focus on, to realize potentially while their import demand has higher values, especially when grown significantly over the period considering that the State already under consideration. The State possesses manufacturing capabilities can strive towards increasing
83 competitiveness in these markets under product champions, 3 product for the identified products. groups under underachievers, 6 • Losers in Declining Sectors under declining sectors, and 5 product (negative AAGR; negative groups under achievers in adversity NRCA): Andhra Pradesh does (Exhibit 29). not have competitiveness in these Vegetable products, construction products, and these sectors have material, pharmaceutical products, also registered weak growth during and vehicles, aircraft, vessels and the period under consideration. associated transport equipment • Achievers in Adversity (negative have been identified as the product Andhra AAGR; positive NRCA): champion categories. Andhra Pradesh Pradesh has competitiveness in has comparative advantage in exports these products, but the AAGR for of these products, and the global these products has been weak. import demand for these products has Product Identification been robust.
A total of 18 product groups In the category of vegetable products, (Annexure 1) have been considered China, the USA, Germany, Japan, and for categorization. Based on the the Netherlands are the top importers in methodology outlined above, 4 the world. Out of these, India is among product groups have been identified the top five supplier countries only in
Exhibit 29: Identification of Promising Products for Exports from Andhra Pradesh
Source: TradeMap, ITC, Exim Bank Research
84 case of the USA. Andhra Pradesh the USA where it is the fourth largest accounts for nearly 8.4 percent of the import source. The USA is also the exports of these products from India. largest export destination for Andhra The top destinations for exports from Pradesh, with the African countries the State are Vietnam, Sri Lanka, the of South Africa, Kenya, Ghana and USA, Guinea and Senegal. The State Mozambique being the other major could consider focusing on exports destinations for exports (Table 40). to major importing countries such as China, Germany, Japan, and the The export of vehicles, aircraft, Netherlands (Table 40). vessels and associated transport equipment from Andhra Pradesh are In case of construction materials, India largely geared towards the Asian is the seventh largest exporter in the markets of Malaysia, Japan, Sri Lanka, world. However, its exports to most Singapore, etc. This is at variance to of the top five importing countries are the top markets for these products. limited. Andhra Pradesh accounts The State can explore opportunities for 12.9 percent of India’s exports, in these yet unexplored but major and its top export destinations under markets (Table 40). this category are the USA, Turkey, Saudi Arabia, UAE, the UK, Egypt, Machinery and mechanical appliance; Vietnam, Algeria and Libya. The State electrical and electronics; optical, can focus on exports to top importers measuring, medical and similar such as Germany, France, and South instruments and parts; and leather and Korea (Table 40). leather products are the underachiever Andhra Pradesh accounts for about 9.0 categories. It is essential to improve percent of India’s total pharmaceutical competitiveness and increase exports. India’s success in penetrating manufacturing capabilities in these the top markets for pharmaceuticals product categories which have shown has been limited, except in case of robust import growth.
85 Andhra Pradesh for Exports from Top Destinations Top Vietnam, Sri Vietnam, Lanka, The USA, Guinea, Senegal, Thailand, Cote D’ Ivoire, Malaysia, Indonesia, Liberia The USA, Turkey, Saudi Arabia, UAE, The UK, Egypt, Algeria, Vietnam, Libya, Italy 8.4% 12.9% Estimated Share of Andhra Pradesh in Exports India’s (2015) 5 8 8 7 20 14 15 22 16 10 14 14 India’s India’s Rank as Supplier Major Supplier Countries Brazil, The Argentina, Canada USA, Thailand, Mexico, Canada, Chile, Colombia, India The Netherlands,Spain, Italy, France, Brazil The USA, China, Canada, Brazil, Philippines Belgium, Germany, France, The USA, Spain The Netherlands, China, Canada USA, China, Brazil, Mexico, Canada Italy, The Brazil, The USA, Poland, China, Italy, Austria Spain, Italy, China, Germany, The USA China, Spain, Germany, Italy, Belgium The USA, China, Japan, The UK Germany, The USA, Germany, China, Italy, Spain 6170.5 3731.7 3697.6 2880.9 59789.4 43836.3 32817.2 19827.8 19458.3 14159.0 91065.1 (2015; Import 478472.3 Value of Value US$ Mn) Importers China The USA Germany Japan The Netherlands World The USA Germany The UK France South Korea World Table 40: Top Importers in Product Champions Category and their Major Supplier Countries 40: Top Table Product Champion Vegetable Vegetable Products Construction Material
86 The USA, South Africa, Kenya, Ghana, Mozambique, Tanzania, Russia, Brazil, Hungary, Germany Malaysia, Japan, Sri Lanka, Singapore, The USA, UAE, Bangladesh, Bhutan, Nepal, Mexico 9.0% 7.7% 4 11 17 17 24 10 15 27 33 25 26 17 Ireland, Germany, Switzerland, India, Israel The USA, The Netherlands, Switzerland, Ireland, France The USA, Ireland, Italy, France, Germany The Netherlands, Germany, The USA Switzerland, Belgium, Germany, The USA, Ireland, Switzerland, France Germany, Switzerland, The UK USA, Belgium, The Mexico, Canada, Japan, South Korea Germany, France, The The UK Republic, Spain, USA, The Japan, The USA, Germany, Czech UK, France Germany, The USA, Belgium, France, Spain The USA, Italy, Spain, Germany, The UK Japan, The USA, Germany, South Korea, China 86073.9 45673.3 36300.5 33744.3 23186.4 99964.6 96521.6 86881.9 517444.4 324189.6 130317.7 1686902.0 The USA Germany Belgium The UK Japan World The USA Germany China The UK France World Pharmaceutical Products Vehicles, Aircraft, and Vessels Associated Transport Equipment Source: DGCIS, Exim Bank Research
87 4. INVESTMENT SCENARIO
At the time of State bifurcation, development, the Government Andhra Pradesh lost the two most of India has started the ‘Make in industrialised districts - Hyderabad India’ programme which aims at and Rangareddy. This made promoting the country as an important acceleration in investment activity an investment destination and a global imperative for economic and exports hub for manufacturing, design and growth from the State. innovation.
In spite of the setback on account of INVESTMENT TRENDS the State bifurcation, Andhra Pradesh has emerged as an important According to CMIE States of India investment destination in India and database, in the previous two years, offers conducive environment for the State has witnessed a spur in business to flourish. Investor friendly investments, both in terms of new policy and business environment, investments announced, as well coupled with availability of reliable as project completions. On a y-o-y power, large industrial land banks, basis, project completion more skilled labour, and robust infrastructure than doubled to Rs. 196.5 billion in has made the State a globally 2014-15, and further increased to competitive investment destination. Rs. 440.4 billion in 2015-16. This is Among its ambitious plans is building the highest investment completion a world-class greenfield capital city at seen in the last five years. It is also the Amaravati. second highest investment completion in the entire investment cycle captured Andhra Pradesh has not only since 1995-96. been a major recipient of domestic investment, but also of FDI. FDI, According to CMIE, new investment an important source of capital, announcements also saw a supplements domestic private considerable increase during investment, boosts economic growth, 2014-16. New investment proposals leads to employment generation and rose significantly to Rs. 713.2 billion may also facilitate technology transfer, in 2014-15. In the subsequent year, in recipient countries. Recognizing a total of 166 new projects worth the importance of FDI for economic Rs. 918.5 billion were announced.
88 The share of Andhra Pradesh in new of various policy incentives such as investments announced at an all-India single desk clearance mechanism, level rose to over nine percent from an reimbursement on value added tax average of 2-6 percent seen in the last (VAT)/ central sales tax (CST), capital five years. The investors meet held in subsidies and energy subsidies, the State during January 2016 played among others, to support the growth a significant role in contributing to this of investment flows in the State. It has rise in new investments. also succeeded in implementing policy This rise comes over a period of reforms to become the most business- sluggish investment activity during friendly State in India, according to the 2012-2014. The divided State of World Banks Ease of Doing Business Andhra Pradesh had seen a peak in report. investment activity during 2008-09 to 2011-12. Investment completion FDI TRENDS IN ANDHRA PRADESH and announcement of new projects tanked in the subsequent two years. According to DIPP, FDI equity Investment announcements during inflows in Andhra Pradesh (including this period fell by nearly 80 percent to Telangana) more than doubled from 229.4 billion in 2012-13. It grew only US$ 678 million in 2013-14 to US$ marginally by 25.7 percent in 2013- 1,556 million in 2015-16 (Exhibit 30). 14. Similarly, investment completion During April 2000-December 2016, dipped by 55 percent to 65.9 billion in the state received US$ 12.6 billion of 15 2012-13 . FDI equity inflows, accounting for 4 After the bifurcation, Andhra percent of the total FDI equity inflows Pradesh has seen announcement in India.
Exhibit 30: Foreign Equity Inflows in Andhra Pradesh (US$ Mn)
*Till September Source: DIPP
15CMIE
89 To enable a thorough understanding State received nearly 2 percent of the of the greenfield FDI flows coming total number of greenfield projects in into Andhra Pradesh, data from fDi India. Markets database of the Financial Between January 2003 and Times has been used for analysis in Nobember 2016, a total of 166 foreign the current study. fDi Markets tracks capital expenditure projects by 132 cross-border investment in a new companies were recorded in the State physical project or expansion of an of Andhra Pradesh (Exhibit 32). These existing investment which creates projects represented a total capital new jobs and capital investment. Joint investment of US$ 17.24 bn which is ventures are only included where they an average investment of US$ 103.9 lead to a new physical operation16. mn per project. Both the number of According to the data for greenfield FDI projects and the total foreign foreign capital expenditure, Andhra capital investment registered robust Pradesh accounted for 3 percent of y-o-y growth in 2015. In the eleven the total investment during Jan 2003- months of 2016, Andhra Pradesh November 2016 (Exhibit 31). The received US$ 4.7 bn of foreign
Exhibit 31: State-wise Foreign Capital Expenditure in India (January 2003-November 2016)
Source: fDi Markets
16The data on capital investment and job creation is based on the total investment the company is making at the time of the project announcement or opening. As companies can raise capital locally, phase their investment over a period of time, and can channel their investment through different countries for tax efficiency the data is different to the official data on FDI flows. The data from fDi Markets is more accurate and a real time indicator of the real investment companies are making in their overseas subsidiaries.
90 Exhibit 32: Foreign Capital Investment in Andhra Pradesh
Data for 2016 is till November Source: fDi Markets Exhibit 33: Top Source Countries for Foreign Capital Investment in Andhra Pradesh (Jan 2003-Nov 2016)
Source: fDi Markets capital investment from 23 projects investments in Andhra Pradesh, with (Exhibit 32). shares of 29 percent and 25 percent, respectively. In terms of number of FDI The USA accounted for the largest projects, Japan (share of 10 percent), share in total number of greenfield the UK (share of 10 percent), UAE FDI projects and foreign capital
91 (share of 8 percent), and France oil and natural gas sector, accounting (share of 7 percent) were the other for 7.6 percent of the total inflows at top source countries, while in terms of an all-India level (Table 41). The other foreign capital investment, Singapore major sectors (in terms of absolute (share of 24 percent), Malaysia (10 value of FDI) were metals (share percent), Sri Lanka (9 percent) and of 3.4 percent in India), chemicals UAE (8 percent) were the top source (14.5 percent), textiles (21.7 percent) countries (Exhibit 33). and financial services (2.6 percent). The State also received nearly 14.3 Maximum greenfield foreign capital percent of the total investment in expenditure was received in the coal, India’s medical devices sector. Table 41: Top Industry Sectors Receiving Foreign Capital Expenditure (Value in US$ Mn; January 2003-November 2016)
Destination States Andhra Pradesh India Share % Coal, Oil and Natural Gas 3,436.1 45,188.2 7.6% Metals 2,087.8 60,716.3 3.4% Chemicals 2,042.2 14,121.6 14.5% Textiles 1,119.5 5,149.9 21.7% Financial Services 959.1 37,492.9 2.6% Automotive OEM 681.1 38,646.5 1.8% Real Estate 532.5 37,887.9 1.4% Building & Construction Materials 515.0 9,442.4 5.5% Food & Tobacco 483.6 10,386.1 4.7% Automotive Components 480.2 19,050.7 2.5% Non-Automotive Transport OEM 459.7 6,140.1 7.5% Medical Devices 433.7 3,033.5 14.3% Warehousing & Storage 400.7 12,062.9 3.3% Beverages 396.9 3,153.1 12.6% Software & IT services 370.3 33,131.1 1.1% Alternative/Renewable energy 359.8 27,641.1 1.3% Paper, Printing & Packaging 346.4 2,027.4 17.1% Business Services 344.3 12,779.2 2.7% Consumer Products 342.3 17,911.5 1.9% Others 1,448.2 1,25,243.1 1.2% Total 17,239.3 5,59,893.5 3.1% Source: fDi Markets
92 Dunning (1993) provides four different customers (23.1 percent), skilled motivations for FDI: a) market seeking workforce availability (23.1 percent) investment for accessing new markets, and regulations or business climate b) resource seeking investment for (9.3 percent) (Exhibit 34). Hence, specific resources found in foreign market seeking and efficiency seeking territories, c) strategic asset seeking investments are the major types of investment for expanding the set of investments in the State. firm’s proprietary resources, and d) KEY INVESTMENT DRIVERS efficiency seeking investment with a view to reduce cost. Hence, factors This section attempts to analyse such as business environment, the various facets which facilitate labour market efficiency, large foreign investments with the aim of market size, robust infrastructure, identifying the different areas where stable macroeconomic environment, there is a scope for improvement for favourable innovation climate, etc. Andhra Pradesh. help attract investment. Business Environment In the case of investments in Andhra The focus of the ‘Make in India’ Pradesh, nearly 62.2 percent of the programme is not only on the companies cited domestic market manufacturing sector, but also on growth potential as a key determinant promoting entrepreneurship in for foreign capital expenditure, the country. In December 2014, followed by proximity to markets or at the ‘Make in India’ workshop,
Exhibit 34: Motives for Investment in Andhra Pradesh
Source: fDi Markets
93 State Governments had agreed has also been designed and developed upon a 98-point action plan for as a measure for effective monitoring business reforms in their respective of the applications received. jurisdictions. The DIPP along with the A comparison of business reforms World Bank Group and KPMG took a in Andhra Pradesh with the national stock of the reforms carried out by the average indicates that the State States in the “Assessment of State performed better in all parameters Implementation of Business Reforms” other than enforcing contracts (Exhibit report. This included reforms in 35). Introducing electronic court the areas of setting up a business, systems can further improve the allotment of land and obtaining business environment in the State. construction permit, complying with Electronic court systems reduce the environmental procedures, complying time and cost of filing, administering, with labour regulations, obtaining tracking and resolving legal disputes, infrastructure related utilities, while allowing for more efficient record registering and complying with tax management in courts and reduction procedures, carrying out inspections, in administrative costs. Several states and enforcing contracts. have already taken initiatives in this Andhra Pradesh ranked second in direction. For example, Madhya the 2015 assessment with a score of Pradesh has enabled e-summons, 70.1, only one percentage point lower Maharashtra allows online payment of than the State of Gujarat which had court fees, and Sikkim has introduced the highest score among all States. digitally signed court orders. Andhra Pradesh and Telangana have jointly topped the ease of doing In order to further improve the business ranking in 2016. The good performance in the parameter of practices of the State include a Single enabling contracts, the State should Desk Policy 2015-20 with the objective ensure that the vacancies in district of providing all clearances/approvals courts are sufficiently filled, which is 17 within 21 working days to set up an not currently the case . Moreover, industry. Single Desk Mechanism specialized commercial courts can provides for State clearances required also be introduced to focus exclusively for starting an industry across pre on contract disputes. Model contract establishment and pre-operation templates and guidelines should also phases. A Chief Minister’s dashboard be made available on web portal.
17Source: Assessment of State Implementation of Business Reforms, DIPP, World Bank and KPMG, September 2015
94 Exhibit 35: Assessment of Business Reforms- Comparison of Andhra Pradesh with National Average
Source: Assessment of State Implementation of Business Reforms, DIPP, World Bank and KPMG, September 2015
Policy Environment and apparel; electronics and IT; mineral based industry; automobiles Andhra Pradesh has a robust and auto components; petroleum, policy environment. The Industrial chemicals (including fertilizers) and Development Policy 2015-20 aims at petrochemicals; energy; leather; making the State the most preferred and aerospace and defence are the logistics hub and India’s gateway key thrust areas for the Industrial to East and Southeast Asia, while Development Policy in the State. The attracting investment to the tune State also has several sector specific of Rs. 2 lakh crore by 2020 and policies suited to the requirements of creating employment opportunities for the respective sectors. additional 1 million people. The policy targets to increase the contribution While Andhra Pradesh is expected to of manufacturing to GSDP from 9.95 steadily gain grounds in these sectors percent in 2013-14 to 15 percent on account of the favourable policy by 2020, and the contribution of environment and incentive structure, industries to GDP from 20.7 percent the State also needs to develop to 25 percent during the same period. policies in high potential niche areas The sectors of agro and food which have substantial growth processing; life sciences; textile prospects. This includes segments
95 Table 42: Select Sector Specific Policies in Andhra Pradesh
Micro, Small and • Reimbursement of stamp duty, power cost and VAT/CST/SGST Medium (MSME) • Subsidy on capital investment and skill up-gradation and Training Enterprises Policy • Seed Capital Assistance for first generation entrepreneurs 2015-20 • MSME revival fund of US$ 16 million in FY 15-16 Food Processing Policy • Incentives for establishment of Food Parks 2015-20 • Power and Capital subsidy for cold chain units • Reimbursements of cost incurred in obtaining quality certifications and marketing initiatives • Capital and interest subsidy for setting up Primary Processing Centres and Primary Collection Centres • Grant for setting up/up-gradation of National Accreditation Board for Testing and Calibration Laboratories accredited testing labs • 100 percent exemption of Agriculture Produce Marketing Committees cess/fees Aerospace and • Capital subsidy for basic infrastructure development and setting Defence Manufacturing up new units Policy 2015-20 • Reimbursement of cost incurred for patent registration and quality certifications • Specific incentives for Public Sector units and R&D centres • 100 percent Exemption from Entry Tax on ‘Plant Machinery and Capital goods’ Electronics Policy • 100 percent reimbursement of Stamp Duty, Transfer Duty and 2015-20 Registration Fee • 100 percent exemption on electricity duty for 5 years from commencement of commercial operations • 10 percent Capital Subsidy on total investment • 6 percent Interest Subsidy for a period of 7 years Textile and Apparel • Interest subsidy up to 12.5 percent per annum Policy 2015-20 • Power Tariff subsidy at `1-1.50 per unit depending on category • 100 percent reimbursement of stamp duty on lease of land • Capital subsidy, linked to investments, ranging from 20 percent of fixed assets to 10 percent of project cost Biotechnology Policy • Fixed power cost reimbursement of `1.50 per unit for 5 years 2015-20 from commencement of commercial production • Technology Acquisition Fund of US$ 1.6 Million to be set up • Additional interest subsidy @ 3 percent per annum on term loans towards purchase of capital equipment necessary for technology up gradation for 5 years • Financial assistance for patent registration Tourism Policy 2015-20 • Complementary/Linkage Infrastructure Development Assistance • Waiver of Non-Agricultural Land Assessment tax or Land Use Conversion charge • 100 percent reimbursement on Registration and Stamp duty for all tourism infrastructure projects • Investment subsidy for Tourism Services
96 Automobile and Auto- • Capital Subsidy for Auto Clusters and Automotive Suppliers component Policy Manufacturing Centers developers – 50 percent of fixed capital 2015-20 investment in building and common infrastructure • 75 percent reimbursement of patent cost and 50 percent reimbursement for quality certification • For Mega Integrated Automobile Projects – O 100 percent CST reimbursement for 10 years or GST regime whichever is earlier O Gross VAT/SGST reimbursement on sale of finished goods O 75 percent reimbursement of Gross VAT/SGST for 10 years Source: Investor Handbook, Government of Andhra Pradesh such as animation and gaming, understanding the innovation organic products, medical devices, potentiality of a State. etc. Andhra Pradesh ranks eighth on the Technology and Innovation index, and there is a need to focus on leveraging talent and establishing The innovation climate is another more R&D centres in specific crucial element for attracting categories. There is also a need to investment, especially in technology improve the start-up ecosystem, and intensive industries. The innovation the State Government has already sphere in Andhra Pradesh is among formulated a policy in this context. the best in the country. For interstate comparison of innovation scenarios, While the State has substantial Institute for Competitiveness, innovation potential, it has a India has developed the “State significantly higher percentage of Innovation Index” which is a tool firms not engaged in R&D activities18. for the policymakers to track the R&D is imperative for development of innovation activity in the States. The technology intensive sectors, while index is built on a framework based for other sectors, innovation largely on which it seeks to understand concerns adoption of knowledge the underlying levers that can act to and technology. Encouraging R&D increase or impede the trajectory of activities through various government India’s innovation and growth. The incentives can go a long way in framework has four broad pillars that enhancing the innovation climate are divided into sub-pillars and further in the State, and thereby attracting into indicators for mapping innovation. investors in technology intensive These factors are important for looking industries. This can also be achieved into the present innovation scenario through greater industry-academia of States as well as ultimately interaction.
18Indian National Innovation Survey, 2014
97 Exhibit 36: State Innovation Index
Source: Future of States Project, Institute for Competitiveness, India
CONCLUSION can help further strengthen its The strong policy thrust, robust stature. This includes among others, innovation climate and facilitative reforms pertaining to enforcement of business environment has positioned contracts in the State, policies the State as a major investment in niche areas, and promotion of destination, but certain measures R&D activities.
98 5. STRATEGY FOR EXPORT PROMOTION
Discussions in the preceding chapters AUGMENT WAREHOUSING AND highlight the diverse industrial and STORAGE CAPACITY export base in the State. The State The logistics sector, comprising the Government policies formulated transportation, storage and distribution after the bifurcation of the State are components is a key driver of a state’s imparting a renewed energy and competitiveness in the national and momentum to export growth. However, international markets. Transportation there is currently no dedicated export accounts for nearly 60 percent of strategy for the State. the logistics market in India, while An export strategy is one of the critical warehousing accounts for 25 percent components for the competitiveness (Exhibit 37). of any State. While trade and Lack of adequate transportation, commerce is a subject of Union List, storage and distribution services is which empowers the Parliament of an issue for exporters across the India to make legislations, the building country. Specifically, in the context blocks of such activities which of Andhra Pradesh, this is a major includes agriculture and industries are constraint as perishable products prerogatives of the State Government. account for a significant share of It is therefore essential that States the State’s exports. Agro and food create and integrate an export strategy as part of their economic agenda. processing and marine products are key export sectors for the State, and In order to take a holistic view, the Government is also focusing on planning of a strategy for promotion of incentivizing pharmaceutical exports. exports from Andhra Pradesh would These require adequate warehousing entail strategizing across various and cold storage infrastructure. levels. Strategies will be required for creating an enabling environment There is significant demand-supply across sectors, as also for capacity mismatch in storage infrastructure. In building in sectors with high potential 2015-16, foodgrain production in the for exports. Select such strategies are State was estimated at 13.8 million discussed in the following section. MT. Horticulture production during
99 Exhibit 37: Segmentation of Indian Logistics Market (2014)
Source: Frost and Sullivan Research the year was 18.8 million MT. As per units to meet the growing demand for industry norms, the storage facility safe handling of exports. The State should typically be 60 percent of the can also develop a multi-modal cold- production amount19. According to this chain network which shall involve benchmark, the State should have two or more modes of transport for at least 19 million tonnes of storage facilitating transportation and storage space. However, according to the of perishable products. Investment in Andhra Pradesh State Warehousing development of last mile connectivity Corporation, the State currently has can also serve as an objective for this only about 1.1 million MT per annum proposed multi-modal network. of warehousing capacity. Table 43: Cold Storage The State also needs substantial Infrastructure in Andhra Pradesh expansion of cold storage Capacity Ownership Number infrastructure, which is critical for (MT) ensuring quality and maintaining Cooperative 9 6269 shelf life of products. Currently, the Public 6 2519 State has 203 cold storage units, with Private 188 575453 capacity of 584 thousand MT (Table Grand Total 203 584241 43). There is need for more such Source: APEDA, Exim Bank Research
19Ernst and Young
100 ESTABLISHMENT OF COASTAL For export prospects from the CEZs in ECONOMIC ZONES Andhra Pradesh to remain positively resolute, key driving forces need to be Fourteen Coastal Economic Zones identified. Some policy interventions (CEZs) have been identified along the which could be considered include the coastline of the country in the National following: Perspective Plan of the Sagarmala Programme. These economic zones • The policy of tax exemption with are expected to lower the cost of a sunset clause as in the case of movement of goods and thereby SEZs may not necessarily promote improve export competitiveness. productivity and innovation. The CEZs shall comprise existing Therefore, overall tax incidence major and non-major ports, industrial on the units should depend on units and requisite evacuation the type of enterprise, its stage infrastructure. Two CEZs have been of development, and the amount proposed in the State of Andhra of exports. According to a report Pradesh – one covering the ports of of the Comptroller and Auditor Kakinada, Vizag and Gangavaram; General of India,, only 9.6 percent and the other around the port of of the SEZs in the country cater Krishnapatnam. to multi-product manufacturing, and more than half are engaged Creation of adequate infrastructure in in the IT/ITeS sector. To promote the CEZs needs to be complemented more units in high-technology through incentives from the manufacturing sector, the tax Government for enterprises located incidence on such units should be within these. It is noteworthy that comparatively lower. Units at early while Shenzhen is the most famous stage of business development, SEZ development model in China, adjudged by the number of years the characteristics of the region were of operation and nature of industry, equally important for its success can also be provided greater tax and that exact model may not be incentives. replicable. Proximity to the well- developed financial hub of Hong Kong • Common testing and certification was a crucial factor in the growth story facilities for key exports should of Shenzhen. Moreover, the national be provided within the CEZs. and global economic scenario at the Enhanced quality standards time of set-up of the Shenzhen SEZ adherence will be crucial to keep was vastly different from the current pace with international trends and landscape in India and globally. expectations.
101 Exhibit 38: Taxation in Proposed CEZs
• Sales by SEZs to Domestic Tariff constraints for export growth. The role Area (DTA) are subject to tariffs. On of the agency shall include: the other hand, India has signed • Assisting exporters in free trade agreements with several understanding and leveraging countries, and the tariff levied the export policies and export on goods imported from these assistance schemes of the State countries are at concessional rates. and Central Government; To alleviate this constraint in case • Building a statistical database for of CEZs, a certain percentage of exports and imports from the State; sales to DTA should be permitted at concessional duties. • Providing commercially useful information to exporters through SETTING UP ANDHRA PRADESH market research and identification EXPORT PROMOTION COUNCIL of key markets and products. This can be made available through the Andhra Pradesh Export Promotion agency’s website; Council (APEPC) can be set up with support from the State Government, • Providing guidance to exporters on industry associations and exporters various matters such as standards, for providing information and guidance certification, export finance, to exporters. It shall also serve as a insurance, etc.; link between the exporters and the • Providing support for promotional Government, and help alleviate the activities such as external publicity,
102 participation in fairs and exhibitions, RAW MATERIAL BANKS promotion of exclusive exhibitions and trade fairs of specific Availability and cost of raw material products; can be a major constraint for • Coordinating the working of all manufacturers. In the handloom institutions engaged in supporting sector, for example, high fluctuations international trade within the State; in raw material prices can affect • Identifying the need for export capacity utilization and value related training and capacity accruals. In the engineering sector building, and liaison with DGFT and as well, there are limited domestic industry chambers for facilitating capabilities for advanced metallurgy these and development of special materials, The proposed APEPC can set up which makes the availability of certain Trade and Information Centres/ Kiosks at major industrial growth centres of materials a constraint. The efficacy the State for providing information of raw material banks in alleviating to the exporters, conducting buyer- supply side constraints to production seller meet, etc. These centres can has been well established. For provide information pertaining to example, a raw material bank for setting up export business, market dyes and chemicals in the Tirupur and buyer identification, channels Export Knitwear Cluster allows the of distribution, processing of export order, export pricing and costing, risk manufacturers to procure dyes and mitigation methods, export finance, chemicals at prices which are atleast and labelling, packaging and marking 5 percent lower than the market prices of goods. (Box 1).
Box 1: Tirupur Export Knitwear Printers Association (TEKPA) Raw Material Bank Tirupur cluster in the State of Tamil Nadu comprises around 5,000 textile units. The Tirupur Export Knitwear Printers Association (TEKPA) contributes to the growth of the textile industry in Tirupur through its multifarious activities. Recognizing the need for achieving technical specifications for exports, the TEKPA set up a raw material bank in 2013. The objectives of the bank as outlined by TEKPA are: • Make available high quality dyes and chemicals for the printing industry; • Ensure no adulteration of dyes and chemicals used in the industry; • Buy directly from reputed manufacturers, and take advantage of bulk buying; • Ensure uninterrupted supply of dyes and chemicals.
103 Poor and often adulterated quality of dyes and chemicals was impacting exports from Tirupur as international buyers insisted on high quality of printing. With the establishment of the bank, the members of TEKPA could buy from reputed manufacturers and take advantage of bulk buying, thereby ensuring availability of quality products at low prices. Since its operationalization in January 2013, when the store was started, over 250 members have purchased dyes and chemicals from the store. On account of establishment of the bank, members need not stock dyes and chemicals and incur inventory expenses. The prices of dyes and chemicals in the bank were also 5 percent lower than market prices at the time of establishment. Over time, the market prices have been stabilised as dealers and traders have been forced to match the store prices.
Source: Knowledge Centre, Reliance Commercial Finance
To ensure timely supply of quality constraints for exports oriented raw materials to producers, raw production in the State. material banks can be set up by BRANDING OF GEOGRAPHICAL the Department of Industries, INDICATIONS PRODUCTS Government of Andhra Pradesh in key areas such as textiles, engineering, Several handicrafts, handloom and agro and food products, etc. These agricultural products from Andhra raw material banks can supply the Pradesh have been conferred required raw materials to MSME units Geographical Indications (GI) as and when required on producing status (Table 44). The reference a prescribed requisition form. A price to geographical origin along with fluctuation reserve can be maintained the use of traditional practices in these banks to ensure that smaller and processing methods, provides producers are protected against wide substantial marketing potential. GIs fluctuations in raw material prices. are considered important tools for Several raw material banks already marketing strategies, and function as exist in areas such as handlooms, but product differentiators. there is a need for more such banks To reap the benefits of GI status, in areas such as handicraft, agro and it is important for the GI brand to food products, etc. In this regard, be recognised as a reliable and APEPC can make recommendations preferred brand in the market with a to the State Government based on distinguished positioning. Products its assessment of the supply related such as Darjeeling Tea have been
104 Table 44: Geographical Indications Department of Industries. This will be in Andhra Pradesh aimed at building globally competitive Product Category brands for products originating from Pochampalli Ikat Handicraft the State. The fund can also assist in Srikalahasthi Kalamkari Handicraft marketing of these branded products Kondapalli Bommallu Handicraft in the international arena. Export Machilipatnam Kalamkari Handicraft related brochures, interactive CDs, Budiiti Bell & Brass Craft Handicraft etc. can be created for popularizing Andhra Pradesh Leather the products from the State in Handicraft Puppetry international markets. Uppada Jamdani Sarees Handicraft EXPORT AWARDS Tirupathi Laddu Foodstuff Guntur Sannam Chilli Agricultural To encourage exports from the State, Venkatagiri Sarees Handicraft Export Awards can be introduced for Bobbile Veena Handicraft recognizing the efforts of exporters Mangalagiri Sarees and across the key sectors—agricultural Handicraft Fabrics and allied products, marine products, Dharmavaram Handloom Textile chemical and allied products, Pattu Sarees and Paavadas engineering goods, textile and Banaganapalle Mango Agricultural garments, drugs and pharmaceuticals, Source: Geographical Indications Registry and services. Separate awards can able to gain substantial market share also be instituted for the MSME on account of this brand building. industries in the State. A selection In order to attain similar levels of committee comprising officials from success, key value proposition needs key Government agencies and to be defined for the products having eminent industrialists can evaluate the GI status. The logo and name of the applications taking into consideration GI brand needs to be developed and the value of exports, ratio of exports to marketed, and mechanism needs sales, level of value addition, adoption to be devised for ensuring that all of best practices, product and process the products marketed under the GI innovation, R&D activity, etc. brand meet the minimum specified SKILL DEVELOPMENT AND standards. Initiatives are also needed CAPACITY BUILDING for identifying more products from the State which can be accorded Exporters need to have in-depth with GI status. In this regard, a brand knowledge of the latest global equity fund can be setup by the State developments pertaining to Government under the aegis of the international trade viz., export finance,
105 insurance, packaging / eco-labelling, geared towards developing countries, quality, etc. They should also acquaint and its penetration in the developed themselves with the rules and countries, which are the largest procedures of importing countries. importers for several of the identified Hence, there is a need to conduct products, has been fairly limited. The Workshops / Seminars / Conferences usage of Non-Tariff Barriers (NTBs) in regularly on different aspects of developed countries, especially TBTs international trade and across discourage exporters from entering different sectors in the State. Industry these markets. A list of generic and associations and agencies, along sector- specific NTBs is given at with the proposed Andhra Pradesh Annexure 2. Export Promotion Council can help in organizing these programmes. For Andhra Pradesh, it is even more important given that it is one of the The Government of Andhra Pradesh major producers and exporters of intends to set up Sector Skill Councils agriculture and allied products, which at the State level on the lines of remains one of the most protected National Sector Skill Council. These sectors for majority of the trading can also be leveraged for enhancing nations. Standards in the sector are the existing capacity of exporters and stringent, and compliance with these creating awareness about important requires significant investment. Many procedural aspects. developing countries, including India FINANCIAL SUPPORT FOR face the twin challenges of inadequate MANAGING TECHNICAL BARRIERS research and development facilities TO TRADE / STANDARDS as well as good quality lab network services to improve and upgrade Technical Barriers to Trade (TBT) product qualities as per requirements are measures relating to technical of Good Agriculture Practices (GAP), regulations and standards, and Hazard Analysis and Critical Control procedures for assessment of Point (HACCP), etc. The investment conformity. These are increasingly requirements for HACCP plants are emerging as a challenge for the large as most of the capital goods exporters. TBTs can be in the related to the plant need to be imported form of certifications, packaging from the developed countries. The and labelling requirements, re-test installation cost of HACCP plants of shipments for conformity, etc. varies from Rs 10 million to Rs 25 Analysis carried out earlier in the million. Further, on an average, an Study indicated that exports from export processing firm is estimated to Andhra Pradesh have largely been
106 spend about Rs 2 million per year to cutting-edge technologies to catalyse maintain a HACCP plant20. growth and compete in global market. There are several standards and One such initiative is the Technology certifications in other sectors as well. Acquisition Fund Programme (TAFP) For example, the “Communauté which is an industry driven initiative Européenne (CE)” marking is essential aimed towards assimilation of for exports to Europe of products such technology in a short span of time. In as medical devices, simple pressure view of the objectives laid out in the vessels, electrical and electronic 12th Five Year Plan, TAFP mandates products, building materials, gas-fuel- to provide funding to offset the higher fired equipment, toys, etc. Equipment cost of the best technology available used in potentially explosive globally. The TAFP provides financial atmospheres within the EU are also required to comply with the ATEX assistance to Indian Capital Goods directive. Similarly, China requires sector to facilitate the acquisition of certain imported products to have strategic and relevant technologies Chinese Compulsory Certification. and also development of technologies These include several categories through contract route, in-house route of auto-components, electrical or through joint route of contract and equipments, electronics, etc. In in-house. Russia as well, industrial products containing pneumatic products are Similarly, the Technology Acquisition required to conform to the standards and Development Fund (TADF) aims prescribed by GOST-R. In addition, a at facilitating acquisition of clean and certificate of conformity is required at green technologies by MSMEs across customs clearance. sectors, and bridge the technological In order to encourage exporters, gap at an affordable cost. These the State can share a portion of can be leveraged by exporters from the expenses incurred for such Andhra Pradesh to boost high- compulsory certifications. Depending technology exports. upon the turnover of the exporting unit, the State can bear 50-100 percent of In this context, the State government the certification / compliance cost. can provide support in submission LEVERAGING TECHNOLOGY of applications under the Schemes. ACQUISITION SCHEMES OF GOI For example, under TAFP, applicants The Government of India has launched need to carry out a mandatory detailed several Schemes for assisting Indian assessment study by a third party manufacturers to acquire and evolve specialized and accredited agency on
20Export of Horticultural Products from India: Economic Impact of Cost of Compliance for Food Safety Measures; Association of Asia Scholars
107 the proposed technology. This is done oriented units / clusters / consortium to evaluate the following aspects in in the State, and provide necessary the context of improving the existing advisory and financial support in business proposition — preparation of the application. As • Technical uniqueness of the these programs meet only a fixed proposed technology in the context percentage of the cost of technology of area of application vis-à-vis acquisition (25 percent in case of other competitive technologies; TAFP subject to ceiling of Rs. 10 • Commercial viability and Crore), the State Government can appropriate justification for provide additional financial support on financial valuation of the “Proposed a case-to-case basis. Technology”; SUPPORT FROM EXIM BANK • Requisite level of details on Intellectual Property Rights in Several flagship programmes of relation to context of improving the Exim Bank, such as Lines of Credit, existing business proposition. and Buyer’s Credit under NEIA (Box Prior to the opening of the Request for 2) can help propel medium and long Proposal (RFP) cycle of the schemes, term exports from the State, and the State Government can invite create export opportunities for Indian and review applications from export- companies.
Box 2: Exim Bank’s Flagship Financing Programmes Loans to Export Oriented Units: The Bank offers a number of financing programmes for Export Oriented Units, importers and for companies making overseas investments. The financing programmes cater to the term loan requirements of Indian exporters for financing their new project, expansion, modernization, purchase of equipment, R&D, overseas investments and also the working capital requirements. Lines of Credit: The Government of India, in 2003-04, formulated the Indian Development and Economic Assistance Scheme [IDEAS – administered by the Department of Economic Affairs, Ministry of Finance] with the objective of sharing India’s development experience through capacity building and skills transfer, trade, and infrastructure development, by extending concessional Lines of Credit (LOCs) routed through Exim Bank, to developing partner countries, towards creating socio-economic benefits in the partner country. These LOCs facilitate import of project-related equipment and services from India by such partner countries on deferred credit terms.
108 Project Exports: Exim Bank plays a pivotal role in promoting and financing Indian companies in execution of projects. Towards this end, the Bank extends funded and non-funded facilities for overseas industrial turnkey projects, civil construction contracts, supplies as well as technical and consultancy service contracts. Indian companies have implemented numerous projects, spanning various sectors, with support from Exim Bank. These projects, in turn, facilitate and support infrastructure development in host countries, thereby contributing to the overall development process in the region.
Buyer’s Credit under the NEIA: Exim Bank has also been playing a pivotal role in promoting and financing Indian companies in execution of projects overseas. Towards this end, the Bank extends funded and non- funded facilities for overseas industrial turnkey projects, civil construction contracts, supplies as well as technical and consultancy service contracts. The Bank’s strong emphasis on increasing project exports from India has been enhanced with the introduction of the Buyer's Credit under the GOI’s National Export Insurance Account (BC-NEIA) program. BC-NEIA is a unique financing mechanism that provides a safe mode of non-recourse financing option to Indian exporters and serves as an effective market entry tool to traditional as well as new markets in developing countries, which need deferred credit on medium or long term basis. At present, a positive list of 46 countries has been identified for which Indian exporters can avail of Buyer’s Credit under the NEIA. The list could be suitably expanded / modified on receipt of credit requests for projects from other countries, as has been done in the past.
Lines of Credit State can tap such opportunities. In fact, Andhra Pradesh is best placed to Benefits from the LOC program can take advantage of such opportunities accrue to the exporters from Andhra as the State is among the top exporters Pradesh in several key areas. For of cement from India. example, in the cement sector, Exim Bank has several operative LOCs in IT and ITeS is also a focus sector for the the countries of Djibouti, DR Congo, State, and through the LOC program, Central African Republic, and the mutually beneficial arrangements Republic of Congo. Exporters from the can be made by exporters with other
109 countries which require IT training. Export Credit Agencies to supplement Currently, Exim Bank has an operative and facilitate finance. Exports of LOC in Senegal for IT training. projects and services can be broadly categorized into (i) civil construction Under the LOC program, several projects, (ii) turnkey projects, (iii) countries also seek machinery consultancy services, and (iv) imports, which can be supplied by supplies, primarily by way of capital the exporters from Andhra Pradesh. Project exports from the State can goods and industrial manufactures. also be enhanced through the LOC As noted earlier, there is substantial program. Project exports are vital potential for capital goods exports conduits for exporting high-value from the State. However, the scope machinery, labour, expertise, and of these exports is fairly limited as technology, especially since global developing countries are the major merchandise exports remained below markets for India's project exports, 3 percent for the fourth consecutive and these countries demand medium- year in 2016. to long-term credits. With the BC-NEIA Overseas Investment Finance (OIF) product, project exporters from the State can venture into new markets While the State has substantial and help diversify the exports. technology-intensive exports, it will need to move up the ladder in terms MARKET DEVELOPMENT of technology. Since investment in ASSISTANCE R&D has high gestation period, the OIF programme of the Bank can Marketing Development Assistance help companies get access to high (MDA) Scheme of the Government technology by way of inorganic growth of India assists exporters for through the mergers and acquisition export promotion activities abroad. route overseas. Exporters in Andhra Entrepreneurs get funding for Pradesh can also achieve vertical participating in trade delegations/ integration through their overseas buyer seller meets/ fairs/ exhibitions. investments which will improve their These initiatives have been proven to efficiency and margins. assist exporters for export promotion activities. A State-level MDA scheme Buyer’s Credit under the NEIA can also be put in place for further Large scale export infrastructure encouraging participation of Indian projects in the energy, resources and exporters. The implementation of the port sectors continue to look at the scheme needs to be made segment
110 specific, withocus f on exporters in EXPORT PROMOTION the high value added and technology PERFORMANCE MEASUREMENT intensive sectors. SYSTEM CAPACITY BUILDING OF A quantitative-based performance INDUSTRIAL CLUSTERS system needs to be developed for measuring the effectiveness of the Industrial clusters have been proven strategies for export promotion. The to have several advantages in parameters for assessment may promoting the growth of a particular include extent of utilization of common sector or industry. It is recognized testing and certification facilities, that enterprises can achieve high number of firms seeking assistance levels of competitiveness if they work from the proposed APEPC, training in a cluster environment ensuring and capacity building activities complementarities, common facilities, undertaken by APEPC, number of collective activities including collective branded products assisted/marketed sourcing and marketing. through the brand equity fund, support The State of Andhra Pradesh has provided by the State for compulsory several industrial clusters spread certifications, etc. This performance across an array of sectors. The can be matched with actual trade development and upgrading of statistics for the State, and help in clusters will be an important agenda quantification of measurable goals for the State Government. As an for the next fiscal and devising the action plan. essential first step, the State needs to develop a mechanism for assessment OUTLOOK of existing clusters in the State. India expects to increase its share The assessment can cover aspects in world exports from 2 percent to pertaining to infrastructure bottlenecks, 3.5 percent by 2020. Contribution technological upgradation, access to from various States would form the skilled human resource, environmental bedrock of achieving this target. sustainability, etc. Upon assessment Based on the Country's target, it is of the clusters, relevant capacity projected that Andhra Pradesh must building activities can be undertaken achieve the target of US$ 25 billion by the Government. The elements of of exports by 2020, under a baseline capacity building include construction scenario. For the share of Andhra of physical infrastructure, building Pradesh to concomitantly increase in institutions, development of human India’s exports, exports need to further resources, etc. increase to US$ 39 billion by 2020.
111 Exhibit 39: Targets for Exports from the State (Value in US$ Mn)
Source: WTO Statistics, Ministry of Commerce, Exim Bank Research
Under this optimistic scenario, share innovation, bolstering availability of of the State in national exports shall export finance, and strengthening increase from the current 5 percent to the institutional capacity for exports, 7.5 percent by 2020 (Exhibit 39). among others. The export strategies To achieve the aforementioned outlined in the current Study can targets, it will be essential for help devise the roadmap and the State to focus on enhancing action plan for achieving the trade competitiveness, promoting desired results.
112 Annexure 1 Classification of Products
Category HS Code HS Description 1 Live animals 2 Meat and edible meat offal Animal and 3 Fish and crustaceans, molluscs and other aquatic invertebrates Animal Dairy produce; birds' eggs; natural honey; edible products of Products 4 animal origin, not elsewhere specified 5 Products of animal origin, not elsewhere specified or included Animal Or Vegetable Animal or vegetable fats and oils and their cleavage products; Fats & Oils & 15 prepared edible fats Their Cleavage Products Inorganic chemicals; organic or inorganic compounds of 28 precious metals, of rare-earth metals 29 Organic chemicals 31 Fertilisers Tanning or dyeing extracts; tannins and their derivatives; 32 dyes, pigments and other colouring Essential oils and resinoids; perfumery, cosmetic or toilet 33 Chemical and preparations Allied Products Soap, organic surface-active agents, washing preparations, 34 lubricating preparations 35 Albuminoidal substances; modified starches; glues; enzymes Explosives; pyrotechnic products; matches; pyrophoric alloys; 36 certain combustible preparations 37 Photographic or cinematographic goods 38 Miscellaneous chemical products Articles of stone, plaster, cement, asbestos, mica or similar 68 Construction materials Material 69 Ceramic products Gems and Natural or cultured pearls, precious or semi-precious stones, 71 Jewellery precious metals, metals clad Leather and Articles of leather; saddlery and harness; travel goods, Leather 42 handbags and similar containers Products Machinery and Machinery, mechanical appliances, nuclear reactors, boilers; 84 Mechanical parts thereof Appliance; Electrical machinery and equipment and parts thereof; sound Electrical and 85 Electronics recorders and reproducers
113 72 Iron and steel 73 Articles of iron or steel 74 Copper and articles thereof 75 Nickel and articles thereof 76 Aluminium and articles thereof Metals and 78 Lead and articles thereof Metal Products 79 Zinc and articles thereof 80 Tin and articles thereof 81 Other base metals; cermets; articles thereof Tools, implements, cutlery, spoons and forks, of base metal; 82 parts thereof of base metal 83 Miscellaneous articles of base metal Salt; sulphur; earths and stone; plastering materials, lime and 25 cement Mineral Products 26 Ores, slag and ash
Mineral fuels, mineral oils and products of their distillation; 27 bituminous substances Optical, Measuring, Medical Optical, photographic, cinematographic, measuring, checking, 90 & Similar precision, medical or surgical instruments Instruments & Parts Paper and paperboard; articles of paper pulp, of paper or of 48 Paper and paperboard Paper Products Printed books, newspapers, pictures and other products of 49 the printing industry; manuscripts Pharmaceutical 30 Pharmaceutical products Products Plastics And 39 Plastics and articles thereof Articles Thereof Preparations of meat, of fish or of crustaceans, molluscs or 16 other aquatic invertebrates
Prepared 17 Sugars and sugar confectionery Foodstuffs 18 Cocoa and cocoa preparations Preparations of cereals, flour, starch or milk; pastrycooks' 19 products
114 20 Preparations of vegetables, fruit, nuts or other parts of plants 21 Miscellaneous edible preparations 22 Beverages, spirits and vinegar Residues and waste from the food industries; prepared animal 23 fodder 24 Tobacco and manufactured tobacco substitutes Rubber And 40 Rubber and articles thereof Articles Thereof 50 Silk Wool, fine or coarse animal hair; horsehair yarn and woven 51 fabric 52 Cotton Other vegetable textile fibres; paper yarn and woven fabrics 53 of paper yarn Man-made filaments; strip and the like of man-made textile 54 materials 55 Man-made staple fibres Wadding, felt and nonwovens; special yarns; twine, cordage, 56 Textiles and ropes and cables and articles thereof Garments 57 Carpets and other textile floor coverings Special woven fabrics; tufted textile fabrics; lace; tapestries; 58 trimmings; embroidery 59 Impregnated, coated, covered or laminated textile fabrics 60 Knitted or crocheted fabrics Articles of apparel and clothing accessories, knitted or 61 crocheted Articles of apparel and clothing accessories, not knitted or 62 crocheted Other made-up textile articles; sets; worn clothing and worn 63 textile articles Live trees and other plants; bulbs, roots and the like; cut 6 flowers and ornamental foliage 7 Edible vegetables and certain roots and tubers Vegetable Products 8 Edible fruit and nuts; peel of citrus fruit or melons 9 Coffee, tea, maté and spices 10 Cereals
115 Products of the milling industry; malt; starches; inulin; wheat 11 gluten Oil seeds and oleaginous fruits; miscellaneous grains, seeds 12 and fruit; industrial or medicinal 13 Lac; gums, resins and other vegetable saps and extracts Vegetable plaiting materials; vegetable products not 14 elsewhere specified or included Railway or tramway locomotives, rolling stock and parts 86 thereof; railway or tramway track fixtures Vehicles, Aircraft, Vessels Vehicles other than railway or tramway rolling stock, and parts 87 and Associated and accessories thereof Transport Equipment 88 Aircraft, spacecraft, and parts thereof 89 Ships, boats and floating structures Source: DGFT, Exim Bank Research
116 Annexure 2 Generic and Sector-Specific NTBs Type of Non- Imposing Segment Example Tariff Barrier Country Correct packing, marking, and labelling are Technical critical for customs clearance in Japan. All Barriers to Japan All segments imported products and shipping documents Trade are required to show metric weights and measures. Most of the States of America have enacted Procedural their own administrative procedures which Complications The USA All segments govern the adoption of technical regulations and and conformity, complicating the procedures Documentation while exporting to the USA Procedural New GSP rule requires exporters to self- Complications certify the origin of content while exporting EU All segments and to EU. Any error can lead to disqualification Documentation of benefits Strict IP regime would impact certain IPR high-technology items, where the State is EU All segments requirements aspiring to build export base, as technology transfer would be adversely impacted Japan maintains a strong intellectual property rights (IPR) regime. Companies IPR doing business in Japan are encouraged to Japan All segments requirements be clear about all rights and obligations with respect to IPR in any trading or licensing agreements. The USA protects a varied list of products under its IPR regime ranging from industrial designs, circuit designs, trademarks etc. This IPR The USA All segments results in import user fees and excessive requirements invoicing requirements on importers, which add to costs in a similar way to tariffs - e.g.: Merchandise Processing Fee (MPF) E.U. recently came out with revised set Technical of standards like REACH (Registration, Textile and Barriers to EU Evaluation, Authorisation and Restriction Apparels Trade of Chemical Substances) for textile and apparel sector The textile products being imported into EU have to meet their labelling requirements Technical Textile and containing information about the product – Barriers to EU Apparels size and dimensions, fibres used, intended Trade use of clothing, information about the producer and the importer
117 The Ministry of Economy and International Technical Textile and Trade and Industry requires specification Barriers to Japan Apparels of type of fabrics, washing instructions and Trade details of manufacturer/ supplier The Japan Textile Federation has Voluntary Technical Textile and Standards on Non-use of Harmful Barriers to Japan Apparels Substances for Textiles and Clothing Trade regarding Azo Dyes The USA has labelling requirement for Technical Textile and 95 percent of the apparel tariff lines, thus Barriers to The USA Apparels preventing import of uncertified, sub- Trade standard and non-copyright products Commodity Credit Corporation of the U.S. Department of Agriculture provides Government subsidies to the U.S. producers of textiles Textile and subsidies and The USA and apparel by providing a monetary Apparels Support amount equivalent to what a person would have saved if the tariff-rate quotas on wool were still in effect The USA also provides subsidies to producers and users of cotton involved in Government promotion of use of pima cotton in textiles Textile and subsidies and The USA and apparels; yarn spinners of pima cotton; Apparels Support and manufacturers who cut and sew cotton shirts who certify that they used imported cotton fabric Technical Gems and Conform to the provisions of the Labelling of Barriers to The USA Jewellery Hazardous Art Materials Act Trade The Food Safety Modernisation Act (FSMA) Technical Agro and makes it mandatory for importers to perform Barriers to The USA Food "supplier verification process" which Trade requires FDA inspection of suppliers. Technical Agro and Meet import requirements related to grade, Barriers to The USA Food size, quality and maturity Trade Import Licensing, Agro and Certain plant and products, chemicals face quotas The USA Food import licensing in the US restrictions and prohibitions Technical Different Minimum Residue Levels required Barriers to EU Chemical by the member countries for pesticides, Trade drugs and other contaminants
118 Import Licensing, Certain plant and products, chemicals face quotas The USA Chemical import licensing in the US restrictions and prohibitions For pesticides, regulations require importers Procedural to submit to U.S. Customs and Border Complications Protection an Environmental Protection The USA Chemical and Agency (EPA) Notice of Arrival that the Documentation EPA has reviewed and approved before the importation arrives in the United States Imported parts have to undergo more than one type of approval making the process cumbersome. Also, all auto components being imported have to be Technical retested in Chinese laboratory for Chinese Barriers to China Auto Compulsory Certification (CCC). Interior Trade parts (dashboards, console, parts of engine compartment), safety glasses and spare parts and accessories for motor vehicles are required to be marked with CCC labels Technical Korea imposed burdensome conditions like South Barriers to Auto vehicle width for certification, registration Korea Trade and marking requirements Auto parts using specialty metals cannot Technical be imported directly to US since India is not Barriers to The USA Auto a qualifying country from where specialty Trade metal can be melted/ made into a product A vehicle type-approval process has Import prevented the import and sale of "sub- Licensing, standard" vehicles, parts, and components quotas Malaysia Auto since January 2009. In 2013, Malaysia restrictions and imposed Import licensing on some parts prohibitions such as body for cabs and motor vehicles Import Licensing, Brazil introduced non automatic import quotas Brazil Auto licenses on automobiles and auto parts. restrictions and prohibitions Import Import of used car bodies and motorcycle Licensing, frames are prohibited and import licensing quotas Thailand Auto is employed for used diesel engines with restrictions and specific capacity requirements prohibitions Discriminatory Discriminatory system of taxes while taxes and Japan Auto importing automobile and auto parts exists Additional Cost in Japan
119 Few auto/ auto component items have been Discriminatory removed from preference list of GSP (higher taxes and EU Auto rate since 2012) for imports from India to Additional Cost have better leverage while negotiating EU - India FTA) Discriminatory A special consumption tax of 37 % to 130 taxes and Turkey Auto % is levied on all motor vehicles based on Additional Cost engine size High import duties and taxes on imported Discriminatory South cars, high prices for replacement parts in taxes and Auto Korea foreign cars, and higher after-sales service Additional Cost fees for foreign manufactured cars China provides various forms of export- Government contingent Subsidies and Government subsidies and China Auto Support through a program for establishing Support "export bases" in the automobile and automobile-parts industries. Brazil Development Bank (BNDES) Government announced loans / grants to auto component subsidies and Brazil Auto manufacturers to help develop technology, Support modernize equipment and infrastructure The Eco-Car programme requires auto Local Content manufacturers to have minimum local Thailand Auto Requirements content requirements in purchase of capital goods to get advantage of tax exemptions Under local content requirements for Local Content automotive industry, certain manufacturing Indonesia Auto Requirements activities for some auto parts have to be conducted in Indonesia Chinese government rules also pressurize US automakers to transfer the latest electric Technology China Auto car technology in exchange of green-energy Transfer Subsidies and Government Support in China Source: IMaCS Analysis, Exim Bank Research
120 RECENT OCCASIONAL PAPERS OP No. Title 116. CIS Region: A Study of India’s Trade and Investment Potential 117. Indian Chemical Industry: A Sector Study 118. Trade and Environment: A Theoretical and Empirical Analysis 119. Indian Pharmaceutical Industry : Surging Globally 120. Regional Trade Agreements: Gateway to Global Trade 121. Knowledge Process Outsourcing: Emerging Opportunities for India 122. Indian Mineral Sector and its Export Potential 123. SAARC: An Emerging Trade Bloc 124. Indian Capital Goods Industry - A Sector Study 125. Financial Liberalization and Its Distributional Consequences 126. ECOWAS: A Study of India’s Trade and Investment Potential 127. Indian Textile and Clothing Industry in Global Context: Salient Features and Issues 128. Fair Trade : Fair Way of Enhancing Export Value 129. Indian Automotive Industry: At The Crossroads 130. CARICOM : A Gateway to the America 131. IBSA : Enhancing Economic Cooperation Across Continents 132. MSMEs and Globalisation: Analysis of Institutional Support System in India and In Select Countries 133. International Trade, Finance and Money: Essays in Uneven Development 134. Sikkim: Export Potential and Prospects 135. Mizoram: Export Potential and Prospects 136. Floriculture: A Sector Study 137. Biotechnology Industry in India: Opportunities for Growth 138. Indian Gems and Jewellery: A Sector Study 139. SADC: A Study of India’s Trade and Investment Potential 140. Innovation, Imitation and North South Trade: Economic Theory and Policy 141. Comesa (Common Market for Eastern and Southern Africa): A Study of India’s Trade and Investment Potential 142. Indian Shipping Industry: A Catalyst for Growth 143. New Renewable Energy in India: Harnessing the Potential 144. Caribbean Community (Caricom ): A Study of India’s Trade and Investment Potential 145. West African Region: A Study of India’s Trade and Investment Potential 146. India’s Trade and Investment Relations with LDCs (Least Developed Countries): Harnessing Synergies 147. Indian Electronic Industry : Perspectives and Strategies 148. Export Potential of Indian Plantation Sector: Prospects and Challenges 149. Mercosur : A Study of India’s Trade and Investment Potential
121 150. Openness and Growth of the Indian Economy: An Empirical Analysis 151. The Commonwealth: Promoting a Shared Vision on Trade and Investment 152. Southern African Development Community (SADC): A Study of India’s Trade and Investment Potential 153. Strategic Development of MSMEs: Comparison of Policy Framework and Institutional Support Systems in India and Select Countries 154. Indian Chemical Industry : Exploring Global Demand 155. Technological Interventions In Indian Agriculture for Enhancement of Crop Productivity 156. Exports of Services and Offshore Outsourcing: An Empirical Investigation in the Indian Context 157. Indian Ocean Rim Association for Regional Co-operation (IOR-ARC): A Study of India’s Trade and Investment Potential 158. West Africa: A Study of India’s Trade and Investment Potential 159. The Effects of Financial Openness: An Assessment of the Indian Experience 160. Comparison of Labour Laws: Select Countries 161. India’s Trade and Investment Relations with Cambodia, Lao PDR, Myanmar, Vietnam (CLMV): Enhancing Economic Cooperation 162. Indian Horticulture-Imperatives to Enhance Trade from India 163. India’s Trade and Investment Relations with Gulf Cooperation Council (GCC): Strengthening Economic Ties 164. India’s Hi-Tech Exports: Potential Markets and Key Policy Interventions 165. Outward Direct Investment from India: Trends, Objectives and Policy Perspectives 166. East African Community (EAC): A Study of India’s Trade and Investment Potential 167. Trade Liberalization, Product Variety and Growth 168. Research & Development in BRICS: An Insight 169. Indian Capital Goods Industry: A Sector Study 170. Bangladesh: A Study of India’s Trade and Investment Potential 171. Indian Electronic Goods Industry: Neutralizing Trade Deficit with China 172. Indian Steel Industry: Export Prospects 173. Value Addition Chains and Trade in Manufactured Commodities in South-East Asia 174. Potential for Trade of Organic Products from India 175. Multilateral Development Bank- Funded Project: Trends and Opportunities for Indian Exports 176. Indian Pharmaceutical Industry: Challenges and Prospects 177. Migration and Remittances in India 178. Technical Progress and Structural Change: The Roles of Demand and Supply in Economic Growth 179. Inter-linkages between Exports and Employment in India 180. India’s Engagements with CLMV: Gateway to ASEAN Markets 181. Export Promotion From Rajasthan: Key Insights And Policy Suggestions
122 EXIM BANK’S MAJOR PROGRAMMES Bank’s Major Programmes
FINANCE FOR EXPORT VALUE-ADDED EXPORT CREDIT ORIENTED UNITS SERVICES
PROJECTS, PRODUCTS TERM LOANS EXPORT MARKETING & SERVICES SERVICES
PRE-SHIPMENT CREDIT WORKING CAPITAL MULTILATERAL FUNDED PROJECTS SUPPLIERS / BUYERS’ CREDIT
EXPORT MARKETING
LINES OF CREDIT JOINT VENTURE FACILITATION
BUYER’S CREDIT EXPORT PRODUCT UNDER NEIA DEVELOPMENT
CONSULTANCY SUPPORT EQUIPMENT FINANCE EXPORT FACILITATION
GUARANTEES AND L/CS WORKSHOPS & SEMINARS OVERSEAS INVESTMENT FINANCE
INFORMATION & ADVISORY SERVICES IMPORT FINANCE
GUARANTEES & L/CS
123 EXPORT-IMPORT BANK OF INDIA HEAD OFFICE Centre One Building, 21st Floor, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005. Phone: (91 22) 22172600 Fax : (91 22) 22182572 E-mail : [email protected] Website: www.eximbankindia.in LONDON BRANCH 5th Floor, 35 King Street, London EC2V 8BB United Kingdom Phone : (0044) 20 77969040 Fax : (0044) 20 76000936 E-Mail :[email protected]
DOMESTIC OFFICES OVERSEAS OFFICES Ahmedabad Abidjan Sakar II, 1st Floor, 5th Floor, Azur Building, Next to Ellisbridge Shopping Centre, Ellisbridge P. O., 18-Docteur Crozet Road, Plateau, Ahmedabad 380 006 Phone : (91 79) 26576852/26576843 Abidjan, Côte d’Ivoire Fax : (91 79) 26577696 Phone : (225) 20 24 29 51 E-mail : [email protected] Mobile : (225) 79707149 Bangalore Fax : (225) 20 24 29 50 Ramanashree Arcade, 4th Floor, Email : [email protected] 18, M. G. Road, Bangalore 560 001 Addis Ababa Phone : (91 80) 25585755/25589101-04 Bole Kifle Ketema, Kebele - 19, (03/05), Fax : (91 80) 25589107 House No. 015-B, E-mail : [email protected] Addis Ababa, Ethiopia. Chandigarh Phone : (251 116) 630079 C- 213, Elante offices, Industrial Area phase 1, Fax : (251 116) 610170 Chandigarh 160 031 E-mail : [email protected] Phone : (91 172) 4629171-73 Fax : (91 172) 4629175 Dubai E-mail : [email protected] Level 5, Tenancy 1B, Chennai Gate Precinct Building No. 3, Overseas Towers, Dubai International Financial Centre, 4th and 5th Floor, 756-L, Anna Salai, PO Box No. 506541, Chennai 600 002 Phone : (91 44) 28522830/31 Dubai, UAE. Fax : (91 44) 28522832 Phone : (971 4) 3637462 E-mail : [email protected] Fax : (971 4) 3637461 Guwahati E-mail : [email protected] NEDFi House, 4th Floor, GS Road, Johannesburg Dispur, Guwahati 781 006 Phone : (91 361) 2237607/609 2nd Floor, Sandton City Twin Towers East, Fax : (91 361) 2237701 Sandhurst Ext. 3, Sandton 2196, E-mail : [email protected] Johannesburg, Hyderabad South Africa. Golden Edifice, 2nd Floor, 6-3-639/640, Phone : (27 11) 3265103/13 Raj Bhavan Road, Khairatabad Circle, Fax : (27 11) 7844511 Hyderabad 500 004 E-mail : [email protected] Phone : (91 40) 23307816-21 Fax : (91 40) 23317843 Singapore E-mail : [email protected] 20, Collyer Quay, #10-02, Singapore 049319. Kolkata Phone : (65) 65326464 Vanijya Bhawan, 4th Floor, Fax : (65) 65352131 (International Trade Facilitation Centre), E-mail : [email protected] 1/1 Wood Street, Kolkata 700 016 Phone : (91 33) 22833419/20 Washington D.C. Fax : (91 33) 22891727 1750 Pennsylvania Avenue NW, E-mail : [email protected] Suite 1202, Washington D.C. 20006, New Delhi United States of America. Statesman House, Ground Floor, Phone : (1 202) 223 3238 148, Barakhamba Road, New Delhi 110 001. Fax : (1 202) 785 8487 Phone : (91 11) 23474800 E-mail : [email protected] Fax : (91 11) 23322758/23321719 Yangon E-mail : [email protected] House No. 54/A, Ground Floor, Boyarnyunt Street, Pune Dagon Township, Yangon, Myanmar 44, Shankarseth Road, Pune 411 037. Phone : (91 20) 26403000 Phone : (95) 1389520 Fax : (91 20) 26458846 Mobile : (95) 1389520 E-mail : [email protected] Email : [email protected]
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