Gcr Compiled Report

A GLOBAL COUNTRY REPORT ON “GERMANY”

With special focus on industries like Automobile, Textile, IT, Food & Beverages & Chemical Industry

SUBMITTED TO

787 - ATMIYA INSTITUTE OF TECHNOLOGY AND SCIECE, RAJKOT

IN PARTIAL FULFILMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION IN GUJARAT TECHNOLOGICAL UNIVERSITY

UNDER THE GUIDANCE OF Prof. Nishant Dhruv

1 PART-1 ECONOMIC OVERVIEW OF GERMANY

CHAPTER-1 INTRODUCTION TO GERMANY 1.1 DEMOGRAPHIC PROFILE Population 81,305,856 (July 2011 est.) Age structure 0-14 years: 13.3% (male 5,569,390 and female 5,282,245) 15-64 years: 66.1% (male 27,227,487 and female 26,617,915) 65 years and over: 20.6% (male 7,217,163 and female 9,557,634) (2011 est.) Median age Total: 45.3 years Male: 44.2 years Female: 46.3 years (2012 est.) Population development rate -0.2% (2012 est.) Birth rate 8.33births/1,000 population (2011 est.) Death rate 11.04deaths/1,000 population (July 2011 est.)

Urbanization Urban population: 74% of total population (2010) rate of urbanization: 0% annual rate of change (2010-15 est.) Nationality Noun: German(s) adjective: German Ethnic groups German 91.5%, Turkish 2.4%, other 6.1% (made up largely of Greek, Italian, Polish, Russian, Serbo-Croatian, Spanish)

2 Religions Protestant 34%, Roman Catholic 34%, Muslim 3.7%, unaffiliated or other 28.3% Languages German Literacy Definition: age 15 and over can read and write total population: 99% male: 99% female: 99% (2003 est.) Education expenditures 4.5% of GDP (2007) Health expenditures 8.1% of GDP (2009)

3 1.2 ECONOMIC OVERVIEW OF GERMANY

The German economy - the fifth largest economy in the world - is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force. Like its Western European neighbors, Germany faces significant demographic challenges to sustained long-term growth. Low fertility rates and declining net immigration are increasing pressure on the country's social welfare system and necessitate structural reforms. Reforms launched by the government of Chancellor Gerhard SCHROEDER (1998-2005), deemed necessary to address chronically high unemployment and low average growth, contributed to strong growth in 2006 and 2007 and falling unemployment.

GDP contracted 5.1% in 2009 but grew by 3.6% in 2010, and 2.7% in 2011. The recovery was attributable primarily to rebounding manufacturing orders and exports - increasingly outside the Euro Zone. Germany's central bank projects that GDP will grow 0.6% in 2012, a reflection of the worsening euro-zone financial crisis and the financial burden it places on Germany as well as falling demand for German exports. Domestic demand is therefore becoming a more significant driver of Germany's economic expansion.

Following the March 2011 Fukushima nuclear disaster, Chancellor Angela Merkel announced in May 2011 that eight of the country's 17 nuclear reactors would be shut down immediately and the remaining plants would close by 2022. Germany hopes to replace nuclear power with renewable energy. Before the shutdown of the eight reactors, Germany relied on nuclear power for 23% of its energy and 46% of its base-load electrical production.

4 • GDP (purchasing power parity)

$3.085 trillion (2011 est.) $3.003 trillion (2010 est.) $2.9 trillion (2009 est.)

• GDP (official exchange rate)

$3.629 trillion (2011 est.)

• GDP - real growth rate

2.7% (2011 est.) 3.6% (2010 est.) -5.1% (2009 est.)

• GDP - composition by sector

Agriculture: 0.8% Industry: 28.6% Services: 70.6% (2011 est.)

• Population below poverty line

15.5% (2010 est.)

• Labor force

43.62 million (2011 est.)

• Labor force - by occupation

Agriculture: 1.6% Industry: 24.6% Services: 73.8% (2011)

5 • Unemployment rate

6% (2011 est.) 6.8% (2010 est.)

Germany's Federal Employment Agency reported an annual average unemployment rate of 7.1% for 2011 and 7.7% for 2010.

• Taxes and other revenues

43.6% of GDP (2011 est.)

• Agriculture - products

Potatoes, wheat, barley, sugar beets, fruit, cabbages, cattle, pigs, poultry.

• Industries

Among the world's largest and most technologically advanced producers of iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, food and beverages, shipbuilding, textiles.

• Industrial production growth rate

8% (2011 est.)

• Electricity - production

556.4 billion KWh (2009 est.)

• Electricity - consumption

544.5 billion KWh (2008 est.)

• Electricity - exports

6 54.13 billion KWh (2009 est.)

• Electricity - imports

12.28 billion KWh (2009 est.)

• Oil - production

147,200 bbl/day (2010 est.)

• Oil - consumption

2.495 million bbl/day (2010 est.)

• Oil - exports

470,200 bbl/day (2009 est.)

• Oil - imports

2.671 million bbl/day (2009 est.)

• Current Account Balance

$149.3 billion (2011 est.) $188.4 billion (2010 est.)

• Exports

$1.408 trillion (2011 est.) $1.264 trillion (2010 est.)

• Exports - commodities

7 Motor vehicles, machinery, chemicals, computer and electronic products, electrical equipment, pharmaceuticals, metals, transport equipment, foodstuffs, textiles, and rubber and plastic products.

• Exports - partners

France 9.4%, US 6.8%, Netherlands 6.6%, UK 6.2%, Italy 6.2%, China 5.7%, Austria 5.5%, Belgium 4.7%, Switzerland 4.4% (2009 est.)

Imports

$1.198 trillion (2011 est.) $1.058 trillion (2010 est.)

• Imports - commodities

Machinery, data processing equipment, vehicles, chemicals, oil and gas, metals, electric equipment, pharmaceuticals, foodstuffs, agricultural products.

• Imports - partners

China 9.7%, Netherlands 8.4%, France 7.6%, US 5.7%, Italy 5.2%, UK 4.7%, Belgium 4.2%, Austria 4.1%, Switzerland 4.1% (2009 est.)

• Reserves of foreign exchange and gold

$216.5 billion (31 December 2010 est.)

• Debt - external

8 $5.624 trillion (30 June 2011) $4.713 trillion (30 June 2010)

• Fiscal year

Calendar year

1.3 Trade industry overview

Germany Trade and Invest is the new foreign trade and inward investment agency of the Federal Republic of Germany. Formed following the merger of the German Office for Foreign Trade and Invest in Germany GmbH, Germany Trade and Invest officially came into being on January 1, 2009. Germany Trade and Invest’s mission is to promote Germany as a location for industrial and technological investments and to identify investors for the German market. The organization advises and supports foreign companies seeking to expand into the German market, and assists German companies looking to enter foreign markets.

Germany Trade and Invest provides comprehensive and client-oriented economic and industry data as well as information about calls for proposals in foreign countries, investment and development projects, and legal and customs authorities. The promotion of economic activity in Germany’s new federal states, including Berlin, also forms an integral part of the agency’s external trade and business location marketing remit.

Germany Trade and Invest can count upon an international network of industry analysts who perform on-site research into foreign markets and supports foreign businesses looking to establish a company in Germany.

9 Our international team of experts works closely together with the German Chamber Network. This growing partnership allows German exporters and potential foreign investors alike to benefit from a centralized first point of contact overseas, with client-specific information and consultancy services all provided under one roof.

10 1.4 Business and trade at international level

• Market Overview

• Market Challenges

• Market Opportunities

• Market Entry Strategy

Market Overview

The German economy is the world's fourth largest and, after the expansion of the EU, accounts for more than one-fifth of European Union GDP. Germany is the United States' largest European trading partner and is the sixth largest market for U.S. exports. Germany’s "social market" economy largely follows free-market principles, but with a considerable degree of government regulation and generous social welfare programs.

Germany is the largest consumer market in the European Union with a population of over 82 million. However, the significance of the German marketplace goes well beyond its borders. An enormous volume of worldwide trade is conducted in Germany at some of the world’s largest trade events, such as MEDICA, Hannover Fair, Automechanika, and the ITB Tourism Show. The volume of trade, number of consumers, and Germany’s geographic location at the heart of a 27-member European Union make it a cornerstone around which many U.S. firms seek to build their European and worldwide expansion strategies.

11 Market Challenges

The German economy has improved markedly in recent years. The economy took a serious hit during the economic crisis, but recovered quickly. Like most other OECD countries GDP declined significantly in 2009 (by 4.7%), but grew by 3.6% in 2010, the highest rate since unification. Following a 3% growth in 2011, the pace of expansion is expected to slow in 2012. Most economic research institutes have lowered their 2012 GDP forecast to 0.6% from 1.0% predicted in October 2011.

The labor market remained resilient during the economic crisis and continued to be strong in 2011. In addition to a series of labor and social reforms implemented in recent years, many experts credit the government-funded short-time work program for limiting unemployment. Other factors, such as moderate wage increases, flexibility in bargaining agreements, numerous company-level alliances to retain jobs, and employers’ willingness to accept higher unit labor costs, also contributed to the stability of the German labor market. Job cuts in logistics and manufacturing have been offset by job creation in other sectors, such as services and health care. Also due to a declining workforce, average unemployment dropped to 2.976 million over the course of last year, with an average jobless rate of 7.1% – down from 7.7% in 2010. For 2012, the government expects unemployment to decline to an average of 6.8%.

Although unemployment is still higher in the east of the country than the west (11.3% versus 6.0%), it dropped to the lowest level in 20 years. The number of persons in employment living in Germany reached an all-time high (about 41.6 million) in November 2011, an increase of 521,000 from a year ago.

Germany presents few formal barriers to U.S. trade or investment, although Germany’s participation in the EU’s Common Agricultural Policy and German restrictions on biotech agricultural products represent barriers for some U.S. goods. Germany has pressed the new EU

12 Commission to reduce regulatory burdens and promote innovation to increase EU member states’ competitiveness. The Merkel government has talked about the need for regulatory reform in Germany. In particular, Economics Minister Rainer Bruederle (pro-market Free Democratic Party - FDP) has pushed to reduce bureaucratic costs, since Germany's regulations and bureaucratic procedures can be very complex. While not directly discriminatory, government regulation by virtue of its complexity may offer a degree of protection to established local suppliers. Safety or environmental standards, not inherently discriminatory but sometimes zealously applied, can complicate access to the market for U.S. products. American companies interested in exporting to Germany should make sure they know which standards apply to their product and obtain timely testing and certification. German standards are especially relevant to U.S. exporters because, as EU-wide standards are developed, they are often based on existing German standards.

Market Opportunities

For U.S. companies, the German market - the largest in the EU - continues to be attractive in numerous sectors and remains an important element of any comprehensive export strategy to Europe. While U.S. investors must reckon with a relatively higher cost of doing business in Germany, they can count on high levels of productivity, a highly skilled labor force, quality engineering, a first-class infrastructure, and a location in the heart of Europe.

Market Entry Strategy

The most successful market entrants are those that offer innovative products featuring high quality and modern styling. Germans are responsive to the innovation and high technology evident in U.S. products, such as computers, computer software, electronic components, health care and medical devices, synthetic materials, and automotive technology. Germany boasts one of the highest Internet access rates in

13 the EU and new products in the multi-media, high-tech and service areas offer great potential as increasing numbers of Germans join the Internet generation. Certain agricultural products also represent good export prospects for U.S. producers. Price is not necessarily the determining factor for the German buyer, given the German market’s demand for quality.

The German market is decentralized and diverse, with interests and tastes differing dramatically from one German state to another. Successful market strategies take into account regional differences as part of a strong national market presence. Experienced representation is a major asset to any market strategy, given that the primary competitors for most American products are domestic firms with established presences. U.S. firms can overcome such stiff competition by offering high-quality products, services at competitive prices, and locally based after-sales support. For investors, Germany’s relatively high marginal tax rates and complicated tax laws may constitute an obstacle, although deductions, allowances and write-offs help to move effective tax rates to internationally competitive levels.

14 after-sales support. For investors, Germany’s relatively high marginal tax rates and complicated tax laws may constitute an obstacle, although deductions, allowances and write-offs help to move effective tax rates to internationally competitive levels.

Green Industries

CS Germany offers U.S. companies that are looking into the thriving and fast evolving ‘green’* markets in Germany information on

• current developments

• research

• trends and opportunities

• trade fairs

• relevant links and resources

Green industries of germany

• renewable energies

• environmental technologies

15 • alternative vehicle drives

• energy efficient construction or appliances

• "green" R&D, and much more.

CHAPTER-2 PESTLE ANALYSIS

PESTLE stands for - Political, Economic, Sociological, Technological, Legal, Environmental Landscapes.

Various other similar acronyms have been used including ETPS, STEP, PEST, and STEEPLE. The term PESTLE is particularly popular on HR and introductory marketing courses in the UK.

The country analysis report on Germany provides a wide array of analytical inputs to analyze the country’s performance, and the objective is to help the reader to make business decisions and prepare for the future. The report on Germany analyzes the political, economic, social, technological, legal and environmental (PESTLE) structure of Germany. The report provides a holistic view of Germany from historical, current and future perspective. Insightful analysis on critical current and future

16 issues is presented through detailed SCPT (strengths, challenges, prospects and threats /risks) analysis for each of the PESTLE segments.

• Political section on Germany provides inputs about the political system, key figures in the country, and governance indicators.

• Economic section on Germany outlines the economic story of the country to provide a balanced assessment on core macro-economic issues

• Social section on Germany enables understanding of customer demographics through the income distribution, rural-urban segmentation and centres of affluence, healthcare and educational scenario in the country.

• Technological section on Germany provides strategic inputs on information communications and technology, technological laws and policies, technological gaps, patents data and relevant laws.

• Legal section on Germany provides information about the legal structure, corporate laws, business set-up procedures and the tax regime.

• Environmental section provides information on environmental policies in Germany and the performance in terms of important environmental indicators.

A PESTLE analysis is often used as a generic 'orientation' tool, finding out where an organisation or product is in the context of what is happening outside that will at some point affect what is happening inside an organisation. The six elements form a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea.

"Germany was in a far better position than expected in 2010 as it belied the gloomy scenario predicted at the beginning of 2009. In 2010, it was Europe’s largest economy in terms of gross domestic product (GDP). Although its economy shrank by 4.7% in 2009, it bounced back to

17 register a growth of 3.4% in 2010, mainly due to increasing exports and domestic demand. However, inflation has been on the rise after it fell to 0.2% in 2009. It grew to 1.1% in 2010 and in January and February 2011, the higher cost of food and energy accelerated inflation to 2.0% and 2.2%, respectively. This was the fastest growth in more than two years, according to the German Federal Statistical Office."

Chart-1

2.1 Political analysis

• System of Government :

Germany is a Federal Republic. The Federal Government, based in Berlin, consists of the Federal Chancellor and the Cabinet of Federal Ministers. Federal elections are held every four years. In addition, there are 16 state governments and thousands of local government

18 'communes'. Each state has its own constitution and a state parliament. State elections are held every four or five years.

The federal legislative authority is the Bundestag (Parliament or lower house equivalent) whose members are elected through a combination of direct election and proportional representation. Following each federal election, the Bundestag elects a Chancellor by absolute majority. Angela Merkel was re-elected as Chancellor for a second term on 28 October 2009, following the federal election on 27 September 2009. The Bundesrat (Federal Council or upper house equivalent) represents the 16 state governments and has 69 seats. Based on population size, a state has between three and six votes. The Bundesrat debates all legislation, but only approves legislation affecting state responsibilities (e.g. tax revenue distribution).

The Federal President, who has ceremonial duties, is elected every five years by the Bundesversammlung (Federal Assembly), a body comprised of all Bundestag members plus an equal number of state representatives. Presidents can serve up to two terms. Dr Horst Köhler, who was re-elected for a second term on 23 May 2009, resigned on 31 May 2010. The Federal Assembly elected the Premier of Lower Saxony, Christian Wulff, as President on 30 June 2010.

• Political parties

19 Germany has five major political parties: the Christian Democratic Union (CDU), including the Christian Social Union (CSU), the CDU's sister party; the Free Democratic Party (FDP); the Social Democratic Party (SPD); the Green Party; and the Left Party (die Linked).

The Left Party is a recent addition to Germany's political landscape. Formed in 2007 from a merger of leftist parties in former East and West Germany, the Left Party is largely dominated by former left SPD members.

• Recent developments

The German federal election was held on 27 September 2009. The CDU/CSU secured the highest percentage of the votes (33.8%), followed by the SPD (22.9%), FDP (14.6%), the Left Party (12%), and the Greens (10.7%). The CDU/CSU and FDP formed a coalition government (with 332 seats out of a total of 622 in the Bundestag), and the new German Cabinet was sworn in on 28 October 2009. The next federal election must take place by October 2013.

Seven of Germany’s 16 states will hold elections in 2011. In the four state elections this year so far, the CDU/CSU has lost ground including major setbacks in the key states of Hamburg and Baden-Württemberg, the latter a traditional stronghold of the CDU and FDP for the past 58 years.. The Green’s victory in Baden-Württemberg has resulted in them controlling four of the six Bundesrat (upper house) state- allocated seats. While Chancellor Merkle’s centre-right ruling coalition lost its majority in the Bundesrat in 2010, the further loss of votes will make it harder for the government to progress its legislative agenda in areas requiring the approval of the states. The remaining three state elections in 2011 are in Bremen (May), Berlin and Mecklenburg- Vorpommern (both September).

• Foreign policy

Germany is a strong supporter of multilateralism and is the third- largest contributor to the United Nations (UN) budget and largest contributor to the European Union (EU) budget. Germany has been elected to the UN Security Council (UNSC) for the 2011-12 term but continues to seek a permanent seat on the Council. Priority themes for Germany’s UNSC term are nuclear non-proliferation and disarmament, climate change and security, crisis prevention, and inter-cultural dialogue.

Germany is the EU’s most populous member state (82 million) and its largest single economy. It plays an increasingly prominent role in all major EU decisions including laying the groundwork for a reworked EU "reform" treaty signed on 19 October 2007 in Lisbon. Germany was the ninth EU member to ratify the Lisbon (EU Reform) Treaty, on 24 April 2008. The treaty entered into force on 1 December 2009.

Germany is an important dialogue partner for Australia on a wide range of multilateral issues, including the global economic crisis, global security, arms control, disarmament, poverty alleviation, UN reform, human rights, development cooperation and climate change. We work together closely in the UN and other forums including the G20, the Global Carbon Capture and Storage Institute (GCCSI), and the International Renewable Energy Agency (IRENA). Germany was actively involved in the International Commission on Nuclear Non- proliferation and Disarmament (ICNND), a joint initiative of the Australian and Japanese governments which completed its work in July

21 2010. We now work closely together on the Non-Proliferaton and Disarmament Initiative (NPDI).

The NATO alliance is the predominant focus of German defence and security policy. Germany is the second-largest troop contributor to the NATO-led mission in Afghanistan and provides the naval monitoring role in Lebanon as part of UN Interim Force in Lebanon (UNIFIL). Germany is also a contributing member of the UN peace missions in Darfur, Sudan, Liberia, Kosovo, Bosnia and Herzegovina, Georgia, Moldova/Ukraine, and the Palestinian terrorities.

Germany has taken a leading role on a number of key international issues, including the G20, climate change, energy, the Middle East Peace Process, and international security.

2.2 Economic analysis

• Analysis of the economy

Germany is the largest economy in Europe and the fourth-largest economy in the world (GDP was more than A$3.3 trillion in 2010). Germany is ranked as the world's second-largest goods exporter: approximately A$1.16 trillionwith a trade surplus of A$194 billion. Exports of goods and services made up over 41 per cent of GDP. Manufacturing is the mainstay of the German economy, with the export sector dominated by automobiles and machinery. Germany's exports of services are relatively underdeveloped and reform in the services sectors is relatively slow, but new sectors, like IT, biotechnology and renewable energy are growing markedly. Agriculture accounts for only one per cent of GDP.

• Key economic indicators

Germany felt the effects of the global economic and financial crisis particularly strongly in the export-oriented manufacturing sector. The economy fell into recession in the first quarter of 2009 as global demand for German exports weakened but in 2011 its exports are expected to grow by 8.5 per cent. GDP contracted by 4.7 per cent in 2009 but rose by

23 3.6 per cent in 2010 and is forecast to rise by 2.2 per cent in 2011 (IMF/EIU forecasts).

The Federal Government attributes this expected recovery to improved global economic conditions and increased domestic demand, as well as a sharp expansion in industrial output in the second quarter of 2010. Inflation, after falling to 0.2 per cent in 2009, rose slightly to 1.3 per cent in 2010 and is forecast to remain steady for 2011 at 1.4 per cent (IMF/EIU). The budget deficit is forecast at 1.7 per cent of GDP in 2011, reduced from 3 per cent in 2010 (EIU). Germany implemented an austerity package at the start of 2011 to reduce the budget deficit significantly by 2014. This will require substantial savings of approximately €82 billion (A$134 billion) between 2011 and 2014.

2.3 Social analysis

Germany is the second largest exporter and third largest importer of goods in the world. Yet despite its close links and relationships with other nations around the globe, it retains its own very distinct culture.

If you are a newcomer to Germany, an insight into German culture is essential to help you integrate into your new life. However, the starting point for an understanding of any new culture is recognition that your own values which, have become ingrained over many years, are invisible! Perspectives and beliefs which shape behavior are developed following the unique experience any individual has while interacting with others from the same region, with a similar belief system, over a period of many years. These collective experiences will inevitably influence behavior in any given situation.

24 Often these values only become apparent when meeting people from a different culture. Miscommunication and misunderstandings can therefore frequently occur when a newcomer comes into contact with the new culture, which, due to its own rich heritage, will have a very different outlook and set of values. Insight into German culture takes time to acquire and this will be helped by specialist intercultural training before moving abroad. However, the newcomer can gain some insights through understanding the most common areas which make the German culture unique and sometimes surprising.

2.4 Technological analysis

More than 2 billion people use mobile phones; 9 trillion emails are sent each year; everyday 1 billion searches are started on Google. Process know-how and integrated solutions will be at the fore-front of the next technological revolution in information & communication technologies (ICT) – and Germany can play a leading role. Germany’s existing expertise and technological know-how can serve as a basis for a leading global role in embedded software, instrumentation and control devices and controlling of complex processes as well as in the technological transformation of health care, public administration, domestic security

25 and defence, and transportation and logistics systems. The magnitude of these applications surpasses the capabilities of individual companies and calls for an industrial policy framework that will unlock international marketing potential. Germany should learn the lessons offered by past projects (e.g. : Toll Collect) and explore new forms of cooperation between the private and public sectors.

Germany's achievements in sciences have been significant, and research and development efforts form an integral part of the economy.Germany is also one of the leading countries in developing and using green technologies. Companies specializing in green technology have an estimated turnover of 200€ billion. Especially the expertise in engineering, science and research of Germany is eminently respectable.The lead markets of Germany's green technology industry are power generation, sustainable mobility, material efficiency, energy efficiency, waste management and recycling, sustainable water management.

2.5 Legal analysis

The modern German legal system is a system of law which is founded on the principles laid out by the Basic Law for the Federal Republic of Germany, though many of the most important laws as for example most regulations of the civil code ( Bürgerliches Gesetzbuch , or BGB) were

26 developed prior to the 1949 constitution. It is composed of public law (öffentliches Recht ), which regulates the relations between a citizen/person and the state or two bodies of the state (including criminal law) and the private law which regulates the relations between two people or companies and the criminal law.

The German legal system is a civil law based on a comprehensive compendium of statues, as compared to the common law systems. Germany uses an inquisitorial system where the judges are actively involved in investigating the facts of the case, as compared to an adversarial system where the role of the judge is primarily that of an impartial referee between the prosecutor and the defendant.

The independence of the judiciary of Germany is historically older than democracy in Germany. The organization of courts is traditionally strong, and almost all state actions are subject to judicial review.

2.6 Environmental analysis

27 The rapid industrial development in Germany, especially by the end of the 19th century, caused severe environmental problems. As a reaction to this first ideas of nature conservancy were developed around 1900 by Ernst Rudorff.

Environmental protection became a major political issue in Germany 70 years later. In 1971 the first Environmental Programme of the Federal Government was adopted, one year later the Waste Disposal Law (today: Act for Promoting Closed Substance Cycle Waste Management and Ensuring Environmentally Compatible Waste Disposal) and in 1974 the Federal Emission Control Act. (General information on air pollution control in Germany).

Until 1986 environmental matters were dealt with by three different ministries within the Federal Government: the Ministry of the Interior, the Ministry of Agriculture and the Ministry of Health. On 6 June 1986 the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety was established. Since then it has been responsible within the Federal Government for (lead-managing) national environmental policy.

The IFAT (world’s biggest and most important trade fair for environmental technology and services) takes place in Munich, Germany.

The Current environmental landscape of Germany is like to be as follows : emissions from coal-burning utilities and industries contribute to air pollution; acid rain, resulting from sulfur dioxide emissions, is damaging forests; pollution in the Baltic Sea from raw sewage and industrial effluents from rivers in eastern Germany; hazardous waste disposal; government established a mechanism for ending the use of nuclear power over the next 15 years; government working to meet EU commitment to identify nature preservation areas in line with the EU's Flora, Fauna, and Habitat directive

28 PART-2 INDUSTRY SPECIFIC STUDY

A STUDY REPORT ON TEXTILE INDUSTRY IN GERMANY

29 INTRODUCTION to TEXTILE INDUSTRY

Textile is one of India’s oldest industries and has a formidable presence in the national economy in as much as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. The textile industry occupies a unique place in our country. One of the earliest to come into existence in India, it accounts for 14% of the total Industrial production, contributes to nearly 30% of the total exports and second largest employment generator after agriculture.

Textile Industry is providing one of the most basic needs of people and the holds importance; maintaining sustained growth for improving quality of life. It has a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it is a major contribution to the country's economy. This paper deals with structure, growth and size of the Indian textile industry, role of textile industry in economy, key advantages of the industry, textile industry export and global scenario and strength, weakness, opportunities and treats of the Indian textile industry.

Indian textile industry is one of the largest in the world with a massive raw material and textiles manufacturing base. Our economy is largely dependent on the textile manufacturing and trade in addition to other major industries. About 27% of the foreign exchange earnings are on account of export of textiles and clothing alone. The textiles and sector contributes about 14% to the industrial production and 3% to the gross domestic product of the country. Around 8% of the total excise revenue collection is contributed by the textile industry. So much so, the textile industry accounts for as large as 21% of the total employment generated in the economy. Around 35 million people are directly employed in the

30 textile manufacturing activities. Indirect employment including the manpower engaged in agricultural based raw-material production like cotton and related trade and handling could be stated to be around another 60 million.

Textile is the largest single industry in India (and amongst the biggest in the world), accounting for about 20% of the total industrial production. It provides direct employment to around 20 million people. Textile and clothing exports account for one-third of the total value of exports from the country. While yarn is mostly produced in the mills, fabrics are produced in the power loom and handloom sectors as well. The Indian textile industry continues to be predominantly based on cotton, with about 65% of raw materials consumed being cotton. The yearly output of cotton cloth was about 12.8 billion m (about 42 billion ft). The manufacture of jute products (1.1 million metric tons) ranks next in importance to cotton weaving. Textile is one of India’s oldest industries and has a formidable presence in the national economy inasmuch as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. They include cotton and jute growers, artisans and weavers who are engaged in the organized as well as decentralized and household sectors spread across the India

Indian textile industry can be divided into several segment some which can be listed as below:-

• Cotton textiles • Woolen textiles • Readymade garment • Hand-crafted textiles • Jute & coir

31 STRUCTURE OF TEXTILE INDUSTRY

Textile industry in India comprises mostly of small-scale, non-integrated spinning, weaving, and finishing and apparel-making enterprises. Such a structure arose due to the policies on tax, Labour and other regulations that favoured small-scale, labour-intensive enterprises, while discriminating against large-scale, capital-intensive operations. There is a modern mill sector on the one hand and handloom and power loom sectors on the other. Small-scale unorganized players dominate the industry, where the regulations are less stringent. Most of the units are in handloom sector and the employment is also the highest. On an average round 2 workers work in each handloom unit, thus making handloom sector mostly home based.

In 2007-08, power loom sector alone accounted for 62% of the total cloth production. However, the organized mill sector accounted for only3% of the total cloth production during the same period and the quantity of cloth produced by the share of both handloom and mill sector has almost halved in the past decade. The rise in cloth production is due to positive growth rate in production of cloth by power loom and hosiery. This indicates the diminishing importance of handlooms in comparison to power looms. The handloom sector is continuously becoming marginalized. Further the share of cotton cloth in Indian cloth production was as high as 60% in 1995-96, though over the years its share declined gradually to 46% in 2004-05. However, the years2005-06 and 2007-08 have shown an increase in cotton cloth production. This indicates that in the recent years there is a renewed interest for cotton cloth production.

Large-scale mills that integrate spinning, weaving and, sometimes, fabric finishing are common in other major textile-producing countries. In India, however, these types of mills now account for about only 3 percent of

32 output in the textile sector. About276 composite mills are now operating in India, most owned by public sectors & many deemed financially sick.

• Spinning

Spinning is the process of converting cotton or manmade fiber into yarn to be used for weaving and knitting. Largely due to deregulation beginning in the mid-1980s, spinning is the most consolidated and technically efficient sector in India’s textile industry. Average plant size remains small, however, and technology outdated, relative to other major producers. In 2002/03, India’s spinning sector consisted of about 1,146 small-scale independent firms and 1,599 larger scale independent unit

• Weaving and Knitting

Weaving and knitting converts cotton, manmade, or blended yarns into woven or knitted fabrics. India’s weaving and knitting sector remains highly fragmented, small-scale, and labor-intensive. This sector consists of about 3.9 million handlooms, 380,000 power loom enterprises that operate about 1.7 million looms, and just 137,000 looms in the various composite mills. Power looms are al firms, with an average loom capacity of four to five owned by independent entrepreneurs or weavers. Modern

shuttle less looms account for less than 1 percent of loom capacity

• Fabric Finishing

Fabric finishing (also referred to as processing), which includes dyeing, printing, and other cloth preparation prior to the manufacture of clothing, is also dominated by a large number of independent, small scale enterprises. Overall, about 2,300 processors are operating in India, including about 2,100 independent units and 200 units that are integrated

33 with spinning, weaving, or knitting units.

• Clothing Apparel

It is produced by about 77,000 small-scale units classified as domestic manufacturer

Exporters & fabricators

CONSUMPTION OF COTTON IN INDIA

The consumption of cotton by the textile mills and small-scale spinning units has witnessed sustained increase since 2001-02, except in 2002-03, when the total domestic consumption declined. Domestic consumption of cotton fibre increased at a CAGR of 7.0% rising from 168.8 lakh bales in 2002-03 to 236.9 lakh bales during 2007-08, but fell to 229 lakh bales in 2008-09.

There has been a phenomenal growth in the Indian textile industry in the last 2 decades in terms of installed spindles and yarn production. The pace of modernisation achieved by the Indian spinning

34 GROWTH OF TEXTILE INDUSTRY

India has completed more than 50 years of its independence. The analysis of the growth pattern of different segment of the industry during the last five decades of post independence era reveals that the growth of the industry during the first two decades after the independence had been gradual, though lower and growth had been considerably slower during the third decade. The growth thereafter picked up significantly during the fourth decade in each and every segment of the industry. The peak level of its growth has however been reached during the fifth decade i.e., the last ten years and more particularly in the 90s. The Textile Policy of 1985 and Economic Policy of 1991 focusing in the direction of liberalization of economy and trade had in fact accelerated the growth in 1990s. The spinning spearheaded the growth during this period and man-made fiber industry in the organized sector and decentralized weaving sector.

Exports from the handloom sector constitute a negligible 2% of the total textile exports from India. In fact, this share has declined from 5% in 1995-96. If the production levels are not improved, handloom sector may not be able to withstand the competition owing to globalization though it occupies a significant position in terms of employment, flexibility of small production, uniqueness, innovation and adaptability.

35 Productivity –Growth in Textile Industry

One of the important aspects of the textile and garments industry is its contribution to employment. If at all it is believed that Indian textile and garments industry will grow by leaps and bounds during the post quota regime it is precisely because of its advantages in terms of labor productivity in relation to the prevailing wage rate.

Among handloom, power loom and mill sector, power loom sector occupies a dominant position followed by the handloom and organized mills sector. As far as the labor productivity is concerned, it was the least for handlooms (877 sq.mtrs. per worker) as compared to power looms (5896 sq.mtrs.) and organized mill sector (1500 sq.mtrs.). Thus, it Productivity & Competitiveness of Indian Manufacturing – Textile & Garments Sector

National Productivity Council, New Delhi is quite apparent that though the handloom sector provides the largest employment, it also has the lowest labour productivity levels.

36 Labor Productivity in the Organized Factory Sector

Labor productivity (Gross Value Added per worker) growth estimated at 1993-94 prices for the textile and garments sector at the all India level has shown a declining trend over the years.

In the recent years the growth pattern of labor productivity across the states appears to be skewed. In other words, the national growth in labor productivity in the textile sector is dominated by a few States. The States such as Haryana, Karnataka, Madhya Pradesh, Orissa, exhibit growth in labor productivity, which is higher than the national average in the recent years. The interstate disparity in the labor productivity growth in the recent years is certainly a concern. The States such as Andhra Pradesh, Haryana, J&K, Orissa, Rajasthan & Tamil Nadu etc. have shown better labour productivity growth in the recent years in comparison to earlier decades. This probably implies that the growth is concentrated in a few regions where the textile sector has some advantages either in terms of raw material availability or in terms of the availability of skilled manpower.

Capital Productivity growth and Total Factor productivity growth during the last decade reveal secular growth trends with minor fluctuations at all India level.

37 ROLE OF TEXTILE INDUSTRY IN ECONOMY

Textile industry plays a significant role in the economy. The Indian textile industry is one of the largest and most important sectors in the economy in terms of output, foreign exchange earnings and employment in India. It contributes 20 per cent of industrial production, 9 per cent of excise collections, and 18 per cent of employment in industrial sector, nearly 20 per cent to the country’s total export earnings and 4 per cent to the GDP. The sector employs nearly 35 million people and is the second highest employer in the country. The textile sector also has a direct link with the rural economy and performance of major fiber crops and crafts such as cotton, wool, silk, handicrafts and handlooms, which employ millions of farmers and crafts persons in rural and semi-urban areas. It has been estimated that one out of every six households in the country depends directly or indirectly on this sector.

India has several advantages in the textile sector, including abundant availability of raw material and labor. It is the second largest player in the world cotton trade. It has the largest cotton acreage, of about nine million hectares and is the third largest producer of cotton fiber in the world. It ranks fourth in terms of staple fiber production and fourth in polyester yarn production. The textile industry is also labor intensive, thus India has an advantages.

38 CHAPTER- 4 COMPARATIVE ANALYSIS 4.1 COMPARATIVE ANALYSIS OF INDIA’S TEXTILE INDUSTRY

India’s share of global exports of textiles increased from 1.8 percent in 1980 to3.3 percent in 1998. However, India’s export growth was lower than that of most Asian countries during that period. There are number of competitive strengths of the Indian textile industry: • India has a large fibber base, and ranks as the world’s third-leading producer of Cotton, accounting for 15 percent of the world’s cotton crop. India produces a wide variety of cotton, providing operational flexibility for domestic textile producers. In the manmade fibber sector, India is the world’s fifth-largest producer of polyester fibbers and filament yarns and the third-largest producer of cellulosic fibres and filament yarns. • India is the world’s second-largest textile producer (after China), and is diversified and capable of producing a wide variety of textiles. The spinning segment is fairly modernized and competitive, accounting for about 20 percent of world cotton yarn exports. • India’s textile industry benefits from a large pool of skilled workers and competent technical and managerial personnel. India’s labour is inexpensive; hourly labour costs in the textile and apparel industry average less than 5 percent of those in the U.S. textile industry. The study also identifies the competitive weaknesses that have impeded the growth of India’s textile industry • Policies of the Government of India (GOI) favouring small firms have resulted in the establishment of a large number of small independent units in the spinning, weaving, and processing sectors. Sources in India claim that GOI policies have provided competitive advantages for the small independent units over the generally larger composite mills, discouraged investments in new

39 manufacturing technologies, and limited large-scale manufacturing and the attendant benefits of economies of scale.

• Sources in India also claim that because of the GOI policies, small units have significantly lower production costs than the composite mills, use low levels of technology, and produce mostly low value- added goods of low quality that are less competitive globally. • India’s textile industry depends heavily on domestically produced cotton. Almost two-thirds of domestic cotton production is rain fed, which results in wide weather-related fluctuations in cotton production. Moreover, the contamination level of Indian cotton is among the highest in the world. According to sources in India, the cotton ginning quality is poor, contributing to defective textile products. • The Government of India policy reserving apparel production for the SSI sector had restricted the entry of large-scale units and discouraged investment in new apparel manufacturing technologies. As a result, most Indian apparel producers do not benefit from economies of scale. • The competitiveness of India’s textile sector is adversely impacted by an inadequate domestic supply of quality fabrics. Fabric imports are subject to high duty rates and other domestic taxes that increase the cost of imported fabrics. Another major weakness of the Indian textile sector is a lack of product specialization which, along with a limited fabric base, has limited India’s apparel production and exports to low value-added goods. • India has high energy and capital costs, multiple taxation, and low productivity, all of which add to production costs. As a result, textile products from India are less competitive than those of China and other developing countries in the international market.

40 4.2 PRESENT POSITION OF TEXTILE INDUSTRY

Indian textile and clothing industry was generally inward looking till 1980s. The Textile Policy of 1985 heralded a new beginning for the textile industry by focusing on the deep-rooted structural weaknesses. The reforms initiated in 1990s further boosted the textile industry. The textile industry was deli censed and reforms on fiscal and external front were pursued. As a result, India’s Textile export during the financial year 2007- 08 reached Rs.923940 million from Rs.154836 million in 1992-93 marking an annual growth of 12.91per cent per annum. Though the volume and value of textile exporters increased over the years, in relative terms this period also witnessed drastic decline in the share of textile export in India’s total exports as it declined from 28.84% of total exports in 1992- 93 to15.16% in 2007-08 Textile exports play a dominant role in the total exports of the country. In India, 15% of the country’s total export earnings are textile exports. India’s share in the global textile market and apparel market is 4% and 2.8% respectively.

The Composition of Indian Textile Exports

The Textiles exports basket consists of Ready-made garments, Cotton textiles, Textiles made from man-made fibre, Wool and Woollen goods, Silk, Handicrafts, Coir, and Jute. Further, the export basket consists of variety of items: cotton yarn and fabrics, wool and silk fabrics, man-made yarn and fabrics, etc., of which man-made textiles and silk showed the highest growth rate. The major export earner is ready-made garments followed by cotton textile and man-made fabrics in April-Oct 2008. All the textile items are growing impressively. During April –Oct. 2007-08, except the three items (i.e. Cotton Textiles, Silk, Ready Made Garments and Handicrafts) the exports of all the items have grown impressively during the periods between 2005 and 2010

41 Textiles Exports 2012-13

The targets for textiles exports for 2012-13 initially set at USD 38 billion have been revised upwards to USD 40.50 billion, following the Foreign Trade Policy Annual Supplement in June, 2012. The export Council-wise targets are (i) Apparel Export Promotion Council (AEPC) – USD 18.00 billion (ii) Export Promotion Council for Handicrafts (EPCH) – USD 3.30 billion (iii) Handloom Export Promotion Council (HEPC) 0.40 billion (iv) Wool & Woollens Export Promotion Council (W&WEPC) – 0.75 billion (v) National Jute Board (NJB) – 0.50 billion (vi) Carpet Export Promotion Council (CEPC) – 1.05 billion Imports The total imports of T&C products by India reached US$ 5.22 billion during the calendar year 2012. Cotton was the biggest import amongst T&C items, with a share of USD 0.77 billion followed by impregnated textile fabric (USD 0.74 billion) and Man-made Filaments with a share of USD 0.73 billion. The imports have increased by 5.26% during the calendar year 2012 in dollar terms over the corresponding period in calendar year 2011. Table-1 EXPORT SCENARIO

(in million US $) April-oct. Items 2009-10 2010-11 2010-11 2011-12 Readymade 10064.13 10627.99 5512.15 7088.74 garment Cotton 5711.41 8360.25 3466.96 4899.36 textile Manmade 3970.88 4643.03 2465.75 3215.49

42 textile Woolen, 470.20 429.75 248.77 324.65 yarn, fabrics etc. Silk textiles 596.05 595.19 323.95 282.34 Handloom 264.85 365.48 185.89 324.14 Total 21078.12 25021.82 12203.47 16134.72

India’s Textile Imports

One of the important aspects of India’s textile sector is that it has relatively low import content as compared to other export oriented sectors. As far as imports are concerned, textiles accounted for only 2 to 3% of the total import bill. During 1990s woollen yarn and fabrics, silk yarn, and cotton yarn and fabrics were not imported but from 2000 onwards their imports began, that too at a very rapid pace. This might be due to decrease in production of yarn, as seen in case of cotton yarn. All other textile products imports have grown at an annual average rate of 15-20%. However, the import-export ratio doubled during the period from 8.7% in 1992-93 to 16.6% in 2008-09. Textiles imports have risen much faster than the textile exports implying that the cost of exports in terms of imports doubled during this period. Thus, globalization seems to affect Indian textile trade through increased competition.

43 4.3 CONSUMPTION OF COTTON IN INDIA

Although the Indian textile industry consumes a diverse range of fibres and yarn, it is predominantly cotton based. The ratio of the use of cotton to man-made fibres and filament yarns by the domestic industry is 59:41 (FY09). Thus, cotton is one of the major raw materials for the Indian textile industry. The proportion of cotton in the raw material consumption basket of the Indian textile industry is around 59%. Cotton consumption has increased significantly over the years given the rapidly expanding domestic textile industry. The consumption of cotton by the textile mills and small-scale spinning units has witnessed sustained increase since 2001-02, except in 2002-03, when the total domestic consumption declined. Domestic consumption of cotton fibre increased at a CAGR of 7.0% rising from 168.8 lakh bales in 2002-03 to 236.9 lakh bales during 2007-08, but fell to 229 lakh bales in 2008-09.

There has been a phenomenal growth in the Indian textile industry in the last 2 decades in terms of installed spindles and yarn production. The pace of modernisation achieved by the Indian spinning Industry received a fillip after the launch of "Technology Up-gradation Fund" by the Indian government in April 1999. The robust growth of spinning industry and its modernisation has led to sustained growth in cotton consumption.

44 Chart-2

4.4 TEXTILE INDUSTRY POSITION OF GERMANY

Within the last many years the actual German textile and clothing business offers gone through rigorous strength modifications, completely outclassed through dropping household creation, move associated with creation in order to overseas lower-wage financial systems,ongoing rigid competitors along with a change associated with concentrate within house creation in the direction of higher-quality, theoretically difficult fabrics. The actual companies possess handled the actual strength modify go on. These people countered this through techniques such as internationalization as well as directing upon revolutionary services powerful brand names that have resulted in the introduction of brand new client organizations as well as crucial marketplaces.

The sector still spans a broad range of fields, from traditional segments grappling with the pressures of stiff international competition right through to the newer and markedly expanding segments of technical textiles which are setting the pace of innovation.

45 Above we have discussed about introductory part related to current situation of German Textile industry. Now, following figures and tables give an overall view about current situation of the German Textile & Clothing industry. They also clarify the development of last decades.

BUSINESS, EMPLOYEES AND TURNOVER

Business Following is the figure which is shows; the number of business in the German clothing industry was reduced from ca. 5500 in the mid-1960s down to below 500 in the year 2003. It is assumed that the actual number of business in the year 2006 was 408.

2. Employees If we talk about the employees in German textile industry, than there is a downturn in the number of employees in the German clothing industry since mid-1960s.The number of employees decreases from almost 4 Lacs in 1956 to around 49 thousand in 2003. Until 2006 the number of sank again down to 45,139 employees in this sector.

3.Turnover

• If we talk about the turnover, the turnover of business in German clothing industry is declining since the beginning of the 1990s.

46 The Biggest Textile Manufacturer In Europe.

• The great success of German manufactures is at any rate also an indication for the successful process of recognition, outsourcing and internationalization of the German textile and clothing industry. • Although the number of enterprises and employees is shrinking in the German textile and clothing industry, the German businesses are outstanding positioned. • Other essential factors, which establish this success, can be found in the innovative ability of German businesses especially in the textile sector and the high quality of standards, which are the trademark of the German textile and clothing industry.

47 CHAPTER- 5 POLICIES & NORMS 5.1 Policies and norms of Germany for textile industry for import including licensing, taxation & policies

Industry norms developed by the DIN (Deutsches Institut für Normung e.V., German Institute of Standardization) are widely accepted in Germany, although they are not required by law. DIN coordinates its activities with and represents Germany in international bodies of standardization, i.e. CEN (European Committee for Standardization) and ISO (International Organization for Standardization). DIN provides its own or German adaptations of international standards which business partners may chose to agree upon; some standards are even used as references in laws and regulations. Although DIN began its work with technical standards, it has expanded its focus to include more and more standards for services. Here are a few types of norms in Germany: DIN: norms issued by the German DIN institute. EN: norms and standards developed by the European Committee for Standardization. ISO: norms and standards issued by the International Organization for Standardization. DIN EN: European norms which have been adapted for Germany through the DIN institute. DIN ISO: International norms which have been adapted for Germany through the DIN institute. The German RAL e.V. (RAL Deutsches Institut für Gütesicherung und Kennzeichnung e.V.) works together with industry representatives to develop a wide range of quality standards for both products and services in Germany. The organization also independently assesses companies'

48 goods and services and awards a seal of quality if the requirements are met. The seal of quality, like the DIN industry norms, provides a means of distinguishing companies from the competition and increasing their reputation with customers and, consequently, their chances for referral. Import Regulations

As free trade provides an important impulse for global economic growth and an improved standard of living, Germany supports open markets and the liberalization of international trade within a set of clear and multilaterally negotiated agreements. As a result only a very small portion of the goods traded in Germany are actually subject to direct market regulations. For example: • EU market control regulations apply to several agricultural products. • Textiles and steel products from a few third countries are generally restricted by import quotas and require an import license. More information on licenses is available on the website of the Federal Office of Economics and Export Control which is responsible for the relevant procedures. • Specific import control regulations apply to products that may potentially pose a risk to human health, public security or environmental protection, such as medicine, weapons or endangered species of plants and animals, for instance. The German Customs Administration provides businesses with further guidance on this matter.

Irrespective of any import regulations or licenses, importers are still required to remain informed about the product-related rules that also apply to businesses active on the German market, as the legal environment and administrative procedures guiding business transactions in Germany may differ from those in place in the importer's home country.

49 An overview on general rules and regulations that need to be observed while introducing products to the German market is available in this section. For more details on the requirements for specific products please refer to our ''Business Sectors'' section. General information on customs procedures is available in our ''Tax and Duty'' section. The German Customs Office, which is the competent authority on all customs matters, provides further information and individual support on its online portal.

5.2 Policies and norms of India for textile industry for export including licensing:

NATIONAL TEXTILE POLICY 2000

ON NOVEMBER 2, the Government announced the New Textile Policy (NTP), illustrating measures to make India a worldwide player in textiles and readymade articles of clothing by raising fares from $11 billion to $50 billion by 2010. Of this, the allotment of readymade pieces of clothing will be half. The Government has chosen to de hold the article of clothing industry from the SSI class to make the previous globally more aggressive. Work now, the article of clothing part was under SSI reservation, with a venture roof of Rs 3 crore, and the most extreme outside straight backing cutoff of 24 for every penny.

There are two more changes. To begin with, the FDI farthest point of 24 for every penny has been uprooted, and outside associations can make 100 for every penny speculations through the Foreign Investment Promotion Board (FIPB) track. Second, the 50 for every penny fare commitment on firms with remote value has been finished away with.

The Government expects to bring about, in a period bound way, the Technology Up gradation Fund Scheme blanket all assembling areas of the industry. Consistent with the Textiles Minister, Mr. Kashiram Rana,

50 reaction to this plan is enhancing, and recommendations worth Rs 11,000 crore were appropriated.

According to the RBI, deals of ready-made content of outfits in the 11 decades from 1987-88 to 1998-99 increased from $1,430 thousand to $4,444 thousand --more than threefold. The yearly regular growth amount ready-made delivers out throughout this interval were 10.9 %, against the on the whole stand up growth amount of 9.7 %.

Deals of ready-made to the enhanced countries are advancing. Against fares of $427 thousand to the US, in 1987-88, they moved $1,503 thousand --once more, more than threefold--in 1998-99. There have been relative creates in dispatches to the UK, Malaysia, Italy, North America, Italy, Asia and the Holland. There was a loss of fares to the Earth of Separate Declares (CIS) in perspective of the temperamental circumstances.

India was likewise equipped to catch showcases in improving nations, particularly the UAE. The climbing movement of readymade article of clothing fares, even to the most improved nations, demonstrates past mistrust the focused capability of the little area.

Trade Policy Measures taken under Foreign Trade Policy 2009-14:

• Under Market Linked Focus Product Scheme:- 1. 335 New Products incentivized under MLFPS at 8 digit level, eligible for benefits @ 2% of FOB value of exports to 15 specified markets like all inorganic chemicals and inorganic / organic

51 compounds of metals, Flexible Intermediate Bulk Containers and Narrow Woven Fabrics.

2. 71 new products at 8 digit level for exports to EU (27 Countries) .

• Under Focus Product Scheme (FPS):- 1. 147 products incentivized for Bonus Benefits (additional 2%) under FPS at 8 digit level, henceforth eligible for benefits @ 4% or 7% of FOB value of exports to all markets. 2. 57 New products incentivized under FPS at 8 digit level, eligible for benefits @ 2% of FOB value of exports to all markets. These include products from Sectors viz. Engineering, Chemical, textile made ups etc.

A. Support for Technological up-gradation • Zero duty Export Promotion Capital Goods scheme and Status Holder Incentive Scrip scheme introduced in 2009 for limited sectors and valid for only 2 years initially, extended by one more year till 31.3.2012 and the benefit of the scheme expanded to additional sectors. • 3 Additional Towns of Export Excellence (TEEs) announced, bringing the list upto 24. B. Availability of concessional Export Credit: • Interest subvention of 2 per cent extended upto March 2011 for certain labour-intensive sectors of exports namely handloom, handicrafts, carpet, SMEs and a few products from the sectors namely engineering, textiles, leather and jute.

52 • Interest rates on export credit in foreign currency reduced to LIBOR + 200 basis points in February 2010 from the earlier LIBOR+350 basis points. C. EOUs / STPIs: • Section 10A and 10B (Sunset clauses for STPI and EOU schemes respectively), extended for the financial year 2010- 2011. Anomaly removed in Section 10AA relating to taxation benefit of ‘unit vis-à-vis assessee’.

D. Services: • FTP also provided fillip to services sector (Hotels) by doubling duty free entitlement under Served from India Scheme (SFIS) from 5% to 10% of foreign exchange earnings.

E. Others: • Duty Entitlement Passbook (DEPB) scheme extended beyond 31.12.2010 till 30.06.2011. • Time period of export realization for non-status holder exporters increased to 12 months, at par with the Status holders. This facility has been extended upto 31.03.2011. • Advance Authorization for Annual Requirement now exempted from payment of Anti-dumping & Safeguard duty. The Scheme has been made more flexible for import of required inputs. • Value limit on duty free import of commercial samples enhanced from 1 lakh to 3 lakh per annum. • Export Obligation Period under Advance Authorization Scheme enhanced from 24 months to 36 months without payment of composition fee. • Facilitation of Trade through various Electronic Data Interchange (EDI) initiatives taken on online message exchange facility.

53 • Additional facility of filing “online” application for obtaining IEC introduced. India’s textiles and clothing industry is one of the mainstays of the national economy. It is also one of the largest contributing sectors of India’s exports worldwide. The report of the Working Group constituted by the Planning Commission on boosting India’s manufacturing exports during Five Year Plan (2012-17), envisages India’s exports of Textiles and Clothing at USD 64.41 billion by the end of March, 2017. The textiles industry accounts for 14% of industrial production, which is 4% of GDP; employs 45 million people and accounts for nearly 11% share of the countr y’ s total exports basket.

(a) Trend during the period 2011-12. In rupee terms, during 2011-12 (P) there has been a surge in exports of Handloom product (68.51%), Coir & Coir Manufactures (40.49%), Cotton Textiles (37.23%), Man-made textiles (25.99%), RMG (24.80%), Wool & Woolen textile (20.97%) and Jute (4.72%).

In US$ terms the surge during 2011-12 (P) registered in Handloom product (60.09%), Coir & Coir Manufactur es (33.46%), Wool & Woolen textile (14.93%), Man-made textiles (19.69%), RMG (18.56%), Cotton Textiles (30.37%) and Jute (-0.52).

(b) Latest Trend during the period 2012-13. The total textile exports during 2012-13 (Apr-Jan) (P) were valued at Rs 137619.44 crore as against Rs 129829.30 crore during the corresponding period of financial year 2011-12, registering an increase of 6.00 percent in rupee terms.

In US dollar terms, the same was valued at US$25263.74 million

54 as against US$27328.06 million during the corresponding period of previous financial year registering a decline of 7.55 percent in US$ terms.

(c) Country-wise Analysis. India’s country-wise exports for top 20 destinations during the last three years is at In the global exports of Textiles, India ranked as the third largest exporter, trailing EU-27 and China, as per WTO data – 2011 (latest). In the global market exports of clothing, India ranked as the fifth largest exporter as per WTO data – 2011 (latest), trailing Bangladesh, Hong Kong, EU-27 and China.

(d) Textiles Exports 2012-2013 The targets for textiles exports for 2012-13 initially set at USD 38 billion have been revised upwards to USD 40.50 billion, following the Foreign Trade Policy Annual Supplement in June, 2012. The export Council-wise targets are (i) Apparel Export Promotion Council (AEPC) – SD 18.00 billion (ii) The Cotton Textiles Export Promotion Council (Texprocil) & The Powerloom Development Export Promotion Council (PDEXCIL) – USD 9.00 billion (iii) The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) – USD 7.00 billion (iv) Export Promotion Council for Handicrafts (EPCH) – USD 3.30 billion (v) Handloom Export Promotion Council (HEPC) 0.40 billion (vi) Wool & Woollens Export Promotion Council (W&WEPC) – 0.75 billion (vii) National Jute Board (NJB) – 0.50 billion (viii) Carpet Export Promotion Council (CEPC) – 1.05 billion (ix) Indian Silk Export Promotion Council (ISEPC) 0.50 billion.

55 (e) Slowdown in exports of the textile sector and policy measures taken As per latest exports figures (Principal Commodities) released by the DGC&IS, textiles & clothing worth USD 26.82 billion was exported during 2010-11 and USD 33.31billion during 2011-12. During April- Oct’12, exports of textiles & clothing were of the order of USD 16.86 billion as against USD 17.95 billon in April-Oct’11, recording a negative growth 6.04%.

The volatility in the EU market during the calendar year 2012 affected severly India’s T&C exports to EU. The EU textiles market witnessed a negative growth of 13% during the calendar year 2012, resulting in a 2.3 billion shortfall of India’s T&C exports to EU during the Calendar year 2012 over 2011. Though, it has been established that there is urgent need for a restructuring for domestic textile industry to address the slowdown that is being witnessed during the current financial year and last year. The confederation of Indian Textiles Industry had reported that out of 287 companies listed in the Bombay Stock Exchange 122 companies have reported net losses in Q1 of listed in the Bombay Stock Exchange 122 companies have reported net losses in Q1 of 2011-12 and 166 companies have shown poorer results compared to previous year. Many companies are reported to be finding it extraordinarily difficult to repay term loans and finance working capital Unprecedented raw material price volatility coupled.

Export targets of USD 40 billion will not be achieved since RMG exports are down 8 percent. Policy realignment for apparel sector urgently required – duty drawback/ incentives under FTP/ duty reduction in fabric/ yarn imports. MSP sales plan needs to be put in place, CITM has held 2 rounds of discussions. TUFS committed liabilities crowding out new sanctions.

Custom Duty The BCD on raw silk is being increased from 5% to 15% a measure of protection to domestic sericulture. Presently, coir yarn (53.08) is mentioned at notification Customs which is presently blank, the entry Nil has been inserted as a technical rectification No change.

Excise Duty: All handmade carpets and carpets & other textile floor coverings of coir and jute, whether or not handmade, falling under are being fully exempted from excise duty. In this connection, dated 1st March, 2011 It has been accepted that the readymade garment industry is in the throes of a crisis and needs a lifeline. There was a demand to restore the ‘zero excise duty route’ for cotton and manmade sector (spun yarn) at the yarn, fabric and garment stages. Zero excise duty route, as existed prior to Budget 2011-12, has been restored on readymade garments and made ups. The zero excise duty route will now be available in addition to the CENVAT route under which manufactures can pay excise duty on the final product and avail of credit of duty paid on inputs dated the 9 th July, and CE dated 17 th March, 2012.

5.3 Present Trade Barriers in Textile Industry

Lack of irrigation facilities:

57 Predominance of rain-fed area has been one of the major hindrances to cotton cultivation in India. Almost 65% of the area under cotton cultivation is rain-fed and only 35% of it is irrigated, thus, exposing the cotton productivity to the vagaries of monsoon. Cotton contamination : Cotton is vulnerable to contamination at the harvesting, marketing and ginning stages, if proper care is not taken. The two kinds of contaminants predominantly found in cotton are fibrous and non-fibrous.

Poor quality : It has been difficult to develop a globally-competitive cotton industry in India because of the average quality of cotton. In fact, the cotton sector and the large textile enterprises have been importing quality cotton to meet their growing demand for high-quality cotton products.

Lack of infrastructure : The transport infrastructure is poor in India and the cost of transporting cotton fibre from one state to another is substantial.

Problem of admixtures: There are inconsistencies in the strength, length, micronaire, colour and reflectance of cotton as different varieties of cotton fibre with different physical properties are mixed together. Admixture also makes the grading and testing of cotton difficult. Quality-conscious mills, particularly the export-oriented ones, are compelled to engage themselves in expensive bale management exercises to maintain yarn quality.

Absence of uniform standards:

58 Another issue related to quality of cotton has been the absence of uniform quality standards across the country. While there are various agencies involved in the quality testing and grading of cotton across the country, they do not adhere to uniform standards.

Need for an Indian arbitration for imported cotton: The Indian textile mills importing cotton have to encounter onerous problems because foreign buyers invariably stipulate arbitration by International Cotton Association (ICA), Liverpool, in the sale contracts. India has been a regular importer of cotton and imports will continue in future. Therefore, unless corrective action is taken in the right earnest, problems will compound in future.

CHAPTER- 6 FUTURE POTENTIAL

6.1 Potential for Export in India

The Native Indian fabric market is one the most important sectors for the Native Indian economic system. Its importance is underlined by the fact that it accounts for around 4% of GDP, 14% of the commercial development and 17% of the nation's total trade income. Besides, the industry utilizes nearly 35 MN employees; the fabric market is the second-largest employment producing market in both non-urban and towns, after the farming market.

The Government has been continually supporting the textiles exports sector through markets. Government has introduced several export promotion measures in the Union Budget 2012-13 as well as through schemes of Foreign Trade Policy 2009-14, including incentives under Focus Market Scheme and Focus Product Scheme; enhancing the coverage of Market Linked Focus Product Scheme for textile products and extension of Market Linked Focus Product Scheme etc to increase India’s share in various countries.

To ease the resultant financial distress, recognizing the Handloom sector as the most vulnerable segment of the Textile industry, Government has announced a Handloom Revival, Reform & Restructuring Package under which Rs.3884 crore was allocated for waiver of loans of handloom cooperatives, individual weavers, etc. and for interest subsidy, margin money and credit guarantee for fresh loans. Government also approved a debt restructuring package to help loss making textile mills, to be administered on a case by case basis by the banks within the prudential norms of the Reserve Bank of India.

The recent measures taken by the Government to support the textiles exports sector are as under: 1. 2% Interest Subvention Scheme on rupee export credit is available to certain specific export sectors. These are (i) Handicrafts, (ii) Carpets, (iii) Handloom, (iv) Readymade Garments , (v) Processed Agriculture Products, (vi) Sports Goods and (vii) Toys. In addition Small and Medium Enterprises (SME) in all sectors enjoy this benefit. Currently the scheme ends on 31 st March, 2013. Now this scheme of 2% interest subvention to these specific sectors will be extended by one more year, i.e., up to 31 one more year, i.e., up to 31 st March, 2014. 2. Introduction of a new scheme to incentivize incremental exports in certain sectors and to certain markets (incremental export performance for the last quarter of the current year, i.e. for Jan- March 2013 as compared to exports made by the same IEC holder in Jan-March 2012 would be eligible for such incentives); and 3. Five new countries have been added under the Focus Market Scheme while Eritrea has been added under the Special Focus Market Scheme. The five countries being added under FMS are New Zealand, Cayman Islands, Latvia, Lithuania and Bulgaria. Under FMS Duty Credit of 3 per cent is given on the FoB value of exports while under the Duty Credit is 4 per cent. Sixty new products which include Engineering, Rubber, Textiles, Drugs & Pharmaceuticals products among others, and three countries (Taiwan, Thailand and Czech Republic) have been incorporated under the Market Linked Focus Product Scheme. Under the

61 Focus Product Scheme, more than 100 new products have been added from sectors including Engineering, Textiles, Chemicals, Drugs, Pharmaceuticals, Paper, Books, Publication and Printed Material. The products will be benefitted by 2 per cent Duty Credit. Further, the scripts issued under different schemes namely FPS, FMS, VKGUY, SHIS, MLFPS, SFIS, AIIS, for import of goods, will now be permitted to be utilized f or payment of Excise Duty for domestic procurement, to encourage manufacturing, value addition and employment.

The Highlights of Union Budget 2013-14 in respect of Textiles Sector are as under: Technology Up gradation Fund Scheme (TUFS) to continue in 12 th Plan with an investment target of Rs. 1,51,000 crore. The major focus would be on modernization of the power loom sector. It is proposed to provide Rs. 2,400 crore in 2013-14 for the purpose.

Allocation of Rs. 50 crore to Ministry of Textile to incentivise setting up Apparel Parks within the SITPs to house apparel manufacturing units with an additional grant of upto Rs.10 crore to each Park.

A new scheme with an outlay of Rs. 500 crore called the Integrated Processing Development Scheme has been proposed to be implemented in the 12th Plan to address the environmental concerns of the textile industry, including improving the effluent treatment infrastructure. It is proposed to provide Rs. 50 crore in 2013-14 for the scheme.

It has been accepted that the handloom sector which subsumes a large proportion of women and belongs mainly to the backward classes is in distress. It is proposed to accept their demand for working capital

62 and term loans at a concessional interest of 6 percent. 150,000 individual weavers and 1,800 primary cooperative societies will benefit in 2013-14 with this inisiative. It is proposed to allocate an additional sum of Rs.96 crore in 2013-14 to the Ministry of Textiles for interest subvention.

6.2 INDIA'S TEXTILE INDUSTRY MARKET SIZE

Overview Indian Exports to Germany

Barter relations between the two countries have expanded to a momentous degree and have recorded a positive development throughout the final few years. Figures starting 2009 indicate that India is on 28th position on the record of sourcing nations for Germany and is stacked up 27th around the essential ends for German trades. Post to the worldwide subsidence, there has been an expansion in the fares from India to Germany with the figures touching to 21.5% and the sum fares ending up as Euro 6.2 billion.

Germany might be viewed as one of the advancing shippers of Indian hand tailored filament textiles. Germany is additionally an imperative business in EU (European Union), in particular for textile and dress, with a sum business sector size of about US $ 34 billion (in 2005).During 2005- 06, the aggregate German imports of textile features from India ended up

63 as Rs. 4714.59 crore and in the same year, the sum imports quality of Synthetic and Rayon textiles from India developed into Rs. 254.63 crore, demonstrating a development of 58.43% contrasting with the exhibition of past year. There is a developing movement in the two-sided exchange between the two countries and the fare business has enrolled an amazing development. Figures of fare for the textile business touched Euro 1.5 billion. Fare of chemicals involved the second position with statistics demonstrating fare worth about Euro 585 million. The following spot is taken by information handling, electronic and optical supplies where send out arrived at Euro 579 million. Hardware and calfskin fares possessed the fourth and fifth positions with fare figures worth Euro 418 million and Euro 396 million separately. Textile industry plays a critical part in the development of Indian economy and it is an essential segment of worldwide exchange. Textile industry explains something like one third of India's aggregate fare profit. It is viewed as the second biggest industry of India and is the biggest outside fare earner, elucidating 35% of the terrible fare income in exchange. Throughout 1992-93 and 2001-02, textile sends out recorded an expansion at a compound annual development rate of 14.01%. Handloom and cotton are the two above all noteworthy segments in textile industry. The aforementioned two parts together give the major divide of aggregate textile send out in India.

Textile industry usually incorporates makers, wholesalers, suppliers, and exporters of cotton textiles, handloom, woolen textiles and so on. This industry has the probability of producing countless chances. In the vicinity of thirty five million individuals are as of recently captivated with this area. During April- March 1998-99, India's complete fabric exports were US $ 12533.1 thousand (RS.52720.78 crore). During April-December 2000, ready-made garments included 40% of the overall exports of fabric products in Native Indian, which came to US$ 3974.8 (Rs.180443.4 million). During the year 2001-02, complete fabric exports in Native Indian were worth US $ 10715 thousand. In 2005-06, fabric exports in Native Indian were at $ 17 billion dollars.

64 According to the industry reports, in 2007, the complete value of the fabric exports is likely to remain between $20 billion dollars and $21 billion dollars. This is about 4 % more than the previous season's exports of $ 19.7 billion dollars.

The Artificial and Cotton Fabrics Trade Promotion Authorities (SRTEPC) is an top body established by the Government of Native Indian to boost exports of Native Indian synthetic and rayon fabric items.

Trading partners of India

Major trading associates of Indian are Malaysia, Sydney, Kazakhstan, USA, South African-american, Romania, Argentina, The red sea, Malaysia, Finland, and Poultry. Above Desk reveals the transfer value of outfits products by the top 5 publishing nations in the world.

Major trading partners for India for Apparel exports

The major business sectors of Indian fares are USA, UK, Germany, United Arab Emirates and France. Since most recent five years, the aforementioned five nations have stayed as the top fare friends of India and have elucidated 65 for every penny impart in 2005-06 which declined to 62 for every penny in 2009-10. India's fare to the planet has been developing with 5.5 for every penny for every annum since 2005-06. Greatest development enrolled by UAE was 21.3 for every penny in the most recent five years emulated by Germany with 11.7 for every penny, UK with 7.9 for every penny, and France with 2.8 for every penny, while USA enrolled negative development by 1.8 for every penny. It is significant to say that at a provincial level, EU has remained the top most fare friend of India since 2005.

6.3 Present Trade Scenario

Consistent with the Ministry of Textiles, India's textile sends out throughout FY09 was USD 20.9 bn (Rs 963.1 bn) and enrolled a negative development of 5%, in dollar terms, over the past year. As per the temporary figures for FY09, fares of textiles constituted about 11.5% of the nation's aggregate fares; on the other hand, throughout the same period, the fares of textiles in USD terms enlisted a yearly decay of over 5%. In rupee terms textile sends out enlisted a development of 8% apparently because of the deterioration of the rupee against major outside monetary standards.

The textile fares from India incorporate readymade articles of clothing (RMG), cotton textiles and man-made textiles. The RMG, barring cotton, incorporates frill, man-made fibre. In FY09 (P), RMG fares were worth Rs 471.1bn, and elucidated more than 48% of India's aggregate textile trades. The cotton and man-made textile send out constituted over 22.5% and 15.5% of India's for the most part textile trades, individually. The impact of investment lull was unmistakable all through major trade portions in the segment. Throughout FY09, fares of all textile items, aside from cotton textiles and crafted works, enlisted a yearly development. The fares of cotton textiles and handiworks enrolled a yearly decay, in rupee terms, of 21.0% and 15.5%, separately. The rate commitment of handiworks and cotton textiles in the on the whole textile trades likewise declined.

The prevailing businesses for India's textile items are the US, the European Union and Japan. As per the Ministry of Textiles, the European Union (EU) explains practically 36% of India's sum textile trades while the US elucidates around 21%. On the whole, in dollar terms, the fares

67 recorded a negative development in FY09; however fares to the EU nations recorded positive development.

6.4 Trade Opportunities in Future

The future of the European textile industry will likely lay in sub-sectors that require innovation, fashion knowledge and research and development. Today, a textile company’s product has a life span of around 5 years before it is replaced by a newly developed product. The competition abroad is often picking up on the development and products with similar properties are imported into the EU often at a much cheaper price. In the clothing sector the cycle is much shorter, often from one season to another fashion, styles, requirements change.

The EU’s competitive advantages that, in addition to an innovative and fashion edge, will continue to be important factors are transport costs, environmental concerns, consumer awareness and questions of sustainability. With regard to future trade trends, the emerging markets will likely become more important for EU’s exports but also as import sources. Moreover, EU industry indicates that the Asian markets, such as China, will become more important for exports of luxury products made in the EU.

In the liberalized post-quota period, India has emerged as a major sourcing destination for buyers from all over the globe. As a measure of growing interest in the Indian textiles and clothing sector, a number of reputed houses opened their sourcing / liaison office in India. These include Marks and Spencer, Haggar Clothing, Kellwood, Little Label, Boules Trading Company, Castle, Alster International, Quest Apparel Inc., etc. Commercially the buoyant retailers across the world are looking for options of increasing their sourcing from the Indian markets. Indian manufacturers are also pro-actively working towards enhancing their capacities to fulfil this increased demand.

68 6.5 SWOT Analysis For Textile Industry

India has never before faced such a tremendous window of opportunity to become a significant player in the global economy as now. India and the global economy: Vast potential but also difficult challenges.

Strengths: * India is one of the largest exporters of yarn in international market and contributes around 25% share of the global trade in cotton yarn.

* Growing economy and potential domestic and international market.

* Availability of large varieties of cotton fibre and has a fast growing synthetic fibre industry.

* Availability of low cost and skilled manpower provides competitive advantage to industry.

* Abundant raw material availability that helps industry to control costs and reduces the lead-time across the operation.

* Industry has large and diversified segments that provide a wide variety of products.

* Indian textile industry is an independent & self-reliant industry.

69 Weaknesses:

* Higher indirect taxes, power and interest rates.

* Lack of technological development that affect the productivity.

* Industry is highly dependent on cotton.

* Lacking to generate economies of scale.

* Infrastructural bottlenecks and efficiency.

* Unfavorable labour laws.

Opportunities:

* Emerging retail industry and malls.

* Elimination of quota restriction leads to greater market.

* Growth rate of domestic textile industry.

* Shifting towards branded readymade garment.

* Product development and diversification.

70 Threats:

* In export, elimination of quota system will lead to fluctuations.

* Geographical demerits.

* Balance between price and quality, demand and supply.

* Continuous quality improvement.

* International environmental laws.

* Competition from other developing countries, especially China.

71 CHAPTER-7 CONCLUSION

Although the overall number of patent applications in the textile sector is small compared to other technical fields, lively activities are registered in this area too. They are, however, concentrated on a small group of very active players and a small number of countries, among them Germany, the United States, Japan, Switzerland, and Italy. Most of the inventions in the textile industry that are protected by patents come from large companies producing chemicals or consumer goods, or from larger textile machinery manufacturers.

After the detail study, analysis and interpretation of textile industry market of India as well as Germany, we have concluded that the opportunities of the Export potential of textile products in India is much constructive and concrete & the Import potential of textile products in Germany is also much productive and beneficial, whereby there will be the least chance of the saturation among the textile industry is concern.

As there is a wide product range and a core need in this modern periodic time people in the foreign countries do prefer to varieties of garments made of textiles. Thus we can conclude over here that there is a great opportunity to export the textile products into the German Markets which will be beneficial the GDP of India & growth in the textile industry can be seen. Thus textile industry plays a vital role in any of the country and it has became the need of the country.

72 CHAPTER-8 SUGGESTION

1. The textile Group of Companies is the capital intensive in nature but the policy of purchase of fixed assets should be carefully planned and reviewed so that the funds may be properly utilized. 2. The few companies, which did not follow a definite policy of financing fixed assets, should follow such policy. 3. Cost accounting and cost audit should be made mandatory for these units and cost sheet along with annual financing statement should be prepared. 4. There has been too much of government interference in policy and day-to-day working and decisions. This leads to delays in decision making. This should be abolished. 5. The government should minimize the subsidy and encourage the capital market for the textile companies.

PART-2 INDUSTRY SPECIFIC STUDY

A STUDY REPORT ON AUTOMOBILE SECTOR IN GERMANY

74 2.1 Introduction of Automobile Sector in Germany

The Birth place of Automobile industry is Germany as Karl Benz & Nikolaus Otto started Four-Stroke Internal Combustion engines in late 1870s, which led to Modern day motor car. Germany produced around 900 cars in the year 1901.B.M.W founded in 1916 started Auto production in 1928.

The collapse of the global economy during the Great Depression in the early 1930s plunged Germany’s auto industry into a severe crisis. In 1920 around 86 companies existed in Germany out of which only 12 survived Depressions.

There was a drastic change in German auto industry in 1930 when Nazi party came into power with the election. The Nazi’s instituted a policy known as “Motorisierung” which was a transparent policy & Adolf Hitler considered it as a step by Nazi party to improve the standard of living of German people. In addition to development and extensions of major highway schemes, the Volkswagen project was also conceived to design and construct a robust but inexpensive “Peoples car”.

Most of the automobile factories in Germany at the end of Second World War were either destroyed or damaged. In addition, the eastern part of Germany was under control of the Soviet Union, which dismantled much of the machinery that was left back and sent it back to Soviet Union.

The Volkswagen started producing Volkswagen Beetle in 1945, a car which intended to start making before the war but the factory was converted into military truck production during the war. By 1955 Volkswagen had made one million Volkswagen Beetle and ten million till 1965. The other manufacturers also started manufacturing slowly & steadily.

During the 1980s and 1990s, the German auto industry engaged in major acquisition and international expansion all over the world. The German

75 companies besides Export also established their plants in European, Asian, and Latin American Countries and also in United States.

Currently Six German companies dominate the auto industry of Germany. Volkswagen , BMW, Daimler , Porsche , Opel, Ford . Six million vehicles are produced each year in Germany and approximately 5.5 million vehicles are produced by German Brand overseas.

Germany is amongst top 4 automobile manufacturers in the world along with United States, China and Japan. The Volkswagen group is one of the 3 biggest automobile companies of the world along with Toyota and General Motors.

76 2.2 Role of Economy in Germany

The automobile industry in Germany is one of the largest employers in the country, with a strong labor force of over 866,000 (2005) working in the industry.

With an annual output near 6 million and a 35.6% share of the European Union now, Germany is the absolute leader of auto production in Europe since the 1960s, and in World was the third during 1970s - middle of 2000s and is fourth now (conceding to China, US and Japan only).

Germany designed cars won in the European Car of the Year, the International Car of the Year, the World Car of the Year annual awards one of the most times among other countries. Two cars (Volkswagen Beetle and Porsche 911) took 4th and 5th places in the Car of the Century award.

Currently, six German companies dominate the automotive industry in the country: Volkswagen AG, BMW AG, Daimler AG, Dr. Ing. h.c. F. Porsche AG, Adam Opel AG and Ford - Werke Gmb H. Nearly six million vehicles are produced in Germany each year, and approximately 5.5 million are produced overseas by German brands. [9] Alongside the United States, China and Japan, Germany is one of the top 4 automobile manufacturers in the world. The Volkswagen Group is one of the three biggest automotive companies of the world (along with Toyota and General Motors).

The Chevrolet Volt and its Voltaic Technology have been invented and developed first and foremost by the former German Opel engineer Frank Weber and—still today—some of the most important parts of the development of GM's electric vehicles is done in Germany.

German Automotive industry improving Its Competitiveness

The German automotive industry has a decisive influence on the development of entire German economy. Its activities clued the

77 manufacture of Automobiles and their 19ines, the production of trailers, specialized vehicle bodies and containers and also vehicle parts and accessories. The innovative capacity and economic importance of the automotive industry make it a key player in Germany.

The development, production, sale and use of the automobile account for an essential proportion of the overall revenue and employment generated by the German economy as a whole. The automobile is the outcome of a production process based on the division of labor and characterized by complex interactions that bring together the services of almost all sectors of the economy in a common aim. The importance of the automotive industry as the hub of this economic network therefore derives not only from vehicle production in itself but also from the knock-on effects of the economic sectors involved both upstream and downstream of production .With its stringent demands on manufacturing technology and on the technical standard and quality of upstream products and services. The automotive Industry under the pressure of International competition acts as a driving force for innovation and technical progress in numerous other sectors of the economy.

ONE OF THE BIGGEST EMPLOYERS IN GERMANY

The innovation campaign of the German automotive industry has been responsible for creating 110,000 new jobs over the last five years. By the end of 2001, almost 770,000 people were employed in the automotive industry. However, the number of people employed directly in the automotive industry is only a small proportion of the total number of people whose job depends on automobile production. Due to the further slimming down of production processes and the resulting concentration of automobile manufacturers on their core production, the distribution of output between vehicle manufacturers, suppliers and primary suppliers is changing. The reduced depth of production has resulted in an increased and varied demand for upstream products and services, so that numerous

78 other sectors participate indirectly in generating value added in automobile production. Investment goods and the materials and parts supplied during ongoing production are procured from a wide range of sources, including the chemicals industry, textile industry, mechanical engineering, electrical engineering, steel drawing works, cold rolling mills and the iron production industry.

In addition, service sectors such as design offices, forwarding agents and transport companies also play their part in the creation of an automobile; overall, a total of about a million people work for the automotive industry in the upstream industries. When this secondary employment effect over the entire automobile output chain is taken into account, we find that 1.8 million people were employed in automobile production over the last year.

ONE IN SEVEN JOBS DEPENDS ON THE AUTOMOBILE

However, the employment effect of the automobile does not stop there: in fact it even goes much further. For example, 3.35 million people owe their job directly to the use of the automobile (e.g. motor trade, vehicle maintenance and repair and filling stations). In addition, automobile users have recourse to other services, such as those provided by banks, insurance companies or public authorities, to name but three. Then there are the jobs linked to the use of road vehicles in freight and passenger transport (e.g. road haulage and taxi companies). When all these jobs are added to those in the automotive industry itself, we find that one in seven jobs in Germany depends directly or indirectly on the automobile. Overall, in 1998, more than 5 million people were employed in automobile-related jobs.

ONE IN FOUR EUROS OF TAX REVENUE COME FROM THE AUTOMOBILE

The gross output obtained from the development, production, sale and use of the automobile accounted for almost one fifth of gross national

79 product in 2001. The resulting taxes paid into state coffers amounted to more than 120 billion Euros, almost a quarter of Germany's total tax revenue. Automobile-specific taxes alone - i.e. the mineral-oil tax, VAT on the mineral-oil tax, road tax and the road user tolls for heavy goods vehicles -netted the German tax office about 50 billion DM.

TURNOVER: 60% EARNED OUTSIDE GERMANY

The German automotive industry earned a turnover of 202 billion Euros in 2001. Roughly 69% of this figure came from the manufacturers of vehicles and their engines, just over 3% from the manufacturers of trailers, specialized vehicle bodies and containers and 28% from the vehicle parts and accessories industry. As a result, the automotive industry alone, as one of the biggest industrial sectors in Germany, accounted for a sixth of the country's total industrial turnover. With 121 billion Euros, roughly 60% of the automotive industry's turnover was obtained from, operations with countries outside Germany.

AUTOMOTIVE INDUSTRY AS THE LEADING EXPORT SECTOR

The automotive industry continues to top the ranking of German export industries. In 2001, the automotive industry exported 3.64 million cars and 276,000 commercial vehicles. German automobile exports attained a total value of 128 billion Euros. Over half of these vehicles were delivered to partner states in the European Union. Mean while, automobile imports over the last year amounted to 57 billion Euros. The balance of trade in the automotive sector therefore resulted in a surplus of more than 71 billion Euros for Germany.

Over the last year, trade with the United States of America continued to grow. The German export volume rose by 9% compared to the year 2000, to a good 20 billion Euros. By contrast, imports stood at just under 3 billion Euros. The German American balance of trade in the automotive

80 sector, with a surplus of 17 billion Euros, is therefore particularly positive for Germany.

Eastern Europe is becoming an increasingly important trading partner in the automotive sector. The German automotive industry exported products worth almost 14 billion Euros to Eastern Europe, whilst at the same time a fifth of all German automobile-specific imports, to a value of a good 11 billion Euros, came from there.

INCREASING INVESTMENT IMPROVES COMPETITIVENESS

The international competitiveness and therefore also the long-term sales prospects of any industry depend essentially on its investment levels. In 2001, the gross outlay of the German automotive industry for plant and equipment in western Germany amounted to 9.4 billion Euros. The automotive industry therefore accounted for a fifth of total industrial investment in Germany. Roughly half of the total investment last year went into expansion and restructuring, followed by investments in rationalization and equipment replacement (30%). This year, the German automotive industry again intends to increase its investment in Germany.

Given the drastically increased requirements of international competition, German manufacturers have increased their direct investment outside Germany as part of their globalization strategy and also under the pressure of high costs at home. Since the proportion of output generated outside Germany is generally supplemented by assemblies and parts supplied from Germany, these foreign investments also help to increase the output of domestic production.

In 2001, German automobile manufacturers alone invested about 10 billion Euros outside Germany. The main reasons included the need to expand their network of production sites and broaden their distribution network. With this high investment volume, the German automotive industry helps to create jobs both in Germany and other countries, not

81 only within the automotive companies themselves but also in numerous businesses in the investment goods industry and in upstream supplier sectors.

WORLD LEADER IN PATENT APPLICATIONS AND MOST RESEARCH INTENSIVE SECTOR IN GERMANY

Last year, the German automotive industry spent 14 billion Euros on research and development (R&D). This figure represents a third of total R&D spending in the economy as a whole. As a result, the automotive industry leads all other economic sectors in the Federal Republic, a long way ahead of IT manufacturers and the chemicals industry. By comparison, in 1991, the companies of the German automotive industry spent only 5 billion Euros on R&D, corresponding at the time to a share of 18% of research spending in the economy as at whole.

As a result of this forward looking strategy, the number of patent applications in German road vehicle manufacture is also continuously increasing. According to the latest statistics, companies domiciled in Germany in the automobile construction sector have applied for 4,300 patents. This figure again tops the world rankings and is much higher than for the competition, for example from the USA (3,200) or Japan (3,100). 30% of all patent applications came from companies in German road vehicle construction.

In an economy characterized by the organized division of labor and clearly defined areas of activity, participation in transport is indispensable to each member of society. The satisfaction of personal mobility and freight transport requirements is no longer conceivable without the automobile. In Germany, about 90% of personal transport is carried out with the automobile, including buses. Leisure transport has now taken the leading role, not to mention professional and business travel, shopping trips and holiday journeys.

82 In goods traffic, the commercial vehicle bears the brunt of the burden. Toughly 70% of freight transport in Germany is carried out by road haulage. Thanks to its inherent advantages as a transport system, the commercial vehicle is able to deliver goods flexibly and punctually even to remote regions, ensuring optimal supply to the population whilst also meeting strict logistical requirements, such as those deriving from just-in- time production processes. The commercial vehicle is therefore the back- bone of goods transport.

2.3STRUCTURE OF AUTOMOBILE INDUSTRY

The Five Force constitutes an Industry’s ‘structure’. Porter’s Five Forces model is a way of examining the attractiveness of an industry. It does so by looking at five forces which act on that industry. It shows that five force model is so important tool for us to analyze an organizations industry.

1. The threat of new entrants

In the auto manufacturing industry, this is generally a very low threat. Factors to examine for this threat include all barriers to entry such as upfront capital requirements (It costs a lot to set up a car manufacturing facility), Brand equity (a new firm may have none), Legislation and government policy (think safety, German Federal Constitutional Environmental protection), Ability to distribute the product.

2. The bargaining power of buyers/customers

Who in the Germany has ever bought a car without bargaining? In 2011 especially, Germany dealers were giving great deals to buyers to get the industry moving. While quantity a buyer purchases is usually a good factor in determining this force, even in the automobile industry when buyers only usually purchase one car at a time they still wield considerable power.

83 However, this may be different in other market. In Europe it sure is lower than in the Asian country, creating a more favorable situation for the industry but not the buyers.

Generally, however, it’s safe the customers have some buying power, but it depends on the market.

3. The Threat of substitute products

If buyers can look to the competition or other comparable products, and switch easily (they have low switching costs) there may be a high threat of this force. With new cars, the switching cost is high because you can’t sell a brand new car for the same price you paid for it. A P5F analysis of the industry covers the new market, not used or second-hand.

But here while considering the threat of substitute product before the buyer makes the purchase, there are many car manufacturing companies. In this industry, typically there are many cars that are similar – just look at Audi and you can easily find a very similar Mercedes, Volkswagen but it is little of substitute product.

4. The amount of bargaining power suppliers have

In the car industry this refers to all the suppliers of parts, tires, components, electronics, and even the assembly line workers (auto unions). We know in the Germany the auto unions are tremendously powerful. But we also know that some suppliers are small firms who rely on the carmakers, and may only have one carmaker as a client. So this force can be trick to evaluate.

5. The intensity of the competitive rivalry (which in part determine by 1-4)

We know that in most countries all carmakers are engaged in fierce competition. Tit-for-tat price slashes, ad campaigns, and product development keep them on the edge of innovation and profitability.

84 Margins are low and pressure between rivals is high. All major car producing nations experience intense rivalry. This obviously includes the Germany, Japan, Italy, France, UK, and more.

2.4 Functions of Automobile Sector in Germany

• The automobile industry is one of the largest employers in Germany with a workforce of around 723,000.Germany is Europe’s number one automotive market in terms of production and sales for over 35 % of all passenger cars manufactured and almost 30 % of all new registrations. • Germany is the largest concentration of OEM (Original Equipment Manufacturer) plants in Europe. There are currently 30 OEM (Original Equipment Manufacturer) sites which are producing for major auto brands. • Germany is the European car production leaders: passenger cars and trucks, buses were manufactured in Germany. • New and innovative products are made to the highest possible technological standards. With an average of 10 patents registered per day, Germany is the leader in auto industry patents. Around half of these patents are related to environmentally friendly technologies. • Efficiency and Alternative Drive SystemsIn Germany, automotive engineers are hard at work improving internal combustion engine energy efficiency, developing alternative drive technologies (like electric, hybrid and fuel cell cars), and adapting lightweight materials and electronics. • There are several German companies dominate the automotive industry in the country: Volkswagen , BMW , Daimler , Porsche , Adam Opel and Ford-Werke GmbH . Nearly 6 million vehicles are produced in Germany each year. Germany is one of the top 4 automobile manufacturers in the world.

85 • The Volkswagen Group is one of the three biggest automotive companies of the world (along with Toyota and General Motors ).

3.1 Comparative Position of Automobile sector with India (Gujarat)

Currently, six german companies dominates the automobile industry in Indian market. Volkswagen AG, B.M.W AG, Daimler AG, Porsche AG, Adam Opel AG and Ford-Werk. Nearly six million vehicles are produced in Germany each year, and approximately 5.5 million are produced overseas by German brands. The Volkswagen Group is one of the three biggest automotive companies of the world (along with Toyota and General Motors).

Tata Motors' plan to produce, in real terms, by far the cheapest car ever made. An Indian car may soon earn a parking place in history alongside Ford's Model T, Volkswagen's Beetle and the British Motor Corp.'s Mini, all of which put a set of wheels within reach of millions of customers after they rolled onto the scene. Tata Motors had developed a car it aims to sell for about $2,500--the cheapest, by far, ever made.

For decades Tata Motors has been India's largest commercial vehicle maker--the Tata logo appears on buses, dump trucks, ambulances and cement mixers. But Tata Motors, part of India's largest conglomerate, first had to reset its ways. Like many Indian companies protected for decades from foreign competition, Tata had gotten to 2000 still fat and slow. Tata Motors boosts its revenue by making dies for Jaguar, Ford, General Motors and Toyota, too, just as it does by allowing the made-in-India Mercedes to be run through its paint shop.

86 Tata Motors has more than 250 dealerships in more than 195 cities across 27 states and 4 Union Territories of India. It has the 3 rd largest sales and services Networks after Maruti Suzuki and Hyundai.

Chevrolet Sales India Private Limited In the year 2010 (January to December), Chevrolet Sales India Privet Limited sold 110,804 vehicles against 69,579 vehicles sold during the year 2009 and reported an increase of 59% in sales.

General Motors India Privates Limited GMIPL operates vehicle manufacturing plants in Halol, Gujarat and TalegaonDabhode, Maharastra; it maintains headquarters in Halol and Gurgaon and a large technical center in Bangalore. Its Halol and TalegaonDabhade Manufacturing Plants have a combined Production Capacity of 385,000 vehicles annually.

87 3.2 Present Position & Trend of Business with Gujarat

Beginning with the actual period whenever there was clearly as well thin of the number of vehicles obtainable in Indian native marketplace, Indian native car business offers show up quite a distance to possess a varied variety of vehicles nowadays. Still while seeking for the greatest ten car businesses within Indian, 1 title that could usually business lead record is actually Maruti Suzuki Indian. Maruti Suzuki offers regularly already been the actual dominating innovator within the Indian native car business. Still additionally, there are some other hot-shot companies such as Tata Motors, Mahindra as well as Mahindra, Hyundai Engines, Hindustan Engines and so on.

After the recent setback due to the global recession, the Indian automobile market has again started to grow up. Though the auto sales except commercial vehicles started creeping up since the beginning of this financial year, it's only the month of September 2009 when the market saw buoyant sales. It fuelled optimism in the industry. The retail trade also started soaring up .The auto sales saw a 9.6% rise in the month of September with a sale of 1, 092, 262 units. The passenger vehicle sales also grew by 20. 32%. The two wheeler market was also augmented by 7.67 % during the same period with a total sale of 838, 150 units. The same trade is applicable for the three-wheeler market, which saw a growth of 13. 51 %(with sale of 41, 137 units) during the same period.

88 List of Top Automobile Companies in India, 2011(Figures in ` Crore)

2011 ET 500 Company Turnover PAT Assets Rank 7 Tata Motors Ltd. 123222.91 9273.62 52209.48 Mahindra & Mahindra 21 37026.37 3079.73 36926.19 Ltd. Maruti Suzuki India 19 38140.69 2382.37 14762.9 Ltd. Tata Motors

Tata Motors may be the biggest car organization associated with Asian countries based within Mumbai, Indian. Yearly Forecasted income with regard to 2010-11 is actually US$27. 629 billion dollars. Additionally, it takes up the main place within industrial vehicle section. Tata Motors likes 31.2% associated with business within the multi-utility automobiles, that within luxurious vehicle section, they have 6.4% business. The majority of the Tata Motors' automobiles are offered mainly within Indian and also 4 million automobiles happen to be created locally inside Indian.

Tata offered 52,531 models associated with automobiles throughout Sept 2009, evaluating in order to 49,647 models throughout Sept 08 (a regarding 6%). Within household marketplace, Tata Motors offered 49,650 models throughout the exact same time period, evaluating in order to 45,234 models within Sept 08.

Tata Motor was initially on the NEW YORK STOCK EXCHANGE 7 years ago. They have the production foundation within Jamshedpur, Fortune right now as well as Pune. 7 years ago additionally, it purchased Daewoo's articulated vehicle manufacturing facility within Southern Korea. Within Mar 2005, this obtained the 21% risk within HispanicoCarrocera VOTRE, creating managing legal rights within the organization.

89 Tata Motors has got the distinctive differentiation associated with providing Indian it is very first in support of indigenously constructed traveler vehicle -- The Tata Indica and also the high quality function car -- The Tata Indigo. The Indica, released more than a decade ago, arrived at the 2, 50,000 product sales tag inside 52 months associated with release.

Tata Motors is among the biggest businesses within the Tata Team having a complete earnings associated with US$2.35 billion dollars. A lot more than 3 million Tata automobiles ply count upon Indian native highways creating Tata the dominating pressure within the Indian native car business.

Maruti Suzuki India Limited

Maruti Suzuki Indian is definitely an indisputable innovator within the Indian native car business. Began the trip within Feb 1981 because MarutiUdyog Restricted, the organization developed historical past within the Indian native car marketplace using its greatly well-known four- wheeler product Maruti 800.The organization grew to become Maruti Suzuki Indian Restricted upon Sept 17, 2007.

Maruti's typical income for year closing 2010-11 is actually US$7.13 billion dollars. Maruti offered 83, 306 models associated with automobiles within Sept this year, evaluating in order to 71, 000 models within the exact in the last year (with a rise price associated with 17.3%). Additionally, it released 11,712 models throughout Sept 2009, evaluating to 6,318 models in the last year (with a rise price associated with 85.4%).

Think about this: through 2015-16, almost among each and every 3 vehicles which campaign in the United States might be through Gujarat.

90 In case that is insufficient, within the next 35 many years, 1 / 2 the actual set up convenience of creating vehicles within Indian is going to be situated in new York state.

Simply 2 years back, the actual Sanand-Mehsana center wherever the majority of the brand new vehicle tasks are now being setup had been no place within the country’s car chart.

The Tata Nano Plant has a capacity of 2, 50, 000 each year, however can move up to 5, 00, 000.

General Motors is actually growing the capability within Halol through 85, 000 to at least 1, 00, 000 each year.

Along with auto makers through Maruti Suzuki, Peugeot PSA, Kia Indian as well as Kia Engines, in addition to the Tata’s as well as Common Engines, creating a beeline, the actual Gujarat federal government offers removed or even is within superior phases associated with discussions for more ability to create almost 3 mil vehicles each year, beginning 2014.

To check out this through an additional viewpoint, the vehicle business experienced forecasted complete vehicle product sales will be 4.5 - 5 mil through monetary year 2015-16.

Let's assume that more compared to half the capability prepared within Gujarat as well available at that time, another from the vehicles bought from the nation ought to campaign associated with Gujarat, based on skillfully developed.

91 The entire investment decision of those brand new tasks is actually approximated in a lot more than Rs. 26, 000 crore, excluding those wherever discussions continue to be upon.

All those changing in order to Gujarat possess reasons. Maruti Suzuki, like may be the biggest trader within the car field within Gujarat and it has authorized the pact using the local government to setup the 2 mil each year capability flower within Mehsana region. The actual investment decision label is actually Rs 18, 000 crore.

4.1 Policies and Norms of Automobile Industry in Germany The European Commission asserts that “the competitiveness of the automotive industry, and the European economy, depends on a coherent and cost-effective regulatory framework”. Many of regulations were established as a result of accidents, pollution, noise or to promote competition and a better deal for consumers). On the other hand, motoring is an important source of revenue for all Member States. There are a wide range of tax instruments to “ensure significant budgetary receipts from both private and commercial road users”

Block Exemption In the past, the block exemption from the European Union set a framework for the “operation of vehicle franchised networks” and regulated the “distribution of cars and vehicle services” Consumer groups have complained that in large markets like Germany the prices for identical vehicle models vary by up to 40 % in Europe and that car manufacturers exploit national market differences to boost their own profits To eliminate the market differences the European commission introduced the right to buy a car in a member state where prices are This opening of the territory invites much more intense competition which impacts on the automotive industry

Oil consumption Oil consumption by the transport sector has risen dramatically in recent years Of this car consumption accounts for a huge part of the oil for which the EU is dependent on imports The European Union is trying to reduce the dependence on oil from the current level of 98%, by using alternative fuels, improving the energy efficiency of modes of transport and by introducing of higher fuel prices There must be lower fuel consumption in the future (and it is necessary for the automotive industry to look for alternatives ( This fact forces leading manufacturers to do research and engineering into new fuel and power technologies

Clean air Environmental objectives provided by the Kyoto Protocol forced the use of fiscal measures (taxation) to reduce CO2emissions from passenger cars and improve fuel economy, Fiscal measures have a potential to support reduction of the average CO2emitted from vehicles and they are a wide spread incentive to change behavior of consumers and therefore manufacturers The EU introduced emissions standards which are compulsory for all EU Member States Norms and standards are regulations which promote innovations in particular fields In addition a labeling scheme was introduced to provide consumers with standardized information based on tests which reflect normal driving conditions Moreover the label scheme may be used to ban old, high polluting cars from entering the city centers. This would indicate that EU-based car manufacturers are forced to reduce CO2emissions of new cars

European safety program The European safety program is publishing test results to inform consumers about the safety performance of the most popular categories of new cars, with harmonized testing protocols, under conditions representative of different types of crashes

93 The European Commission provides financial support and takes part in technical decisions, giving incentives to make cars safer and avoid accidents

94 4.2 Policies and Norms of India for Export-Import to Germany

The various rules and guidelines in respect of various commodities and category of importers are mentioned in the following publications issued by the Ministry of Commerce, Government of India and revised from time to time:

• Import - Export Policy, 2010-2011 as modified up to 31.03.1999 • Handbook of Procedure • Standard Input - Output Norms, 2010-2011 • ITC (HS) Classification of Import and Export Items.

Export- Import Policy (2010 2011) (EXIM):

Export Import Policy or better known as Exim Policy is a set of guidelines and instructions related to the import and export of goods. The Government of India notifies the Exim Policy for a period of five years (2010 - 2011) under Section 5 of the Foreign Trade (Development and Regulation Act), 1992. The current policy covers the period 2010-2011. The Export Import Policy is updated every year on the 31st of March and the modifications, improvements and new schemes became effective from 1st April of every year. All types of changes or modifications related to the Exim Policy is normally announced by the Union Minister of Commerce and Industry who co-ordinates with the Ministry of Finance, the Directorate General of Foreign Trade and its network of regional offices.

Canalization is an important feature of Exim Policy under which certain goods can be imported only by designated agencies. For an example, canalised import items like gold, in bulk, can be imported only by

95 specified banks like SBI (State Bank of India) and some foreign banks or designated agencies.

Handbook of Procedure:

Handbook of Procedure (Volume I and Volume II), which is issued by the Director General of Foreign Trade (DGFT), is a book that contains all the necessary information about the rules and regulation in the matter related to Foreign Trade Policy. Handbook of Procedure is issued at the gap of every five year with change in the Foreign Trade Policy. Between the five years terms, any further changes or modifications in the Handbook of Procedure are carried out by notifications and amendments.

Standard Input - Output Norms (SION) :

Standard Input Output Norms or SION in short is standard norms which define the amount of input/inputs required to manufacture a unit of output for export purpose. Input output norms are applicable for the products such as electronics, engineering, chemical, food products including fish and marine products, handicraft, plastic and leather products etc. An application for modification of existing Standard Input- Output norms may be filed by manufacturer exporter and merchant- exporter.

The Directorate General of Foreign Trade (DGFT) from time to time issue notifications for fixation or addition of SION for different export products. Fixation of Standard Input Output Norms facilitates issues of Advance Licence to the exporters of the items without any need for referring the same to the Headquarter office of DGFT on repeat basis.

96 ITC- HS Codes:

ITC- HS codes or better known as Indian Trade Clarification based on Harmonised System of Coding was adopted in India for import-export business. Indian custom uses an eight digit ITC HS Codes to suit the international trade requirements.

Harmonised System codes are divided into two schedules. Schedule I describe the rules and guidelines related to import policies where as Schedule II describe the rules and regulation related to export policies.

Schedule I of the ITC-HS code is divided into 21 sections and each section is further divided into chapters. The total number of chapters in the schedule I is 98. The chapters are further divided into sub-heading under which different HS codes are mentioned. Schedule II of the ITC-HS code contain 97 chapters giving all the details about the guidelines related to the export policies.

LICENCING:

IMPORT LICENSE:

While the majority of the goods are freely importable, the Exim Policy (2007) of India prohibits import of certain categories of products as well as conditional import of certain items. In such a situation it becomes important for the importer to have an import license issued by the issuing authorities of the Government of India.

• Import License Issuing Authority:

97 In India, Import License is issued by the Director General of Foreign Trade. DGFT Delhi office is situated in UdyogBhawan, New Delhi 110011.

• Validity of Import License:

Import Licenses are valid for 24 months for capital goods and 18 months for raw materials components, consumable and spares, with the license term renewable.

• Sample of Import License:

A typical sample of import license consists of two copies- Foreign Exchange Control Copy: To be utilised for effecting remittance to foreign seller or for opening letter of credit Customs Copy: To be utilised for presenting to Customs authority enabling them to clear the goods. In the absence of custom copy, import will be declared as an unauthorised import, liable for confiscation and or penalty.

• Categories of Import:

All types of imported goods come under the following four categories

• Freely importable items:

Most capital goods fall into this category. Any product declared as Freely Importable Item does not require import licenses.

• Licensed Imports:

There are number of goods, which can only be importer under an import license. This category includes several broad product groups that are

98 classified as consumer goods; precious and semi-precious stones; products related to safety and security; seeds, plants and animals; some insecticides, pharmaceuticals and chemicals; some electronically items; several items reserved for production by the small-scale sector; and 17 miscellaneous or special-category items.

• Canalized Items:

There are certain canalized items that can only be importer in India through specified channels or government agencies. These include petroleum products (to be imported only by the Indian Oil Corporation); nitrogenous phosphatic, potassic and complex chemical fertilizers (by the Minerals and Metals Trading Corporation) vitamin- A drugs (by the State Trading Corporation); oils and seeds (by the State Trading Corporation and Hindustan Vegetable Oils); and cereals (by the Food Corporation of India).

• Prohibited items:

Only four items-tallow fat, animal rennet, wild animals and unprocessed ivory-are completely banned from importation.

• Category of Importer:

On the basis of product to be imported and its target buyer, importers categories are divided into three groups for the purpose of obtaining import licensing:

1. Actual Users applies for and receives a license to import of any item for personal use rather than for business or trade purpose. 2. Registered exporters defined as those who have a valid registration certificate issued by an export promotion council, commodity board or other registered authority designated by the Government for purposes of export-promotion.

99 3. Others .

The two types of actual user license are:

1. General Licenses : This license can be used for the imports of goods from all countries, except those countries from which imports are prohibited; 2. Specific Licenses : This license can only be used for imports from a specific country.

• Custom Inspection:

Any violation in the import license is usually scanned by the custom officials of the custom department. Customer inspector and other custom officials have authority to inspect and evaluate the goods to be imported. It’s a part of their job to determine whether imports conform to the description in the import License or not. Custom official even have right to charge fines and penalties if any violation in the import license is found to be done by the importer.

EXPORT LICENSE:

An export license is a document issued by the appropriate licensing agency after which an exporter is allowed to transport his product in a foreign market. The license is only issued after a careful review of the facts surrounding the given export transaction. Export license depends on the nature of goods to be transported as well as the destination port. So, being an exporter it is necessary to determine whether the product or good to be exported requires an export license or not. While making the determination one must consider the following necessary points:

• What are you exporting?

100 • Where are you exporting? • Who will receive your item? • What will your items will be used? • Canalization

Canalization is an important feature of Export License under which certain goods can be imported only by designated agencies. For an example, an item like gold, in bulk, can be imported only by specified banks like SBI and some foreign banks or designated agencies.

• Application for an Export License

To determine whether a license is needed to export a particular commercial product or service, an exporter must first classify the item by identifying what is called ITC (HS) Classifications. Export license are only issued for the goods mentioned in the Schedule 2 of ITC (HS) Classifications of Export and Import items. A proper application can be submitted to the Director General of Foreign Trade (DGFT). The Export Licensing Committee under the Chairmanship of Export Commissioner considers such applications on merits for issue of export licenses.

• Exports Free unless regulated

The Director General of Foreign Trade (DGFT) from time to time specifies through a public notice according to which any goods, not included in the ITC (HS) Classifications of Export and Import items may be exported without a license. Such terms and conditions may include Minimum Export Price (MEP), registration with specified authorities, quantitative ceilings and compliance with other laws, rules, regulations.

101 4.3 Trade Barriers for Import-Export of Automobiles

Trade barriers are government-induced restrictions on international trade. The barriers can take many forms, including the following: Tariffs Non-tariff barriers to trade: • Import licenses • Export licenses • Import quotas • Subsidies • Voluntary Export Restraints • Local content requirements • Embargo • Currency devaluation • Trade restriction

Trade Barriers Any restriction imposed on the free flow of trade is a trade barrier. Trade barriers can either be tariff barriers (the levy of ordinary negotiated customs duties in accordance with Article II of the GATT) or non-tariff barriers, which are any trade barriers other than tariff barriers. • Import Licensing : One of the most common non-tariff barriers is the prohibition or restrictions on imports maintained through import licensing requirements. Though India has eliminated its import licensing requirements for most consumer goods, certain products face licensing related trade barriers. For example, the Indian government requires a special import license for motorcycles and vehicles that is very restrictive. Import licenses for motorcycles are provided to only foreign nationals permanently residing in India, working in India for foreign firms that hold greater than 30 percent equity or to foreign nations working at embassies and foreign missions. Some domestic

102 importers are allowed to import vehicles without a license provided the imports are counterbalanced by exports attributable to the same importer. • Standards, testing, labelling & certification : The Indian government has identified 109 commodities that must be certified by its National Standards body, the Bureau of Indian Standards (BIS). The idea behind these certifications is to ensure the quality of goods seeking access into the market, but many countries use them as protectionist measures. For more on how this relates to labeling requirements, please see the section on Labeling and Marking Requirements in this chapter.

• Anti-dumping and countervailing measures : Anti-dumping and countervailing measures are permitted by the WTO Agreements in specified situations to protect the domestic industry from serious injury arising from dumped or subsidized imports. India imposes these from time-to-time to protect domestic manufacturers from dumping. India's implementation of its antidumping policy has, in some cases, raised concerns regarding transparency and due process. In recent years, India seems to have aggressively increased its application of the antidumping law. In the first half of the calendar year 2006 India topped the list of countries initiating new anti-dumping investigations with 20 new initiations.

• Export subsidies and domestic support : Several export subsidies and other domestic support is provided to several industries to make them competitive internationally. Export earnings are exempt from taxes and exporters are not subject to local manufacturing tax. While export subsidies tend to displace exports from other countries into third country markets, the domestic support acts as a direct barrier against access to the domestic market.

103

• Procurement : The Indian government allows a price preference for local suppliers in government contracts and generally discriminates against foreign suppliers. In international purchases and International Competitive Bids (ICB's) domestic companies gets a price preference in government contract and purchases.

• Service barriers : Services in which there are restrictions include: insurance, banking, securities, motion pictures, accounting, construction, architecture and engineering, retailing, legal services, express delivery services and telecommunication.

• Other barriers : Equity restrictions and other trade-related investment measures are in place to give an unfair advantage to domestic companies. The GOI continues to limit or prohibit FDI in sensitive sectors such as retail trade and agriculture. Additionally there is an unpublished policy that favors counter trade. Several Indian companies, both government-owned and private, conduct a small amount of counter trade.

104 5.1 Potential for Export-Import in India

German automobiles are known worldwide. Now the industry is focusing on India’s enormous market. On 23 and 25 January, Germany Trade & Invest is hosting two investor events, the Indo- German Automotive Industry Forum, in New Delhi and Chennai to mark this window of opportunity for cooperation between the two countries. In 2011, market share for German cars doubled and suppliers exported 53 percent more to India. In a sign that these trends are set to continue in 2012, Germany's industry made up the largest single country representation at New Delhi's Auto Expo at the beginning of January. At the same time, Germany's cutting-edge R&D and high standards for efficiency and quality make it an ideal partner for Indian suppliers and automakers.

Indian automotive companies are gaining momentum and notice around the world. With Tata's takeover of Jaguar and Land Rover as well as the company’s concept of an affordable electric vehicle introduced at the Detroit auto show, international markets are increasingly in focus for the country’s automakers.

105 "Germany is an ideal destination for Indian companies because of its culture of innovation, outstanding infrastructure, and access to the entire European market. Especially the ingenuity found in eastern Germany makes the country attractive for potential partners from India," said Michael Pfeiffer, Chief Executive of Germany Trade & Invest.

In eastern Germany, Volkswagen, Mercedes, Porsche, BMW and Opel all operate modern factories that take advantage of the excellent infrastructure and well-trained workforce. This is also true for countless suppliers that joined the major manufacturers in these regions. Eastern Germany will be the focal point of the investor events next week. The industry forums mark Germany Trade & Invests first events as part of this year’s Germany & India: Infinite Opportunities celebrations.

"In 2011, Germany exported over nine billion Euros in goods and services to India and imported more than six billion Euros worth. At this point there are approximately 280 Indian companies with several thousand employees already active in Germany. There is definitely strong potential for growth in these areas and the automotive industry is an excellent place to start," continued Michael Pfeiffer.

106 5.2 Business Opportunities in Future

The Indian automobile components’ industry has been associated since 3 decades with a wide spectrum of technology originating from different countries through collaborations. This enabled the industry to build a very strong technological base. The industry possesses sophisticated manufacturing technologies and employs CAD/CAM and other production technologies. The industry manufacturers a wide range of products such as engine parts, electronic parts & equipment, drive transmission and steering parts, suspensions and braking parts. The industry uses batch production techniques to cater to one time requirements made to order. Raw materials are available at international prices under the new policies

107 5.3 Conclusion The question that has often been asked is "Does the Indian Industry have the power to compete internationally: There is no simple answer to this. Rather one would have to make a detailed analysis often strengths weaknesses of the Indian industry with a specific focus on what Indian Industry is and should be doing to cope with the ride of global competition. Although it would be very difficult to analyse all aspects of exports an attempt has been made of highlights the issue relevant to in Indian automobile industry exports.

Historically production of Indian Automobile Industry was controlled monitored by various policies resulting in shortage of vehicles in the market. Automobile industry was considered as a luxury item and therefore controlled by various policies and measures. For some of the model the customer had to wait for years not months to get his vehicle.

Most often vehicles were enjoying high premium and it continued little liberalization. Moreover the policy was worse of import substitution taken than export promotion.

In this context, manufacturer had a limited opportunity or incentives to export from Indian market. It was very difficult to meet even the domestic demand due to limited licensed capacities. Further the manufacturers had problems like:

• Low volume and high cost of production • Difficult to access the technology capital goods and production aids • Cumbersome export procedure • Low margin in export market • Lack of international network • Lack of infrastructure like loads However with the liberalization July '91, some of these problems were taken care by the government. But some of the problems either

108 aggravated or remained unsolved. It was expected that with the liberalization and with more industrialization, the government may allocate more funds or privatize source of the infrastructural activities like rods, railway, telecom it I to augment the growth process.

However even after 5 year of liberalization some of the decision has been either postponed or policies are not clear or supportive to attract investment.

Further in most of the countries exports activity is being considered or priority activity and the --- who the most successful exporter carried a high regard in the country. In India we have not yet identified or given the importance of exports from India. It is worth mentioning that in the past India was ahead of countries like Korea in exports. The analysis shows that on India, exports have been a marginal activity.

We are still concentrating more on the issue how to make imports rather than to promote exports. Keeping in these constraints of carefully analyse some of the automobiles companies, performance of exports over the last 5 year, one will conclude that the performance has been reasonable.

There has been a substantial increase in exports volume in 1997-98 as compared to 1992-93. In just 5 years, overall exports increased from 73891 vehicles to 189684 vehicles an increase of 256%. Exports as a percentage of total sales increased from 3.9% in 1992-93 to 4.8% in 1997-98.

Within the liberalization of foreign investment technology, vehicle and vehicle and component manufacturing have easier access to the latest technology which is essential to meet international quality of performance standards. It is also easy to import machines and tooling. While these while these are no longer serious hurdles, further liberalization simplification of procedures and reduction of taxes and duties, buildings, up of proper infrastructure like ports, roads etc. and threat on export by

109 the government are necessary to augment exports India. If these are implemented, with the volume advantage in some segment, there is no doubt that Indian automobiles manufacturing can increase their share in export market many times in the next 5 to 50 years.

110 PART-2 INDUSTRY SPECIFIC STUDY

A STUDY REPORT ON INFORMATION TECHNOLOGY SECTOR IN GERMANY

111 INFORMANTION TECHNOLOGY IN GERMANY

Information technology (It) is the requisition of Pcs and telecommunications gear to store, recover, transmit and control information, regularly in the connection of a business or other undertaking.

The term is ordinarily utilized as an equivalent word for workstations and Pc systems, yet it likewise includes other qualified data conveyance innovations for example TV and phones.

A few commercial ventures are connected with informative content engineering, for example workstation equipment, programming, hardware, semiconductors, web, telecom supplies, e-trade and workstation administrations.

In a business connection, the Information Technology Association of America has described informative content engineering as "the study, configuration, infrastructure, requisition, execution, help or administration of machine based informative data frameworks".

The obligations of the aforementioned working in the field incorporate system management, programming growth and introduction, and the arranging and administration of a conglomeration's engineering life cycle, by which equipment and programming is looked after, overhauled, and displaced.

People have been saving, recovering, controlling and imparting informative data since the Sumerians in Mesopotamia advanced written work in something like 3000 Bc, yet the expression "informative content engineering" in its cutting edge sense first showed up in a 1958 article distributed in the Harvard Business Review; writers Harold J. Leavitt and

112 Thomas L. Whisler remarked that "the new innovation does not yet have a solitary made name.

We should call it qualified information innovation (It)." Based on the space and preparing advances utilized, it is conceivable to recognize four dissimilar stages of It improvement: premechanical (3000 Bc – 1450 Ad), mechanical (1450–1840), electromechanical (1840–1940) and electronic (1940–present).

This article keeps tabs on the latest period (electronic), which started in the ballpark of 1940.

113 2.1 INFORMATION TECHNOLOGY SECTOR IN GERMANY

The Information Technology industry in Germany assumes extremely essential part in the nation's economy and also the EU's Market. Despite of current investment headwinds, Germany's It industry is still Forecasted to develop at a CAGR of 4% over 2010-2014.

The addressable domestic market for IT products and Services is projected by Business Monitor International (BMI) to arrive at Us$58.8bn in 2010 and Us$68.1bn by 2014.

BMI estimates Germany's addressable Computer hardware Market sector will be worth around Us$16.2bn in 2010, up an expected 7% from Us$15.1bn in 2009. Add up to Pc incomes incorporating journals and desktops are evaluated to be Us$13.2bn and are wanted to ascent to Us$16.1bn by 2014.

German market programming deals are imagined by BMI at Us$18.8bn and, regardless of the indeterminate budgetary conditions; incomes are needed to ascent to Us$20.4bn in 2014. While programming CAGR for 2010-2014 Should be about 3%.

2.1.1 IT SECURITY

The civil technology market can be subdivided into eight dissimilar sections. Various the aforementioned portions are wanted to record noteworthy builds in the instantaneous future, with It security specifically needed to twofold as far as business potential. The It security section comprises of IT items and servicesdesigned to guarantee the privacy, availability and trustworthiness of information. This incorporates the fields of hostile to infection programming (malware), content and spam’s sifting, firewall and interruption aversion, portable security, remote

114 access, message encryption, personality administration, and other security Technologies and applications.

The It security field additionally displays many chances for consultancy Servicesproviders spend significant time in It security administration frameworks and preparing, preventive measures, episode reaction, and open source following. The on the whole market elucidated EUR 4.7 billion in 2008, and it is gauge that the business will produce EUR 10.6 billion by 2015. The primary explanation behind this conjecture development is the ongoing increase in security risks.

2.1.2 INFORMATION TECHNOLOGY GEOGRAPHIES

The change in the work environment from assembling to the purported "administration public order" does not just recharge the rivalry between rustic regions and conurbation and yet between metropolitan zones. Primary territories of towering R&D and improvements in the Service Industry are Hamburg, Bremen, lower Main range, Ludwigshafen, Mannheim/Heidelberg, Stuttgart, Nuerngerg/Erlangen, and Munich. Each of them Focus on one primary zone. In eastern Germany Berlin and Dresden have an extraordinary improvement that will transform them into focuses of ability inside the next years.

Dresden -an inside of microelectronics

The biggest victory in pulling in new organizations has been the semiconductor assembling offices Siemens Microelectronics Center Dresden -SIMEC (Dm 2.7 billion / 1.7 billion ventures) and the chip processing line by AMD -Advanced Micro Devices Inc., California (Dm 2.9 billion / $1.8 billion ventures). Accordingly, the capital of Saxony gets a cutting edge elevated tech territory in Europe. 3500 -4000 livelihoods were picked up and back the neighborhood work market. Since the new

115 plants will lure further business, medium estimated associations of the electronic business, suppliers and research foundations additionally benefit.

Berlin -Center of Excellence

Berlin has become active for start up organizations out of the programming, media and telecommunication industry. Today, more than 1100 programming associations are found here. 7.700 associations of the media and conveyances industry with pretty nearly 70.000 workers proceed the media custom of Berlin. Something like 62,000 individuals are utilized with deductive and inquire about foundations and associations incorporating 16,300 researcher. As of now, 3,500 understudies are enlisted in machine science with 600 of them graduating every year. Most programming associations in Berlin just have seven or less representatives and numerous were established by understudies throughout their school training. The 13 schools and universities, 10 foundations and more than 250 examination organizations around them the Heinrich-Hertz-Institute for correspondences designing, and the Konrad-Zuse-Institue for informative content innovation speak for human capital and innovative smoothness that is likewise ready for private companies. 80 examination foundations of colleges keep tabs on telecommunications, information framework engineering and arithmetic.

The city of Berlin has establish nine centers for begin up associations with the objective to support newly founded companies. The Scientific fields of interest are photonic, natural innovation, qualified data and conveyance engineering and production technology.

Private companies in Berlin established an activity assembly called Pro Time to quicken the presentation of interactive media benefits and provisions to the commercial center. Comparable to Smart Valley in

116 California, Pro Time is expected to advertise innovation infrastructure in the area and to serve as a conveyance and qualified information basis.

2.2 INFORMATION TECHNOLOGY USAGE

Qualified information innovation expands benefits in numerous ranges of the commonplace life. Just a couple of perspectives are said on the aforementioned sites.

2.2.1 THE BANKING SECTOR The managing an account segment is one of the primary client of qualified information innovation. Furthermore interconnections inside the monetary part, supplemental administrations for clients for example telebanking or terminals for the full run of installment administrations are furnished. In 1997, the cashcard in manifestation of a shrewd card was presented in Germany. A different characteristic of the German keeping money segment are immediate banks for example Bank24 a subsidiary of the Deutsche Bank or comdirekt a subsidiary of the Commerzbank. The aforementioned saving money associations give their administration only by telephone, send, web or other online benefits as BTX. There are two major points of interest for the client: (1) 24 hour administration and worldwide access through the web give heightened adaptability and freedom of time and area. (2) Direct banks have the ability to give benefits for easier administration expenses because of the way that they don't work any extensions. Along these lines, working and faculty expenses are much more level.

2.2.2 INFOCITY NRW Infocity NRW is the biggest mixed media venture in Europe acting for the advanced city of tomorrow. It is worked by o.tel.o, one of the new contenders of Deutsche Telekom. Infocityassociate families, associations, informative data bases and the regulatory form in Duesseldorf, Cologne

117 und Gelsenkirchen through a fast filament optic link. Administrations incorporate teleshopping, qualified information on interest, diversions and excitement, voyage & tourism, keeping money, computerized Tv and teleteaching. The Metropolitan Area Network of 220 km, that exchanges information with a velocity 30-times speedier than Isdn, furnishes pictures, content and motion pictures. 2.2.3 THE PEOPLE

In numerous urban communities in Germany, the regular individuals started web ventures on their city. One illustration is the Internet Hagen - launched by number of inhabitants in the city of Hagen to furnish Information about occasions, society, the individuals and the history. Exceptional is likewise the native's qualified information framework "Dresden and the Frauenkirche (Church of Our Lady)" in Dresden. Is furnishes informative content for occupants and guests about the 800 year history of the city and serve to expand cognizance about the activity to reconstruct the Frauenkirche, which was decimated in the Second World War.

2.3 INFORMATION TECHNOLOGY STRENGTHS & WEAKNESSES

Strengths Weaknesses

- very advanced and fully - the golden mile to connect digitized infrastructure households is almost entirely Infrastructure - high ra tio of fiber optic owned by the former PTT cables Deutsche Telekom

- market just recently - legal environment for liberalized, therefore, Liberalization competitive market exists competition has t o develop further

Education - very good basic education - improvement of conditions

118 System - very efficient vocational in university necessary with system respect to student /professor ratio, average time spend in higher education

- focus of research is on innovations, more basic high - many high te ch research Research tech research is necessary institutes not to fall behind the US and Japan in a few years 2.4 INFORMATION TECHNOLOGY SECTOR IN INDIA

The Information innovation industry in India has picked up a mark personality as an information economy because of IT and ITES segment. The ITES business has two major segments: Services and business process outsourcing (BPO). The development in the administration area in India has been advanced by the It–ITES segment, giving considerably to build in GDP, vocation, and sends out. The area has expanded its commitment to India's GDP from 1.2% in Fy1998 to 7.5% in Fy2012. Consistent with NASSCOM, the It–BPO part in India amassed incomes of Us$100 billion in Fy2012, where send out and residential income stood at Us$69.1 billion and Us$31.7 billion individually, developing by over 9%. The major urban areas that elucidate about practically 90% of this areas fares are Bangalore, Hyderabad, Chennai, Delhi, and Mumbai. Bangalore is acknowledged to be the Silicon Valley of India on the grounds that it is the advancing It exporter. Send out rule the It–ITES business, and constitute about 77% of the sum business income. Despite the fact that the It–ITES area is fare driven, the local business is likewise huge with a powerful income development. The industry's offer of aggregate Indian trades (stock in addition to administrations) expanded from less than 4% in Fy1998 to about 25% in Fy2012. Consistent with Gartner, the "Top Five

119 Indian It Services Providers" are Tata, Infosys, Cognizant, Wipro and HCL Technologies.

This segment has additionally accelerated enormous livelihood era. The industry presses on to be a net job generator -wanted to include 230,000 livelihoods in Fy2012, in this manner furnishing control vocation to about 2.8 million, and by implication utilizing 8.9 million individuals. For the most part prevailing player in the worldwide outsourcing part. Then again, the area presses on to face tests of aggressiveness in the globalized planet, especially from nations like China and Philippines.

India's developing stature in the Information Age empowered it to shape close ties with both the United States of America and the European Union. Nonetheless, the later worldwide monetary emergencies has profoundly swayed the Indian It associations and worldwide associations therefore procuring has dropped sharply, and workers are checking out distinctive areas like the money related administration, telecommunications, and assembling commercial ventures, which have been developing sensationally throughout the most recent not many years. India's It Services industry was conceived in Mumbai in 1967 with the station of Tata Group in association with Burroughs. The primary programming fare zone Seepz was set up here route in 1973, the old avatar of the cutting edge It Park. More than 80 percent of the nation's programming fares happened out of Seepz, Mumbai in 80s.

2.4.1 POST LIBERALIZATION

In 1991 the Department of Electronics broke this impasse, making a partnership called Software Technology Parks of India (STPI) that, being claimed by the legislature, could give VSAT correspondences without breaking its imposing business model. STPI set up programming

120 innovation stops in distinctive urban communities, each of which gave satellite connections to be utilized by firms; the neighborhood connection was a remote radio join. In 1993 the legislature started to permit distinctive associations their particular devoted connections, which permitted work done in India to be transmitted abroad straight. Indian firms soon influenced their American clients that a satellite connection was as dependable as a group of programmers working in the customers' office.

VIDESH Sanchar Nigam Limited (VSNL) presented Gateway Electronic Mail Service in 1991, the 64 Kbit/s rented line benefit in 1992, and business Internet access on an unmistakable scale in 1992. Race outcomes were shown by means of National Informatics Centre's NICNET.

The Indian economy experienced monetary changes in 1991, expediting another period of globalization and universal budgetary coordination. Investment development of over 6% every twelve-months was seen throughout 1993-2002. The budgetary changes were determined to some extent by noteworthy the web utilization in the nation. The new government under AtalBihari Vajpayee—which set the advancement of Information Technology near its top five necessities structured the Indian National Task Force on Information Technology and Software Development.

Wolcott & Goodman (2003) report on the part of the Indian National Task Force on Information Technology and Software Development

Inside 90 days of its foundation, the Task Force processed a far reaching foundation cover the state of engineering in India and an It Action Plan with 108 suggestions. The Task Force could act rapidly on the grounds that it based the encounter and frustrations of state governments, mid government firms, schools, and the programming business. Much of what

121 it proposed was likewise predictable with the reasoning and suggestions of global figures like the World Trade Organization (Wto), International Telecommunications Union (ITU), and World Bank. Also, the Task Force fused the encounters of Singapore and different countries, which accomplished comparative projects. It was less an errand of brainstorm than of starting movement on an agreement that had as of recently advanced inside the systems administration group and government.

The New Telecommunications Policy, 1999 (Ntp 1999) assisted further change India's telecommunications part. The Information Technology Act 2000 made lawful techniques for electronic transactions and e-trade.

All through the 1990s, a different wave of Indian experts entered the United States. The amount of Indian Americans arrived at 1.7 million by 2000. This migration comprised extensively of quite knowledgeable mechanically capable specialists. Inside the United States, Indians fared well in science, building, and administration. Graduates from the Indian Institutes of Technology (Iit) ended up being known for their specialized abilities. The victory of Information Technology in India not just had financial repercussions and yet had sweeping political outcomes. India's notoriety both as a source and agoal for skilled workforce caused it enhance its relations with various planet economies. The relationship between economy and engineering esteemed in the western—expedited the development of an entrepreneurial class of worker Indians, which further assisted help in advertising innovation driven development.

The monetary impact of the mechanically slanted administrations part in India—elucidating 40% of the nation's GDP and 30% of fare wages starting 2006, while utilizing just 25% of its workforce—is outlined by Sharma (2006)

122 The stake of It (mostly programming) in sum fares expanded from 1 percent in 2001 to 18 rate in 2001. It-empowered administrations for example back office operations, remote support, bookkeeping, open call focuses, therapeutic translation, protection claims, and other mass transforming are quickly growing. Indian associations for example HCL, TCS, Wipro, and Infosys might yet come to be family names far and wide.

Today, Bangalore is reputed to be the Silicon Valley of India and commits 33% of Indian It Exports. India's second and third biggest programming associations are head-quartered in Bangalore, as are a hefty portion of the worldwide Sei-Cmm Level 5 Companies.

Mumbai too has its offer of It associations that are India's first and biggest, for example TCS and decently built like Reliance, L&t InfoTech, Wns, Shine, Naukri, Jobs saucy and so on are head-quartered in Mumbai. Furthermore the aforementioned It and dab com associations are controlling the perch of Mumbai's moderately elevated octane industry of Information Technology.

Such is the development in speculation and outsourcing; it was uncovered that Cap Gemini will soon have more staff in India than it does in its home market of France with 21,000 personnel+ in India.

On 25 June 2002 India and the European Union consented to reciprocal collaboration in the field of science and innovation. A joint EU-India aggregation of researchers was structured on 23 November 2001 to further push joint research and advancement. India holds onlooker status at CERNwhile a joint India-EU Software Education and Development Center is unpaid at Bangalore.

123 2.4.2 BIG FOUR IT SERVICES COMPANY

Fiscal Firm Revenues Employees Headquarters Year

$10.17

TCS 254,076 2012 Mumbai billion

Wipro $7.30 billion 140,569 2012 Bangalore

Infosys $7.00 billion 153,761 2012 Bangalore

HCL

$4.3 billion 85,335 2012 Noida

Technologies

124

2.5 INFORMATION TECHNOLOGY SECTOR IN GUJARAT

Gujarat is a standout amongst the most prosperous states of India owing to its farming profit and mechanical improvement. The for every capita GDP of Gujarat is 2.5 times the nation's normal GDP The state leads the nation in different modern parts in particular, textiles, building, chemicals, petrochemicals, sedates and pharmaceuticals, dairy, concrete and earthenware production, diamonds and Jewellery. There has been an enormous business chance in the manifestation of Gujarat Tender, Government delicate notices, Procurement Notices, Public Tender Notices, Bids, Online Tenders and contracts throughout the year. India is currently one of the most amazing It capitals in the up to date planet. India's outsourcing industry is needed to expand to US $225 billion by 2020. TheIt business elucidates a major offer in the fares from India. The most amazing profit of the It business is the tremendous vocation it produces. With stimulus development Information Technology area, there are colossal interest for Information Technology Tenders, Global It Tenders, delicate warning, delicate warning, Tenders on the web, Tenders on the web, open delicate notices and It Procurement observes onto every part of planet.

Gujarat is the place that is known for venture, of spirit of co-operation, of practicality and functional shrewdness. Gujarat was dead set to accomplish a head position in the national economy. It has planned imaginative strategies, advanced indigenous procedures and fixed all available attention on the for the most part advancement of its individuals.

Added to this is the state's decently improved framework. It has brilliant way arrange, line connectivity, air linkages with a worldwide airfield at

125 Ahmadabad, ports and telecommunication offices. The state has national level scholarly and research establishments and overall advanced higher instructive foundation. The state additionally furnishes great living conditions with high caliber of urban administrations like power, water, impeccability, training and social insurance foundation. It likewise has a generally improved diversion base with multiplexes in all major urban communities, entertainment and water parks and human services office.

2.5.1 COMMUNICATION INFRASTRUCTURE

The fundamental telephony framework of the state embodies more than 3.5 million landlines, making as a phone thickness of around 7 incorporating associations furnished by BSNL and Private Operators. New landline administrators like Tata Teleservices and Reliance Infocomm have recognized Gujarat as their imperative business. The State additionally has a vibrant versatile telephony market. It has 4 specialists and has almost 1.1 million subscribers in the state, which is the most astounding in the A ring states. Tata Teleservices and Reliance Infocomm have begun their CDMA cellular telephone administrations.

The state likewise has a noteworthy transmission capacity framework with a limit of around 72 Mb. The state has 5 universal passages with 1 more proposed. Gujarat is the state where almost 90% talukas are as of recently joined through an OFC link system.

The state has Software Technology stop of India -at the state's capital, Gandhinagar. The STPI has 295 affirmed units, explaining 5% of the endorsed STPI units in India. It likewise has 3 other It stop -Infocity at Gandhinagar and GNFC Tower &Astron Tech Park at Ahmedabad.

126 2.5.2 INVESTMENT CLIMATE

The legislature has set up a free organization that might deal with the usage of the It drives by setting up Gujarat Informatics Ltd. (Gil). Right from its initiation, Gil has had a clear center -burgeoning of It into the regular life of its residents and inspiring the expectation for everyday comforts. Gil is the nodal office for the legislature for achieving It- arrangement. The single focus contact dispenses with all equivocalness and escapes the necessity to surge from column to post for an entire plenty of exercises. The accentuation on speed, productivity and professionalism is apparent from the methodology consumed and the eagerness to take the fundamental steps.

The state government has additionally been pushing e-administration in a huge manner. TheIt branch has made an informative data passageway (GSWAN) uniting the state capital with the locale home office and taluka home office. As of now, the legislature is in the any time that was spent Computerizing area records, which will then be made accessible at the area authority central command with the expectation that this drive will achieve more terrific transparency. The move is likewise needed to profit It associations envious of setting up their particular framework in the state.

127

3. INDIA AND GERMANY AS TRADING PARTNERS

Indo-German ties, which have customarily been close and friendly, are especially portrayed by serious co-operation in the fields of economy. Indo-German financial relations have taken shape as right on time as the 19th century with first German associations like Krupp Ag, Siemens and Bayer Ag. Because of their heightened innovative gauges, productive business, execution and lifelong responsibility, German associations in India have earned themselves an exceptional notoriety.

India offers an enormous potential for remote exchange and ventures. India's majority rules system and market economy guarantee a sound political framework and lawful structure, basically solid micro financial structure, handy ambition people and splendid architects. Anyway less than 1% of Germany's outside exchange is traded with India and India aggregates less than 1% of our venture. This methods for India there is a gigantic untapped potential.

Germany stands around the top five exchanging friends of India. Add up to volume of exchange between India and Germany recorded 8,1 billion Dm in 2000 with Indian sends out arriving at 4, 4 billion Dm and Indians imports recording 3, 7 billion Dm.

Indo-German exchange arrived at just about 9 billion Dm in 1997 and Indian fares to Germany have demonstrated a development of near 10% each year. This brisk response to the investment changes shows Germany's managed premium and faith in the potential of this nation. The continuation of the financial changes will have positive impacts on the reciprocal connection.

128 In 1998 Germany was India's fifths biggest supplier, furnishing 7% of Indian imports and the third biggest purchaser engrossing 6% of Indian Exports. Around Germany's exchanging accomplices, India has 30th position in a planet wide standing of suppliers and stacked up 36th around purchasers.

India's major fares to Germany regularly comprise of cotton articles of clothing and fabrics, calfskin and cowhide products, concoction and pharmaceutical items, silk fabrics and pieces of clothing and covers and floor coverings and additionally valuable stones. India's concoction fares have been recording solid development in the previous two years.

India's major imports from Germany are fundamentally hardware, chemicals as pharmaceuticals, electro specialized products, vehicles and iron and steel.

3.1 THE FUTURE

1. Prospects for expanding respective exchange between India and Germany are exceptional • The enormous Indian prerequisite for cutting-edge gear to modernize and restructure the Indian economy. If this enlarges to broadband for online bingo and other new-wave computerized amusement sources, or basically more up to date engineering in a mechanical or even restorative limit, all will profit the Indian economy in some shape or an alternate one. • Enormous interest for purchaser products to fulfill the climbing requests of the Indian customers. • Rising cognizance around Indian populace towards natural insurance and the requirement for the exchange of earth sound innovation.

129 • Indian fares to Germany are getting more refined and enhanced. The nature of merchandise is progressing • the culmination of the inward market of the European Community and the formation of the European Monetary Union might help budgetary development and making supplemental interest for Indian merchandise. The European Union is as of recently to a considerable degree India's most amazing exchanging friend on the planet the substantial European market of almost 380 million buyers with heightened obtaining power is open for imports from everywhere planet. The present Indian government which exhibited its third plan in February 2001 endeavors to support the changes procedure. Numerous change ventures have been raised to make the schema for an expanding development of economy. Indian takes mind too to satisfy its commitments requested by the WTO. In April 2001 the confinements of amount for the final 715 gatherings of great might be lifted.

2. THE INDO-GERMAN CHAMBER OF COMMERCE (IGCC) One of the most important institute promoting establishments to push Indo-German exchange relations is the IGCC with its more than 6000 members (for comparison: 1990 = 4500 members) is the biggest German Chamber abroad (Austria: 3.274; Switzerland: 3.230; Netherlands: 1.732). IGCC has its Head Office in Mumbai and branch work places in New Delhi, Chennai, Calcutta, Bangalore and a contact office in Hyderabad and Düsseldorf. The Chamber finished 40 years in India in 1996.

3. OTHER ECONOMIC PROMOTIONAL INSTITUTIONS A) GERMAN DEVELOPMENT COMPANY (DEG)

The basic focus of the Deg are to project India as a investment location and co-operative partner around German business people through i.a. Workshops and segment announcement through sector studies. It

130 additionally gives combined adviceto German and Indian entrepreneurs for joint ventures and lifelong technical co-operation.

B) INDO-GERMAN EXPORT PROMOTION PROJECT (IGEP) Set up under a two-sided agreement between India and Germany, the Indo-German Export Promotion Project is a joint trade announcement programme of the Ministry of Commerce in India and the Ministry of Economic Co-operation and Development in Germany. IGEP plays a vital part in promoting Indian exports to Germany and the European Union. Its main focus has been on small and medium-estimated manufacturing and exporting organization in the private sector. IGEP's trade announcement programmes furnish commercially centred services, pragmatic & practical. 3.2 GERMAN EXPORTS TO INDIA

German Exports to India is an essential part of the respective economic relations between the two countries, India and Germany. There exists an intensive co-operation in the field of economy and the year 2005 saw the festival of the 500 years of the establishment of Indo-German exchange relations. After Us, Uk and Japan, Germany is India's fourth biggest exchanging join partner with about 5% of Indian international trade accounting to 4.94 billion Euro in aggregate.

The Indo-German exchange volume has expanded by 180% from 2,7 Billion EUR in 1990 to 7,6 Billion EUR in 2005, with the German Exports to India have been recorded to have expanded by just about 135%. The aggregate volume of the Indo-German trade expanded by 22% in 2005 with the measure of German Exports to India expanding by 28% to record 4,2 Billion EUR. In the year 2006, the Indo-German trade expanded by 39% with the German Exports to India expanding by 52% to record 6,3 Billion EUR.

131 Vital things of German Exports to India are like machinery, electro innovation and in addition plants and metal items followed via aircrafts, measurements and control equipments, plastics and plastic items, chemicals and pharmaceuticals and automobiles and segments. Of these hardware exports to India including one third shares of sum German Exports to India.

3.2.1 FACTORS FACILITATING GERMAN EXPORTS TO INDIA The German Exports to India is facilitate because of the liberalization approaches of India in addition to her majority rule type of government, a generally described political framework and legitimate structure, productive visionaries, talented designers and planet class researchers, all of the aforementioned guaranteeing enduring business chances for the outside nations. German Exports to India has been empowered with India sourcing less raw materials, semi-finished products, and essential products and furthermore it had been importing finalized goods from Germany. 3.3 GERMAN INVESTMENTS IN INDIA

Germany gets a position as a most prominent amongst the foreign investors in India. German speculation in India essentially tripled in the beginning couple of years of economic changes in 1991. Approved German ventures in India bounced 40% in 1997 to Rs. 21.5 billion.

They have developed considerably since 1990. As a straight outcome about of the changes launched in 1991 they get twice in that year, multiplied again in 1992 and 1992 over the past year. 1994 Germany even tripled its venture volume making it the third biggest nation investing into India after USA and UK. In 1995 German firms again more than twice to their ventures in India. They contributed Rs. 15 billion in India in 1996 and 21 billion in 1997. Accordingly Germany held its position around the top five outside investors in India. In 1998, the

132 ventures declines by 53 %, however there are sings of recovery. The year 1999 saw expanded speculation volumes of Rs. 11, 4 billion again contrasted with Rs. 8, 5 billion throughout the year 1998.

India is a lucrative centre for remote speculators and as far as foreign investors, German Exports to India in aggregate from 1991 to December 2005 has been less than one and a half billion dollars. At present there are more than 600 German associations working in India and a powerful German export of investments to India have been in practice.

German trade to India is not just significant regarding products sent out by Germany, but its importance lies in the high trade went with by great streams of investment and technology to India. The best example is the Germany's first and greatest support venture, the steel plant at Rourkela, in India. Since the post liberalization time in India the German trade to India has been supported for an expansion in the new speculation and specialized collaboration ventures.

3.3.1 CENTRES REGULATING THE GERMAN EXPORTS TO INDIA

The Indo German Chamber of Commerce and Industry is the major instrument in the announcement of Indo-German exchange relations. An additionalcentreis the German Office for Foreign Trade with normal market studies on important economic advancements in India. It supports the German speculators in examining the speculation chances in India.

However, still German Exports to India have not yet arrived at any huge level as according to recorded in 2006, less than one percentage of German foreign exchange is traded with India while Germany regarding her worldwide export volume ranks as the first exporter of the world.

133 3.4 INDIAN EXPORTS TO GERMANY

CeBIT 2011, Hannover Germany

One of India's prime exchange facilitation organization, Electronics and Computer Software Export Promotion Council (Esc) having more than 2,300 members participate in a ground at the CeBIT held from March 1- 5th 2011at Hannover, Germany.

CeBIT is one of the best known international trade fair showcasing the innovative procedure utilized all over the world. The essential objective of the trade show was to support the associate exporters to increase their business base internationally. Clients from industry, skilled trades, banks, service sector, government offices, science and all passionate about engineering were the crux target group.

About 20 Indian ICT associations participate at CeBIT under ESE pennant. The mass investment of the Indian associations obviously showed their expanding premiums of speculation in the EU area, with Germany being a prime target. ICT items as ERP, business process administration, business brainpower, vertical market results, supervised administrations, web results, web content administration, ecommerce, web outline and advances and numerous others were on presented at the CeBIT. ESC has been a normal member at the CeBIT since last numerous years. The Indian associations under ESC have communicated their premiums in setting up joint steps, having further presentation affiliations with the EU. The ESC has specified that there has been a wonderful ascent in ICT trades from India to Germany.

134 INDIASOFT 2011

The ESC likewise had a substantial designation from EU which took part at Indiasoft 2011 on March 25-26. Indiasoft is one of the most amazing ITsystems administration according to worldwide models and in the near future venue for the occasion was Pune. It brought about further reinforcing the It relations between India and EU and especially with Germany.

India has asked for to Germany to evacuate technical exchange limitations

For better exchange relations, particularly higher closure technical trade with Germany, India has urged the European country to simplicity exchange confinements and hence give a suitable stage for both the nations to deal with and pick up shared profit.

135 3.5 IMPORT -EXPORT POLICIES IN GERMANY

3.5.1 IMPORTING GOODS TO GERMANY

While trading to Germany, different perspectives are to be recognized: Customs and duties, quality and natural measures, trademark and rivalry tenets are only a couple of them. It is inside the authority of the merchant to clear the things for course in Germany,exporters need to be presented on requirements of infiltrating the German business sector, if just for estimating purposes. Regarding traditions callings for products which are traded to Germany, their beginning is of matter of attention.

3.5.2 FREE CIRCULATION OF GOODS IN THE SINGLE EUROPEAN MARKET

Businessmen sold to Germany from a state area of the European Community are not subject to traditions jobs. They are allowed to flow inside the Single European Market, in which there is opportunity of developments for products and capital. The free debate of businessmen in the Single European Market implies that they could be transported in without any traditions move inside the part states. This debate of products is between neighbourhood supply and procurement.

3.5.3 NON-EU NATIONS

For investors starting from outside the Common Market, importing to Germany suggests intersection an EU fringe. Along these, the European Customs Tariff applies, since traditions tariffs have been fit inside the Union. Entering into the European Union, products must be announced for traditions freedom. Accordingly, shippers should deliver to the traditions power, ordinarily by giving over transportation records. When all is said in done, traditions obligations in Europe are figured commercial value,

136 implying that they are determined from the quality of the foreign exporter. This worth -the traditions worth -is proportionate to the bargains value; it is balanced by including the expenses of transport, protection, stacking, and taking care of to the port of section into the European Union in the event that theyare not incorporated in the deals costs (cif-value), which is to be demonstrated by deals records. Vice versa, costs for the transportation inside the European Union might be deducted assuming that they have been incorporated in the bargains cost previously, which must be archived, as well.

3.5.4 EUROPEAN CUSTOMS TARIFF

The European Customs Tariff seeks merchandise beginning from outside the Single European Market, since traditions tariffs have been corresponded inside the Union. Products must be announced for traditions movements, when they are carried to the European Union. Thus, shippers must address the traditions power, as a rule by giving over transportation records.

As a rule, traditions jobs in Europe are computed notice value, implying that they are determined from the quality of the foreign made merchandise. This quality -the traditions worth -is proportional to the deal value; it is balanced by including the expenses of transport, protection and stacking on the off chance that they are not incorporated in the deals costs (cif-value), which is to be demonstrated by deals reports.

Vice versa, expenses of transportation inside the Single European Market could be deducted, provided that they have been incorporated in the deals cost hereto trade, which must be certificated, as well.

137 3.5.5 TRANSIT REGULATIONS

A travel system expedites the traditions free trade of foreign made merchandise to an inner part traditions post. Legitimately, the travel system is directed by the Community travel technique inside the EU or the normal travel system for the trade of merchandise between EU and Efta nations. Other global methods are likewise allowed. Things which are just briefly carried into the European Union and are for the most part exempted from traditions obligations proposed to be re- traded without alteration, e.g. shows for exchange fairs. Things are traded to this technique of interim utilize, if their individual traditions absolution or the provision of a diminished traditions rate attach on the non-Community products being utilized under the supervision of the traditions office.

3.5.6 GENERAL INCLINATION FRAMEWORK

The European Customs Tariff gifts tariff exceptions or special medicines, relying on the foreign made thing and its beginning. Traditions tendency come about either as territorial tendency from exceptional understandings or are conceded unilaterally to improving nations by the European Union in the system of the General Preference System (GPS).

The GPS aims to back the improvement of certain territories and areas or to help moving an in number request inside the European Market. Tariffs may be suspended for a time or for portions of a certain sum.

3.5.7 CUSTOMS TENDENCY

Dismissing the proposed utilization of the stock, the European Customs Tariff gifts tariff exclusions or particular medicines, attaching on the transported in thing and its cause. Traditions tendency come about either

138 as local inclination from uncommon factors or are conceded unilaterally to advancing nations by the European Union in the schema of the General Preference System (GPS). There is an unlimited list of concessions to special medicine. The mentioned understandings are either intended to back the advancement of certain zones and districts or to help moving an in number request inside the European Market. In a few cases, tariffs may be suspended for a time or for portions of a certain sum.

3.5.8 TAX AND OBLIGATIONS

All streamlined imports are liable to an "Import deals expense" of 19%. It is proportional to the quality included duty (Vat) which is required on all locally processed things, along these lines setting the same assessment trouble on foreign made and residential items. The import turnover duty is charged on the obligation paid worth of the import article in addition to a traditions obligation. A reduced assessment of 7% is exacted on nourishment items, books, daily papers, bits of workmanship and so on.

Inside the Single European Market, a neighbourhood wide arrangement of Vat gathering is set up. National Vat is demanded on the item at the spot of creation. Purchasers can deduct it as information charge in their home nation, gave that the supplier has got a bona fide esteem included charge Id number. Traditions callings and expenses are gathered by the German traditions powers

3.5.9 EXPORTING GOODS FROM GERMANY

The trade system must be watched -as per article 161 of the German Customs code -while trading products from Germany. This is intended for the provision of Community (implying the EU) and national outside exchange limitations on trade fares of Community products. The fare method ought to be strictly competing when re-sending out non-

139 Community products also, in conjunction with a traditions methodology which has specific investment significance for the German nation. It would be ideal if you remember that the trade of certain products needs exceptional approval; e.g. defence merchandise, double utilization merchandise.

There is a unique office for this, the German Federal Office of Economics and Export Control (Germany Trade and Invest). This Office issues import authorisations and control reports in appreciation of certain merchandise from third nations (non-EU nations). Third nations are liable to an authorisation under EU regulations, and send out or shipment authorisations for particular conveyances of products in EU and non-EU States. Also, further exchange confinements might go out from ban measures.

140 3.6 INDIAN EXPORTING BUSINESS

Towards Increased Global Integration through Trade (India) 350 305 300 251

250 185 179 200 163

150 126 US$ in bn 103 100

50 0 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

India’s Trade in Services 62.2 55.5 49.7 46.3 40.3

31.3 23.6 Software Exports (US$ bn)

FY FY FY FY FY FY FY 2006 2007 2008 2009 2010 2011 2012

141

India’s Trade Basket

UAE 36

USA 34 China 18 Singap … 17 Hong … 13 Top Export Nether … 9 Markets (FY 2012, US$ bn) UK 9

Germany 8 Belgium 7 Indoneia 7

India’s Trade Basket

UAE 58

USA 36

China 32 Singapore 31 Hong … 23 Top Import Netherl … 19 Sources (FY 2012, US$ bn) UK 16 Germany 16 Belgium 15 Indoneia 15

142

India's Export Destinations 2011-12 (US$ 305 bn) CIS 1%

Europe Asia 19% africa Others north america 5% LAC LAC Asia 52% Others 4% north Europe america 12% CIS

africa 7%

India's Export Destinations 2001-02

(US$ 44 bn) CIS 2%

Asia Europe africa 25% Asia 40% north america LAC Others Others 5% Europe LAC north america CIS 2% 21% africa 5%

143 3.7 IMPORT -EXPORT POLICIES IN INDIA

IT has assumed a major part in the for the most part development and advancement of India. In the gadgets and IT area, 100% FDI is allowed under the programmed track. The major monetary policies furnished by the Government of India in this part have been for trade arranged units (EOU), programming technical stops (STP) and unique economic zones (SEZ). The mentioned are definite beneath:

Programming Technology Parks (STPs) were set up as self-governing public orders under the Department of Electronics and Information Technology in 1991 to advertise programming trades from the nation. There are in the field of 51 STPcentres that have been set up sincethe begin of the programme. STPs appreciate various profits that incorporate exclusions from administration impose, extract obligation and refunds for instalment of Central deals impose. The most critical motivator accessible is 100% exclusion from livelihood charge of trade benefits; the STPs have been instrumental in boosting India's IT and Its sends out.

According to MOC&IT, trades by STP units crossed Rs. 2,044.40 billion in 2010–11. The state with the biggest trade commitment was Karnataka accompanied by Maharashtra, Andhra Pradesh and Tamil Nadu. STPs have a dish India surrounding, incorporating in the urban communities of Bangalore, Bhubaneswar, Chennai, Coimbatore, Hyderabad, Gurgaon, Pune, Guwahati, Noida, Mumbai, Kochi, Kolkata, Kanpur, Lucknow, Dehradun, Patna, Rourkela, Ranchi, Gandhinagar, Imphal, Shillong and Nashik, around others.

Special Economic Zones (SEZ) plan was ordered by the Government of India in 2005 with a goal of furnishing a globally intense and bug free environment for fares. It gives exceptional disentanglement of techniques and a solitary window moving arrangement on matters identifying with

144 Central and state governments. Under the plan, the exception from livelihood duty is recordeddown over 15 years from the date of beginning of assembling. There is 100% exclusion of fare benefits from livelihood assess for

The first five years, 50% for the following five years and 50% for afterward five years subject to exchange of benefits to extraordinary saves.

Consistent with the SEZ Approval Board of India, the most extreme number of SZs has been affirmed for the IT &-Its segment. On the whole for the It, Its, electronic fittings and semiconductor areas, the administration has given formal endorsement to 354 SEZs and the amount of informed SEZs in the further mentioned members was 236 until 2010.

Qualified information Technology Investment Regions (ITIRs) were informed in 2008 with a specific end goal to address the segment's framework needs. According to plans, the aforementioned locales will be enriched with great base that will permit associations to procure the profits of co-sitting, systems administration and more terrific proficiency through utilization of normal framework and help administrations.

145 3.7.1 TAXATION SYSTEM IN INDIA

India has a decently advanced expense structure with obviously differentiated Authority between Central and State Governments and neighbourhood forms.

Midway Government requires charges on salary (aside from duty on rural livelihood, which the State Governments can demand), traditions callings, centremost extract and administration charge.

Value Added Tax (Vat), stamp duty, state extract, land income and calling assessment are required by the State Governments.

Neighbourhood forms are enabled to impose assess on lands, control and for utilities like water supply, waste and so on.

Indian taxation framework has experienced huge changes throughout the final decade. The taxes rates have been defended and impose laws have been re-ordered bringing about better consistence, simplicity of assessment instalment and better authorization. The methodology of defending of duty management is progressing in India.

3.7.2 DIRECT TAXES

If there should be an occurrence of straight taxes(livelihood charge, riches charge, and so forth.), the trouble straight falls on the taxpayer.

3.7.3 INCOME TAX

As per Income Tax Act 1961, each individual, who are an accesses and whose sum livelihood surpasses the greatest exception restrain, ought to be chargeable to the salary charge at the rate or rates endorsed in the

146 Finance Act. Such earnings taxes ought to be paid on the sum livelihood of the past year in the significant evaluation year.

Evaluates indicates an individual by whom any duty or whatever possible whole of cash is payable under the Income Tax Act, and incorporates –

A. Every individual in admiration of whom any undertaking under the Income Tax Act has been taken for the appraisal of his earnings (or appraisal of edge profits) or of the livelihood of any viable individual in admiration of which he is assessable, or of the misfortune stood by him or by such other individual, or of the measure of discount because of him or to such other individual.

B. Every individual who is regarded to be surveys under any procurements of the Income Tax Act.

C. Every individual who is regarded to be surveys in default under any procurement of the Income Tax Act.

147 3.8 CONCLUSION

As far as growth of the business is concern, India's IT industry has recorded phenomenal growth over the last decade. During the period from 1992-2001, the compounded annual growth rate of the Indian IT services industry has been over 50%. The software sector in India has grown at almost double the rate of the US software sector.

The statistics of the India's IT industry substantiates the huge momentum acquired by the IT sector in the recent past. During the financial year 2000-2001, the software industry in India accounted for $8.26 billion. The corresponding figure was $100 million 10 years back.

The purchasing power of a large section of Indian population has increased dramatically. This has resulted in an increase in the average standard of living of the majority of population of the country. The increase in purchasing power of the common people has propelled the growth rate of the other sectors of the economy as well.

Import – Export is a booming business in today’s era. It helps to generate new employment opportunities and to encourage the attainment of internationally accepted standards of quality. There are some other laws also which control the import – export business.

Germany features the largest IT market in Europe, making up 20 percent of total European market volume. The German IT industry posted annual revenue of approximately EUR 137 billion in 2011, a figure expected to grow in coming years. Cloud computing is one of the most significant growth segments, with revenue expected to nearly quadruple from EUR 3.5 billion to EUR 13 billion per year by 2015.

148

PART-2 INDUSTRY SPECIFIC STUDY

A STUDY REPORT ON ELECTRICITY GENERATION IN GERMANY

149 2.1 INTRODUCTION OF THE ELECTRICITY SECTOR IN GERMANY

In the year 2009 the electricity sector produced 61 % fossil fuel power, produced 23 % nuclear power and 18 % renewable energy whereas we can see that wind, solar, hydro, geothermal power is totally negligible in Germany. Germany has mainly planned a policy of phasing out nuclear power by 2022. As comparing 2009 to 2004 nuclear power production has decreased by 19 %. From total power production their share has been declined from 27 % to 23 % with a rise in renewable electricity which includes wind power, biomass, solar power and also increase in coal and natural gas consumption.

Due to nuclear power there is an increase in coal share of power production to 50 %. EU15 average (EU15: 7409 kwh/person) an77 % of the OECD average (8, 991 kwh/person) is equal in the year 2008 which is been produced by Germany by considering per person consumption. Germany is one of the largest exporters of electricity with 10 % of the overall exports. During the year 2010 Germany reinforced its position as a net exporter by 20 %.

There are four largest electricity companies (RWE, E. ON, Vattenfall and EnBW) which are dominating to German electricity industry. These four largest companies together control 90 % of the country’s electricity generating capacity. This structure grouping with the jamming prevailing at all German boarders with the exception of Austria is thought to stop effective competition from developing. As the new supplier entered in to the market after the liberalization the graph has fallen sharply in recent years and due to this effect there are many supplier who exit from the German market.

150 In 1998 there was full competition between electricity and gas market in Germany but there are frequent players in both markets. Electricity and gas sector is not competitive because they are characterized by high degree of horizontal and vertical integration as they are dominated by a few of the largest company}. Most of the large electricity and gas network operators are already removed and the deadline for removing is 1st July 2007. In gas sector retail prices are free for all customers where as in case of electricity sector charges for households will continue to be regulated until 1st July 2007. In all European countries the German customer pays the highest prices for the electricity.

Since 1995 prices for households have remained same which is less than 6 % increase in spot price. After Italy and Luxembourg the household are the third highest among all member states. In 2006 the EU average of the household price is 27 %. From 1995 to 2001 there is a decline trend in electricity prices for industrial users. Since they have been constantly rising every year and currently increasing 16 % above the EU 15 and EU25 average.

Electricity per person and by power source Electricity per person in Germany

Energy in Germany

Capita Prim.energy Production Import Electricity Co 2- emission

Million TWh TWh TWh TWh Mt

2004 82.5 4048 1582 2509 580 849

2007 82.3 3853 1594 2344 591 798

151 2008 82.1 3899 1560 2453 587 804

2009 81.9 3705 1478 2360 555 750

2010 81.8 3807 1528 2362 590 762

Change -0.9 -6.9 % -4.4 % -6.9 % 2.7 % 11.3 % 2004- % 2010

Mt=12.63 TWh, prim.energy includes energy loss that are 2/3 for nuclear power

2.2 ROLE IN THE ECONOMY OF ELECTRICITY SECTOR IN GERMANY

The electricity sector plays an important role in an economy. Though the substantial development made in the power sector in the country, most of the regions in the country are suffering from shortage of electricity. Sufficient capacity addition and its utilization in the most optimal manner results the most important aspect of the power development.

Adequate capacity addition, an extensive network of transmission and distribution has been developed over the years for evacuating power produced and utilizing the same by the ultimate consumers. The new capacity additions call for further development of the transmission system. The addition programmed is being constantly monitored by the Power System Project Monitoring division in the Central Electricity Authority.

152 2.2.1 ROLE OF CENTRAL ELECTRICITY AUTHORITY

The Central Electricity Authority is a key foundation in promoting and assisting the timely completion of the scheme for improving and increasing the electricity system. The Power System Project Monitoring Division which working as a facilitator in faster construction of the transmission schemes and renders valuable help to the utilities in solving their problems like technical, financial and arranging various clearances like forest clearance from MOE and F etc .. To achieve the target of the electricity sector the officers of the Power System Project Monitoring Division conduct the “REVIEW MEETINGS” in the of Central Electricity Authority which provide an excellent ground for interaction and to ensure the completion of schemes.

2.3 STRUCTURE OF ELECTRICITY SECTOR IN GERMANY

Germany’s electricity industry is a traditionally developed system with federal structure existing alongside public and private utilities. It has progressed in to a three tier electricity supply system consisting of supra regional associations, regional utilities and municipal power suppliers.

The electric utilities concluded differentiation agreements among each other, which defined their respective supply areas within these they signed concession contract with the municipalities, the marvelous power of these regional monopolies also affected the prize of electricity and gas.

The strongly centralized structure of energy supply was claimed to be essential for protection, efficiency and supply reliability, in the context of nuclear power it was argued that reactor safety could only be assured for

153 centralized, large power stations with regard to coal-fired power plants. It was seen that modern, economical pollution control was only potential with large scale power stations.

Before the EU committee launched in the 1980s, the structure had proved to be inflexible to the area that the German energy market remained almost entirely protected from the competition in the market. German politics unbreakable the rigidity of those structures and so did the fact that all the parties had silently accepted the reasons for monopolization.

Liberalization of the energy market effected the revision of the German energy industry act in 1998 due to the demanded by the EU. The major purpose of these revisions was to stand in the competition in the electricity market to meet the objective by using lower electricity and gas prices that were affected by the inflation. The energy industry had become costly and useless as a result of its protection.

154

Six semi-public Large IPP s Large IPP s Two semi-public power power companies companies (ELSAM)

ELKRAFT power pool

Germany Extra (grid ELKRAFT system operator) (grid operator)

Small IPP s Small IPP s

78 distribution companies 24 distribution companies

CHART 1: Structure Of Electricity Sector In Germany

155 2 . 4 FUNCTION AND BUSINESS ACTIVITIES OF

ELECTRICITY SECTOR IN GERMANY

There are many activities which are been produced by the Germany are as follows: 1 . NUCLEAR POWER

In March 2011, nuclear power in Germany accounted for 24% of nationwide electricity consumption before the eight plants had shut down permanently. In the 1950s and 1960s German nuclear power initiated with research reactors, and coming online in 1969 with the first commercial plant.

In recent 10 years it has been high on the biased agenda with continuing debates about when the technology should be removed out. The topic has been renewed in 2007 due to the two reasons: (1) Due to the political crash of the Russia- Belarus energy dispute. (2) In 2011, after the Fukushima I nuclear accidents.

2 . RENEWABLE ELECTRICITY

Renewable electric power formed in 2009 by source. In Germany the share of electricity created from the renewable energy has increased from 6. 3% of the nationwide total in 2000 to over 26 percent in the first half of 2012. Renewable energy distribute of gross electricity utilization rise from 11% in 2005 to 25% in 2011. Main renewable electricity sources were in the 1st half of 2012: hydropower 14. 7%, wind energy 36. 6%, photovoltaic’s (solar) 21. 2%, biomass 22. 5% and biowaste 3. 6%.

In 2010, fully investments totaling 26 billion euros were made in Germany’s renewable energies sector. Especially in small and medium sized companies, according to official figures there are only 370000 people in the Germany were employed in renewable energy sector in

156 2010. This is an increase of approximately 8 percent compared to 2009 around 339600 jobs and well over twice the number of jobs in 2004 around 160500. With reference to that three-fourth of these jobs are attributed to the Renewable Energy Sources Act.

3. COAL

Power mix in 2008 integrated with 291 TWh Coal (46% of total 631 TWh). Germany was ranked in fourth position for Coal- produced power after China (2733 TWh), USA (2133 TWh) and India (569TWh).

4. WIND POWER

Major wind power suppliers in Germany up to 2009 were RE power System 9%, Enercon 60% and Vestas 19%. Wind power was installed in Germany 25. 777 GW at the end of 2009 and 27. 214 GW at the end of 2010. The contribution of wind power was in average 9. 4% of electricity requirement in the end of 2010. After Denmark (24% of electricity), Spain (14. 4% of electricity), Ireland (10. 1% of electricity) and Portugal (14% of electricity), this was fifth top in Europe.

157

5. ENERGY CONSUMPTION

Germany is one of the biggest clients of energy in the world. In 2009, it consumed energy from the given below sources: Oil 35. 6%

Bituminous coal 11. 2%

Lignite 11. 5%

Natural gas 22. 7%

Nuclear power 16. 0%

Hydro and wind power 1 .7%

4. OTHERS

As Germany imports about two thirds of its energy, Renewable energy is more present in the nationally produced energy. In the world, Germany is the fifth biggest consumer of Oil. Germany imports largest part of Oil from Russia, Norway and United Kingdom, in that order. Germany is the third biggest consumer of natural gas in the world. Germany is the fourth largest consumer of coal in the world because of its location at the center of Europe.

5. ENERGY EFFICIENCY

The energy efficiency bottom- up index for the entire economy (ODEX) in Germany reduced by 18% between 1991-2006, which is same to an energy efficiency enhancement by 1 . 2% per annum on average based on the ODEX, which calculates technical efficiency improvements. As the starting of the new century, though, the efficiency improvement measured by the ODEX slowed down. While between 1991-2001, a

158 constant decrease by 1 . 5% could be experienced, the reduce in the period 2001-2006 only amounted to 0. 5%, which is lower the EU-27 level. Germany projects a 25 % drop in electricity requirement by 2050.

3.1 COMPARATIVE POSITION OF ELECTRICITY SECTOR WITH INDIA AND GUJARAT

Electricity sector in Germany

Energy in Germany describes electricity production, consumption and import in Germany. In Germany electricity sector is one of the biggest in the world with state- of-the-art clean electricity industry. In 2002 Germany was Europe’s largest punter of electricity at that time consumption of electricity was 512.9 billion kilowatt-hours.

Reliable information on customer switching activities in electricity is mention in following table.

Volume of electricity consumption having switched by group

Customer segment Electricity

Large and very large industrial 41%

Small-medium industrial and business 7%

Very small business and household 5%

The prices of electricity for households have remained relatively constant since 1995 but then after they are the third highest among all member states in which first is Italy and second is Luxembourg. In 2006 household

159 price was about 27% above EU averages. For industrial users the prices of the electricity followed a downward from 1195 to 2001.after that period electricity prices have been steadily risings every year and are currently just over 16% above the EU-15 and EU-25 averages. Following chart shows composition of the price of electricity to end users.

CHART 3: Electricity Sector In Germany

Electricity sector in India

In India development of electricity sector was started in 1897 in Darjeeling. During 1950 to 1985 India’s electricity generation capacity addition were very low compared to developed nations but after 1990 India has been one of the highest growing markets for new electricity generation capacity. In the year 1991 country’s annual electricity generation capacity was 66GW, which reached to 100GW in 2001 and in 2012 it was 199GW. The power finance corporation limited of India predictable to add about 100 GW of installed capacity between 2012 and 2017.

160

Following table represents the capacity of electricity generation, as well as availability to end users of India and their demand. Difference between install capacity and availability is the transmission, distribution and consumer victims. Sometimes shortage may arise due to gap between availability and demand. This lack in supply ignores the effects of to come list of users in rural, urban and industrial consumers.

Electricity sector capacity and availability in India

Item value Date reported

Total installed capacity (GW) 210.27 October 2012

Available base load supply (MU) 893471 October 2012

Available peak load supply (GW) 126.23 October 2012 Demand base load (MU) 988317 October 2012

Demand peak load (GW) 150.09 October 2012

India’s power ministry states that, about 14. 1 GW of new thermal power plants under construction are expected to be put in use by December 2012. So there are 2 . 1 GW capacity hydropower plants and a 1 GW capacity nuclear power plant. The installed generation capacity of India should top 200GW in 2012.

The installed capacity of electricity sector in India is 211. 766 GW as of January 2013. It is the fifth largest in the world. Captive power plants generate an additional 31. 5 GW. Non renewable power plants constitute 88. 55% of the installed capacity and 11. 45% of renewable capacity. During 2011-12 fiscal India generated 855 BU electricity. Following table shows the per capita consumption in India.

161

Electricity sector in Gujarat

Over the past few decades the Indian power sector is facing challenges despite the significant growth in the generation capacity. However , over the last few years, Gujarat has successfully crossed all the barriers. Gujarat has become successful in securing its overall energy requirements with installed power generation capacity of 23927 MW. Following chart shows the installed electricity generation capacity in Gujarat.

CHART 4: Electricity Sector In Gujarat

In terms of solar energy, biomass and wind energy Gujarat is very rich. In India Gujarat is the leading state in terms of overall solar energy. In 1993 Gujarat enacted the country’s first wind energy policy and become the first state with a solar policy in 2009. Following chart shows the share of renewable energy in Gujarat.

162

CHART 5: Combination Of Renewable And Thermal Power Energy

In Gujarat the installed power generation capacity is grows so the peak demand peak deficit in the state has decreased by compound annual growth rate of 31%. Following chart shows peak demand / peak met in the state of Gujarat.

CHART 6: Demand Of Electricity Sector In Gujarat

In last seven years there is considerable improvement of actual power supply position of the state of Gujarat. There is decrease by CAGR of 38%

163 in the power requirement and availability deficit. Following chart shows the actual power supply position of the state of Gujarat.

CHART 7: Position Of Electricity Sector In Gujarat

3. 2 PRESENT POSITION OF ELECTRICITY SECTOR IN INDIA

In India at present large no . of power projects are under construction to face the problem of shortage of power and meet the need of the country. However the sector has been facing problems related to fuel recourses and etc . At present India is on the fifth rank as per power generation capacity.

According to 17th Electricity Power Survey the electricity requirement of India is planned to grow at 7. 5%. According to CRISIL Report about 82000 mw of generation capacity at an investment of RS. 5. 10. 000 crore is likely to be added in the next five years i. e. year 2012 to 2017.

164

INSTALLED CAPACITY & DEMAND IN INDIA

In India the installed generation capacity is around 1 . 64. 508 MW of which thermal capacity (coal, gas & diesel) is 1 . 06. 432 MW. Renewable Energy (wind, small , hydro, ) is 16. 429 Nuclear Energy at 4, 560 MW.The domestic power requirement for the financial year 2011-12 was 9, 45, 589 Million Units while the energy generated was only 7, 48, 658. Creating a gap of around 1, 00, 000 Million.

SYSTEM OPERATIONS / GRID MANAGEMENT

Power Grid Corporation of India is the largest power transmission company} in India, has formed wholly owned subsidiary firm, Power System Operation Corporation Ltd. For carrying out independent power system transactions. National Load Dispatch Centre is linked with the 5 Regional Load Dispatch Centers (RLDCs), which in turn and connected to 31 State Load Dispatch

RECENT GOVERNMENT POLICYS FOR POWER SECTOR

Government of India has approved “ Re structured Accelerated Power Development Reform Programmers” for XI plan as a Centre Sector Scheme Projects under the plan will be taken up in to two parts. Part 1 will include the projects related to establishment of baseline data of IT applications for energy accounting.

ALTERATION IN MEGA POWER POLICY

165

Government of India has amended the Mega Power Policy which is applicable to power projects more than 1000MV. Main characteristics are extension of customs duty/ tax benefits to expansion of projects.

PRE REFORMS 1999 2002 2007 2010 2011

Distributi Distributio Delhi Distributi Orissa on n CEBC,AECL,NPC,TPC Privatisati on Privatisati Franchise Franchisee (EXISTING PRIVATE on Franchise on e Nagpur, PLAYERS) Distributio d First state Agra and Aurangaba n Bhiwandi Kanpur d.

3.2.1 CRITICAL ISSUES FACING REALATED ELECTRICITY SECTOR

• ISSUES RELATED TO THERMAL PROJECTS • AVAILABILITY OF POWER EQUIPMENTS • COAL SHORTAGE • ENVIRONMENTAL ISSUES • GAS SUPPLY CONSTRAINTS • INTRA STATE OPEN ACCESS ISSUES

3.2.2 NEW TARIFF AMMENDMENT FOR GENRATION AND TRANSMISSION PROJECT

The Central Electricity Regulatory Commission had issued tariff regulation for existing cost plus benefit central sector generation and transmission projects. These regulation results in rising of base rate of return on equity

166 for central sector projects of various financial and operational parameters to benefit computation.

WIN- WIN SITUATION FOR UTILITY AND FRANCHISEE

BENEFITS TO DESCRIPTION

Reduction in commercial and distribution losses Distribution utility Better collection efficiency

Possibility to earn high return Franchisee Customer lock in period

Improvement in quality service Consumer Improved power availability

Distribution Franchisee at present needs serious correction related to especially in provisions for regulatory oversight, specify guidelines and standard bidding documents for Distribution Franchisee in urban as well as rural areas, supply guarantees by the license and asset ownership and transfer.

They also need complete rethink on Unbundling of intrinsic service like wires, supply and customer service will lead to value release. They would allow for core specialization in all the activities. They will also allow for Non-discriminatory open access to become a reality and to Addressing responsibility for emerging interventions initiatives.

167 3.3 PRESENT STATUS OF ELECTRICITY SECTOR IN OTHER COUNTRIES

In upcoming Union Budget 2013-14 expectations are much more. India is fifth largest county in terms of power generation capacity and sixth as the biggest consumer of power. In last 20 years the nation’s power demand is increased at avg. of 3.6 per cent per annum.

RECENT DEALS

168 FRANCHISEE CURRENT YEAR UTILITY COMPANY AREA STATUS

Operation Madhya Pradesh Poor Smart will be 2012 Gwalior kosher vidhut vitaran Wireless, taken over Co Ltd. Essel Group soon

Operation Madhya Pradesh poor Smart will be 2012 Sagar kosher vidhut vitaran Wireless, taken over Co Ltd. Essel Group soon

Operation Madhya Pradesh poor Smart will be 2012 Ujjain kosher vidhut vitaran Wireless, taken over Co Ltd. Essel Group soon

Operation Smart North Bihar Power will be 2013 Muzaffarpur Wireless, Distribution Co. Ltd. taken over Essel Group soon

Operation South Bihar Power Spanco will be 2013 Gaya Distribution Co. Ltd. Group taken over soon

Operation South Bihar Power will be 2013 Bhagalpur SPML Infra Distribution Co. Ltd. taken over soon

In financial year 2011-12, the highest capacity addition is 20,000 mw. A capacity addition of 17500 mw in year 2012-13 has been envisaged. The big PSU in this sector plan to make investment of Rs. 55,000 Crores in different project also the private companies have been enter by fuel scarcity and distribution losses.

169 4.1 POLICIES AND NORMS OF SELECTED COUNTRY FOR SELECTED INDUSTRY FOR IMPORT/EXPORT INCLUDING LICENSING/PERMISSION, TAXATION ETC

POLICIY FOR POWER SECTOR IN GERMANY

Germany is the country who supports the renewable source in tariff. For this criteria is decided for the eligibility in Granting Priority to Renewable Energy Sources (EEG). The Authority of EEG decide the market premium and flexibility premium for company who produce their electricity from renewable sources. There is also facility of low interest loan provided to this company.

In Germany, policy are formed as Market Incentive Programme (MAP) as facilitated to the company for the promotion of heat produced by this renewable energy. Major support scheme is provided for renewable sources used as transport is a quota system. More over Bio fuels also provided through Fiscal Regulation.

In Germany priority given to the Connection of Grid in power sector

ELECTRICITY SUPPORT SCHEME

1. EGE Feed-in-tariff 2. Loan( KFW renewable energy programmed) 3. Premium tariff 1- market premium 4. Premium tariff-2 flexible premium

170 ELECTRICITY GRID ISSUE

Germany gives priority for the connection of grid in plants for the generation of electicity by renewable sources. Moreover operators of grid will be obliged to give importance to electricity from such renewable sources when purchasing and transmitting electricity. On Other hand those who are interested in feeding in electricity can demand to expand his gid. Such special provisions are framed in Granting Priority Act to Renewable Energy.

General provision in Energy Industry Act .

1. Connection for Grid 2. Development of Grid 3. Use of Grid

POLICY

There is policy for promotion of the method of renewable energy sources covering training in Gernany. Research programmes and certification and public authority of self –commitment, district network of heating and the introduction of forming responsibilities for the use of heat produced from Renewable sources.

1) Certification programmes for RES installation 2) Exemplary role of Public Authorities 3) RD & D policies 4) RES-H building operations(Quota) 5) Support of RES-H Infrastructure-KFW Programme 6) Support of RES-H Infrastructure-KWKG 7) Training Programme for Installers( Training of Craftsman)

171 HEATING AND COOLING SUPPORT SCHEME

Germany has given the guidelines for the support of RES-H framed Market Incentive Programme (MAP). Such support schemes for the promotion of heat produced by sources of renewable sources. KFW also provides low interest Loans and BAFA offers Investment Support.

1. KFW low interest loan 2. Investment support – subsidy

TRANSPORT SUPPORT SCHEME

Major support scheme for renewable energy sources applied in transport ( fuel for transportation). Such scheme obliges companies importing and producing diesel, petrol and gas to ensure that bio fuels to make up and defined total sales annual for company in percentage. Moreover also assisted through regulation of Fiscal.

1. Quota for Bio fuel 2. Tax rules

172 4.2 POLICIES AND NORMS OF INDIA FOR IMPORT OR EXPORT TO THE GERMANY INCLUDING LICENSING / PERMISSION, TAXATION ETC

INDIAN IMPORT POLICY

Import is the antonym of export. According to economics, if any commodity is brought in to the country by legal way then it is called import. Foreign currency plays an important role in influencing India’s import policy. There are main three objectives of India’s import policy • To make the goods easily available • To simplify importing license • To promote efficient import substitution

There are many problems due to large import of products. Some concern is of recent trend of import. The regular import of any product reflects upon the facts that India is not able to produce the required quantity in India and it also indicates that India needs to develop that sector in India. There is pressure on foreign reserve for higher cost of imports.

INDIAN EXPORT POLICY

The transferring of any goods from one country to another country in a legal way is called export. The purpose of transferring goods should be of trade. There are some restrictions on export of goods in India and if any goods exported or attempted to exported which are prohibited under customs act or any other law is liable for confiscation.

Before making mark in to the export sector, India need to be solves some problems. The first and foremost area in which India need to be focus is

173 packaging and branding so that the countries are interested to export from India. The government should also frame regulatory policy to give boost to the export. LEGAL FRAMEWORK

• The foreign trade policy 2009-2014, incorporating provisions regarding export and import of goods and services. The policy was came in to force with effect from 27 th august 2009 and will remain in force up to 31 st march 2014.the export and import up to 26 th august 2009 are governed by foreign trade policy of 2004-2009.

• Incorporation of supplement is updated on 5 th june 2012 and it will remain in force unless otherwise specified.

• The central government reserves right in public interest to make any amendments by notification to this policy in exercise of powers conferred by section 5 of foreign trade act.

• Before commencement of foreign trade policy, authorization issued shall continue to be valid for the purpose and duration for which such authorization was issued.

• In case an export or import that is permitted freely under foreign trade policy is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated.

• However for operational zing such irrevocable commercial letter of credit, latter of credit shall be registered by applicant. and contract

174 with the concerned RA within 15 days of the issue of any such restriction or regulation.

• To promote the export in specified sector, government of india shall make concerted efforts with specific sectoral strategies that shall be notified time to time.

• Further sectoral initiatives in other sectors will also be announced from time to time.

• Followings are the norms for electronics and IT hardware manufacturing industries (a) Export of electronic goods to be incentivized under focus product scheme. (b) Expeditious clearance of approvals required from DGFT shall be ensured. (c) Exporters / associations would be entitles to utilize MAI & MDA schemes for promoting electronics and IT hardware manufacturing industries exports. (d) Electronics sector included for benefits under SHIS scheme.

• For advising government on relevant issues connected with foreign trade, board of trade has a clear and dynamic role.

• Export and imports shall be free except when regulated and such regulation would be as per foreign trade policy.

• If authorization holder violates any condition of such authorisaton or fails to fulfil export obligation he shall be liable for action in accordance with FT act, the rules and orders made there under, FTP and any other law for time being in force.

175 • No export or import shall be made by any person without an IEC number unless specifically exempted. An IEC number shall be granted on application by competent authority in accordance with procedure specified in policy.

• Goods already imported in advance but not cleared from customs may also be cleared against an authorization issued subsequently.

• All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency.

In the field of green products and technologies, India wants to become the hub for production as well as export and foe achieving the same objective India will take special initiative to promote development and manufacture of such products and technologies. As a result India start with, focusing on transportation, solar and wind power generation and other products. All these products are incentivized under reward scheme of the foreign trade policy.

TAXATION

Customs duties (import duty and export tax)

• In India indirect taxes are levied on goods whether imported or exported in form of customs duty.

• Custom act 1962 is the basic law for levy and collection of custom duty.

176 • The right to legislate and collect duties on import and export are given to union by the constitutional provisions.

• Central board of excise & customs is the apex body for customs matters and also a part of department of revenue under the ministry of finance government of India.

• The function of CBEC is formulation of policy concerning levy and collection of customs duties, prevention of smuggling and evasion of duties and all administrative matters relating to customs formation.

• Board ensures that taxes on foreign and inland travel are administered as per law and the collection agencies deposit the taxes collected to the public exchequer promptly.

4.3 TRADE BARRIER

Germany's policy and bureaucratic procedures can be a difficult obstacle for companies wishing to enter the market and need close attention by U.S. exporters. Complex protection standards, not normally discriminatory but sometimes passionately useful, complicate right to use to the market for many U.S. products. U.S. suppliers are fit advised to do their homework carefully and make sure they know precisely which standards apply to their product and that they gain timely testing and certification.

177 Trade Problems

Where can I find information on trade sanctions?

The Office of Foreign Assets Control (OFAC) in the U.S. Treasury Department administers and enforce economic and trade sanctions in opposition to targeted foreign countries, terrorism-sponsoring organizations, and worldwide narcotics traffickers based on U.S. foreign policy and nationwide security goals. OFAC acts under Presidential wartime and national emergency powers, along with right granted by specific legislation, to force controls on dealings and freeze foreign assets under U.S. power. Many of the sanctions are depends on United Nations and other international mandates, are multilateral in range, and involve close collaboration with allied governments.

While trade barriers and unfair practices take many types, the most common examples are as below:

• Intellectual property infringement - include copyright, patent and trademarks

• Be short of of competitive bidding for foreign government tenders.

• Competition from unjustly traded (i.e., dumped or foreign government subsidized) imports.

• Unjust and trade distortive subsidies provide by foreign governments to overseas competitors.

• Foreign trade remedy investigation conducted inconsistent by international obligations.

178 • Burdensome certification and testing necessities that are not required by home manufacturers.

• Rising imports and unfair competition.

• Concerns over additional foreign trade barriers to export or investment.

The U.S. government helps U.S. exporter’s resolution trade barriers every day all the way through programs like ITA’s Trade Agreements obedience program.

Trade Problems and Foreign Trade Barriers

While trade barriers and unfair practices take frequent forms, the most common examples are scheduled under:

1. Intellectual property infringement - include copyright, patent and trademarks.

2. Customs procedures that are not consistently applied

3. Shortage of competitive bidding for foreign government tenders.

4. The request of direct or indirect subsidies by a foreign government in support of domestic suppliers.

5. Burdensome certification and testing necessities that are not required by domestic manufacturers.

6. Influence peddling - A corporate entity or country is inquisitive with fair trade practices at your expense.

179 7. Bribery, corruption and requests for payoffs - When foreign corruption prevents you from opposing fairly on the basis of price, quality or service.

If you feel your company’s exports or foreign bid has been, or may be unfavorably affected by a trade barrier or unfair business practice, you may file a grievance electronically with the Trade Compliance Center within the International Trade Administration.

180 5.1 GERMANY: ELECTRICITY EXPORTS MUCH HIGHER THAN IMPORTS LAST YEAR DESPITE FASTER NUCLEAR EXIT

Germany exported much more electricity than it imported previous year, with the excess increasing to its maximum in four years in spite of the government’s decision to rapidity up its exit from nuclear power.

The Federal Statistical Office said Tuesday that Germany exported 67.6 billion kilowatt hours to additional European countries in 2012 and imported 44.8 billion. The surplus of 25.8 billion was up from the past year’s figure of 6 billion, and was worth €1.4 billion.

Chancellor Angela Merkel’s government close down the eight oldest of Germany’s 18 atomic reactors after Japan’s Fukushima nuclear disaster in March 2011.

181 The rest are to be steadily phased out by 2022, with the government focusing on rising use of renewable energy sources to load most of the gap.

5.2 BUSINESS OPPORTUNITIES IN GERMANY

1. SMART HOMES AND OFFICE

Smart homes and offices settled constantly to the occupant’s requirement and changing lifestyle. Gradually more home appliances are becoming brightly. In a smart house, all of these systems and policies communicate with each other and with outside world through network. But what makes a house actually smart is its central brain. This built in intelligence learn from our every day regular and separately adopts its decision to make our life relaxed. Smart houses are already technologically and commercially feasible. And the market is rising. As time progresses, new sensors will become accessible and more difficult designs can be measured. Right to use electricity, telephone. TV, and data everywhere in the house is becoming an ordinary.

2. SMART AGEING INDEPENDENT LIVING FOR ELDERLY PEOPLE

A smart house adapts to the growing desires of its occupants become they travel throughout the different stages of their life. When emphasis is placed on the live and care function, a smart house can develop into a smart ageing house. Or, smart housing for dynamic 50-pluses. Technological maintenance such as electric cooking plates that automatically switch off, stairs lift, automatic right to use and garage doors, surveillance cameras, and entry control, allows individuals of advancing age to live in their personal home for longer periods. With 20 % of the residents of Europe above 65 by the year 2020, the market

182 potential is large. The repair division will become the major market for smart aged, since aged people often do not desire to shift into a new house. There is not even enough space offered to construct new housing for this increasing division of the population.

3.0 TELEMEDICINE : MEDICAL HOME CARE

From smart aged to telemedicine is just a small step. The construction of a house can be enriched with sensors and expertise to collect medical information that could be very important for people who live alone. For measuring blood pressure and heart rate or monitoring other health parameters, home care becomes much easier with each remote systems. Technology advantages is care for the handicapped, those with chronic obstructive pulmonary disease, congestive heart failure, diabetes, and dementia. As latest technologies can compliment traditional care, increasing relief for patients and caretakers similarly. Automatically calling for help or videoconferencing with therapists are additional examples. Most people preference for being cared for their own home results in rising independence of patients meets. Encouraging home care instead of hospitalization answers some of society’s financial burden regarding our fast aged population.

ENERGY MANAGEMENT

183 Also high on the schedule is energy management. The main importance are decreasing consumption peaks, in the push for more well organized use of energy and smoothing the energy requirement profile. Thanks to current technical development, smaller energy consumers will start to play a more dynamic role in the demand side management along side large, energy in intensive industries. Automatic breakers with built in metering devices are accessible on the market. They enable real time monitoring and energy management of individual circuits by measuring voltage, current and power.

3. PHOTOVOLTAIC SYSTEMS : CATCHING UP ?

The move to renewable is a new trend that tiny consumer are picking up from industry. The sale of photovoltaic (PV) system has improved every year by around 35 %. Yet PV systems, whether grid attached or independent still have some obstacles’ to beat. Their high primary investment cost, low availability ( approximately 1000 hour’s full load equal per year ) and low efficiency ( today’s top performing system converts 16% of accessible solar energy in to electricity ) stop them from being more economically attractive. Local support schemes may provide PV systems a feasible alternative of green electricity supply but the major expectation lies with technological improvement. The European technology platform for photovoltaic has ambitious purposes . In 2030 they objective for PV systems with an efficiency of 25 %, a life span of 40 % years, a reimbursement period is not more than one year and build out of abundantly existing, non-toxic materials. Present research in thin film technology is very promising. Their efficiency is lesser than silicon systems, but they do not depend on limited and costly raw materials. In addition, manufacture is considerably less power demanding.

4. HEAT PUMPS: THE REVELATION OF THE PAST DECADE

184

Favored by government subsidies, heat pump are today the majority energy well- organized heating and cooling systems in well-insulated buildings. They diminish the final energy require through a factor of three and CO 2 emission by 25 to 60%. heat pumps are mainly of interest for new buildings, ever since their integration frequently requires radical adaptation of the building’s plan. This applied merely to the extraction of heat from the ground, ground water, or ambient air, but also to the allocation of heat. Heat pumps are best joint among low temperature heating method such as sub floor heating in well-insulated building . This is good information for contractors and electricians from the time when their professional skill are indispensable.

5. DOMESTIC CHIP : ANCIENT TECHNOLOGY, MODERN APPLICATION

Already well liked for more than a century in business, Combined Heat and Power (CHP) making is now penetrating home market. The most potential for domestic CHP S(dchps) is in substitution in the substitution of boilers in dwellings, small communities (a grouping of houses or apartments), and micro-enterprises. The scheme is gorgeous to both the consumer (saving on total energy cost ) and the utility company (creating opportunity for customer retention and peak-load reduction). The first dCHPs, with an internal combustion engine, have been on the market for around six years and have proven their consistency, newer systems be inclined to utilize sterling engines, which run quieter, creation them more appropriate for utilize in the domestic location. These systems still have high heat-to-electricity ratios, which initiate difficulties in

185 homes, where requirement for electricity increases and heat demand is decreased.

In the near future this may be addressed by dCHPs with hydrogen fuel cells that create one kWh of electricity for each kWh of heat. These systems are anticipated to be commercially accessible around 2010. Though the question of whether dCHP systems will observe a actual breakthrough also depends on the development of competing technologies such as high efficiency boilers, heat pumps, and solar heating systems.

6. ELECTRIC HEATING MAKING A COMEBACK?

Electric heating has constantly been unbeatable in terms of security and relieve. Though it had and representation as luxurious and bad for the environment and bad for the environment. But this has certainly become unfair in today’s market. Both technology and four way of living have changed considerably. In an increasingly developed environment, with improved insulated dwellings, electricity could very well turn out to be a capable way of heating. Taking into account all the preservation costs connected with other systems, the final demand for electric heating is very competitive with other energy sources, and with a decreasing energy requirement per customer, investing in a single network that serves all energy applications in the house becomes more cost-effective as compare to multi-utility investments.

7. POWERING THE DIGITAL ECONOMY: ROBUST DESIGN & EXTENSIVE CIRCUIT MONITORING

186 Today’s digital society is becoming tremendously sensitive to turbulence in electric power supply. Outages and voltage dips happen often within the grid and on-site; harmonics are becoming omnipresent as well. The cost of poor power quality for doing business is still rising. At present it is not economical to develop power quality at the supply level to assemble the necessities of digital society, A wide range of solution is obtainable for mixing into the electric installation : filters, neutral upsizing, dedicated circuits etc saving mitigation however should be well-considered, and therefore monitoring is essential. Characterizing power quality in terms of type of event, location and frequency of occurrence is required. Fortunately, metering plans are becoming affordable and valid at the individual circuit level.

8. RENOVATION FOR SAFETY AND COMFORT : UNDERESTIMATED RISKS ?

Higher than 70% of European housing stock is more than 30 year older. Except these buildings are correctly adapted, maintained, and renovated, their technical installations become increasingly less matched to the higher standards of functionality, security, and safety need by society of today. It is predictable that each year 16,000 Europeans are hurt and 540 killed due to incidents with electrical installations.

187 5.3 CONCLUSION

The electricity sector of the Germany was the most competitor of the economy. It is also marked that the combination of fuel used was heavily influenced by state intervention, this intervention including sizeable subsidies. More ever, it’s intensity and the extend of subsidies for the energy sector would definitely increase.

Since it is been seen that now a days every country has consider the electricity sector to be a natural monopoly. Controls where exercised by state supervision or rights. In National Socialist Germany, the most electricity company having the motto “safe and cheap“were able to extend their superior position.

In conclusion as a peculiarity of the electricity sector, it seems that the private sector orientation of the national grid utilities also provide increase to a conflict of interest : the macro economy purpose of supplying electricity at the lowest possible price cannot be reconciled with a private company’s goal of maximizing profit.

Profit-seeking by electricity suppliers also motivates against energy preservation and using more environmentally sound resources of energy. in addition, public and private shareholders are similarly interested in high dividends, and the state is in addition tied in to the interests of suppliers through income from licensing charges, lend, commercial and other taxes as well as through a home public network- which has been described as “modern form of legitimate corruption “

188 5.4 SUGGESTION

As now a days we can see that the electricity sector is totally been depend on the conventional energy sources in Germany. If they want to increasing their production then it is been advisable to more concentrate on the non-conventional energy sources i.e wind energy, solar energy, biogas, renewable energy sources etc…

The company of India, suzlon working in electricity sector is importing some of the spare parts from Germany which automatically increases the production of suzlon company. If Germany tie-up with suzlon company then an export of the Germany can be increased.

If Germany would tie-up with some countries like Africa, which is cover under the area of an equator, so an export of indirect electricity possible. Such electricity generated by solar panel.

Germany would invest in countries like India having large coastal area and generate electricity through tidal energy as well as wind energy. So in this manner there is an indirect export of electricity.

189

PART-2 INDUSTRY SPECIFIC STUDY

A STUDY REPORT ON FOOD & BEVERAGES IN GERMANY

190 2.1 INTRODUCTION OF FOOD SECTOR

For a marked number, German nourishment still summons pictures more sound than haute. Yet, the actual existence is, that the German national consuming strategy is considerably more various than on the whole clichés may arouse acknowledge.

Europe's grandest sustenance and drink market offers significantly continuously for purchasers and creators vague. Significantly open to new social effects and culinary developments, the German food and drink market offers business risks on all fronts.

Germany's sustenance industry is not only resolved by a vow to pass on the definite best and yet by a yearning to actively respond to altering purchaser needs.

Extending health heed, a developing people, and the coming to fruition investment for health and wellness characteristics have aided different some time ago corner business segment actors to get vital industry players.

Solicit for utilitarian supports inaccessible from everybody else has manufactured Germany as an European pioneer, with the common sustenance segment experiencing a threefold unfold in bargains inside a decade.

Germany stands at the bleeding edge of sustenance and drink showcase progression as it adjusts to current factors of broadened investment for safe and sound foodstuffs.

191 2.2 ROLE OF FOOD SECTOR IN GERMAN ECONOMY

The food & drink industry has a novel part in widening fiscal risk in light of the way that it is comprehensive to human life and health.

The industry works at various levels of social standards:

1. Families improve trims for their specific usage. 2. Neighborhoods trade regular produce and home-took care of stock. 3. Neighborhood affiliations change over tamed gathers for neighborhood organizations and 4. Universal organizations purchase things globally to pass on characteristics across over geologies.

In this diverse scene, billions of people improve, change, and pitch food, particularly in enhancing countries where cultivation guidelines all other budgetary divisions.

Yet an unlimited grant of the previously stated workers can't both satisfy their brief use needs and secure sufficient compensation from sustenance business areas to improve their lives.

1. The Advantage of Large Firms

1. By handling particular hindrances in a couple of areas around the globe, hefty associations are showing that advancement might be made: individuals can transform their work into incremental increases in pay and enhanced expectations for everyday comforts

192 2. Unsurprisingly, associations' intercessions reflect their particular plans of action and compass rural generation of crude materials, sustenance transforming, and dissemination and promoting exercises. 3. By updating the conditions in this "field to mouth" esteem chain, imposing associations assist give dependability and chance to many individuals. Such updates focus on the basic preconditions to investment chance. 4. They make comprehensive plans of action with accentuation on worldwide or nearby businesses; fabricate the human and physical capital of the abject to partake viably in nourishment & refreshment esteem chains, and work to defeat the unfavorable institutional and arrangement figures, around others, that avert sustenance & drink esteem chains from satisfying their guarantee of quality conveyance.

2. Knowledge of demand market

1. Large associations comprehend both local and global business sectors, the nature of interest for foodstuffs, and subsequently the "bar" that the underprivileged must clear to business their merchandise (not slightest to associations' particular obtaining offices). 2. In a large portion of the cases assessed, a repeating goal is to raise the harvest nature of minor scale ranches, which are tested to stay aware of continually climbing benchmarks for harvest preparation.

3. Span across the value chain

193 1. Additionally, the major firms in this division work or emphatically impact whole esteem affixes from cultivators to purchasers. 2. That compass is especially compelling for making investment chance in light of the fact that great associations can either connection downtrodden makers to whatever is left of the planet or reinforce neighborhood cycles of riches creation by activating cultivators, makers, wholesalers, and shoppers.

4. Resources and soundness

Not minimum, vast associations have the weight to stand up to legacy methodologies to processing and vested diversions in supply binds and the notoriety to be trustworthy accomplices to a wide assortment of partners imparting corresponding targets. Together, they can bear to contribute for the lifelong and implant patient capital into transformative drives.

2.3 STRUCTURE OF FOOD SECTOR

1. Dairy Products

Market 1. Germany is Europe's biggest dairy maker. With milk handling volume of 30 million tons in 2011, the nation ranks sixth all inclusive. 2. Total handling worth of around EUR 21 billion and more than 36,000 specialists at around 100 German dairy processors,

194 assisted make the German dairy industry the nation's second biggest nourishment and drink division. 3. The milk, cheddar, and crisp dairy features transformed by the German dairy industry make a major commitment to the well-being of German purchasers, underpinning the segment's imperative part in the announcement of a solid lifestyle. 4. Milk subordinates for example casein, whey, and milk powder are utilized as a part of various sustenance segments as fixings in an extensive mixed bag of features.

Competitive Landscape

1. The German dairy industry is impressively made up of minor to medium-measured players and can at present be viewed as profoundly divided: the top three players holding just 19 percent of the aggregate business sector esteem. 2. As such, universal associations can drop in the commercial center all the more effortlessly, granted that industry examiners anticipate an expanding solidification drift towards fewer yet bigger associations sometime later.

Opportunities

1. The dairy industry is one of Germany's for the most part inventive nourishment and drink industry divisions. 2. Companies are unvaryingly enhancing existing features through the requisition of new advances and enhancements.

195 3. The dairy industry has been speedy to react to expanded buyer interest for practical nourishments.

The movement for health and wellness sustenance items furnishes amazing development chances; not only for dairy features utilizing utilitarian fixings, and yet for makers with a keep tabs on common parts for example calcium or diminished oversized recipes for yogurts or pastries.

2. Baked Goods

Market

1. Fuelled by an annual for every capita bread utilization of 75 kg, Germany is the European guide in the preparation of bread and rolls.

2. In 2011, the industry produced bargains of EUR 13.4 billion (3 percent expansion on 2010) and handled 6.4 million tons of bread.

3. In 2010, the German scone market had a business sector worth of EUR 2 billion (2 percent increment) with chocolate treats the biggest sub portion (21 percent), emulated by

196 spread based bread rolls (17 percent), and cream filled treats (14 percent).

4. A normal annual business sector development of more than two percent is expected until 2015, surpassing both the UK and French market estimates.

Competitive Landscape

Even though the for the most part number of associations working in the German heated merchandise industry has been diminishing for a considerable length of time because of a continuous merging movement, the industry remains home to an abundance of business sector actors, being made up of SMEs and heading multinational players indistinguishable.

Opportunities The heated merchandise portion has immovably built itself in the German retail buyer business sector.

In 2010, artisanal bread and rolls deals elucidated 62 percent of the German bread advertise, accompanied by streamlined items (33 percent), and in-store pastry shops (6 percent) separately.

Estimates indicate that the domesticated business for bread and rolls will develop by eight percent by 2015. 3. Confectionery andSnacks

Market

197 1. High development levels and flat boundaries to new feature market section have assisted make an EUR 13 billion confectionery and nibble handling business sector in 2011. 2. The advancing fragments regarding business quality are cocoa and chocolate items (EUR 6.5 billion), fine cakes (EUR 2.3 billion), and sugar confectionery (EUR 1.8 billion) individually. 3. Average annual confectionery for every capita utilization surpassed 32 kg (identical to EUR 112).

Competitive Landscape

1. Although the top three business sector actors in the German confectionery industry possess around 40 percent of the aggregate business sector esteem, the industry is equitably divided. 2. The wide palette of marks ready (separated in value and value terms) is such that buyer power is not the figuring out element in this business. 3. Germany's magnetic and intense area variables are underpinned by an above normal fare quantity rate of as of now 46 percent, which makes Germany the planet's confectionery trade champion – impressively in advance of the Netherlands and Belgium (with only 50% of German fare volume separately).

Opportunities

1. International confectionery makers expanded their fare impart to Germany by 6 percent to arrive at EUR 3.6 billion.

198 2. Retail bargains of exquisite snacks, potato chips, peanuts, and nut blends, again surpassed past years comes about by three percent. 3. Other development fragments are controlled by the health and wellness movement, which has expedited expanded interest for large liberate, level sugar, and without sugar confectionery.

4. Beverages

Market 1. Germany is Europe's biggest business sector for soda pops and alcohol mixed drinks. 2. In 2011, the normal for every capita utilization of soda pops and mineral water expanded by 2 and 3 percent to achieve 120 liters and 140 liters separately. 3. In the same year, non-jazzed up refreshments explained EUR 11 billion in retail bargains, whereby mineral waters (EUR 3.3 billion), juice based soda pops (EUR 2 billion), and foods grown from the ground juices (EUR 1.4 billion) were the most significant classifications. 4. Segments with above normal development incorporated caffeinated beverages (40 percent increment), tree grown foods water blends, and game drinks (12 percent increment each). 5. Germany is Europe's advancing jazzed up refreshments advertise – around 17 percent of all alcohol mixed refreshments depleted in Europe are sold in Germany. 6. With just about 50% of the piece of the overall industry, lager and enhanced jazzed up refreshments act for the

199 biggest sub portion, accompanied by spirits (29 percent), and wines (23 percent) separately.

Competitive Landscape

1. Although various major universal players are available in the German sodas market, the industry is exceptionally separated.

2. Like the German soda pops industry, the fermented beverages business is enhanced, with the advancing associations producing just a quarter of aggregate deals.

This makes the German alcohol mixed drink advertise an alluring business recommendation – especially for corner or esteem included features.

Opportunities

1. Following the health and benefit megatrend, the industry offers chances in sections and corner portions for example utilitarian beverages, smoothies, improved water, and natural refreshments specifically. 2. Companies new to the business sector additionally have the opportunity to record littler scale victories by focusing on health profits or exceptional processing systems. 3. Current development classifications in the hard refreshments segment incorporate brewskie blended beverages, foods grown from the ground cognacs, and liquor unhindered brews.

200 4. Changes in shopper inclination have additionally expedited a higher utilization of natural wines, brews, and spirits.

5. Meat and Sausage Products

Market 1. The meat and frankfurter features industry is the biggest fragment in Germany's sustenance industry. In 2011, it produced deals of around EUR 38 billion (9 percent increment on past year). 2. The major fragments incorporate pork (68 percent), chicken (17 percent), and meat (14 percent).

With a sum meat utilization of 90 kg for every capita in 2010 (an expansion of 1.5 percent over 2009), incorporating around 32 kg (2011) of frankfurter items, Germany is a standout amongst the most magnetic business sectors in Europe.

Competitive Landscape The German meat preparing industry is portrayed by a progressing combination drift. The top four industry players, for instance, elucidate around 60 percent of all pig butchering.

As on the whole rivalry in Germany might be viewed as solid, associations are incite to improve new items and investigate trade markets (add up to fares arrived at very nearly EUR 9 billion in 2011).

201 Certain retailers take after a retrogressive reconciliation methodology and work own slaughterhouses, putting supplemental force on processors.

Opportunities 1. Recent market movements incorporate prepacked meat items (5.1 percent bargains build in 2010), hotdogs (2 percent increment in volume in 2010), and large lessened pre-packed meat items (19 percent piece of the overall industry in 2010). 2. Although naturally processed meat and wiener features remained corner businesses in 2011, makers are moving to natural processing to take care of developing purchaser demand. Clear mark features and also poultry wiener varieties are progressing in fame. 3. Besides natural processing, the assembling of meat features as per halal prerequisites will come to be more significant in Germany because of more than 4 million rehearsing Muslims.

6. Fruits and Vegetables

Market Germany's leafy foods business is quite compelling for remote associations: only one fifth of expended foods grown from the ground third of devoured vegetables are provincially sourced.

1. More than 50% of Germany's leafy foods imports originate from Spain, Italy, and France. 2. Sales of prepared products of the soil (prohibiting juices) arrived at EUR 5.6 billion in 2011.

202 3. As such, foods grown from the ground (EUR 2 billion) and vegetables (EUR 1.5 billion) make up for more than 60 percent of for the most part preparation esteem. 4. Potato items explain EUR 1.4 billion and blended pickles for around EUR 0.6 billion. In 2011, jams and jams (38 percent piece of the overall industry) and soil grown foods arrangements (32 percent) commanded the transformed products of the soil business sector. 5. Frozen vegetables (33 percent) and canned vegetables (28 percent) are the most essential sub fragments of the vegetable business. 6. Savory potato snacks (47 percent), solidified potato features (23 percent), and dried potato items (10 percent) are the top three single sub portions inside the transformed potato portion.

Competitive Landscape The German products of the soil business is still divided, granted that certain associations are gradually dropping in an union stage. With business volume and esteem imparts of 55 percent and 45 individually, discounters were the most significant dispersion channel for natural leafy foods in Germany in 2010.

Opportunities 1. Germany's new leafy foods utilization is far behind other European nations. Current customer movements incorporate benefit features incorporating pre-packed foods grown from the ground mixed greens. 1. Rising business costs and the abolishment of EU normal showcasing norms expands the engagingness of the business and maneuvers bargains in Germany.

203 2.4 FUNCTIONS OF FOOD SECTOR

Later customer movements in the German nourishment and refreshment advertise have, most importantly, been affected by various extensive updates in publicly accepted norms:

1. A maturing populace is powering interest for health and wellness and in addition useful and natural nourishment items to counteract or overcome conditions incorporating diabetes, elevated pulse, and cholesterol. 2. Healthy nourishment plays an essential part in the lives of around 70 percent of the populace. 3. The natural sustenance development has since a long time ago realized standard status in Germany. 4. An more and more quick paced public order and the climbing number of single families is driving interest for greatly advantageous foodstuffs incorporating prepared to consume dinners, sweets, and heated merchandise. 5. Other movements incorporate bargains of reasonable exchange features, for example cafe and products of the soil juices, which developed by around 20 percent – arriving at EUR 400 million in 2011. 6. Ethnic substances, delightfulness substances, and "unhindered of" nourishments (e.g. lactose and without gluten items) are further movements as of now finding support with Germany's in an every expanding degree perceiving purchaser base.

2.5 BUSINESS ACTIVITIES OF FOOD SECTOR

The fluctuated exercises of the nourishment division are ordered as takes after:

204 1. Agricultural exercises for developing yields, raising domesticated animals and fish. 2. Food preparing of brand new items into canned and stuffed products, incorporating solidified nourishments. 3. Research and improvement on nourishment engineering. 4. Manufacturing manures, cultivate hardware and mixture seeds to expedite farming creation. 5. Regulation on nourishment generation and conveyance to guarantee value and wellbeing. 6. Financial administrations incorporating protection and credit to aid nourishment preparation and appropriation. 7. Marketing, bundling, publicizing and dispersion ( Wholesale and Retail)

PART III

3.1 COMPARATIVE POSITION OF FOOD AND

BEVERAGES INDUSTRY

3.1.1. INDIA

The Indian nourishment and refreshment industry (not incorporating hard drinks) was esteemed at approximately$200 billion in the year 2007.

1. Beverages, basically bundled tea and cafe, milk-based bundled beverages, carbonated beverages and products of the soil based beverages explain a modest extent of the industry, a little more than $6 billion.

205 2. The sustenance and drink industry is acknowledged a necessity segment by the administration, since it has potential for producing business in both urban and rustic regions. 3. According to the India Brand Equity Foundation (IBEF), the industry as of recently utilizes over 1.6 million laborers straight, additionally its effect on different parts for example agribusiness, logistics and retailing. The sustenance and drink industry spreads numerous segments, and the Ministry of Food Processing has extensively isolated into this regions:

1. Dairy transforming. 2. Fruits & Vegetable transforming. 3. Grain transforming. 4. Fish, meat & poultry transforming and finally 5. Packaged products for example drinks, snacks, pastry shop features, convenience/ready-to-cook substances.

4. Currently, numerous units in the sustenance handling industry work in the unorganized segment, yet the stake of formed industry is needed to develop, continuously.

5. The bundled sustenance, industry is needed to be a noteworthy donor to this development. Therefore, every capita utilization of bundled nourishments in India is wanted to ascent with the expansion in disposable salaries.

6. Beverages, specifically, are a quickly developing section, with an annual development rate of over 25 percent as of now.

Surprisingly, in ranges for example dairy transforming, meat & poultry transforming or apples and oranges & vegetable preparing, the opening

20 6 up of fare businesses and additionally climbing mindfulness on hygiene locally is moving commercial enterprises to receive higher norms, incorporating an expert and prepared workforce.

3.1.2. Industry Evolution and Trends

1. Until the early 90s, the Indian nourishment industry comprised impressively of modest scale units working with level close innovation and included in flat volume generation, impressively for the residential business sector.

2. The bundled nourishment industry, which incorporated a couple of composed players and made items like ketchup, sticks, scones and moment noodles, had not many marks and a flat level of rivalry.

3. With liberalization and the ascent in urban working class earnings, there was an outburst of marks, as existing players unfolded and new players dropped in the business.

4. While marked features have made a section into practically all classifications, the Indian nourishment industry is yet to experience numerous updates. The nourishment obtainment bind from homestead to production line is still wasteful, because of downtrodden transportation offices and absence of icy space.

5. Some associations have tried to address the aforementioned issues by putting set up frameworks for contract cultivating and acquirement from ranchers in particular land zones so ventures in cool space, warehousing and transportation offices could be made.

207 India is an extensive exporter of nourishment items for example grain, tea, brand new and dried vegetables; it is not yet however a major exporter of worth included features in the bundled nourishment area, granted that makers have made a starting by focusing on hefty ostracize Indian neighborhoods in ranges for example the Middle East and South East Asia. With additional stringent wellbeing standards and a more terrific offer of the composed segment, this is wanted to change.

At present, a portion of the major players in the Indian sustenance industry are: Hindustan Unilever Limited (refreshments, staples, nibble nourishments, fixings). ITC Ltd (staples, confectionery, nibble substances). Parle Products Ltd (nibble substances). Britannia India Ltd (nibble substances). Nestle India Pvt. Ltd (Dairy, nibble substances, chocolate). Haldirams (Snack substances). GCMMF-Amul (Dairy, refreshments).

Hindustan Lever Limited’s (HLL) Beverages business significantly improved its profitability, in a challenging market situation. Rs. Crores For the For the year Category year ended ended wise 31 st March, 31 st March, turnover 2012 2011 Sales Others Sales Others Beverages 2577.02 40.41 2309.23 37.27 Packaged foods 1341.93 17.53 1162.28 16.15 * Others represent service income from operations, relevant to the respective businesses

TABLE 3:

208 While the domestic market is currently the focus for most manufacturers, this may change in the future. Haldirams, for instance has begun an ambitious expansion plan, including a manufacturing plant in the UK.

3.1.3. Career Options in the Food & Beverage Industry 1. Since the food & beverage industry includes both basic and value- added food processing, there are a wide range of jobs available. In the primary food processing industry, the roles may involve close interaction with the farm end of the food chain. 2. At the value-added food processing industry, whereas, the focus would be greater on production and process technology as well as Research & Development (R&D).

Broadly, the key roles in this industry could be classified as-

Agriculture-related Production & process related Testing, Safety & Quality Control Health & nutrition related R&D and Sales and Marketing.

These are besides the general functions such as-

Finance Administration and Supply Chain.

3.1.4 GERMANY

Germany's economy is a lot fare turned and henceforth likewise sends out ward. In the meantime, because of rare common assets Germany

209 additionally relies on imports – specifically, in the vigor segment (mineral oil, common gas). In 2012 Germany sent out products worth 1 097.3 billion euro and foreign made products worth 909.1 billion euro. In 2012, the worth of German fares surpassed a trillion Euros. Imports, excessively, surpassed the past greatest of Euro 902.5 billion (arrived at in 2011). The remote exchange parity accomplished a "surplus" of 188.3 billion euro. Turnover in settlement and nourishment administration exercises current costs, new qualities, Relatives 2005 = 100

Chart 1

DR. AUGUST OETKAR KG

The Oetkar Group is one of the major German family ventures. The business divisions of the Oetkar aggregation showed exceptional infrastructure in the 2011 reporting year.

210 The Food Division involves the marked sustenance associations maintained by Dr. Oetkar GmbH, which are dynamic in approximately 40 nations, and different associations working at long last customer and mass purchaser portion.

change Items 2009 2010 2011 2010/2011 Food 2139 2318 2337 0.80% Beer and Non- alcoholic beverages 1586 1636 1813 10.80% Sparkling wine, wine and spirits 628 644 671 4.20% TABLE 4

3.2. PRESENT BUSINESS TREND IN INDIA FOR

FOOD INDUSTRY

As far as worldwide nourishment business, India accounts less than 1.5% despite being one of the crux nourishment processing countries worldwide. Anyhow this furthermore additionally shows the gigantic conceivable outcomes for the development of this industry.

Backed by the GDP evaluations, the rough development of this segment is between 9-12% and throughout the tenth arrangement period the development rate was around 6-8%.

Nourishment Processing Industry gives openings for work to 1.6 million individuals and it is evaluated to unfold by 37 million by 2025.

3.2.1. India’s exports to Germany

Starting 2010, India stands 26th on the record of sourcing nations for Germany and 21st near significant goals for German sends out.

211 Since the presentation of the Euro in Germany, Indian sends out have climbed relentlessly throughout the years.

YEAR EXPORTS €4.2 2006 billion €4.7 2007 billion €5.3 2008 billion €5.10 2009 billion €6.2 2010 billion

TABLE 5: Indian exports to Germany

With 24 for every penny of the sum quality, textiles elucidated the biggest impart of Indian fares to Germany worth €1.5 billion in 2010. At the second spot were substance items with €585 million, emulated by information preparing, electronic and optical supplies with €579 million. The fourth and fifth spots were brought by apparatus with €418 million and cowhide items with €396 million . 3.2.2. Germany’s exports to India Starting December 2010, Germany is India's fifth biggest bartering accomplice worldwide, and the biggest changing accomplice inside the European Union, with an unbelievable offer of 21 for every penny of the aggregate exchange between EU and India.

1. In line with its notoriety of being one of the planet's heading exporters, German fares to India developed to €8.2 billion, developing at a rate of over 12 for every penny in 2008. 2. In 2009, this figure fell by 1.2 for every penny to arrive at €8.1 billion. On the other hand, in 2010 it again expanded by 15.7 for every penny to arrive at €9.3 billion.

212 The top three victors of German fares to India were- 1. Machinery 2. Chemical items 3. Data transforming 4. Electronic and optical supplies parts.

With the quality of €2.9 billion, apparatus took the lion's offer of 31 for every penny in Germany's sum fares to India. Compound features with €1.2 billion took an allotment of 13 for every penny, and information transforming, electronic and optical gear developed to €894 million.

Fares of electric gear stood at €818 million. Metals and vehicle parts were other significant fare things, with a quality of €614 million and €534 million separately.

3.2.3. German investments in India: German industry, right from the starting, was dependably more than a supplier of merchandise to India. Times of elevated fares were dependably went hand in hand with by vast streams of venture and engineering.

Since liberalization began in 1991 the new spurt of German fares to India has prompted a proportionately magnificent support in new speculation and specialized collaboration ventures.

1. Among outside speculators in India, Germany ranks 8th with sum speculation of give or take $3.9 billion since August 1991. 2. Since April 2000, a combined figure of $3051 million has been put by German firms into India. 3. Despite the subsidence, German speculators pressed on to show extraordinary premium in India throughout 2008-09, when they contributed an unequaled heightened measure of $629 million,

213 indicating an increment of 32 for every penny over 2007-08. In 2009-2010, the dollar figure tumbled to $626 million, even as the speculation into India developed possibly. 4. In line with the negative development of sum Foreign Direct Investment in India, Foreign ventures from Germany likewise fell recording just USD 200 Million. 5. Top divisions drawing in FDI inflows in India are Transportation industry, electric supplies, metallurgical commercial ventures, fills, administrations segment. Chemicals, development exercises, bartering, autos are other essential segments. 6. Maharashtra with 57 for every penny imparts of German ventures stays to be the most engaging end of German speculations in India. Pune has recently come to be the hotbed for German ventures. Karnataka and Gujarat are other imperative objectives. 7. Delhi and Andhra Pradesh have, notwithstanding, encountered a drop in the ventures from Germany. Southern states like Tamil Nadu and Karnataka are perceived to be growing prevalence because of the conductive nature.

According to the database on enrolled German associations with the IGCC, there are 1,280 German associations in India, which have made more than 200,000 businesses.

3.2.4. India’s investments in Germany:

Indian associations were included in no less than 55 mergers and acquisitions bargains in Germany throughout the same period.

Germany stacked up third behind USA and UK as target business sector for Indian ventures. India is the single biggest wellspring of FDI ventures from rising nations in Germany.

214 In 2008 separated from everyone else, Indian firms contributed an expected measure of $1.8 billion in Germany, up from $825 million in 2007 and $850 million in 2006.

By August 2010, Indian FDI stock in Germany had arrived at $4.1 billion, which appears to have surpassed German FDI stock in India.

There are 134 Indian MNEs in Germany. Informative data and Communication engineering, car part, Pharma and Biotech and assembling are critical ranges of Indian speculations.

The state of Hesse has pulled in the most noteworthy number of Indian subsidiaries (29 for every penny) accompanied by North-Rhein Westphalia, Bavaria and Baden Württemberg.

Karnataka and Maharashtra are the most paramount source areas of Indian FDI in Germany (33 for every penny every), emulated by Delhi at 20 for every penny and Tamil Nadu at 15 for every penny.

215 Part 4

4.1. POLICIES AND NORMS OF INDIA AND GERMANY 1. Industrial License

Indian Industrial permit administration has been extensively moved after dynamic liberalization and deregulation since 1991. Mechanical licenses are controlled under the Industries Development Regulation Act 1951. Streamlined permit is allowed by the Secretarial of Industrial Assistance (SIA) on the proposal of the Licensing Committee. In no time Industrial Licensing for assembling is needed if there should arise an occurrence of – Commercial ventures under obligatory authorizing.

Projects affected by locational restrictions like-

Environmental Clearance Shops and Establishment License Import License

An Import License consists of two copies:

1. Foreign Exchange Control Copy : To be utilized for effecting remittance to foreign seller or for opening letter of credit

2. Customs Copy : To be utilized for presenting to Customs authority enabling them to clear the goods.

The two types of license are:

1. General Licenses: This license can be used for the imports of goods from all countries, except those countries from which imports are prohibited;

2. Specific Licenses: This license can only be used for imports from a specific country.

216 2. Import Export Code (IEC)

IEC Code is novel 10 digit code issued by DGFT – Director General of Foreign Trade. It is required for import send out exercises and to make settlement against buys made to remote venders. One and only IEC might be issued against a solitary PAN number. Any proprietor can have one and only IEC number and if more than one IEC is designated to a proprietor, the same may be surrendered to the Regional Office for retraction. An IEC number designated to a candidate ought be uncertainly substantial for all its branches/divisions/units/factories. Provision for IEC must be submitted to the Regional Authority of Directorate General Foreign Trade.

Licenses Required For Restaurant Business (Not Exhaustive)

Licenses Issuing Authority

Health / Trade License Municipal Authority/ Health Department

Eating House License Police Commissioner

Restaurant Grade License FDA

Liquor License Excise Commissioner

Approval / Re -Approval of Department of Tourism of Restaurants (this is required for Government of India in the State Liquor License) concerned

License to play music in Phonographic Performance Limited / restaurants Indian Performing Right Society

Environmental Clearance Pollution Control Board

No Objection C ertificate (NOC) State Fire Department from Fire Department

217 Signage License Municipal Authority

Shop & Establishment License Local Municipal Corporation

TABLE 6:

3. Central Excise License For the management of the Central Excise Act, 1944 makers of excisable merchandise or any individual who manages excisable products, with certain exemptions, are solicited to get the premises enlisted with the Central Excise Department before beginning business. Makers, fabricates and foundation that carries on exchange, holds private store-room or warehouse or generally utilizes excisable products might get enlisted.

4. Excise License State

Alcohol mixed drinks are a state subject in India, so guidelines & regulations and callings & charges differ relying on the states. Any individual managing excisable merchandise are obliged to enroll with the State Excise. All marks (mainly transformed or foreign) must be enrolled with the Excise Department of every state. Allows need to be gotten from concerned extract powers for development of alcohol mixed drinks from warehouse to the exchange. Such authorization is ordinarily issued after installment of the state extract callings pertinent; in the event that products are being moved between two states, this might involve paying an Import Fee and an Export Pass Fee.

5. Trade License To guarantee that the way in which a business is almost always carried on is consistent with the correlated standards, benchmarks and security guidelines the civil power responsible for the spot where exchange is directed issues a Trade License. The system & expenses to get an exchange permit are situated by the metropolitan power consequently

218 extensively contrasts as per the area. Exchange License is a certificate/document which allows authorization to bear on the specific exchange or business for which it is issued. 6. Regulation and Control 1. Most of the prepared nourishment things have been exempted from the purview of authorizing under the Industries, Development and regulation, Act, 1951, with the exception of things saved for little scale part and hard refreshments. 2. As for every degree approach Foreign Direct Investment up to 100% is allowed under the mechanical track in the nourishment framework like Food Park, Cold Chain and warehousing. 3. As far as sustenance retail is concerned the FDI strategy does not allow FDI into retail part with the exception of Single Brand Product Retailing. This approach is uniform for all retailing movement. 4. FDI strategy for assembling of things saved for the Small Scale Industry segment is uniform for all things so saved and a marked agreement for things in the nourishment preparing segment is not scrutinized. 5. The approach for refining of liquor has been announced vide Press Note 4 (2006) as per which FDI up to 100% is allowed on the programmed track for refining and fermenting of liquor subject to permitting by the proper power. 6. No streamlined permit is needed for generally the sum of the nourishment and agro handling commercial ventures with the exception of certain things such as brewskie, consumable liquor and wines, genuine sweetener, hydrogenated animal fats and oils and so forth. and things saved for elite fabricate in the minor scale segment. 7. Items held for S.S.I. incorporate pickles and chutneys, bread, confectionery, rejecting chocolate, toffees and mulling over gum and so on, rapeseed, mustard, sesame and groundnut oils (with the exception of dissolvable concentrated), ground and handled flavors

219 other than zest oil and oleoresins, sweetened cashew nut features, tapioca sago and tapioca flour. 8. Use of outside mark names is currently uninhibitedly allowed the legislature. 9. MRTP (Monopolies and Restrictive Trade Practices Act) tenets and FERA (Foreign Exchange Regulation Act) regulations have been loose and given more opportunity to empower speculation and extension by substantial corporate. 10. Most of the things might be unreservedly foreign and sent out with the exception of things in the negative records for imports and trades. Capital merchandise are likewise uninhibitedly importable, incorporating second hand ones in the sustenance handling segment.

7. Fiscal policy and taxation • Custom job rates have been significantly diminished on nourishment transforming plant and gear, and additionally on crude materials and intermediates, particularly for fare processing.

• Wide-going financial arrangement updates have been presented continuously in sustenance handling area. Extract and Import job rates have been diminished generously. Numerous prepared sustenance things are completely absolved from extract job.

• Corporate charges have been decreased and there is a movement towards market identified premium rates. There are assessment motivating forces for new assembling units for certain years, with the exception of commercial enterprises like brewskie, wine, circulated air through water utilizing enhancing thinks, confectionery, chocolates and so forth.

220 • Indian cash, rupee, is presently completely convertible on current account and convertibility on capital record with unified swapping scale instrument is predicted in advancing years.

• Repatriation of benefits is uninhibitedly allowed in numerous commercial enterprises aside from some, where there is a supplemental necessity of adjusting the payment installments through fare wages. 8. Export promotion Nourishment transforming industry is one of the developing ranges recognized for fares. Facilitated commerce Zones (FTZ) and Export Processing Zones (EPZ) have been set up with all bases. Likewise, setting up of 100% Export turned units (EOU) is empowered in different regions. They might import unlimited of job various sorts of products, incorporating capital substances.

• Capital merchandise, incorporating extras up to 20% of the CIF quality of the Capital products may be foreign made at a concessional rate of Customs calling subject to certain fare commitments under the EPCG plan, Export Promotion Capital Goods. Trade joined calling unlimited imports are additionally permitted. • Units in EPZ/FTZ and 100% Export turned units can hold 50% of outside trade receipts in outside money accounts.

4.2POLICIES AND NORMS OF INDIA FOR IMPORT AND EXPORT

221 Section I. Food Laws: The LFGB gives crucial definitions, procedural standards and destinations of the German support law. It depicts general food security and health protection tenets, addresses labelling necessities, controls evaluation, restriction, and seizure runs of suspect support. The previously stated leads have an acquaintanceship with generally created and transported in sustenance things much the same.

At final, the German shipper has keep going power observing the engagingness of any outside made things into Germany. The German law sanction departments acknowledge the dealer only answerable for any violations of the Food Law since they can't launch development against outside producers, consolidating those in other EU countries. Violations of the Food Law by the shipper constitute a punishable offence.

1. The control for sanction rests with the chose states (German Leander). This surmises that on occasion, a minor infraction to the sustenance law may be tolerated in one state yet not in another or that explanations can vacillate to a little degree. 2. However, major violations are abused in all chose states. Down home and outside stock are checked by erratic testing by government explore focuses at the reason for deal or any reasonable centre in the trade chain or at the planning region. 3. German government labs, despite looking for confined parts or honest labelling, evaluate the general nature of a characteristic observing solid updating practices and general purchaser needs. 4. Whenever a thing dismisses the Food Law and presents a peril to open health, paying small appreciation to provided that it is a family or outside characteristic, this comes to be known to the press, which will define the imprint name, trader or creator while

222 preparation the purchaser. 5. A general managerial comprehension watching sustenance wellbeing necessities German food security powers to take five samples for each thousand tenants annually. This joins cases at any region of the creation and trade chain. 6. It is under the supervision of the Federal Ministry of Food, Agriculture and Consumer Protection (BMELV).

Section II. Labelling Requirements: General Requirements Germany applies EU-harmonized legislation to: • General Labelling Requirements • Nutritional Labelling • Product-Specific Labelling • GMO and Novel Foods Labelling

1. All substances must be labelled in German. 2. Multi-vernacular imprints are allowed. 3. Labelling may in like manner join traces. 4. However, it is blocked to show components on the name that are not held in the characteristic, e.g. representations of results of the dirt if simply fabricated flavours are used or a multi-substances developed starting from the earliest stage may simply exhibit pictures of the previously stated soil developed nourishments held in the characteristic. 5. There are different other remarkable labelling necessities identifying with specific supports or food packs. 6. Since various distinctive necessities are fitting, U.S. food makers and exporters are urged to contact their potential German shipper before making upgrades in names on things labelled for movement in Germany.

223 7. Some shippers may agree to annex workstation transformed, stick stamps in Germany for humbler measures all through a test- showcasing stage.

GMO-free labelling:

1. In Germany suitable July 2008, another labelling decision declaring that the sustenance has not been dead set from biotech plants has been open. 2. The name "without biotech" is voluntary and the German government and NGOs assume that the sustenance business enhances another third offer showcase aside from standard and regular substances where the buyer can picked between without biotech and biotech sustenance things.

Section III. Packaging and Container Regulations: Germany applies EU-harmonized legislation to packaging and containers. Germany applies additional requirements regarding packaging waste and recycling of packaging material.

Packaging Waste Recycling - Green Dot System

Generally, the German business has been utilizing the "Green Dot" image to guarantee that bundling material will be reused in a regulated framework. The "Green Dot" is considered on the bundling material of for all intents and purpose all items retailed in Germany.

224 Since January 1, 2009, the reusing law no longer needs that the "Green Dot" to be printed on item bundling to demonstrate that the material will be reused in a legitimate way. In any case, if the maker or the merchant decides to keep utilizing the Green Dot image, a permitting contract should be marked with the Duals System Deutschland GmbH (DSD).

Mandatory Deposit System for One-way Beverage Packages:

Since May 2006, an expansive uniform compulsory discount framework spreads restricted drink bundles with a substance volume of 0.1 to 3.0 liter. The store is gathered at the retail level and has an association with locally processed or packaged features and also to foreign made drinks.

Rejected from this store framework are compartments holding this: 1. Fruit and vegetable juices and nectars. 2. Milk and milk blend refreshments holding least 50 for every penny of milk. 3. A dietetic beverage, aside from exceptional wears drinks. 4. Spirits and wine incorporating blend drinks holding least 50 for every penny wine and 5. Multi-layer container bundles (since they are respected to be the minimum ecologically irritating).

225

4.3 PRESENT TRADE BARRIERS FOR IMPORT/ EXPORT OF FOOD INDUSTRY

EU Feed & Food Products The European Commission presented expanded controls on the import of food and nourishment items.Be cognizant that the aforementioned things will unquestionably cause delays and potentially additionally supplemental expenses because of examination and examination of their source.

Affirmation and propel cautioning is needed with a specific end goal to permit the transforming to move ahead rightly. The measure will be substantial from March 27 2011 until March 31, 2014 and will be evaluated by the European Commission on a monthly premise until further recognize.

Germany Import Prohibitions

This is a posting of things disallowed for section into Germany: 1. Green and Black Tea of P.R. China starting point. 2. Certain nourishment things (if the shipment weight is 20 kgs or more) from certain nations can't be cleared into Germany. It would be ideal if you contact GTS Germany for portions. 3. Ozone draining substances (ODS, for example CFC or halon) or items holding them, aside from blaze dousers for air ship (merchant requirements import permit and grant). 4. Medication (counting "over the counter" and certain nourishing supplements recognized to be solution by Germany regulations; if indeterminate, ask with GTS Germany upfront) with the exception of pharmaceutical makers or traders with import permits/licenses. 5. Due to the danger of defilement with E coli microorganisms perhaps joined to the later flare-ups in Germany and France, the crisis measure

226 denies the instantaneous impact the importation of seeds and beans from Egypt to all EU nations. The things are: Rocket sprouts Beetroot sprouts Radish sprouts Soya bean sprouts, Soya beans, whether broken Sugar beet seed Vegetable seeds Mustard seeds, for sowing Other oil seeds and oleaginous tree grown foods, whether broken.

Germany Restrictions This is a posting of products limited (need support licenses) for passage into Germany:

• Bees and nectar • Cream and identified features • Eggs; fowls and other • Fish and Fish features • Meat and poultry; numerous other animal features • Flours and dish of animal starting point

The importation of nourishment items holding meat or drain features for individual utilization is disallowed unless went with by the fundamental documentation from the official veterinary administrations of the nation of starting point.

Baby milk, nourishment and extraordinary nourishments needed for restorative explanations might be transported in under the condition that the aforementioned features don't need refrigeration before opening, that they are bundled restrictive mark features for straight deal to the last buyer, and that the bundling is unbroken.

227

CE Marking

The CE Marking is instructed to be shown on managed items offered for business deal on the European business.

It demonstrates that an item follows appropriate European Directives identified with health, wellbeing, and environment and shopper assurance. On the grounds that the CE Marking distinguishes features that meet a normal set of criteria secured and embraced by the 15 CE parts, the CE Marking on your features will allow them to move uninhibitedly in trade all through the European business.

The producer, or commissioned agent, is answerable for putting the CE Marking on consistent features. The regular CE Marking logo is set on the item, item writing or bundling as portrayed in every Directive.

Articles controlled under the European Directives that are not fittingly checked when foreign made are liable to postpone in traditions and may not be cleared for utilization.

Eco-labels In March of 1992, the EU Council affirmed law 880/92 securing a neighborhood wide framework for allowing Eco-names (green mark) to items that voluntarily fulfill ecological principles.

The EU's destinations in setting up a framework for issuing green names are twofold. The marks brief buyers of features those are ecologically more secure than others in all parts of an item's life cycle.

Besides, they enhance the outline, creation and promoting and in addition build the utilization of items that have level or non-antagonistic

228 consequences for nature and that utilization characteristic assets sagaciously.

The EU trusts that the aforementioned targets will build the norms of health, security and the state of nature's turf of the EU nations.

Items foreign into the EU that wish to acquire a green mark must take after the same strict criteria as EU parts.

Import duty & taxes when importing into Germany

Overview Import calling and expenses are owed while importing merchandise into Germany from outside of the EU if by a private single or a business substance. The import job and charges payable are computed on the quality of the foreign products in addition to the expense of importing them (dispatching and protection). Duty Rates The duty rates applied to imports into Germany typically range between 0% (for VAT Rates illustration books and 17% for instance Wellington Boots). Certain features, for example Laptops, Mobile Phones, Digital Polaroid and Video Game reassures, are job unhindered. Certain products may be liable to supplemental jobs hinging on the nation of assembling, for instance Bicycles made in China convey an extra (hostile to dumping) job of 48.5%.

Minimum thresholds While importing merchandise into Germany, obligation is not charged, if either the aggregate quality of the merchandise (not incorporating delivering charges or protection) does not surpass €150 or if the measure of obligation payable, does not surpass €5. Not obligation or VAT is payable if the sum worth of the products (not incorporating sending charges or protection) does not surpass €22.

229

Other taxes and custom fees • Excise obligation is payable on for instance tobacco and liquor. • Additional pattern charges could be charged to blanket the upkeep of performing any needed examinations, verification and or testing of the foreign made merchandise. • The entire shipper must have emulating freedom handle.

Clearance process

Food and beverages:

The European Commission presented expanded controls on the import of nourishment and drinks items from India. Be cognizant that the aforementioned things will unquestionably bring about deferrals and potentially additionally extra expenses because of examination and examination of their source.

Confirmation and heads up notice is needed with a specific end goal to permit the handling to continue effectively. The measure will be good from March 27 2011 until March 31, 2014 and will be assessed by the European Commission on a monthly premise until further perceive. This has an association with concerned things either starting in or submitted from India.

The EU enactment needs all part states to embrace the Economic Operators Registration and Documentation (EORI) System. All Economic Operators (who are outlined as persons common or legitimate whose organizations are measured by Customs enactment) need to utilize a novel EORI reference number in all electronic conveyances with Customs and other government firms included in the universal development of products be it send out, travel or import operations.

230 A special EORI number will be designated to every Economic Operator in the EU, to be utilized as a part of all part states in which they work. This EORI will be utilized for making import trade and travel presentations.

Disappointment to give an EORI number at the FedEx freedom areas while trading out of, or importing in the EU in your name will bring about traditions leeway delays. For additional informative content visit the EU Commission online site.

All conveyances holding wooden bundling (made of strong wood) more than 6mm thick from non-EU Countries must be sanction by the German Forestry Administration. Shipper ought to furnish this information on the Commercial Invoice or on a divided comment: Shipper & Consignee Address, HS code, Air Waybill Number, International Plant Protection Convention (IPPC) Stamp (yes or no), and Type of medication in the nation of inception (hotness treated or treated). Shipments without the IPPC stamp can't be foreign to Germany.

Import Duties:

Most products foreign are liable to Ad Valorem Duty and Value Added Tax. Rates of calling shift and are dependent upon the item sort and nation of birthplace. Esteem Added Tax is zero, 7.0% (relevant explicitly to obsolescent and new showstoppers) or 19.0 % and is dead set by the merchandise sort. Obligation is dependent upon the expense of protection and cargo esteem, and Value Added Tax is payable on the total of the expense, protection, cargo esteem in addition to the obligation sum payable. Extra charges additionally incorporate Excise Duty which is payable on products that have a spirit or liquor content, tobacco features, cafe, and hydrocarbon oils.

Excise Duties:

Extract callings are payable on various products: hard refreshments, tobacco items, Coffee and Coffee Products, minerals oils (all at EU fit

231 rates), and waste, electric vigor, certain vigor sources, sweets and soda pops (at national rates). Higher costs than the EU level may be necessary on this things: footwear, elastic, plastic, metals, crude covers up & skins and some electric hardware.

Import Taxes:

Most imports drop in underneath MFN Rates (Most Favored Nation) rates. Near heightened costs have an association with dairy, sugar, and liquor. Esteem included expense (VAT) notwithstanding callings products; foreign made into Germany are likewise subject to a Value-Added Tax (VAT) that is ordinarily charged at one of the aforementioned rate.

Invoice fee:

Traditions in certain conditions will evaluate further expenses dependent upon the receipts accommodated a shipment. The charge is ordinarily imposed provided that they consider them essential as a feature of the terms of section because of the span of the conveyance and the identified imposing number of receipts on condition that by the shipper for his merchandise.

Examination Fees

Added expenses might be computed on certain items to blanket the liability of performing the examinations and or testing needed as a state of the products passage into the trade of Germany.

Exchange Controls

There are national restrictions within the EC for cash money transport to Germany.

Technical Barriers to Trade (TBT's):

232 Specialized obstructions or non-tariff boundaries to exchange, as they are now and again known, can create numerous complexities for exporters searching for new showcases for their features. The aforementioned obstructions could be in the type of regulations, principles, testing and accreditation techniques. The World Trade Organization (WTO) Agreement on Technical Barriers to Trade tries to surety that the aforementioned boundaries don't make unnecessary impediments. To get further qualified data on Technical Barriers to Trade and also Notifications on specialized regulations and traditionalism appraisal methodology.

Germany Import Prohibitions

Green and Black Tea of P.R. China cause. Certain nourishment things (if the shipment weight is 20 barrels or more) Soya bean sprouts. Soya beans, whether broken. Sugar beet seed. Lucerne (hay) seed. Vegetable seeds. Mustard seeds, for sowing. Other mustard seeds. Other oil seeds and oleaginous soil grown foods, whether broken. Fenugreek seed. Market entrances

233 Part 5:

5.1 POTENTIAL FOR IMPORT/ EXPORT IN INDIA

Market Potential

Generally speaking sustenance and refreshment utilization is liable to develop at rates between 6–11 percent for the following not many years. The items and divisions that are prone to have the most elevated potential for development are:

Meat:

For religious and social explanations, numerous Indians are either veggie lover, or do not consume decided sorts of meat. Meat utilization is flat, at 5.6 kg for every individual in 2010, yet is expected to develop at around 4.4 percent for every annum for the following not many years. This development is principally determined by the interest for poultry, which is ending up being more and more notorious. Also, the meat business sector is principally crisp meat. The 5/ Exporter Guide | INDIA | Food & Beverage| August 2011 present modest size of the business for transported in meat can additionally be ascribed to the administrative climate and the higher cost of foreign made meat items.

Fish : Fish utilization is at present flat because of level wages. Nonetheless, as salaries ascent, the utilization of fish is needed to ascent 17 percent by 2015. The experience for fish utilization development is that it is not generally part of Indian cooking and, comparable to meat, Indians

234 basically incline toward crisp angle so inland regions tend not to deplete it.

Milk & Dairy:

Because of infrastructure and climbing salaries, there is towering development for transformed dairy and milk items. In addition, the dairy taking care of industry in India is developing and mandating milk and dairy segments. Cheddar, margarine, and frozen yogurt are a portion of the major dairy items that are foreign with cheddar.

Packaged & Processed Products:

As additional ladies join the work energy and families get more modest, bundled and took care of items for example prepared to consume dinners, Germany nourishments and snacks will be in higher interest. The primed to consume dinners business sector was just around US$24 million in 2009 however it is likely to twofold by 2014. The most notorious ready to consume features are those dependent upon universal Indian systems.

Beverages: In India, tea is one of the main drink features that has an experienced business sector. Different drinks for example java, fizzy drinks and practical beverages all are feeling towering development. Java utilization is needed to develop 20–30percent for every year for the following not many years. Mandate for wine is additionally developing; however the business is caught for the most part by down home suppliers because of elevated rates on transported in wines. The residential wine processing in India brought just about 300 percent up in the previous 10 years.

Import Trends:

235 Germany sent out 178 million of sustenance and refreshment features to India in 2012, an expansion of 106 percent from 20010. Nourishment and drink fares to India are subject via dairy features which have been acting admirably lately.

Hotels:

The lodging business is overwhelmed by the top end of the business (5 star inns) which explains 65 percent of incomes. The aforementioned five star lodgings are fundamentally set in major urban areas for example New Delhi and Mumbai, however are beginning to stretch to medium estimated urban communities and notorious visitor purposes. Clients of this portion are primarily specialists and universal sightseers. Premium lodgings import their nourishment and drink features over executors that work with consolidator in Germany.

5.2. BUSINESS OPPORTUNITIES IN FUTURE

In order to successfully enter the German fruit and vegetable industry, Indian firms should consider the following : 1. Visiting the business and meet with included shippers. 2. Refining solid associations with German shippers and administer customary contact. 3. This will aid in characterizing upcoming windows of chance, new market advancements, updates in enactment, and naming. 4. Keeping them generally educated about developments/changes, promotional methodologies. 5. A profoundly regulated store network administration from developing to racking, coupled with a tried and true German shipper, is critical to victory.

236 6. In request to business your items in the German foods grown from the ground business, you may as well acknowledge this Visiting the business sector customarily and catching up on visits. 7. Preparing thorough attention packs (perhaps bi-lingual, English/German) profiling your association, your features and seasonal accessibility. 8. A joint approach with a retailer (after an association with the shipper has been structured). This may be recognized as a promotional and instructive venture to advance the business sector further. 9. Actively pushing your item in the business sector. 10. Contribution in nourishment identified exchange shows for example Fruit Logistical in Berlin and ANUGA in Cologne is prescribed. 11. There is additionally an industry-driven crusade, called '5 am Tag' (5 a Day), advertising the utilization of five servings for every day of products of the soil to German purchasers. 12. Forming an in number fare announcement form (e.g. the NZ- ZESPRI model), which is decently recognized and underpinned by German media and industry. Advancing quality included items in conjunction with your German importer/retailer. 13. It is key that Indian exporters work nearly with shippers to assurance that their items are primed for the German business sector and conform to neighborhood regulations for specific items, bundling and marking. 14. As bundling shifts enormously with distinctive items, correct procurements need to be gotten from the individual merchants. 15. Concern ought to be given to fare by means of specific consolidators who have as of recently dropped in the German products of the soil business. 16. German buyers are usually generally educated, need high caliber (at level costs) and look for new items.

237 17. German general stores and bind outlets as a rule advertise foods grown from the ground when supply is heightened and costs are level because of business sector immersion; hence the markets as a rule confirm utilization levels. 18. Consumers just for the most part purchase products of the soil in the event that it’s adequately stacked on apples and oranges racks -modest amounts don't pull in consideration in the natural unit of the business sectors. 19. Although there are bartering stages for leafy foods for example online sustenance markets, a hefty lion's share of changing is still controlled by means of straight correspondences between associations. 20. Nourishment retailing through the Internet is still exceptionally insignificant in Germany and particular contacts and face to face times are still critical elements in this industry.

238 5.2. CONCLUSIONS AND SUGGESTIONS:

1. Nourishment & drink associations broaden financial chance in numerous courses, in both rich and abject areas of the planet.

2. Various studies have highlighted the commitment of the industry in making both financial and social worth.

3. From incomes created by the industry worldwide, an extensive parcel of worth streams to: Farmers included in crude materials processing. Local nourishment handling or assembling capital ventures. Both immediate and roundabout work. Governments as assessments. Local and worldwide moguls as profits.

4. The part of impressive firms and of their accomplices in unfolding budgetary chance can take an assortment of structures.

5. The developing Indian retail goliath, Reliance, is arriving at into the nation's particular country rural store network to furnish value nourishments for its stores.

6. Nestlé is interfacing the monetary motor of its drain production network in Pakistan with a drive to back many ladies visionaries prepared in animals mind.

7. Coca-Cola Sabco, an East African packaging association, is making many micro-organizations to enhance item conveyance.

8. Whether the lifelong vision is about improving nearby businesses or worldwide supply chains, the distinctive situations all have one thing in as something to be shared: they concentrate on the capacity of downtrodden neighborhoods to make and catch a greater amount of the value from their work.

9. These cases are still special cases, but imposing ones. Multinationals ordinarily don't buy from micro cultivates, yet from bigger, more proficient farming makers or exchanging associations that total and advertise sustenance products. And the run of the mill technique for dropping in improving nations is not to utilize and serve the poorest.

239 PART-2 INDUSTRY SPECIFIC STUDY

A STUDY REPORT ON CHEMICAL INDUSTRY IN GERMANY

240 The Chemical Industry in Germany – Global Heavyweight for the Chemical Industry

Germany’s chemical industry is number one in Europe. The industry employs almost half a million highly trained staff. Businesses and research institutes involved in the sector invest substantially in research and development. This makes the industry a driving force for innovation. By developing new materials, active pharmaceutical ingredients and high- performance chemicals and plastics, the chemical industry sets the benchmarks for advancing state-of-the-art technologies. This creates benefits for a number of different fields such as energy efficiency, renewable, energy storage, and mobility. Leading international chemical firms choose to locate in Germany. They are drawn to Germany because of its highly qualified workforce, an excellent research landscape, state- of-the-art logistics, and the presence of world-class infrastructure.

Germany’s central geographical location at the heart of Europe provides a further decisive advantage, giving access to a market of more than 500 million customers in the European Union.

The Industry in Numbers Decades of Robust Growth

During the period 1960 to 2010, chemical industry revenue in Germany increased from EUR 12 to EUR 171 billion (according to Feri AG and the German Chemical Industry Association – VCI); resulting in an average nominal growth rate of 5.4 percent per year (real growth rate: 3.1 percent per annum). Over the same period, the number of employees decreased from 458,000 to 415,000; increasing productivity sixteen-fold indicated by revenue per employee levels of EUR 412,000 in 2010.

241 Turnover: European Number 1 and World Number 4

When it comes to chemical production locations, Germany is a global heavyweight, ranking first in Europe. With 2010 turnover of EUR 180 billion (Eurostat), the German chemical industry played a leading role in European performance, generating a quarter of total EU-27 sales of EUR 721 billion. Germany has occupied the world number four spot in global chemical revenue ranking for a number of years, being passed only by China (EUR 694 billion), the US (EUR 584 billion) and Japan (EUR 214 billion).

Stable Company Structure

There were nearly 2,000 chemical companies in Germany in 2008, of which more than 90 percent are SME’s (less than 500 employees). More than 75 percent of the total chemical revenues were achieved by around 100 companies with revenues of over EUR 250 million each.

Facts & Figures

• Largest chemical industry No. 1 in Europe and No. 4 worldwide

• Total chemical product originating in Germany equated to EUR 186.5 billion in 2011 - equivalent to 9% growth annual growth compared to 2010

• EUR 9.9 billion R&D expenditures in 2011 - with another EUR 10 billion planned for new investments and facility upgrades.

• Industry segments in 2010: 20% fine chemicals and specialty chemistry, 24% polymers, 30% pharmaceuticals, 13% petrochemicals, 7% detergents and body care, and 6% inorganic basic chemicals

• In 2011, some two thousand chemical companies - 90% small and medium-sized - employed just over 425,000 people, (2.5% increase on 2010).

• The domestic industry exported EUR 150.9 billion in 2011 (Nº 1 worldwide), while 2011 imports amounted to EUR 109 billion.

242 • In 2010, chemical products provided the largest percent of total manufacturing imports in Germany with 12.7 percent - ahead of both crude oil and natural gas (7.5%) and motor vehicles and components (7.4%).

Market

As Europe's No. 1 in sales, exports, investment, and R&D expenditures, Germany remains a global chemistry leader. Germany has the infrastructure, research facilities, and highly trained workforce to maintain and strengthen its benchmark position. From its outstanding chemistry- specific setting, Germany's chemical industry stands to benefit from the sharply increasing worldwide demand for chemical products.

Chemical Parks & Sites

Germany’s “technologically efficient” reputation stems from process automation, knowledge-sharing infrastructure and bundled supply chain solutions. Industrial investors, with business models focused on core competencies, are well advised to include tours of German chemical and industrial parks in their European site selection process. During such tours the investor can witness first-hand the advantages that complement businesses which integrate their value chains into one of our chemical parks.

To help businesses focus on their competitive success, Germany’s chemical parks offer plug and play services which minimize external dynamics. There is no requirement to utilize the plug and play services; individual park member choose how much or how little of these “bundled” services they require to secure: dependable supply chains, affordable distribution channels, or in order to safeguard against price fluctuations.

Industrial Infrastructure

243 An optimal location in the centre of Europe and an extensive and comprehensive logistics network make Germany an attractive place for investments in the chemical industry. The exceptional international pipeline system connects the German chemical industry to European trans-shipment centers for mineral oil, natural gas, and naphtha. In addition, chemical parks and sites are interlinked by their own pipeline systems as well harbors and cross-nodal staging point which link its rail- lines, roads, and waterways.

Personnel

Germany's chemical industry has a 425,000 strong, highly trained workforce (2011). According to an Ernst & Young survey, Germany's chemical employees are highly educated, attentive to detail, and they lead the industry to success.

R&D

Germany offers one of the most innovative chemical landscapes: 58 university chemistry faculties (including bio- and food chemistry), 24 universities of applied science offering chemistry, 68 non-university research institutes for the chemical industry, and numerous regional chemical cluster initiatives keep us on the cutting edge of research.

Incentives

Germany offers numerous incentives for all investors - regardless of whether they are from Germany or otherwise. There is a large selection of programs designed to support a wide variety of business activities at different stages of the investment process available. Support ranges from cash incentives for the reimbursement of direct investment costs to incentives for labor and research and development (R&D).

Physical Infrastructure

244 We offer an extensive and comprehensive logistics infrastructure that integrates world-renowned transportation networks with state-of-the-art security, IT, and telecommunications systems.

ROLE OF CHEMICAL INDUSTRY IN GERMAN ECONOMY

The chemical and pharmaceutical industry is Germany’s third-largest industrial sector in terms of revenues. It produces a wide range of products, including fine chemicals, specialty chemicals, petrochemicals, inorganic chemicals, synthetic materials, agrochemicals and fertilizers, laundry and cleaning agents, cosmetics, pharmaceuticals, paints and adhesives.

With revenues of €184.2 billion in 2011, the German chemical and pharmaceutical industry is by far the largest European chemical and pharmaceutical industry as well as being the fourth-largest worldwide, according to data provided by the German chemical industry association VCI. Revenues from the chemical and pharmaceutical industry constitute nearly 11 percent of the total revenues in Germany’s processing industries. Furthermore, with a market share of over 11 percent, Germany was the world’s largest exporter of chemical products in 2011. The country exported chemical products with a total value of €150 billion.

According to VCI, over 90 percent of Germany’s more than 2,000 chemical companies are small and medium-sized enterprises. These companies are often based in one of the country’s numerous chemical parks. The outstanding infrastructure, combined with an interconnected system of raw materials and energy, enables companies based in these parks to remain competitive in their production.

Some 429,000 workers are employed in the chemical and pharmaceutical industry. Many of them are graduates in the fields of science, technology, engineering and mathematics. According to figures from the Cologne

245 Institute for Economic Research (IW), 126 out of every 1,000 employees in the industry are graduates in these four key fields, which are in particular demand in Germany .

The chemical and pharmaceutical industry holds a strong position in the area of research. Its high number of innovations and wide range of products make the industry a major supplier for other industries. The industry’s estimated expenditures for research and development were around €8.8 billion in the year 2011, according to VCI. This positions the German industry at third place in an international comparison. In the year 2010, 77 percent of the companies in Germany’s chemical and pharmaceutical industry brought new products to the market. Some €13 billion altogether was invested in innovations. According to data from Germany Trade & Invest, Germany holds third place worldwide in the number of patent applications filed for chemical products. Germany is also among the top-ranking countries in its number of patent applications for pharmaceutical products. Innovations in the chemical and pharmaceutical industry are actively supported by the federal government’s High-Tech Strategy.

246

CHEPTER - 4

COMPARATIVE STUDY

247 4.1 COMPARATIVE COMPANY STUDY

INDIAN COMPANIES

Arasan Phosphates Private Limited

COMPANY INFORMATION:

Company is mainly manufacturer exporter & whole sale supplier of di calcium phosphate, plaster of Paris, fly ash bricks, dustless chalk, conventional chalks, phosphor, gypsum, fertilizers, agro seeds, pesticides.

They started company in the year in 2000,Arasan Pvt. Ltd. well established exporter, manufacturer, supplier of a diverse range of product that include di calcium phosphate, Plaster of Paris , gypsum, aloe Vera herbal products, industrial dryers , lab equipment, uniforms etc.

They also won the certificate from government of India. They also have special award in the export award by Capexil (chemical & applied product export promotion council), India.

BASIC INFORMATION

YEAR OF ESTABLISHMENT: 1995

248 TYPE OF OWNERSHIP: PRIVATE LIMITED COMPANY

ANNUAL TURNOVER: Rs.2-5 CRORE( OR US $ 400 K-1 Mn APPROX)

QUALITY & CERTIFICATE: Company is a member of Chemexcil (Basic Chemicals and Cosmetics Export Promotion Council of India) since 1998.

TEAM & STAFF: 100 people are working in organization.

BUSINESS TYPE: Manufacturer / Exporters / Wholesale Suppliers

MARKET COVER: Germany, Italy, France, Uk, Switzerland, Italy, Netherland, Belgium, Japan.

There are some reasons why company known across globally???

• State of the art technology • Stringent quality norms • Expert professionals & techniques • Scheduled delivery • Fully equipped R& D unit • Prompt supply at minimum cost

249 Archerchem

Archerchem establish in the year 2000 for the company to deal in bulk drugs, chemicals and intermediates. Gradually the product arena was increased and Herbal Extracts, Oils and Cosmetic Ingredients were added to the indenting portfolio. The company having the 11 years of the experience in the pharmacy trade which have built up good reputation as reliable and ethical company with the suppliers as well as the buyers which include leading pharma companies of India.

Archerchem are International Trading Company deals with Bulk Drugs, Intermediates and Base Chemical, Nutraceuticals, Oils and Cosmetic Ingredients. Primarily company established in the year 2000 is today also involve in exports and imports of various products. Archerchem works with all the pharmaceutical industries in all whole INDIA. The Company works on the philosophy of good quality, competitive price and prompt service which is translating into ever increasing list of clients. The company works with reputed, quality-conscious manufacturers and trading houses in China, Europe, Japan and other parts of the world and offers a wide range of products at competitive prices. For products offered they look at our Product List. Being a progressive company they always strive to expand and improve in their product list and services. Products protected by valid patents they are not offered for sale.

250 Deals in:-

Pharmaceutical Manufacturers, Pharmaceutical Wholesalers, Pharmaceutical Companies, Archerchem, Pharmaceuticals

Year of Establishment: 2000

Nature of Business: Importer,

Turnover: Rs. 2 - 5 Crore (or US$ 400 K - 1 Mn Approx.)

The company currently undertakes the activities:-

• Indent of Bulk Drugs, Chemicals & Intermediates, Herbal Extracts, Essential Oils and Cosmetic ingredient.

• Import stock and sale of bulk drugs with its group company.

• Getting special intermediates developed from lab level to plant scale and arrange technology transfer when the requirement of the group is occur.

• Export of API's and Intermediates.

• Helping buyers and suppliers in regulatory work and WHO Approval.

251

Ranmax Chemicals

COMPANY INFORMATION:

BUSINESS TYPE : Wholesale Suppliers / Manufacturer / Exporters / Importer

YEAR OF ESTABLISHED: 2000

COMPANY TURNOVER : Rs. 0.5 to 2.5 Crore Approx .

MARKET COVER : GERMANY, FRANCE & USA

DEALS WITH : Industrial chemicals, laboratory chemicals, organic chemicals, inorganic chemicals, chemicals, pharmaceutical ingredients, chemicals products

252 GERMAN COMPANIES

BASF (Badische Anilin- und Soda-Fabrik )

BASF SE is largest chemical company in the world and is headquartered in Ludwigshafen , Germany. BASF originally stood for Badische Anilin- und Soda-Fabrik (English: Baden Aniline and Soda Factory). Today, the four letters is the registered trademark and the company are listed on the Frankfurt Stock Exchange , London Stock Exchange , and Zurich Stock Exchange . The company delisted its ADR from the New York Stock Exchange in September 2007.

The BASF Group comprises subsidiaries and joint ventures in more than 80 countries and operates six integrated production sites and 390 other production site Europe , Asia , Australia , Americas and Africa . There’s headquarters is located in Ludwigshafen am Rhine (Palatinate, Germany). BASF has customers in over 200 countries and supplies products to a wide variety of industries. Despite its size and global presence BASF has received relatively little public attention since abandoning its consumer product lines in the '90s.

At the end of 2010, the company employed more than 109,000 people, with over 50,800 in Germany alone. In 2010, BASF posted sales €63.87 billion and income from operations before special items of about €8.1 billion.

253 COMPANY INFORMATION

Type: Societas Europaea

Industry: chemical

Founded: 1865

Headquarters: Ludwigshafen, Germany

Product: Chemicals, plastics,performance chemicals, catalysts, coatings, crop technology , crude oil and natural gas exploration and production

Revenue: €73.497 billion (2011)

Operating income: €8.586 billion (2011)

Profit: €6.188 billion (2011)

Total assets: €61.175 billion

Total equity: €25.385 billion

Employees: 111,141

CHEMICALS

BASF produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases , basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries.

254 BAYER AG

Bayer AG, German chemical and pharmaceutical company founded in 1863 by Friedrich Bayer (1825–80), where a chemical salesman, and Johann Friedrich Weskott (1821–76), who owned a dye company. Company headquarters, originally in Barmen (now Wuppertal ), there in Leverkusen , north of Cologne, since 1912.

The Pharma Chemicals product range are primarily based on Bayer Pharma's pharmaceutical business areas. Other products and technologies is the result of custom manufacturing activities, for Pharma Chemicals cooperates with a variety of selected customers. Pharma Chemicals have a advantage of the synergistic effects of combined chemical and microbiological manufacturing to enhance the quality and economy of production.

Our strategic in-house production ensures a continual supply of APIs. Today, production at the Pharma Chemicals unit concentrates on:

• Estrogens

• Progestogens

• Androgens

• Steroidal Intermediates

• Quinolones

• Specialties

• Custom Manufacturing

255 COMPANY INFORMATION:

INDUSTRY: Pharmaceuticals, chemicals

FOUNDED: 1863

FOUNDER(s): Friedrich Bayer, Johann Friedrich Weskott

HEADQUARTER: Leverkusen, Germany

KEY PEOPLE: Marijn Dekkers (CEO), Manfred Schneider (Chairman of the supervisory board)

PRODUCTS: Veterinary drugs, diagnostic imaging, general and specialty medicines, women'shealthproducts, over-the counter drugs, diabetes care pesticides, plant biotechnology, polymers, coatings, adhesives.

OPERATING INCOME: €4.149 billion (2011)

PROFIT: €2.470 billion (2011)

TOTAL ASSETS: €52.77 billion (end 2011)

TOTAL EQUITY: €19.27 billion (end 2011)

EMPLOYEES: 111,800 (FTE, 2011)

SUBSIDARIES: Bayer Material Science, Bayer USA, Bayer Schering Pharma, Bayer HealthCare Pharmaceuticals, Bayer Crop Science

256 EVONIK INDUSTRIES

Evonik Industries have an industrial corporation headquartered in Essen , North Rhine-Westphalia , Germany owned by RAG Foundation and world´s leading specialty chemicals companies. It had created on 12 September 2007 as a result of restructuring of the mining and technology group RAG . Evonik Industries united the business areas of chemicals , energy and real estate of RAG, while mining operations continue to be carried out by RAG. Since then, the energy and real estate business areas have been divested, with a minority share in the former and a majority share in the latter still being held. Its chemicals business already generates more than 80% of sales in areas in which it ranks among the market leaders. Evonik Industries employs about 34,000 people and carries out activities in more than 100 countries. The operating activities are organized into six business units which are a part of the chemicals business area. Evonik is the main sponsor of German football club Borussia Dortmund .

257 COMPANY INFORMATION:

Industry: Specialty Chemical

Founded: 2007

Headquarters: Essen, Germany

Key people: Klaus Engel (Chairman), Wilhelm Bonse - Geuking (Chairman of the supervisory board

Products: chemicals

Revenue: € 13.300 billion

Operating income: € 1.639 billion

Profit: € 793 million

Total Assets: € 20.543billion

Total Equity: € 5.969 billion

Employees: 46,430

258 4.2 Difference between India & Germany in Chemical Industries

Pro’s Con’s

• concentrate on core activities • loss of tax benefits resulting (innovation & marketing) from production of APIs in tax

• deploy your financial havens

resources for more profitable • dissemination of Intellectual investments Property

• benefit from F.C. industry’s • loss of know how

know how and expertise • job losses

• eliminate long lead times to • under-utilization of in-house build and validate a production capacity manufacturing facility

• free capacity for new product introductions

• avoid risks of using hazardous chemistry

259

4.3 Present Position and Trend of Business (import / export) with India

Exports (Rs. in lacks)

Year India's Total export Export to Germany Share Growth (%) (%)

2007 -08 65,586,352.18 2,059,892.83 3.1407 -

2008 -09 84,075,505.87 2,919,475.35 3.4724 41.7 3

2009 -10 84,553,364.38 2,563,293.28 3.0316 -12.2

2010 -11 114,292,192.18 3,071,853.52 2.6877 19.84

2011 -12 146,595,939.96 3,796,531.89 2.5898 23.59

(Source: http://www.commerce.nic.in/eidb )

As we can see from the diagram of India’s total exports, we can observe that in 2009-10 there was some down falls in total exports, but afterwards from 2009-10 the total exports has increased continuously. India’s total export in a year 2011-12 was 146,595,939.96 lacks.

260

As the chart shows that india has exported goods to Germany at regular interval but has exported very high in the year of 2011-12.in 2011-12 india has exported total 3,796,531.89 lacks to Germany.

261 Imports (Rs. in lacks)

Year India's Total Import from Shar e Growth Import Germany (%) (%)

2007 -08 101,231,169.93 3,973,603.74 3.9253 -

2008 -09 137,443,555.45 5,492,241.61 3.996 38.22

2009 -10 136,373,554.76 4,888,575.63 3.5847 -10.99

2010 -11 168,346,695.57 5,413,601.64 3.2157 10.74

2011 -12 234,546,324.45 7,809,529.21 3. 3296 44.26

(Source: http://www.commerce.nic.in/eidb )

From the above diagram we can say that the imports of India are rising year by year. There is very less change in the amount of imports during the year 2008-09 and 2009-10.

262

As we can see from the above diagram, we can say that there is rising trend in imports from Germany. But it has slightly reduced in the year 2009-10 and 2010-11 as compare to the year 2008-09.

263

CHEPTER - 5

POLICIES AND NORMS

264 5.1 For Starting New Business in Germany

Registering a company in Germany

An entry in the commercial register may be mandatory or volunteer. The entry (in German: "Anmeldung") is mandatory for larger companies. The number of employees and their qualifications, the services provided, the turnover and some other legal requirements are all factors depending on which the registration of a business may be mandatory.

There are some legal consequences of registration in the Commercial Register. One of them is that you must advise the local trade licensing office of your company's activities.

The majority of these offices require a report to be filed personally. In bigger towns, offices offer business registration forms that you can find on their website.

If you speak German, you can get a valid help with forms via the Economics Ministry's business start-up software package (Software paket für Gründer und junge Unternehmer). You can download the version 9.3 on their website.

Legal structures for companies

There are many possible business structures, depending on different factors, as for example the dimension of your business or whether you start up on your own or with business partners. here you can find some examples of German companies' structures:

• Sole trader (e.g. businessperson or professional); • Registered trader ('e.K.' in German, it means "Eingetragener Kaufmann");

265 • Limited liability company ('GmbH' in German, it means "Gesellschaft mit beschränkter Haftung"); • Civil law partnership ('GbR' in German, it means "Gesellschaft burgerlichen Rechts"); • Private limited partnership ('KG' in German, it means "Kapitalgesellschaft"); • Stock corporation ('AG' in German, it means "Aktiengesellschaft"); • General partnership ('OHG' in German, it means "offene Handelsgesellschaft"); • Trading concern (with limited liability);

By the choice of the structure for your business we strictly recommended you to consult a lawyer or a tax consultant. This is because plenty of very important legal and tax differences among them occur.

German social security registration

Even if no one probably expect the Social Security Act to apply in Germany, for an American or for any non-European company the social security system in Germany could still represent a very different constellation from the each national social security system. You are better to ask a German tax consultant (we hope this internet site may help you for this) if you do not want bad surprises. In general, employers have to calculate the sickness, healthcare, pension and unemployment insurance contributions for their employee and report and pass these to the German employee's sickness insurance scheme. This scheme is backed up with proof of contributions. The social security contributions are paid half by the employee and half by the employer , unless your employees work less than 15 hours a week. These special category of workers are called in Germany "geringfügig Beschäftigte".

266 You may find some very interesting information (in English) about starting up a business in Germany on the website of the German Ministry for Technology and Economy.

5.2 Germany's Import and Export Policy

Policy for importing goods into Germany

The principle of mutual recognition involves that EU Member States are required to allow products on their markets which are legally marketed in another Member State. This fundamental principal applies even if they have not been harmonized (or uniformed) by an European Regulation or Directive. The application of this principle can be challenged only under some particular conditions (e.g. public safety, health or environmental protection).

It is important to know that companies from EU countries, which are not registered in Germany , are eligible to apply for a VAT refund according to the EU Directive 2008/9/EC. Even companies from non-EU countries can apply for a VAT refund and must apply for it at their local tax administration offices.

The application can be carried out online at the Website of the German Federal Central Tax Office . Alternatively, you may consult a German tax accountant on a Network Apart who will submit your vat refund to the tax office for you.

There are no customs, but taxation and statistical reporting obligations must be kept in mind.

When goods are imported into Germany from non-European countries, tariff and non-tariff restrictions must be observed. It is important to say that few good traded in Germany are currently subject to direct market regulations, as the EU direct market regulations.

267 Tariff import restrictions originate under customs law and tend to consist of customs duties payable for the imported goods;

Non-tariff import restrictions may originate in foreign trade law or in international conventions.

Good imported from non-EU countries into Germany are subject to the value-added tax of 19%. The import turnover tax may be lower in some particular cases (e.g. 7% as for food products, newspapers and books).

Import restrictions under foreign trade law are prohibitions (e.g. embargo measures), requirements for authorizations (e.g. the demand for import authorizations for certain textiles) and monitoring measures (e.g. monitoring documents for the import of sugar).

Goods of which the import is subject to restrictions under foreign trade law and particular procedural requirements are listed on the import list (Annex to the Foreign Trade Law). Import prohibitions or authorization requirements may, however, originate from other legal areas. These are designed to protect other objects of legal protection outside of commercial policy (e.g. bans on imports of drugs for the sake of the protection of the public health).

Customs monitor compliance with the laws and regulations applicable to the goods and often also levy the import duties due (customs, import turnover tax, particular consumer taxes such as excise on spirits or tobacco).

268 Policy for exporting goods from Germany

The export procedure must be observed - according to article 161 of the German Customs code - when exporting goods from Germany. This is designed for the application and monitoring of Community (referring to the EU) and national foreign-trade restrictions on exports of Community goods . The export procedure should be strictly followed when re- exporting non-Community goods as well, in conjunction with a customs procedure which has a particular economic importance for the German country.

Please keep in mind that the export of certain goods requires special authorization (e.g. defense goods, dual-use goods).

There is a special office for this, the German Federal Office of Economics and Export Control ( Germany Trade and Invest ). This Office issues import authorizations and control documents in respect of certain goods from third countries (non-EU countries). Third countries are subject to an authorization under EU regulations, as well as export or shipment authorizations for specific deliveries of goods in EU and non-EU States. Moreover, further trade restrictions may arise from embargo measures.

269 5.3 Taxation in Germany

Taxation mostly depends on the legal structure of a business, its size and activities. The most important German Acts embracing taxation are the following:

• VAT Act

• Income Tax Act

• Trade Tax Act

• Corporation Tax Act

It is important to notice that the German taxation system differentiates between direct taxes and indirect taxes.

German direct taxes

The following are the most important direct taxes for businesses in Germany:

• Income tax (business owners); • Corporation tax (e.g. limited liability company, stock corporation, cooperative association);

German indirect taxes

The following are the most indirect taxes for businesses in Germany:

• Value-added tax or Vat tax (all business owners ). It should be paid by the 10th of the month following a prepayment period (month or quarter); • Trade tax, which foresees a quarterly prepayment;

Submitting your tax declaration in Germany

In Germany the tax declaration should be submitted after end of calendar year. Taxes are administered by the tax offices ("Finanzamt" ). A German

270 tax authority, the Federal German Fiscal Administration's Form Management System (FMS) offers online services in order to facilitate taxpayers by submitting the annual tax declaration.

Furthermore, businesses are obliged to file electronic declarations for payroll tax and VAT.

271

CHEPTER – 6

OPPORTUNITIES AVAILABLE

272 The Opportunities available in Germany due to the following benefits:

Stable Labor Costs

Within the last decade, the labor cost gap between Germany and its eastern European neighbors has been significantly reduced. Since 2001, wages have risen in most European countries (EU-27). While some countries – particularly those in eastern Europe – experienced an increase of more than seven percent, Germany recorded the lowest wage rise within the EU at just 1.6 percent on yearly average.

Competitive Tax Conditions

Germany offers a competitive tax system providing attractive tax rates for companies. In recent years, the German government has implemented root and branch reforms of the tax system to make the country a more attractive business location. The German tax system allows for differing tax rates in German municipalities. On average, corporate companies face an overall tax burden of less than 30 percent. Significantly lower tax rates are available in certain German municipalities – up to eight percentage points less. This makes Germany’s corporate tax system one of the most competitive tax systems among the major industrialized countries.

Highly Skilled Workforce

Germany’s excellent workforce is decisive to the country’s high productivity rates. It comprises over 40 million people – making it the largest pool of ready labor in the EU. Germany’s world-class education system ensures that the highest standards are always met. More than 80 percent of the German workforce has received formal vocational training or is in possession of an academic degree.

273 Engineering Excellence

In 2010, some 443,000 students – at more than 400 universities – embarked on a course of academic study. According to the OECD, Germany has an excellent standard of higher education. Technical fields of study experienced an undergraduate enrollment level increase of more than eight percent. Germany’s share of university students in the sciences, mathematics, computer sciences, and engineering is the second highest in the EU, with 31 percent of all students. In addition, the country can be proud of one of the highest rates of graduates with a doctoral degree. With 312 PhD graduates per million inhabitants, it ranks second in a comparison of OECD countries.

Germany Trade & Invest Helps You

Germany Trade & Invest’s teams of industry experts will assist in setting up operations in Germany. They support project management activities from the earliest stages of expansion strategy. They provide with all of the industry information we need – covering everything from key markets and related supply and application sectors to the R&D landscape. Foreign companies profit from our rich experience in identifying the business locations which best meet their specific investment criteria. They help turn our requirements into concrete investment site proposals; providing consulting services to ensure us to make the right location decision. They coordinate site visits, meetings with potential partners, universities, and other institutes active in the industry.

Their team of consultants is at hand to provide us with the relevant background information on Germany’s tax and legal system, industry regulations, and the domestic labor market. Germany Trade & Invest’s experts help us to create the appropriate financial package for our investment and put us in contact with suitable financial partners. Incentives specialists provide us with detailed information about available

274 incentives, support us with the application process, and arrange contacts with local economic development corporations. All of their investor-related services are treated with the utmost confidentiality and provided free of charge.

275 CHEPTER – 7 CONCLUSION

From the above PESTAL Analysis and Industry Analysis we can say that the Chemical Industry in Germany is providing good opportunities for the investment purpose. Germany and India is working as complementary to each other. The benefits like stable labor cost, competitive tax condition, highly skilled workforce, engineering excellence and help from its Germany Trade and Invest board are beneficial for the investor who wants to start the chemical business in Germany.

276