Tapping into the globally-competitive Indian manufacturing opportunity
May 2020 Foreword
The current global environment has several uncertainties. Global trade has been impacted by the COVID-19 crisis, with disruptions in supply chains highlighting the risk of being dependent on very few geographies. There is now a widespread emphasis by multinational companies on de-risking their supply chains and they are looking at diversifying to other countries.
This report has been prepared to assist multinational companies in getting an understanding of the potential opportunities for them in considering India for manufacturing through collaborations with Indian companies and through contract manufacturing. Broadly, we see India as an attractive destination for MNCs around the world. To become a competitive manufacturing hub, India is expected to leverage its advantages such as, an existing strong manufacturing base, competitive labour and taxation, investor-friendly business regulations and upgradations in infrastructure. Another opportunity for MNCs in India is its large and growing domestic market which can absorb investments.
We hope you find this analysis insightful.
Sudhir H Kapadia
National Tax Leader, EY India Contents
01 02 03 04 05 India as a Large and Engaging with Sectoral How EY can help competitive growing Governments to opportunities manufacturing consumption get necessary destination market policy support Executive summary
Page 4 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only India can be a key manufacturing base for corporations relying on global value chains
Large labour force ► Wages in India 30% of China One of the world’s fastest growing large economies ► 2.6 million STEM graduates – engineering talent (grown at over 7% in last few years) ► Labour laws being modified – flexibility for businesses to hire and fire
Large market – Growing consumption in India Large tracts of land identified by Government – early ► 100% increase in household consumption over last start for manufacturing ten years Large tracts of land available in private run industrial ► US$ 150 billion of consumption added annually parks
World class ports and airports located on global Stable external sector – Relatively stable Rupee, Large transport routes. Good hinterland connectivity through foreign exchange buffer, low crude oil prices rail and roads.
Politically stable with good political and trade relations Excess electricity generation capacity with with leading markets around the world such as Japan, Government making efforts to rationalize tariffs i.e.,
US, China etc. reduce tariffs for electricity
macroeconomic trends trends macroeconomic Growing economy with stable stable with economy Growing Key factor inputs factor Key
Source: MOSPI; IMF 2020 (April) STEM: Scientific, Technology, Engineering and Management
Page 5 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Policy announcements announced in May 2020 underscore Indian Government’s focus on domestic manufacturing and opening new opportunities
Expanding the role for private capital De-controlling agricultural sector Government has opened commercial coal mining and space sector for Government proposes to remove controls that would allow for a nation private participation. Further review of strategic sectors to be wide market for agricultural commodities, giving higher farm prices and undertaken with a potential privatization agenda. greater certainty to private players in sourcing agricultural produce.
An efficient and competitive electricity sector Increased local defence manufacturing and aviation opportunities New reforms could potentially reduce power sector losses, bring more competitive power rates for the industry and increase efficiency and Recent policy changes intend to promote domestic defence competition in the power distribution segment. manufacturing and encourage MROs, that will boost both defence and civil aviation volumes.
Opportunities in mining and healthcare sectors Continued commitment to foreign capital Government will take measures to create investment opportunities for Government’s announcement of increasing FDI limit in defence to 74% mining by auctioning licenses that would allow to go from exploration to and allowing Indian companies to list overseas underscores India’s deep mining, Government also proposes to increase public investment in commitment to foreign capital. health care facilities.
MROs: Manufacture, repair and overhaul Page 6 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only India has undertaken several business friendly reforms in recent years
1. Through recent measures India’s taxation has become 2. Simple regulatory environment globally competitive
► 100% FDI investments in practically all manufacturing
Corporate tax cut to 17%* to 10%** withholding tax for ► Free flow of goods in and out of country: simplified custom boost investment and dividend, long term capital procedures, major upgradation of port infrastructure transform India into a gains, royalty and fees for “manufacturing hub” technical service payments ► World Bank ease of doing business ranking up from 142 in Corporate tax in India is lower 2014 to 63 currently than other Asian countries 5%** withholding tax on interest payment ► Digital compliances for most tax and regulatory processes ► Massive scaled up digital payments infrastructure
Transfer pricing provisions allow non residents to obtain Implementation of GST has 3. Various structural reforms to make Indian economy advance pricing brought in supply chain concluded or are underway efficiency and improved agreement or use safe competitiveness of India’s harbour rules to provide manufacturing sector ► Insolvency and Bankruptcy Code for easier exits certainty to foreign investors ► Decriminalization of Companies Act, 2013
► Liberalization of regulations in: Agriculture, Power, Duty exemption on imports of inputs/capital goods in Aviation, Defence, Coal and mining manufacturing in bonded warehouse ► Government policies likely to favour locally produced goods
Source: World Bank Ease of Doing Business Report 2019, Department for Promotion of Investment and Internal Trade FDI: Foreign Direct Investment *Corporate tax for new manufacturing companies; Subject to applicable regulations and rates GST: Goods and Services tax ** Subject to conditions under Indian tax laws and Double Taxation Avoidance Agreement between India and Japan
Page 7 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Various alternatives for leveraging India as a part of the supply chain
Manufacturing 100% owned Contract through Joint Manufacturing Manufacturing Ventures
► FDI norms allow up to 100% ► Manufacturing in practically ► Vibrant private sector in India equity ownership in any sector can be undertaken ► Number of sectors are well practically all sectors through JVs developed with a host of well ► Numerous examples of global ► Vibrant and well established established players corporations running private sector – numerous ► Contract manufacturing used successful businesses without choices for JVs by a number of companies in any joint ventures ► History of long running and India successful joint ventures in India
Source: EY Analysis JV: Joint Ventures
Page 8 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Key sectoral opportunities
Sectors where India is competitive and has a manufacturing and export base
Textiles & Consumer Auto Chemicals Iron, Steel & Pharmaceuticals Apparel Goods industrials components
► 6th largest in world ► 4th largest producer ► 4th largest sector of ► 2nd largest producer ► Globally, 3rd largest ► Projected to become of textiles Indian economy of Crude steel and in volume terms and 3rd largest ► Profitable with high Coal 10th in value terms manufacturer rates of return ► 6th largest exporter ► Increasing globally by 2025. for apparel globally consumption on the ► 3rd largest finished ► Attractive for ► Growing on the back back of large middle steel consumer in generic ► India has become a of demand for end ► Presence of entire consumer industries value chain in India class the world after manufacturing designing and China and USA. manufacturing hub ► Strong presence and ► Large producer of with increasing Cotton, Jute , ► Large resource of capabilities across Iron Ore the value chain presence of global Polyester, etc. OEMs ► Further liberalization ► Low cost of of the mining sector production ► Well developed auto- and coal sector in component exports ► Well versed with India getting FDA approvals Sources: EMIS sectoral reports, IBEF, Invest India, EY sectoral reports, Make in India, India Trade Portal, World Steel Association Report 2019 OEMs: Original Equipment Manufacturers FDA: Foods and Drugs Administration
Page 9 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Key sectoral opportunities
New high growth sectors where export driven world class manufacturing facilities can be established in India
Smartphones Defence Battery and Medical production manufacturing Electronics devices
► "Large market with ► Large buyer of ► Strong policy push ► Key focus area in a ~ 1.2 bn telecom defence equipment for Electric Vehicles post COVID World subscribers (EVs) in India. ► Liberalisation in FDI ► Increased public ► Large talent of norms (74% from ► Strong push to spending on engineering and 51%) develop local battery healthcare scientific manpower manufacturing ► Focus on procuring capability ► Potential to develop domestically large scale produced equipment manufacturing to serve both Indian and global markets
Sources: TRAI (July-September 2019 report), News Reports
Page 10 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only How EY can support
Assess Analyze and and Implement evaluate advocate
► Market assessment study and ► Detailed SWOT analysis on ► Based on chosen model, execute evaluation of possible potential incentives and benefits the plan, including transaction collaborations and determine that could influence decision and advise, structuring the entry strategy - contract engage with government and arrangement, tax and regulatory manufacturer/ JV/ subsidiary such stakeholders to determine compliance and approvals, as, comparative assessment of feasibility negotiations with stakeholders. India and ASEAN countries ► Assistance in defining and ► Assistance in availing incentives executing advocacy strategy of under various state government global group of companies with policies. Central or state governments. ► Assistance in applying and ► Assistance in finalizing suitable complying with various state location within India – state, government rules and regulations region, district, city (NOCs, approvals etc.)
ASEAN: Association of South East Asian Nations SWOT: Strength, weakness, opportunities and threat analysis NOCs: No Objection Certificate Page 11 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Main report: Why should you invest in India? 01 India as a competitive manufacturing destination What makes India a manufacturing destination? Overall economic factors
The Indian economy signifies large growth opportunities and stability due to relative protection from various geopolitical events (like ongoing trade wars, crude oil shocks), macroeconomic stability, and external sector stability.
One of the world’s fastest growing large economies Aggressive corporate tax cuts and relief on (grown at over 7% in last few years) dividend distribution tax in last 12 months. India now a much more attractive and investor-friendly destination
Attractive FDI destination – 100% FDI automatic route Second largest English-speaking country and in manufacturing; US$ 473 b Foreign Direct young median age of 28 providing a large pool of Investment (from FY10), 60% of which was since employable workforce 2014-15
Strong Intellectual Property Rights ecosystem
Large investments in upgrading infrastructure – India currently implementing a US$1.4 t infrastructure Positive market sentiments and increase in project pipeline to be completed by 2024-25 disposable income expected to result in 3X rise in consumption expenditure by 2025
Politically stable with good political and trade Forex stability: large forex buffer, benefits from relations with leading markets around the world low crude prices, IMF anticipates sharp recovery in such as Japan, US, China. 2021
Source: MOSPI; IMF 2020 (April)
Page 14 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only What makes India a manufacturing destination? Large number of Indian manufacturers with required competence– contract manufacturers/ collaborators
th st In these sectors, companies can find potential Indian Top 10 FDI 6 among the top 1 among collaborators with required competence. destinations in manufacturing Greenfield FDI the world countries of the destinations in the world world Chemical and 4th largest producer Source: UNCTAD 2019 Plastics industry of chemicals in Asia Source: Global Source: UNIDO 2019 Investment Trend Monitor report Textile and Largest producer of apparel industry cotton 7th most valued 2nd fastest Most growing major nation brand in competitive Consumption of economy in the the world economy in US$ 150 b added world Consumer goods South Asia each year Source: Brand Finance Source: IMF 2019 Source: WEF Global Electronics Largest incentives Competitiveness Index program in India to industry promote manufacturing
US$320 1st choice of tech Auto components Large 2, 3 and 4 billion MNCs to set up industry wheeler manufacturer merchandise R&D centres outside their home exports annually rd countries 3 largest supplier of Pharmaceuticals medicines globally Source: Ministry of Commerce Source: Zinnov Consulting
Sources: EMIS sectoral reports, IBEF, EY sectoral reports, SIAM, EY Analysis, National Account Statistics R&D: Research and Development
Page 15 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only What makes India a manufacturing destination? Availability of skilled labour is India’s competitive advantage
Labour availability and its skillset Labour reforms to provide flexibility in Share of working age population in total population (%) labour policies and reduce compliance costs 75 ► Favourable demographics for India ► Government is simplifying labour laws to 70 compared to other countries reduce compliance costs and has allowed 65 companies across sectors to hire workers 60 for specific duration (fixed term) ► Strong technical and engineering 55 ► 44 labour laws have been merged into 4 capabilities (2.6 million STEM 1990 1994 1998 2002 2006 2010 2014 2018 labour codes namely: graduates) USA EU China India 65.4 64.6 71.2 66.4 ► The Code on Wages, 2019
Source: OECD (2020), Working age population (indicator) ► Government recognizes the ► The Occupational Safety, Health importance of human resource *Working age population is defined as those aged 15 to 64 and Working Conditions Code, 2019 development Average wages in Manufacturing Sector (in US$ ‘000) ► The Code on Social Security, 2019
6.3 6.3 6.6 5.7 ► The Industrial Relations Code, 2019 ► Under Skill India initiative Indian 5.1 government has collaborated with 4.5 ► More detailed regulations within these governments across the globe like codes will be prescribed. It is anticipated to USA, UK, EU, Germany, France, Japan retain India’s social culture while being etc. for skill transfer trainings, 1.7 1.7 1.8 1.7 1.8 2.0 business friendly internship programs ► Various relaxations in Labour laws across 2012 2013 2014 2015 2016 2017 states China India
Source: ASI , China Statistical Yearbook
Source: Ministry of Labour and Employment
Page 16 28 May 2020 Opportunities for Japanese companies from India manufacturing partnership - For Internal use only What makes India a manufacturing destination? Business regulatory environment
Free trade Digital compliances
► Good political relationships with major markets around the world ► Digital platform for most compliances like tax filings, applications and payments for licenses and permits, and regulatory filings, creating ► India has Comprehensive Economic Partnership Agreement and Free Trade Agreements with many countries also providing preferential transparency, simplicity and predictability for businesses tariffs for trade (often at nil rate of custom duties) Land on a ‘Plug and Play’ basis Trade related infrastructure
► Department for Promotion of Industry and Internal Trade sets up a ► AEO programme – simplified customs processing platform to facilitate large investors from the world, providing ► ICEGATE - Single-window digitised system for trade-related procedures information on 21,000 acres land along Delhi-Mumbai Industrial corridor available for Industries ► Upgradation of port infrastructure and connectivity: Completed 121 projects at a cost of US$ 4.2 b and several others are underway ► Proposes to also include land in private sector industrial parks FDI policy Structural reforms
► 100% FDI permitted under automatic route for manufacturing ► Introduction of Insolvency and Bankruptcy Code, Goods and Services Tax, companies, though sectors like defence, telecom, media, Companies Act, 2013, Universal Bank accounts, Universal health insurance – pharmaceuticals and insurance need government approval all foundations of a resilient society
Ease of Doing Business Digital payment systems
► India’s performance improved from 142 (2014) to 63 (2019), ► Digital payments across B2B and B2C due to expansion in opening of universal progressing on 7/10 parameters bank accounts, creation of cheap and efficient payment systems, and use of FinTech
► More emphasis on organised and formal economy : Source DPIIT, New Reports, Ministry of Shipping, Ministry of Commerce and Industry, Department for Promotion of Investment and Internal Trade World Bank Ease of Doing Business Report 2019, Unified Payment Interface, NPCI AEO: Authorized Economic Operator ICEGATE: Indian Customs Electronic Commerce/ Electronic Data Interchange (EC/ EDI) Page 17 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - ForGateway Internal use only What makes India a manufacturing destination? Competitive taxation designed to attract new manufacturing investment
Corporate tax cut to 10%* withholding Transfer pricing Implementation of Duty exemption boost investment and tax for dividend, long provisions allow non GST has brought in on imports of transform India into a term capital gains, residents to obtain supply chain inputs/capital goods in “manufacturing royalty and fees for advance pricing efficiency and manufacturing in hub” technical service agreement or improved bonded warehouse payments use safe harbour competitiveness of under Manufacture & rules to provide India’s manufacturing Other Operations in sector 5%* withholding tax certainty to foreign Warehouse on interest payment investors Regulations (MOOWR) 2019
Corporate Tax Rate (%)
Philippines Indonesia China Malaysia 30% Thailand Vietnam 24% 25% 25% India Singapore 20% 20% 17%** 17%
Source: EY Worldwide Corporate Tax Guide 2019 * Subject to conditions under Indian tax laws and Double Taxation Avoidance Agreements **Corporate tax for new manufacturing companies; Subject to applicable regulations and rates
Page 18 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only What makes India a manufacturing destination? Infrastructure upgradation
Physical infrastructure Industrial and dedicated freight progress in the last decade corridors – a game changer
► National highway roads built: 64,000 kms*
► Electricity generation capacity of 217 GW added, 84% growth in power generation May reduce transportation time of ► Moving towards a cleaner fuel: 71% of capacity goods from days to hours addition in last three years is in renewables Dedicated Freight Corridors (DFCs) National Infrastructure Pipeline for next 5 years as backbone to Delhi–Mumbai Industrial Corridor Project (DMIC) and Amritsar Kolkata Industrial Roads - 19% Corridor (AKIC) Railways - 13% Urban and Housing - 16% Integrating the key and highest Energy - 24% generating provincial US$ Agriculture and Rural Sector - 12% economies/regions across the 1.4 country trillion Health and Education - 3% Airports, Ports and Tourism - 3% New sustainable industrial cities Industrial Corridors - 3% with world class infrastructure
Digital Infrastructure - 3%
Others - 4% Integrated infrastructure projects to ease logistics issue In $ billion *2009-19, 1US $ = INR 72 Source: Ministry of Finance Page 19 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only 02 Large and growing consumption market India’s consumption market growth has created several opportunities for investors in the last decade
Household Fastest growing segments US$ 150 billion consumption consumption Transport added each year growth in the last Healthcare and Education decade Equivalent to total consumption of Norway Clothing and Footwear 100%* Consumer durables
Fuelled by:
1 2 3 E-commerce Technology Large investments
12x 90x 44x Corporate capex of over US$1.7 trillion* Increase in wireless Increase in Sales growth in the last decade data usage in smartphone sales FDI inflow of US$510 billion** in last decade in last decade the last decade
2011-19 2014-19 2010-18 2008-18*, at current prices and current $ 2009-19**, 1 US$ = INR 72
Sources: IBEF, TRAI, RBI, MoSPI
Page 21 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only India’s large and growing market gives it an advantage over ASEAN countries
India crossed threshold of per-capita India’s private consumption is Local manufacturing presence would GDP of US$ 2,000 and growing estimated to grow by US$ 2 trillion of provide much better access to the towards per-capita GDP of ~US$ which nearly half would be in premium Indian market 4,000-4,500, which would open up and new category consumption. massive market opportunities.
Growth in consumption in last five years and size of total consumption
10.0% India, 8.8% China, 8.4% Vietnam, 8.2% 8.0%
6.0% US, 4.1% 18) - Phillippines, 4.4%
4.0% Malaysia, 3.3% Singapore, 2.7% Indonesia, 2.6% Thailand, 2.6%
2.0% EU, 0.1%
years (2013 years Average growth in growth Average
consumption in last five five last in consumption 0.0%
-2.0%
Total consumption is reflected in the size of the bubble Source: World Bank, World Economic Reform
Page 22 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only 03 Engaging with Governments to get necessary policy support Government of India and State governments are keen to attract investments to create jobs
With large workforce, the Government of India and State Federal and state level incentives for manufacturing in India Governments are looking to prioritize manufacturing investments leading to job creation. This implies: ► Country wide infrastructure push leading to visible rise in infrastructure quality in states. Land related Fiscal incentives
► Major destinations in India attracting FDI provides ► Stamp duty waiver/concessions ► Capital linked – cash back excellent quality of life. New Delhi and Mumbai feature in ► Other concessions on ► Expenditure linked – exemption / Global Liveability Index, Delhi with a per capita income of registration charges, property cash back US$18,600 features in top 10 metros of the world taxes, conversion charges, etc. ► Sales linked ► Single-window clearance (Global Metro Monitor) ► Interstate competition on ► Ease of doing business leading to enhanced 1 2 information transparency, reduction in human interface and legislation backed time bound services ► Competitive sector specific policies backed by Infrastructure 3 4 Capital investment and umbrella industrial policy in almost all states employment primarily providing capital subsidy, tax breaks, etc. ► Electricity duty exemption ► GST linked subsidies - with higher incentives in backward areas and higher ► Rebates in tariffs for electricity/water/gas reimbursement/soft loan ► Subsidies linked to social incentives on employment generation. ► Subsidies on clean manufacturing security contributions (PF/ESI) ► GIS enabled land bank available with all major states technology, pollution control, etc ► Other subsidies (technology, but right connect can lead to faster acquisition. transport, Interest etc.) With proper engagement with the government, multinational ► Special incentive package may companies can get requisite policy support along the be negotiated for mega projects necessary lines.
Source: Global Liveability Index, Global Metro Monitor 2018 PF: Provident fund ESI: Employees State Insurance Page 24 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only 04 Sectoral opportunity Chemical and Plastics industry Chemicals industry: an overview
Indian chemical and petrochemical industry Industry overview size (US$ b)
► Indian chemicals and petrochemicals (CPC) industry is growing at 2x the global 304 growth rate
► Estimated market size of India US$ 178 b (FY19) 57 163 147 40 ~9% ► India is the 4th largest producer in Asia and 6th largest in the world for CPC +
► India is a strong global dye supplier, accounting for approximately 16% of the world ~13 ~13 production of dye products %+ % ► US$ 17.4 b in FDI during 2000-2019 (other than fertilisers) ~7 $107b or 65% of what is consumed in % India is made in India
Major players UPL OpenAg BASF SE DOW Inc Consumption HUNTSMAN FY 25 Philips Carbon Du Pont FY 18 Black Limited De Nemours Inc
Sources: Department of Chemicals and Petrochemicals, EMIS Chemical sector report, Invest India, IBEF, EY industry reports
Page 27 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Plastics industry: an overview
Strong presence across the value chain Industry overview
► India’s plastics industry is one of the largest in the world Polymer Plastic End-user Recycling with an estimated market size of US$25 b manufacturersStrong presence across the valueprocessors chain industry ► In FY19, plastics export stood at US$ 11 b of which exports of raw plastic material stood at US$ 4.5 b ~15 large industrial ~7,500 units ~30,000 units Packaging, ► More than 2,000 exporters across the country groups infrastructure, industrial sectors ► Western region accounts for 47% of the industry agriculture, textile production fibers, electronics, automotive
Strong domestic market potential Major players ► Low per capita consumption of plastics in India at 9.7 kg compared to 27 kg world average, 45 kg in China and 32 kg in Brazil Time Polylplex ► Growth of end-user industries and low penetration levels especially in agriculture Technoplast Ltd compared to global averages ► Substitution of traditional materials such as glass, metal etc. in end-user SINTEX Garware Polyester industries Limted ► Presence of large number of polymer producers, and plastic process machinery and mould manufacturers in the country
Sources: IBEF, EY Analysis, FICCI
Page 28 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only India’s competitive advantage in chemical and plastics industry
Being amongst the largest Stringent environment waste producers in South India enjoys several norms in other countries East Asia, India provides advantages over other make India an attractive an opportunity for scaling countries alternative for chemical and up the recycled waste plastics products based manufacturing, including plastics
► Stable and growing economy with increasing per capita income and urbanization ► Significant potential in terms of capacity, infrastructure and skilled manpower ► Established supply chain routes and low cost manufacturing ► Ready access to important raw material resources ► Backed by strong government support- planned investment of US$ 6.2 m and 18 plastic parks being set up to boost domestic production and achieve environmentally sustainable growth ► High demand from end user industries specially for speciality chemicals
Sources: IBEF, EY Analysis, EMIS Industry report
Page 29 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Broad overview of potential states in India for the Chemicals sector
Parameter Maharashtra Tamil Nadu Gujarat Andhra Pradesh Telangana Policy (apart NA NA NA Thrust Sector of Industrial Policies Priority sector - Petroleum, from industrial) Chemicals & Petro-chemicals of IPR
Major Incentive/ 40-50% gross SGST limited to 100% Soft loans for mega and above 70-100% of Net VAT/SGST for 10 50% of Net VAT/SGST for 7 years 100% of Net VAT/SGST paid for 7- Subsidy FCI for 7-9 years 100% of Net VAT/SGST for 10-14 years limited to 70-100% of FCI limited to 100% investment in P&M 9 years from commencement of years limited to 100% investment production limited to 200% cost of in EFA P&M
Major clusters 13 chemical zones at Ambernath, Petroleum, Chemical & Petrochemi Petroleum, Chemical & Petrochemi Vishakhapatnam, Nakkapalli, Under Implementation - Chemical Badlapur, Butibori, Dombivali, cal Investment Region cal Investment Region Kakidana Clusters (PCPIR) spread and pharmaceutical cluster in Kalyan-Bhiwandi, Kurkumbh, Lote, (PCPIR), Cuddalore and Nagapattin (PCPIR), Dahej Vapi, across 603 sq. km – (Stage - Berhampur, Petroleum, Chemicals Parshuram, Mahad, Patalganga, am - (Proposed) Bharuch, Ankaleshwar, Valsad – Finalization of Master Plan); LPG and Petro-Chemicals Investment Roha, Taloja, Tarapur, TTC bottling plants in Krishna and Region (PCPIR), Paradeep – with GIDC: Investment 16,959 crore for Kurnool districts 284 sq. km area (Draft plan infra. already done approved, EIA completed) Rs. 1919.13 crore appx. Investment on infra. Support National Chemical Laboratory, Central Electro Chemical Research Petroleum, Chemical & Petrochemi Indian Institute of Chemical Institute of Chemical Technology Infrastructure Pune; Indian Institute of Institute, Karaikudi cal Investment Region Technology, Hyderabad Bhubaneshwar, National Institute Technology, Bombay; Institute of (PCPIR), Dahej of Science Education and Research Polymer Industries Park, CIPET: Andhra Pradesh Petroleum, Chemical Technology, Pune Central Salt & Marine Chemicals (School of Chemical Sciences) – Institute of Plastics Technology Chemicals & Petrochemicals Research Institute, Bhavnagar Khurda, Laboratory of Advanced 20 operational CETPs – Combined (IPT), CIPET: School for Advanced Investment Region Central Institute of Chemical Research in Polymeric Materials, capacity of 286 MLD Research in Polymers (SARP), Engineering & Technology (CICET) 6 SEZs - Pharma SEZ, Andhra Gopalpur has an operational port 4 CHWTPs – Taloja, TTC, 2588 Chemical Manufacturing to come up Pradesh SEZ, Hetero Drugs SEZ, near Berhampur and a SEZ is Ranjangaon and Butibori Factories Kakinada SEZ, Parry’s Food Dahej - 90 MLD effluent disposal proposed here. Products SEZ Sewage Treatment Plant at pipeline, 40 MLD CETP, TSDF of Paradip Port, the largest port on Hinjewadi with 4 MLD capacity 1.4MMT PCPIR Expressway, SCR Trunk Line the east coast of India - Region is Adani Petronet Dahej Port Pvt Ltd – AP PCPIR, Kakinada Deep Water JNPT – biggest container handling 2.5 km form NH-5A and 3 kms Port, Visakhapatnam Port, port in India Six lane Dahej-Bharuch State from SH-12. Proposed airport to be Gangavaram Port Highway (SH6) connects the region built within the zone. to Delhi-Mumbai National Highway NH-5A connects Paradip to NH16 and National Expressway (Golden Quadrilateral)
Sources: Government of Maharashtra, Andhra Pradesh, FICII Manufacturing Hubs in India Report 2019, Department of Chemicals and Petrochemicals Annual Report 2019-20
Page 30 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Broad overview of potential states in India for the Plastics sector
Parameter Assam Karnataka Gujarat Jharkhand Kerala MP Odisha Policy (apart General Industrial General Industrial Scheme for assistance General Industrial General Industrial General Industrial Policy General Industrial Policy from Policy Policy for Plastic industry Policy & special Policy industrial) (Revised) incentive for Deoghar Plastic Park Major For units set up in The industrial policy Interest Subsidy @7% For development of Entrepreneur Incentives for Large Scale Subsidy for investment Incentive/ Plastic Park: encourages plastic per annum Plastic Parks: Support Scheme Industries: in P&M in industries in Subsidy 100% SGST waste recycling units Reimbursement to the Provides incentives and (ESS) will be IPA @40% to 10% max 270 Cr. Plastics Sector: reimbursement with an additional extent of 80% of net concessions for Public, introduced for Plastic Investment subsidy for ETP/STP 10% of investment, max For 15 years, subject investment promotion VAT paid Private, PPP, JV waste Recycling, Bio- @50% max 25 lacs 50 Cr. (depending upon to maximum subsidy of 5 per cent Industrial Parks Degradable Plastics. Exemption from electricity duty for the size of unit) (i) 250% of Fixed (max. 10 lacs) 5% of land in 5/7/10 years capital investment for industrial park to be Interest Subsidy @5% for 5 years micro enterprises earmarked for plastic for technical textile unit (ii) 180% of Fixed recycling units. Rebate on new HT connection @INR capital investment for 1 per unit for 5 years small enterprises (iii)150% of Fixed capital investment for medium & large enterprises Major clusters Tinsukia, Assam Ganjimutt, Mangaluru Sanand, Gujarat Devipur, Deoghar Proposed: Kannur, Tamot, Raisen Siju, Jagatsinghpur Dahej, Gujarat Kerala Billaua, Gwalior Proposed: Narasapura, Kolar, Bengaluru & Dharwad Support Abdos Lamitubes (P) Varroc Polymers, Sintex Plastics, Raga Industries, Gopal Ocean Polymers, Uflex, The Supreme Industries, Techno Green PVC Pvt. Infrastructure Ltd, Avichal Buildcon Shakti Plastics, BASF Satellite polypack, Wim Industries, M.S. Plastic, Mega Polymers, Vectus Industries, Bhawna Ltd., Indian Plastic Pvt Ltd, BCPL, Essel India, Gurudev Plast, RIL, BASF India, Sunrise Plastic, Shree Consolidated Polymers, Prakash Packaging II, Industries, S K Propacks Ltd., Veco Plastics Pvt Ltd., Parag Polymers, Plastic, Jharkhand Thermoplastic Charu Agro Plast, Creative Pro Industries, JS Industries, Enterprises, Plast Microplastics Pvt. Intercontinental Plastics Pvt. Ltd., Products, Southern Pack, Flexi Caps, Friscon Polyfab, Lisa Plastics, Joshna India, Nanotech Pvt. Ltd., Polymer, Jyoti Plastic Rotoplast Containers, Plastics, Paramount India Nets, Jagannath Plastics, M.D. Polymers Ltd., Purbanchal Works, Uflex, Cosmo Hindustan Polytex, Plastic Enterprises, Mahishmati Plastics, Enterprises Films, Time Nilkamal Ltd. SRF Ltd, P.N. Polybag, Flexituff Technolpast Ventures International Ltd.
Sources: Department of Industries and Commerce Karnataka, Industries Commissionerate Gujarat, Jharkhand Industrial and Investment Promotion Policy, Kerala Industrial and Commercial Policy, Madhya Pradesh Department of Industrial Policy & Investment Promotion, Industries dept. and New Opportunities Odisha,
Page 31 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Textile and apparel industry Indian textile and apparel sector has its presence over the entire value chain and can create integrated and efficient industrial units
Presence of the Indian textile and apparel sector across the entire value chain
Processed Readymade Man-made fibre Yarn Fabric Fabric garment/Apparel
Estimated size of India’s T&A market annually (in US$ b)*
37 13% of 21 manufacturing GVA 160 and 2% of GDP 124 103 Largest producer of cotton in the world
2nd largest exporter Apparel and Technical textile Total Exports Total industry and manufacturer home textile consumption consumption size consumption Top markets include: ✓ USA Source: World Integrated Key textile and apparel zones India in zones apparel and textile Key Trade Solutions, IBEF, EMIS *This estimate is based on the value of personal final consumption expenditure (PFCE) of apparel and ✓ Europe Textile sector report, Ministry home textile in 2017-18 from National Accounts Statistics, assumed growth in last two years as per ✓ Middle East of Textiles, EY Analysis growth in overall PFCE, estimated consumption of technical textiles based on its production, and value of exports and imports for 2018-19 as per the Ministry of Textiles. GVA: Gross Value Addition Page 33 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Indian textile and apparel industry strengths
1 Growing domestic market with increasing urbanization and demand for branded and high value products
2 Government push to boost domestic production
3 Availability of wide variety of fabrics such as cotton, rayon-based fabrics, yarn dyed woven fabrics and knitted fabrics
One of the leading producers of value added garments such as embroidered garments accompanied by strong pool of merchandising 4 and designing talent
5 Possibility for greater flexibility in production runs
6 Abundance of labour and availability of trained garment technicians
7 Production of textile and apparel products for some of the leading global brands such as Marks and Spencer, H&M and Gap
Source: EY Analysis, IBEF
Page 34 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Incentives for promoting textile manufacturing
Parameter Maharashtra Tamil Nadu Gujarat Andhra Pradesh Telangana Policy (apart Maharashtra State Textile Integrated Textile Policy of Textile Policy 2019- Textile Policy 2015-2020 Textile Policy 2017-2022 from policy 2018-2023 Tamil Nadu 2019 2023 industrial) MSME Policy Note 2018- Garment and Apparel 19 Policy 2017-22 Major Subsidy of 9% of project cost Textile park financial Support for establishing Capital subsidy for standalone New unit capital subsidy Incentive/ (under SITP Scheme) assistance upto 40 per Textile and Apparel Park garment and apparel units. up to 35% with Subsidy cent upt 50% Capital subsidy of up to 40% Financial assistance upto 50% Power tariff subsidy for 5 of the capital investment for investment in technology years 100% reimbursement of stamp duty Major clusters Baramati Hi-Tech Textile Perudurai Cluster; Baroda Rayon Guntur Textile Park; Textile Park, Siricilla; Park; Aurangabad Textiles Chinnapalanpakam Cluster; Corporation Textile Park; Tarakeswara Textile Park; Kakatiya Mega Textile and Apparel Parks Ltd; Kottamavu Cluster; Sanand Textile Park; Brandix India Apparel City; Park; Pochampally Sangli Garment Cluster; Thirunelveli Cluster; Veraval Textile Park; Hindupur Vyapar Apparel Park Handloom Park; Whitegold Dhule Textile Cluster; Tiruchirappalli Devarshi Textile Park Ltd. Integrated Spintex Park Nagpur Textile Cluster Support State Textile University Centres of Excellences for Dedicated textiles and Integrated Textile Park at Apparel Super Hub at Infrastructure technical textiles. apparels park under Edlapadu on Guntur-Chennai textile park in Sricilla to Textile Development Fund Coastal Economic Zone National Highway house 5,000 state of the Two apparel parks for 8 Textile Parks with plug and Saurashtra art sewing units exports, Wind power Chennai-Bengaluru Industrial play facilities and CETP. project and Hi-Tech Hosted the Textiles India Corridor (CBIC) Weaving park is planned 2017 event for sector Brandix India Apparel City promotion (BIAC) - Visakhapatnam
Sources: Policies by Government of Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana, Industries and Mines Department Gujarat, Directorate of Industries Maharashtra, Ministry of Textiles, Centres of Excellence for Technical Textiles, ASSOCHAM, Synthetic and Rayon Export Promotion Council, News Reports, Press Information Bureau
Page 35 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Aerospace and Defence Aerospace and defence industry
India plans to spend ~US$ 130 b on military Industry overview modernization in the next 7-8 years, as achieving self-reliance in defence production is MSMEs and Tier – II Tier – I OEMs and a key target for the Government of India start-ups companies companies DPSUs
► Recent policy changes intend to promote domestic manufacturing viz. FDI limit increased to 74%, ban 9 DPSUs, 41 on imports of certain items, indigenization of spares, Innovation hub Sub-systems, Producing major sub systems for ordinance factories separate budget for domestic purchases, etc. and backbone of assemblies & sub- and 6 major Indian the industry assemblies Indian & global demand private OEMs ► In FY19, total domestic defence industry stood at ~$ > 8,000 MSMEs 350-400 companies 11 b; private industry was ~US$ 2.6 b; 50 JVs with foreign OEMs in multiple defence segments Over 200 partnerships involving Signing of Memorandum of Understanding (MoUs), Transfer of Technology (ToTs) , Product launches were announced at Defence Expo 2020 >> Industry maturity driving JV opportunities across defence segments
Major foreign private players nd 2 ~9% ~US$ b Honeywell General Electric 1 International BAE Systems Company largest Share in Defence exports Inc Plc armed global arms (2019-20) forces in imports General Raytheon The Boeing the world Dynamics Technologies Company Corporation
Sources: Invest India, IBEF, SIPRI, EY industry reports
Page 37 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Policy initiatives acting as “Game Changers“ to effect ‘Make in India’
Draft Defence Production Policy 2018
Govt. targets to create dynamic, robust and competitive defence industry by 2025 • Achieve an industry turnover of ~ US$ 25 b • Attracting investment ~ US$ 10 b • Achieve an export target ~US$ 5 b • To become global leader in Cyberspace and AI technologies.
Defence Industrial Corridors
• Govt. to invest ~US$ 500 m for each corridor in Northern and Southern part of country • Investment in corridors eligible for 2x multiplier for offsets discharge [Draft DPP 2020]
Draft Defence Testing Infrastructure Scheme (DTIS)
• Set-up of ~8 defence testing infrastructure facilities as a common facility centre • Government to invest up to 75% of project cost as grant-in aid for private sector operations
Draft Defence Procurement Procedure (DPP) 2020
• Increase in “Indigenization content” for each defence contract • A new category “Buy (Global – Manufacturing in India)” proposed as per which foreign OEM can carry out delivery through its wholly owned subsidiary • Aero-engines and FAB designated as areas of national importance/ Buyer Nominated Equipment • Focus on military materials and Artificial Intelligence/ Virtual Reality/ Augmented Reality • Increased impetus on life cycle costs, performance based logistics & spare parts beyond warranty period • MRO proposed as an offsets discharge avenue for defence and commercial aerospace
Sources: Ministry of Defence, Press Information Bureau, Janes
Page 38 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Electronics industry Electronics industry: leading India into a technology driven future
Production profile of electronics manufacturing sector (US$ b)* New policy initiatives to support electronics manufacturing:
Vertical/Item 2015-16 2016-17 2017-18 2018-19 Financial Assistance Modified Electronics Production-Linked Consumer of 25% of Capital Manufacturing Incentive (PLI) Electronics 8 9 11 11 Expenditure on Clusters (EMC 2.0) scheme for Large Manufacture of Scheme for Scale Electronics Industrial Electronics 6 9 10 12 Electronic development of Manufacturing with Components and infrastructure and incentive of 4% to 6% Computer Hardware 3 3 3 3 Semiconductors in amenities in EMCs on incremental sales Mobile phones 8 3 19 24 India
Strategic Electronics 3 3 3 4
Electronic Investment drivers components 6 7 8 10
Light Emitting ► Rapid growth and shift in electronics manufacturing over the years Diodes (LED) 1 1 1 2 ► Industrial electronics are becoming significant along with mobile phones Products due to increasing income and proliferation of technology in the country
Total 35 45 55 65 ► Availability of skilled manpower at very competitive cost ► Strong government policy push for domestic manufacturing *Electronics sector comprises electronic manufacturing and electronic components ► ~70-80% of the electronic component market is imports-driven Production stood at US$ 65 b in FY19, compared to US$ 56 b in FY18 growing at a CAGR of 25% during the last 4 years.
Sources: MEiTY Annual Report 2018-19, Make in India, DGCI&S, News Reports, Invest India
Page 40 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Electronics industry: case of smartphone manufacturing
1 2 3
Following a phased Currently India assembling Further policy package manufacturing plan and smartphones but imports to promote special package in 2017, its components. manufacturing in this India is already the 2nd Opportunity to further sector announced largest smartphone attract investments for the recently. manufacturer in the world. mobile component part of the value chain.
Sources: MEiTY Annual Report, Make in India, News Reports
Page 41 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Incentives for promoting electronics manufacturing
Parameter Maharashtra Karnataka Andhra Pradesh Uttar Pradesh Telangana Policy (apart Maharashtra Electronics Karnataka Electronics Andhra Pradesh Uttar Pradesh Electronics Policy 2016 from Policy 2016 System Design and Electronic Policy Electronics industrial) Manufacturing Policy (2017- Manufacturing Policy 22) 2017 Major Fixed Capital Investment Reimbursement of 50% of the 20% Investment 100% State GST 100% Reimbursement of net SGST for Incentive/ subsidy up to 100% of cost of a prototype. Subsidy for MSME. reimbursement on 5 years. Subsidy investment. fixed capital Interest subsidy of up to 6% 25% rebate on land investment for a 100% exemption on Electricity duty for to startups and MSMEs. cost. period of 10 years. a period of 5 years. 50% cost of filing patents to be reimbursed. Major clusters Santacruz Electronic Export Bengaluru; Mysore; Nellore; Chittoor; Noida; Greater Hyderabad EMC; Ranga Reddy EMC; Processing Zone (SEEPZ); Mangalore; Belgavi; Visakhapatnam; Noida; Gautam Duddada Medak EMC; Rajiv Gandhi Infotech Park, Shivamogga; Tumakuru; Vijaywada; Sri City; Buddh Nagar; Vishakhapatnam Special Economic Ph.II, Talegoan and Khed in Dharwad/Hubballi ELCINA Raaga Yamuna Expressway; Zone Pune Mayuri Electronic Taiwan EMC Park; Kakinada Support 3 brownfield Electronics 85+ Chip designing houses Common Electronics Set up a 50-acre Intel design and Infrastructure Manufacturing Clusters and 3000+ skilled people. Instrumentation Manufacturing engineering centre with an investment (EMC) at Pune, Aurangabad Facilities in Jalahali, Cluster at Sector of US$100 million. and Navi Mumbai. Hardware park at Dvenahalli. Mangaluru, and Ecotech VI and VII, Brownfield ESDM cluster Shivamogga. Greater Noida, Uttar Eight EMCs are notified in Pradesh. the State. facilitation centre at Mysuru.
Sources: UP Electronics Policy 2017, Invest Karnataka 2020, Department of Industries Andhra Pradesh, MeiTY, Govt. of Maharashtra, Electronic policies of selected states, UP Development Systems Corporation Ltd.
Page 42 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Auto components industry 4th Largest automobile market in the world with potential to grow more
Category Domestic sales (mn Car penetration in 2019 4.6 mn vehicle exports volume units, 2018-19) 7% of India’s GDP USA, Mexico, South Africa, Bangladesh, Nepal Two wheelers 21.2 102 per 1,000 people
Passenger vehicles 3.4 28 per 1,000 people US$ 24 b FDI inflows ~5,000 car dealerships across between 2000-2019 523 cities Commercial vehicles 1.0
Major players
Toyota Motor Yamaha Motor Honda Motor Co Corporation Co Ltd. Ltd.
Hyundai Motor Suzuki Motor Nissan Motor Co NCR Company Corporation Ltd.
BMW (Bayerische Motoren Werke) Renault Ahmedabad Indore Pune Volkswagen Aktiengesellschaft
Production concentrated in in concentrated Production Bangalore Availability of multiple clusters across India across multiple clusters Chennai highly trained manpower All figures for 2019 Source: IBEF, SIAM, EMIS India Automotive Sector Report, News Report, IBEF Report February, 2020
Page 44 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only India has a mature policy framework, focussed on new technologies and domestic production
► ~US$ 14 b in auto component 1 exports in FY19 to USA, Turkey, Germany, Brazil, Over 700 auto Mexico etc. component ► OEMs make up 85% of totally players, servicing industry turnover and both local and replacement market contributes 15% global markets
► India follows the European system ► Import duty structure to incentivise for regulating the sector domestic manufacturing ► BS-VI emission norms (EURO VI), Focus on Government ► Strong push towards EVs applicable from April 1, 2020 3 reducing 2 policy support ► Demand side -- Reduced GST ► Push towards using CNG as emission levels rate of 5% against 29% - 50% alternative fuel on other vehicles ► Supply side – Customs duty structure that incentivises local EV and battery manufacturing ► Ambiguity regarding policy framework for introduction of hybrid cars Source: SIAM, EMIS India Automotive Sector Report, EY 2019 report
Page 45 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Incentives for promoting auto manufacturing
Parameter Maharashtra Haryana Madhya Pradesh Gujarat Tamil Nadu Policy (apart Electrical Vehicle and Part of industrial Electric Vehicle (EV) Manufacturing sector Automobile and from Related Infrastructure investment and business Policy 2019; schemes; EV Policy 2019 Components Policy; EV industrial) Policy 2018 promotion Policy 2019 Major 100% Fixed Capital Interest Subsidy Scheme 50% of fixed capital Interest Subsidy is provided @ 100% reimbursement of Incentive/ Investment subsidy. @6% for auto component investments and 25% 7% for MSMEs and 2% for SGST paid on the sale of Subsidy manufacturers (MSMEs) of the value of the Large Industries. EVs manufacture, sold 20% reserved area for for 5 years. charging station for and registered for use in Medium, small and micro Reimbursement of up to 90% first 300 units. the State. enterprises (MSMEs) in Reimbursement of 75% of SGST for a period of 10 new industrial estates. SGST paid up to 7 years. 10% of FCI for first two years depending on fixed units of EV capital investment. manufacturing. Major clusters Mumbai, Pune (Chakan), Gurugram, Faridabad, Indore; Pithampur; Ahmedabad, Sanand, Chennai – Nashik, Aurangabad, Manesar, Rewari, Mandideep; Mehsana Hansalpur, Sriperumbudur, Nagpur Panchkula Govindpura Vithalpur; Dholera; Rajkot Oragadam, Maraimalai Vadodara Support Automotive Research National Automotive Indo-German tool Maruti Suzuki Japan-India National Automobile Infrastructure Association of India R&D Testing Research R&D room; Institute for Manufacturing Testing and R&D center; institute; (JIM); Infrastructure Project MSME Technology Daimler R&D center; Auto Cluster Development Center; Hyundai Motor Training Renault and Nissan R&D and Research Institute. Centre in; 20 Superior Training Institute in Center; Technology Centres Pithampur Auto Ford Technical Support Cluster center.
Sources: Maharashtra EV Policy, Industries and Commerce Department of Haryana, Madhya Pradesh EV Policy, Industries and Mines Dept. Gujarat, Tamil Nadu EV Policy, Page 46 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Pharmaceuticals Indian pharma sector: a key sector with potential for growth
International standing Major players Eli Lilly and ► India supplies over 50% of global demand for Johnson & Johnson Cadila Company various vaccines, 40% of generic demand in Healthcare the US and 25% of all medicine demand in UK Cipla Limited Limited Pfizer Inc ► Ranks 3rd globally in volume terms Growth Piramal Aurobindo Torrent th Enterprises ► Ranks 10 globally in value terms Pharma Limited Pharmaceuticals Limited Limited
Size of market: export and Spending domestic Achieving the optimal ► Domestic production stood at balance ► Government of India spends 1.6% of its GDP US$ 38 b in FY19 on healthcare in FY20- leaving much room ► Pharmaceutical exports for growth stood at US$ 14 b in FY19 ► India’s pharmaceutical spending is predicted (up to Dec 2018) to grow at 8-11% CAGR during 2019-23 to reach a size of US$ 28-32 b Growth drivers
► Rise in public healthcare spending coupled with rising patient awareness
► Expanding insurance coverage across the income pyramid
► Promotion of Domestic Manufacturing of critical Key Starting Materials (KSM) / Drug Intermediates and Active Pharmaceutical Ingredients (API) in the country – investing in industrial parks and production linked incentives Sources: Press reports, Make in India, Economic Survey 2019-20, McKinsey Report:_India_Pharma_2020_Propelling_Access_and_Acceptance_Realising_True_Potential CAGR: Compound Annual Growth Rate
Page 48 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Pharma: advantage India
India has an excellent proven track record in R&D India has 2nd highest number of FDA approved plants outside USA
ANDA Approvals of Indian Drugs 2% 837 % of API manufacturing 2019 336 13% facilities for all drugs 76 26% EU US 813 2018 290 13% 77 India China
846 RoW Canada 2017 304 61 18% 'Total US FDA Approvals Final FDA Approvals to Indian Cos 28% 0Tentative Approvals to Indian500 Cos 1000
India is projected to be a frontrunner in drug discovery outsourcing
2017 2018 2019 40% of total 36% of total 40%, of total final approvals final approvals final approvals
In the decade 2010-2019; US FDA approved total 5,768 ANDA final approvals of which Indian pharmaceuticals companies has bagged 2,046 approvals i.e. over 35%.
*ANDA: Abbreviated New Drug Application Sources: US FDA and drug administration, Press reports
Page 49 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only New paradigms: medical equipment and devices industry
India ranks in top 20 in the world by market size. Indian medical devices industry is growing at a CAGR of 16% against global growth rate of 4% in the sector
Strong domestic market potential:
The industry is valued at US$ 5 b and contributes only 4-5 % of India’s total healthcare sector of US$ 97 b
The per capita spend on medical devices in India is lowest among BRIC countries at US$ 3 ($ 7 in China, $ 26 in Brazil and $ 47 in Russia) and other developed economies like the USA ($ 415)
The industry comprise of 14,000+ different product types with India producing 750-800 products
Availability of trained labour and right governmental policy support
Promotion of Domestic Manufacturing of Medical Devices in the country by investing in medical devices parks and production linked incentives of 5%
Source: EY Analysis, IBEF BRIC: Brazil, India, Russia , China
Page 50 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Capital goods Capital goods and electrical equipment: government spending on infrastructure boosts domestic market
Planned infrastructure investment (US$ b) Industry overview
277 269 ► 71% of the proposed infrastructure investments of US$1.5 Trillion by India will be across Road, Rail, Energy and Urban infrastructure 196 194 182 ► Currently India produces US$ 43 b of capital goods and electrical 157 equipment
► 10% share of capital goods in total manufacturing activity and 2% of GDP
► Indigenous production is broadly 40% of total demand for engineering and capital goods equipment FY20 FY21 FY22 FY23 FY24 FY25 Strong domestic market Planned government spending of US$ 1.5 t on infrastructure over the next 5 years ► Supportive macro trends like rapid urbanization, growth in infrastructure and demand for energy across industries Major players ► Strong domestic demand on the back of planned infrastructure investment by Government
Honeywell International Inc ► Push for domestic manufacturing as currently India imports 40% of Caterpillar Inc capital goods used domestically General Electric Company ► Focus on digitisation and smart cities, thereby opening markets for ABB Ltd new and innovative products ► Availability of established players and raw materials
Sources: Taskforce Report on National Infrastructure Pipeline, IBEF, Invest India, EXIM Data Bank (HS Codes: 84 & 85), All India Association of Industries
Page 52 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only India has well established industry clusters with developed value chains and talent hubs to support manufacturing activity
► Bosch Ltd. ► ABB Ltd. ► Phillips N.V. ► Mitsubishi Corporation ► Yaskawa Electric ► Havells India Ltd ► Godrej Industries ► BHEL ► Siemens Akt. ► Crompton Greaves
► ABB Ltd. ► Crompton Greaves Delhi, NCR ► Siemens Akt. ► Bosch Ltd. ► Godrej Industries Ahmedabad ► Schneider Electric
► ABB Ltd. ► Crompton Greaves ► BHEL ► Siemens Akt. Mumbai ► Siemens Akt. ► Sterlite Technologies Pune ► Philips N.V. ► Philips N.V. Hyderabad ► Schneider Electric ► Godrej Industries ► Schneider Electric
► ABB Ltd. ► Bosch Ltd. Bengaluru ► Havells India ► Ametek Inc. ► Philips N.V. Chennai ► BHEL ► Crompton Greaves ► Yaskawa Electric ► Bosch Ltd. ► Honeywell Intn’l Inc ► Godrej Industries ► Philips N.V. ► Siemens Akt. ► Yaskawa Electric ► Schneider Electric
Sources: Invest India Page 53 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only 05 How EY can help How EY can support
Assess Analyze and and Implement evaluate advocate
► Market assessment study and ► Detailed SWOT on opportunity and ► Based on chosen model, execute evaluation of possible analyse potential incentives and the plan, including transaction collaborations and determine benefits that could influence advise, structuring the entry strategy - contract decision and engage with arrangement, tax and regulatory manufacturer/ JV/ subsidiary government and stakeholders to compliance and approvals, ► Comparative assessment of India determine feasibility negotiations with stakeholders. and ASEAN countries ► Assistance in defining and ► Assistance in availing incentives executing advocacy strategy of under various state government global group of companies with policies. Central or state governments. ► Assistance in applying and ► Assistance in finalizing suitable complying with various state location within India – state, government rules and regulations region, district, city (NOCs, approvals etc.)
Page 55 28 May 2020 Opportunities for multinational companies from India manufacturing partnerships - For Internal use only Contact Us
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