India Economic News No. 2/10 February, 2010

Contents Economy Well Placed For 8% Growth In 2009-10: FM 2 Prime Minister Advocates Creation Of Solar Valleys 2 India Can Become 3rd Largest Economy By 2012: PwC 2 Moody's Forecasts Robust 8.3% Growth 2 GDP May Grow 7-7.5 Per Cent In Current Fiscal: Rangarajan 3 Initiatives For Food Processing Industry 4 Govt Allows 100 Per Cent FDI In Renewable Energy Sector 4 Cabinet Approval For 4th Terminal At JNPT 4 Four PPP Port Projects Get Approval 5 IRDA Unveils Norms For Health-Life Combo Product 5 Core Sector Expands 5.3% In November 5 Industrial Output At 2-Year High.....6 Air Traffic Grows 8% In 2009...... 7 Port Traffic Up 12.8 Per Cent In November 2009 8 Telecom Companies Add 19.1 Million New Users In December 2009 8 Indian Generic Drug Makers Receive More FDA Approvals In 2009 8 TCG Lifesciences, Pfizer Sign Drug Research Agreement 9 Domestic Auto Sales Grow 49% In December 9 Auto Sector To Post 10-12 Per Cent Growth In Sales In 2010: FITCH10 Automobiles: The Wonder Decade10 Indian Auto Industry Bucks Global Trend 11 Record FII Inflows Cheer Markets In 2009 11 Component Maker Bosch Bullish On India, To Invest $ 433.5 Mln In 3 Yrs 12 Parliament had projected robust growth in the second half of the fiscal year. After growth of 7.9% in the second quarter (July-September), the government revised its figure for the fiscal from 7% to 7.75%. In 2008- ECONOMY WELL 09, the economy had expanded by 6.7%. PLACED FOR 8% GROWTH Mr. Mukherjee said the dream of achieving 9-10% growth was much IN 2009-10: FM within reach now. "The growth target which we have dreamt for a very long period of time is now within our reach and we have to achieve it," he added. Finance Minister, Mr. Pranab Mukherjee, said that the Referring to areas of concern, the Finance Minister said short- and economy was well-placed to medium-term challenges before the government were to deal with register growth of up to 8% in price rise and increasing fiscal deficit. On the withdrawal of stimulus the current fiscal year though given to industry in the form of various tax breaks since December last food inflation remained an area year, Mr. Mukherjee said nothing would be considered till the Budget in of concern for the government. February. (The Times of India: December 24, 2009) "The mid-year review projected a growth rate of 7.75% but it would be more appropriate to PRIME MINISTER ADVOCATES CREATION OF say 7.5% to 8%," the Finance SOLAR VALLEYS Minister said. While launching 'Solar India', the Jawaharlal Nehru National Solar The mid-year review which had Mission, the Prime Minister, Dr Manmohan Singh, recommended the earlier been tabled in creation of Solar Valleys across the country and advised industrial houses to view it as a created along the lines of the Silicon Valleys that spur the information considerable opportunity. technology industry across the country. He said that the valley had the potential to turn into hubs for engineering and research, solar science, Dr Singh said that if the Mission fabrication and manufacturing. were to come to fruition, many Solar Valleys would have to be (continued on next page)

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The Prime Minister said that the to achieve it as a priority India's people and that the Mission's ambitious target of national endeavour". He noted spread of solar power-based 20,000 MW was "doable and that solar energy is already rural applications could change we should work single-mindedly bringing benefits to many of the rural energy sector.

INDIA CAN BECOME 3RD LARGEST ECONOMY BY 2012: PWC

According to a report by global by purchasing power parity BRIC (Brazil, Russia, India, and consultancy firm (PPP), overtaking Japan, in China) report. (The Economic PricewaterhouseCoopers 2012. This would be almost 20 Times: January 25, 2010) (PwC), India could become the years ahead of Goldman world’s third largest economy Sachs’ projection of 2032 in its

MOODY'S FORECASTS ROBUST 8.3% GROWTH

Global ratings firm Moody’s has consumer goods and Investment is expected to be said that the Indian economy automobile output. the main driver of GDP growth will grow at an accelerated in 2010 if RBI doesn’t hike rates pace of 8.3% in 2010 from As for the high inflation, aggressively. Business 7.5% in 2009. Moody’s notes that though the confidence and capacity current inflation is primarily due utilization have picked up in Since private demand is to supply-side factors, normally recent quarters, which is becoming a bigger driver of weighed down by monetary reflected in higher industrial growth, there is case for authorities, going forward, the output. Public investment is gradually withdrawing the duration and severity of inflation also set to surge in 2010 as the stimulus, indicated Moody’s. would be largely determined by government is planning on This, it says, is necessary to liquidity. While allowing excess ramping up the kilometers of ensure that inflation does not liquidity would add to road built per day up to 20 by become a problem as capacity inflationary pressures, draining April, from around nine at utilization continues to rise and liquidity may weigh on output present and two a year ago. private investment picks up. growth by discouraging lending. The government is set to It expects consumer demand to Bearing in mind the weak state maintain an expansionary fiscal remain strong even if the of private investment and policy. The combined union and stimulus is withdrawn as budding demand-side inflation state deficit is projected to be improved labor market pressures, RBI is expected to around 10% of GDP for the conditions would support gradually tighten the monetary current financial year and come household confidence. It has policy over 2010. Over the down slowly thereafter. Fiscal noted that consumer course of the year, RBI is authorities face the tricky confidence has translated into expected to lift the repo rate by challenge of trimming the deficit surging consumer sales as 125 basis points to 6%. from its current unsustainable reflected in the strong growth in level whilst increasing infrastructure spending. This a stable government coalition in said. Besides, the could be achieved in part by place, it is by no means implementation of a unified cutting wasteful subsidies on oil guaranteed. GST and an increasing and fertilizer that fluctuate government focus on wildly due to volatility in Even external demand infrastructure spending will international prices. However, conditions are expected to be bode well for the economy’s cutting subsidies is a politically conducive to sustained growth long-term prospects, it said. unpopular move, and even with as FDI has been robust, it has (The Economic Times: January 28, 2010) India News 3

GDP MAY GROW 7-7.5 PER CENT IN CURRENT FISCAL: RANGARAJAN

The Indian economy is set to industrial services were years, could put India among grow between 7 per cent and projected to grow at 8.7 per the developed nations. 7.5 per cent in the current fiscal cent and 8.6 per cent year, according to Dr C respectively. Dr Rangarajan also called for Rangarajan, Chairman of the prudence to improve the fiscal Prime Minister’s Economic He stated that in his opinion, a position and expressed the Advisory Council (PMEAC). consistent growth of 9 per cent opinion that deposit-based While speaking at a meeting on in the industrial and services banking was more prudent than ‘Challenges before the Indian sector and 4 per cent in short-term borrowing by banks Economy', Dr Rangarajan agriculture over the next 20 from the capital markets. stated that the services and

INITIATIVES FOR FOOD PROCESSING INDUSTRY

The food processing industry in launch efforts to set up at least not to levy VAT of more than India is all set for robust growth one mega food park in each four per cent on the food with the government state. processing industry. He said announcing a series of new Stating that the sector was the industry would soon initiatives. This includes a growing at 14 per cent, Mr. become the backbone of the separate policy at the state Sahai said the Centre had also country. Mr. Sahai also asked level, thrust on contract farming decided to keep the food all the states to come out with a and making the sector tax-free. processing industry out of the separate food processing policy tax net. “We have decided not in order to attract investments Inaugurating a mega food park to levy any tax on the industry,” in the rural sector and assured at Haridwar (U.P.), the Union he said. all support from his ministry. Minister for Food Processing (Business Standard: January Industries Mr. Subodh Kant For the further growth of the 06, 2010) Sahai said the Centre would sector, he asked all the states

GOVT ALLOWS 100 PER CENT FDI IN RENEWABLE ENERGY SECTOR

The government has allowed Abdullah, New and Renewable government has also approved 100 per cent foreign direct Energy Minister, in the a generation-based incentive investment (FDI) in the Parliament on December 14, scheme in wind power projects renewable energy sector to 2009. especially for the foreign attract foreign companies in the investors, who cannot avail sector, said Dr Farooq The Minister added that the benefits of the accelerated depreciation, available to have been distributed or pumping systems and 657,000 domestic investors. installed across the country solar cookers have been under the programme. "About distributed or installed in the Dr Abdullah also focused on 770,000 solar lanterns, 510,000 country till November 30 this the solar energy programme solar home lighting systems, year," he said. and said that over two million 82,500 solar street lighting solar energy-run appliances systems, 7,247 solar water

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CABINET APPROVAL FOR 4TH TERMINAL AT JNPT

The Cabinet Committee on years since signing of the the country, including clinical Infrastructure (CCI) approved a concession agreement. "The trials. The proposal will be proposal to develop fourth project would be developed on initially implemented in five container terminal at the public-private partnership smaller states and union country’s busiest Jawaharlal (PPP) mode to reduce burden territories before being rolled Nehru Port at an estimated cost on the government funds which out nationally. of US$ 1.44 billion. are not sufficient to meet all infrastructure needs of the "It is a path-breaking decision. The proposed terminal having country," an official statement It had been in the pipeline for handling capacity of 4.8 million said. long. It is up to the states to TEUs (twenty-feet equivalent implement it. It would help in units) containers annually The Union Cabinet also cleared providing better services and would be constructed on the Clinical Establishment Bill regulation of services design, build, finance, operate 2010 that would make it provided," Union Information and transfer (DBFOT). mandatory for all clinics in the and Broadcasting Minister Ms. country to be registered with Ambika Soni said. (The The port project would be the "national registry". The bill Economic Times: January 29, implemented in two phases aims to regulate and ensure a 2010) with the first phase uniform standard and quality of commissioning within three medical services provided in

FOUR PPP PORT PROJECTS GET APPROVAL

A high-level panel, headed by cost of US$ 675.17 million has The development of the second the Finance Secretary, Mr been granted by the Public North Cargo Berth at the Ashok Chawla, cleared four Private Partnership Appraisal Tuticorin Port in Tamil Nadu for port expansion projects Committee (PPPAC). The handling bulk cargo at a cost of entailing an estimated project to develop a multi- US$ 71.76 million also received investment of US$ 890.36 purpose berth at the Paradip approval. The fourth project million in three states. Port in Orissa to handle clean that received clearance is for cargo at an estimated cost of the development of container As per an official statement, an US$ 83.67 million was also terminal at the New Mangalore approval for the development of cleared by the committee Port at an estimated cost of mega container terminal at the earlier this month. US$ 59.6 million. Chennai Port at an estimated IRDA UNVEILS NORMS FOR HEALTH-LIFE COMBO PRODUCT

The Insurance Regulatory and medical, surgical or hospital Development Authority (Irda) Under the guidelines, life and expenses benefits, whether in- has come out with guidelines non-life insurance companies patient or out-patient, on an on combining a pure term plan can come together to offer this indemnity or reimbursement and a health policy. The policy health-plus-life cover. Health basis and the life insurer will will be called a 'Health plus Life insurance under this scheme offer a pure term product. Combi Product'. will provide sickness benefits; (continued on next page)

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The regulator said the product proposer for health insurance insurers will work as the lead could be offered both to policy, subject to insurable insurer and will facilitate individuals and groups. interest and other applicable underwriting and service of the However, in respect of health underwriting norms of policy. The life insurer will insurance floater policies, the respective insurers. underwrite the life side of the pure term life insurance risk, while the health insurance coverage is allowed on the life Insurers forming the tie-up will portion will be underwritten by a of one of the earning members have to take prior approval from non-life insurer. (Business of the family, who is also the the regulator. One of the Standard: December 24, 2009)

CORE SECTOR EXPANDS 5.3% IN NOVEMBER

The country’s infrastructure salt because it is not broad month, against a decline of 6.3 sector accelerated by 5.3 per based,” said the Chief per cent in the corresponding cent in November, backed Economist of the Bank of period of 2008. Cement primarily by growth in steel and Baroda. production also picked up to cement production in the post a growth rate of 9 per cent month. On a sequential basis, core in November, marginally up sector growth accelerated after from 8.7 per cent in the month The six core sectors, which two consecutive months of in 2008. contribute 26.7 per cent to the deceleration in rate. On a overall Index for Industrial cumulative basis, core sector Production of petroleum Production (IIP), had grown 0.8 grew 4.6 per cent in the current refinery products also grew by per cent in the corresponding financial year (April-November), 4.9 per cent on a year on year month of 2008. The growth in against 3.5 per cent in the basis, as against a contraction October this year was revised corresponding period last year. of 1.1 per cent in the year ago upwards to 3.8 per cent from an period. Crude oil production earlier estimate of 3.5 per cent. Analysts further said the contracted by 1.6 per cent, as Reserve bank of India (RBI) compared to a modest growth “ The figures indicate that the would take major monetary of 0.5 per cent in the growth is skewed, as it is still in policy decisions as credit corresponding period last year. favor of sectors that have demand picks up. Most expect Coal and electricity registered a benefited from stimulus that the third quarter GDP growth of 3.3 per cent and 1.8 measures like construction and growth rate would provide a per cent, respectively, other allied sectors. Therefore, clearer picture. marginally lower than 9.7 per even as the data are tilted Finished (carbon) steel cent and 2.6 per cent, in the towards positive growth, we production grew at the highest corresponding period the should take it with a pinch of rate - 11.7 per cent - during the previous year. (Business Standard: December 28, 2009)

INDUSTRIAL OUTPUT AT 2-YEAR HIGH

Industrial production grew at a strengthening calls for a hike in continue,” said Mr. Kaushik two-year high 11.7% in interest rates to control rising Basu, Chief Economic Advisor November 2009, putting India prices. to the Finance Ministry. on track to achieve 8% (continued on next page) economic growth in the current “ It (industrial growth) is very financial year and good. I expect the trend to

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The better-than-expected undertakes the quarterly review increase in CRR and rate hike industrial output growth, of the monetary policy later. later. Indirect taxes cut need to boosted by a massive 37.3% be reversed, as revenue jump in consumer durables and The pickup in investments buoyancy needs to return,” Mr 12.2% increase in capital highlighted by higher capital Barua said. goods, however, failed to lift the goods output has also been market that ended in the validated by a marginal Though food inflation has negative due to selling pressure increase in Customs collections moderated in recent weeks, the on frontline stocks. for December 2009, suggesting overall inflation has now higher non-oil imports. touched 4.78% for November Industrial growth in November 2009, partly because of the 2008 was 2.5%, exaggerating “ We will have to revise our follow-on effect of high food the rate of expansion in GDP estimates for the year. It prices and high commodity and November 2009. Output grew is currently 7%, but we will fuel prices that have increased by 10.3% in October 2009. revise it to 7.3-7.4%,” said Mr. input costs. Abheek Barua, Chief Industrial output grew at its Economist at HDFC Bank. A hike in CRR is the quickest fastest pace since October way of removing liquidity from 2007, as the economy began to Indian economy grew at 7.9% the system. The RBI had consume and invest more, in the July-September 2009 aggressively cut rates and suggesting that it may no quarter, taking the overall lowered CRR when the longer need the stimulus growth for first half of the economy slowed down due to offered in the form of low current fiscal year to 7.1%, the global economic crisis. interest rates and high prompting the government to government spending. say that it could meet or even “Given the low base and signs exceed the 7.75% forecast for of demand revival, we expect Favorable economic data and the year. Finance Minister Mr. these trends to continue and high inflation rates may prompt Pranab Mukherjee had earlier maintain our view of 125 bps of RBI to absorb excess liquidity stated that he expected policy tightening in 2010 with a in the system through a hike in economic growth to be close to token hike later this month,” cash reserve ratio (CRR), the 8% in 2009-10. wrote Rohini Malkani of Citi in a interest-free reserve banks research note. keep with the central bank, and “ It is time for exiting the fiscal even raise interest rates when it and monetary expansion. RBI For the first eight months of this may probably consider an fiscal, industrial growth stood at 7.6% against 4.1 % in the same Consumer goods output pattern of growth seen in the period of last year. The continued to surge, growing at sub-sectors of industry indicate government had cut excise duty an annual rate of 11.1% in the positive response of the and service tax by six and two November. Mining output was entire industrial sector to percentage points and had up 10% as crude from Cairn stimulus measures and a stepped up expenditure sharply India and RIL’s KG gas basin sudden withdrawal of stimulus through higher borrowings. In continued to push up growth, will surely break this growth the process, the fiscal deficit for but power generation rose only spell and should certainly be the current year is budgeted to 3.3%. avoided,” said Mr. Harsh Pati deteriorate to a 16-year high of Singhania, President of industry 6.8%. The strong growth will Industry, however, continued to association FICCI. (The give the government room to argue against the withdrawal of Economic Times: January 13, bring down the deficit. stimulus measures. “The 2010)

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AIR TRAFFIC GROWS 8% IN 2009

Flying high on strong economic Last month, for instance, saw a term profitable growth if airlines recovery, domestic air travel 33% increase with 4.48 mln continue the capacity and has made a comeback in 2009, people flying within India pricing discipline," said Mr. with traffic registering an against 3.37 mln in December Kapil Kaul, India head of Centre increase of 7.9% over the 2008. for Asia Pacific Aviation. Mr. previous year. In 2008, air Kaul added that the growth has traffic fell by 5%, with 41.2 mln Industry analysts are surprised been mainly due to the low cost domestic fliers taking to skies by the sudden and sharp carrier (LCC) model. "This against 43.3 mln in 2007. revival. "The rebound is much factor led to both Jet and stronger and more robust than Kingfisher reporting good The increase to 44.5 mln flyers anyone could have anticipated. traffic, something that would not in 2009 came on the strong October-December has been have been possible with a full revival in traffic since July, as very good for airlines and most service airline alone." (The the first six months were will make money. January- Times of India: January 14, consistently witnessing a March also looks promising. 2010) double digit percentage fall. We are now looking at long

PORT TRAFFIC UP 12.8 PER CENT IN NOVEMBER 2009

India’s major ports registered a European economies from higher volumes and partially 12.8 percent year-on-year rise recession. India’s logistics due to the (low) base effect”, in cargo volumes to 48.2 million sector, including entities Ms. Supriya Madye Khedkar tonnes in November 2009, involved in the supply chain and Ms. Rajni Mahadevan, paced by growth in container between the point of origin and analysts with domestic and iron ore traffic. Jawaharlal the point of consumption, has brokerage ICICI Securities Ltd, Nehru Port Trust (JNPT) in witnessed revival on the back wrote in a research note. Navi Mumbai, which handles 59 of India’s growth of 7.9 per cent per cent of India’s container in the three months that ended Further, areas such as traffic, posted positive growth of 30 September. warehousing and distribution 8.9 per cent this year. are being explored by a number Demand has begun to rise in Container volumes would “post of transportation companies. A overseas markets with the higher growth in the coming number of logistics firms, emergence of the US and months partially on account of including Gujarat Pipapav Port Ltd, Aqua Logistics Ltd and year-on-year,” Mr. Jignesh TVS Logistics Services Ltd, are “ In November 2009, India’s Dhabalia, an analyst with expected to hit the capital containerized volume reported domestic brokerage India market with initial public a double-digit growth of 15% Capital Markets Pvt. Ltd, wrote offerings this year. in a report.

TELECOM COMPANIES ADD 19.1 MILLION NEW USERS IN DECEMBER 2009

The Indian mobile service recorded by any telecom in November to 37.06 million at providers added a record 19.10 market ever globally. the end of December. The million users in December decline in landline connections 2009, higher than 17.6 million The wireline segment in the was led by BSNL and MTNL added in November. This is country continued to record a who lost 0.12 million also the highest monthly growth decline in subscriber additions. subscribers in December. (The The country’s landline user Economic Times: January 28, 2010) base slipped from 37.16 million 8 India News

INDIAN GENERIC DRUG MAKERS RECEIVE MORE FDA APPROVALS IN 2009

Indian generic drug makers Mr. Ajit Mahadevan, Partner- In the past few years, Indian received half a dozen more health science practice, Ernst companies have grown to approvals from the US Food and Young said, “Indian account for 35-40 per cent of and Drug Administration (FDA) companies have realized that it the total number of abbreviated in 2009, as compared to the is difficult to survive in the US new drug applications (ANDAs) previous year. market with a few products and, with the FDA. Analysts have therefore, it is necessary to pointed out that the increased Dr Reddy's Laboratories have a large basket of number of approvals in the US, received the highest number of products. Established players are on account of more FDA- tentative and final approvals in like Ranbaxy or Reddy’s are approved manufacturing plants 2009 at 32, followed by now concentrating on niche and coming up in India as well as Aurobindo at 26 and Wockhardt specialized products, than patent expirations. at 23, according to FDA trying to sell all products going website. off-patent.”

TCG LIFESCIENCES, PFIZER SIGN DRUG RESEARCH AGREEMENT

TCG Lifesciences has entered molecules in the development Announcing the deal, TCG into an exclusive collaboration cycle. Lifesciences Managing with the US-based pharma Director, Mr. Swapan giant, Pfizer, to develop a This is the second such deal Bhattacharya said: “The portfolio of pre-clinical which TCG Lifesciences has agreement will span more than molecules for discovery of new announced recently, the first two years where we may drugs. being with Forest Laboratories. receive milestone payments But the deal with Pfizer is throughout the cycle. This As part of the deal, Pfizer will significant as this is the first serves as a testament to our own the compounds and TCG time the Indian company will be growing capacity and Lifesciences will receive involved in a drug development capabilities to provide high-end research funding and milestone project of this scale and integrated drug discovery payments linked to the magnitude. services in the global arena.” successful progression of Apart from this, TCG is to be closer to these said Mr Bhattacharya. (The Lifesciences is also planning to developed markets as much of Economic Times: January 06, acquire CROs in the US and new drug development is 2010) Europe. “We are already undertaken by pharma evaluating such deals. The idea companies in these regions,”

DOMESTIC AUTO SALES GROW 49% IN DECEMBER

Domestic passenger vehicle sales being the highest at 66.54 at a far higher rate on the back sales for December 2009 grew per cent. of a low base in the previous 49 per cent to 119,930 units. year when car sales grew by This is the second highest Passenger vehicle sales have just 0.13 per cent. sales figure achieved by the seen a double-digit growth rate auto industry in the current since July 2009. In the last (continued on next page) financial year, with November three months alone, sales grew

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The country’s largest (customer) sales. However, we On the back of a brisk demand manufacturer of passenger see good demand for our fifth for the Skoda Superb in the vehicles, Maruti Suzuki, sold strategic car model A-Star premium segment and the 84,804 units in December 2009 across Europe due to its Laura in the executive - 51 per cent higher than the attractive positioning and segment, December 2009 sales sales posted in December emission compliances,” added for Skoda stood at 1,113 units 2008. Domestic sales last Mr. Srivastava. — a 52 per cent rise over the month stood at 71,000 units, previous year. which is a rise of 36.5 per cent Cumulative December car against the same month in sales for Hyundai grew 23 per General Motors, the 2008. cent to 47,217 units. The manufacturer of the Chevrolet- manufacturer of the successful badged vehicles, sold a record “ Excise duty cuts, attractive i10 and i20 models sold a total 8,258 vehicles in December vehicle loans made possible by 22,252 units in the domestic last year, representing a robust PSU banks and improving market — a year-on-year rise of 101 per cent rise in sales sentiments have helped the 43 per cent. against the numbers achieved whole industry to post good in December 2008. General sales numbers for December However, exports for the Motors says this is the highest 2009,” said Mr. Shashank company moderated to 24,965 ever sales numbers achieved in Srivastava, Chief General units, which is growth of 9 per the history of the company’s Manager (Marketing) at Maruti cent. Last year was a high base operations in the country. The Suzuki. in exports for the company. Cruze (executive segment), the Chevrolet Beat (to be launched Exports for the company during Cumulative domestic sales in on January 4 but already the Christmas month stood at December 2009 for Mahindra & dispatched to dealers) and the 13,804 units — an impressive Mahindra grew by 120 per cent. Spark have contributed to this growth rate of 224 per cent The company sold 16,999 units sales achievement. against the 4,264 units sold of utility vehicles, comprising abroad in December 2008. the Xylo, Scorpio and the December sales for Mahindra “Sales numbers are wholesale Bolero, last month. Renault rose by 13 per cent to (sold to dealers) and do not 308 units. This is for the first represent actual retail time in the current financial year that the company’s (Business Standard: January monthly sales turned positive. 04, 2010)

AUTO SECTOR TO POST 10-12 PER CENT GROWTH IN SALES IN 2010: FITCH

The Indian auto industry is due to increasing penetration of likely to see a growth of 10-12 global original equipment The competitive intensity in the per cent in sales in 2010, manufacturers (OEM). India is auto industry is likely to according to a report by the witnessing an entry of increase over the medium term global rating firm, Fitch. international OEMs, either due to the number of new independently or in players, as well as the higher According to the report, Indian collaboration with existing number of new product Auto Sector Outlook, the players to take advantage of an launches from existing players competition in the country's established distribution auto sector is likely to increase network.

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AUTOMOBILES: THE WONDER DECADE

India’s drive to the top of the in 1998 The Tatas followed it and not just for India As oil small car heap took off in the up with a global breakthrough prices increase, the small car is late 1990s. Ten years on, and 10 years later with the world’s the flavor of the month some painful consolidation cheapest car, Nano. As India’s everywhere, except the US. later, India is the mini hub and appetite for the small car grew, And India is the belle of the ball the world is its market. so did local competence. The result: a top quality component Most analysts now agree that The car market has gone from base and frugal engineering the heart of auto country is 577,000 units in 1999-2000 to skills moving eastwards, towards 1.2 million units in April- India and China. The good November 2009-2010. More MNCs lined up for small news is, between the two Analysts estimate the current car action, even those like markets, there's little overlap. fiscal to close at 2 million units Toyota and Honda not While China is a sedan market, (including SUVs). Global CEOs traditionally mini players India is a hatch heaven. India's like Nissan-Renault’s Carlos From tweaking existing models small car focus is suddenly hot Ghosn are already pegging the and even phased out variants property for global auto majors. next decade to take the market for India, MNCs are now European and Japanese to 6 million units developing car architectures or companies are already using platforms with India as the lead India for contract A bunch of MNC players country; for instance, Toyota manufacturing. The next step is flooded the market with tech and Honda to use homegrown Indian savvy small cars The technology for cost-effective competition expanded the As the biggest small car market engineering. This, along with market thanks to new products in the world and the fastest marketing savvy, will be the and a price war between growing car market after China, next big leap for the industry. market leader Maruti and India is now a bonafide auto That the local market will by newbies Tata Motors and hub. Global auto companies then by three times bigger Daewoo are looking to tap the market won’t hurt either. (The The Tata Indica, a local and its engineering expertise Economic Times: December breakthrough and India’s first MNCs like Nissan Renault want 31, 2009) homegrown car, was launched to replicate the Nano formula, INDIAN AUTO INDUSTRY BUCKS GLOBAL TREND

The year 2009 saw the Indian said, “Car manufacturers are Young said, “The industry's automobile industry register betting on hatchbacks in the B+ turnover is estimated to touch notable export growth and segment. We expect the US$ 155 billion by 2016”, which launch of new models for the segment to constitute nearly would rank the Indian domestic market, bucking the 75% of volumes in the coming automobile industry as the trend of most global auto years.” world’s seventh largest. majors in the year. Experts maintain that during the year, Ernst and Young has forecast The Automotive Mission Plan of the car market grew 15% over the passenger car market in the government also forecasts the previous year and that India to grow by 12% annually that by 2016, India is to emerge similar numbers are expected over the next five years from as the seventh largest for 2010. the present figure of 1.89 mln carmaker in the world, units to reach 3.75 mln units by accounting for over 10% of the Mr. Neeraj Garg, Group Sales 2014. Analysts at Ernst and country’s economy. Director, Volkswagen India,

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RECORD FII INFLOWS CHEER MARKETS IN 2009

With the record FII (foreign themselves in 2009 so far, entities entering the Indian institutional investor) inflow of taking the tally to 5,327. market. over $ 17.3 billion, 2009 will go down as one of the best years However, the number of new One of the primary reasons, in the history of the Indian stock registrations this year is 70% according to Mr. Kishore Joshi, market. But, even as FIIs less compared to 375 new Senior Associate, M/s Nishith invested in Indian equities, registrations recorded in 2008 Desai Associates, a firm there were few new investors. and 223 in 2007. Industry dealing with FII registration in The number of FIIs who watchers attribute the lower India, is the fallout of the global registered themselves with the number of FII registration economic crisis. "Unless and Securities & Exchange Board of largely due to severe risk until there is no strong India (Sebi) this year was aversion among global commitment from overseas higher by 7% over 2008. Data investors after the collapse of clients of FIIs, it doesn't make sourced from the Sebi shows Lehman Brothers, which sense to register in India," he that 113 new FIIs registered deterred the pace of new said. (The Financial Express: December 28, 2009)

COMPONENT MAKER BOSCH BULLISH ON INDIA, TO INVEST $ 433.5 MLN IN 3 YRS

The world's largest automotive "India will be an important Mr. Bohr said demand in component manufacturer, market for the company in the developed markets like the US Bosch, plans to invest $ 433.5 immediate future. Growth focus and Europe has still not picked mln in India over the next three has shifted to the Asia-Pacific up, and it will be some time years. Of this amount, the after the financial crisis," said before demand touches pre- company will spend around Mr. Bernd Bohr, chairman of 2007 levels in the developed 25% towards increasing its the Stuttgart-based Bosch markets. research and development Automative Group. facilities in the country. Bosch Group generated 1 billion euros of its total revenues (about 3 per cent) Viswanathan, Managing from India. "We expect India to Bosch is also ready with Director, Bosch. contribute 5 per cent of our total components of the Tata Nano's revenue over the next three diesel engine. "Whenever the The company has also years," said Mr. Bohr. The total Tatas place an order, we would introduced a 'common rail' revenue of the company from be ready with the components diesel fuel injection system for all its operations was 38 billion for the diesel engine variant of medium and heavy commercial Euros in the calendar year Tata Nano," said Mr. V.K. vehicles in India. (Hindustan 2009. Times: January 05, 2010)

Edited by Mr. Ashok C. Kaushik, Marketing Officer, Embassy of India, Buitenrustweg 2, 2517 KD The Hague. Tel: 070-3469771; Fax: 070-3462594; E-mail: [email protected]; Web: http://www.indianembassy.nl