EXPORT MARKET FOCUS:

India's growth story remains strong:

Since the early years of liberalization in 1990s, India’s economy has undergone a sea change. It is story of robust economic growth with impressive GDP growth rate. As per United Nations (UN) report, the Indian economy is expected to expand by about 7.5 per cent in 2012-13. The GDP growth was 6.9% during 2011-2012 while during the earlier 2 preceding years it was 8.4%.

“India's growth story remains strong,” says the Finance Minister of India, Mr. P. Chidambaram. He was speaking at Annual conference of Economic Editors in New Delhi recently. Even though Indian economy’s growth declined to 6.5 per cent in 2011-12 and further to 5.5 per cent in the first quarter of this fiscal, it is no cause for undue worry,” he said silencing critics.

The government has already taken a slew of reform measures including allowing FDI in multibrand retail and allowing foreign carriers pick up stake upto 49 per cent in Indian aviation companies. The government has also reduced subsidies on petroleum products by increasing diesel prices and putting cap on the number of subsidized LPG per family to six a year.

A few months ago, the government also opened up insurance and pension sectors to foreign investment. Foreign investment in pension sector is to be raised to 49%. In the insurance sector, FDI will be raised to 49 % from the current 26%. Also, reforms are underway in energy sector which includes restructuring of State Electricity boards. Other important areas of reforms are education and labor laws.

India was one of the few economies in the world that sailed through the global economic crisis, thanks to the strong fundamentals of Indian economy. According to the Global Competitiveness report 2010-11, India ranks 51st among 139 countries. India ranks higher than many countries in key parameters such as market size (4th) and innovation (39th). It also has a sound financial market (17th).

1

According to UNCTAD's World Investment Prospects Survey 2010-2012, India is the second-most attractive destination for FDI in the world. Indian markets have significant potential and offer prospects of high profitability and a favorable regulatory regime for investors.

Interesting facts about India’s economy:

Here are some interesting facts about India’s growing economy are:

 Three Indian bourses - NSE, MCX and BSE - have made it to the world's top 20 derivative exchanges.

 The eight core sectors—coal, crude oil, natural gas, petroleum refinery products, steel, cement and electricity—touched a seven-month high, growing by 5.1 per cent in September 2012.

 India's tablet personal computer (PC) market is expected to touch 7.3 million units by 2015-16, from around 1.7 million units currently.  Five Indian companies—Larsen & Toubro, Hindustan , , TCS and —have entered the list of world's 50 most innovative firms.

 India has emerged as one of the top five investment destinations in the world.

Drivers of Growth:

India’s growth is driven by domestic consumption. Increasing standard of living, growing middle class with greater purchasing power and young demography are some of the key factors that are creating demand across sectors.

India is a young nation. More than 50% of India's current population is below the age of 25 and over 65% below the age of 35. Thus India has the biggest young and working population in the world. And this young upwardly mobile population is expected to drive the demand for high end consumer products.

2

What is interesting is that rural India where around 70% of India’s population resides is increasingly linked with the mainstream economy. As put it by Ltd (HUL) Chairman Harish Manwani while speaking at their Annual General Meeting, “Rural India is now becoming the epicentre of India's growth story”.

According to a research report published by CRISIL Research in September 2012, for the first time in last 25 years, rural spending outpaced urban consumption during 2009-10 and 2011-12. Rural consumption per person grew annually at 19 per cent which is 2 percentage points higher than its urban counterpart. Some of the potential sectors for exports for Pennsylvania companies:

India’s growth phenomenon is witnessed across all industry sectors and opportunities exist tremendously. We have mentioned below opportunities and developments only in a few sectors.

Infrastructure: India is projected to spend some US $1 trillion by 2020 on a spectrum of infrastructure projects - roads, ports, airports, power (including nuclear) and urban regeneration/rail, new cities and towns. Infrastructure project completion is expected to go up by 39 per cent during FY 2012- 13.

The infrastructure sector accounts for 26.7 per cent of India's industrial output. The Index of Eight core industries—crude oil, petroleum refinery products, coal, electricity, cement, steel, fertilizers and natural gas—having a combined weight of 37.90 per cent in the Index of Industrial Production (IIP) stood at 147.3 in July 2012, according to data released by the Union Ministry of Commerce and Industry.

According to Goldman Sachs, India's infrastructure sector will require US$ 1.7 trillion investment in the next 10-years. Further, India needs to spend US$ 1.2 trillion by 2030 to meet the projected demand of its cities, according to a McKinsey Global Institute Report.

3

Airport modernization, Highways, upgrading rail infrastructure (new rail lines and high speed rail) and development of ports are some of the focused areas whenever private sector investment is significant.

Advanced Engineering and Manufacturing: India is a leading automotive manufacturer, with significant effort being placed on green technology. India's manufacturing sector is also developing fast, with world- class companies such as , , and Mahindra.

India needs an investment of US$ 200 to 300 billion military and aerospace sectors in 2 decades. India’s Defense sector envisages steep growth driven by modernization plans and increased focused on homeland security The rapid growth of this industry has attracted major global aerospace companies to India. Mining: Estimates indicate that investment opportunities valued at US$30 to $40 billion will be available over next 8 to 10 years to develop new mines and manufacture and sale state of art mining equipment and technology

Environmental Technologies:

Rapid industrialization and urbanization has had adverse impact on the environment in India. This in fact makes, India as one of the fastest growing market for Environmental technologies.

Opportunities include in the following sub-sectors: Environmental monitoring & measuring, clean technologies and solutions for industrial pollution control, environmental analysis & consultancy, waste management and recycling, and Renewable energy technologies.

Food and Food processing: Although India is the 3rd largest producer of food after China and the US, it is interesting to note that India is also a major importer of many agricultural

4

commodities. Imported processed food items like, pasta, cake mixes, dried fruits and nuts, processed fruits and vegetables, chocolate syrups, fruit juices, ketchup, chocolates, sauces, specialty cheeses, potato chips, and cookies are increasingly popular among the consumers in metropolitan cities. The number of Indians eating out and interested in trying intentional cuisine have also increased, this has given a boost to emergence of new hotels and specialty restaurants. Also, post liberalized India is witnessing growth of international fast food chains (Mc Donald’s, KFC etc). Pennsylvania exporters have opportunities to supply food products to these chains.

At present just 6 % of the food items are being processed in India in contrast to the developed nations where about 60% to 80% of the food produced is processed.

The other sectors that are witnessing phenomenal growth are organized food retailing and food services which are growing at annual rate of about 25%.

Healthcare: medical equipment The Indian healthcare industry is witnessing rapid growth and undergoing a transformation due to increasing private sector participation. Currently estimated at $ 35 billion, the healthcare sector holds immense opportunities for Pennsylvania companies to grow their export market.

Growing middle class in India is expecting medical services of International standards. Also, medical tourism is booming in India. As a result a lot of new super specialty hospitals are coming up leading to demand for hi-tech medical equipment. Indian pharma and biotech companies are increasingly becoming influential internationally and going global.

Education: PA India Office closely works with Pennsylvania based Universities in their efforts to reach out to Indian students for recruitment. India continues to be the second largest source of international students in the US. The number of Indian students enrolled in US institutions of higher education in 2010/11 continues to be over hundred

5

thousand at 103,895. India still represents 14% of all international students in US higher education, making it the number two country.

Accessing Opportunities in Indian market:

Pennsylvania companies have tremendous opportunities in Indian market. In fact Pennsylvania’s exports to India have been growing significantly over the past few years.

Pennsylvania companies have access to the services provided by Pennsylvania’s Authorized Trade Representative based in . The services include:

 Market research and Entry strategy,  Agent/Distributor/ Representative search,  Information on Certification/Standards and Regulatory requirements,  Trade leads and follow up with existing clients / agent  Foreign company background checks  Information on custom duties and various business taxes in India,  In-country-assistance during visit to India,  Assistance in participation in trade shows  Organizing / assisting with trade missions to India

CTD Trade Mission to India in February 2013:

Visiting the market to meet with potential business partners face-to-face & taking firsthand experience of the market is very crucial while exploring export opportunities in Indian market. India is vast country with lots of diversity (from language, religion, culture to food habits) and one needs to have a multi dimension understanding of India’s culture and business practices.

Considering the importance of visiting the market in person, the Center for Trade Development at the Office of International Business Development in Harrisburg is organizing a Trade Mission to India during February 3-8, 2013. The Trade Mission will visit 3 cities viz, Bangalore, and New Delhi.

6

Each Mission Participant will have a customized itinerary in accordance with the company’s objective in Indian market. The companies will have appointments with Pre qualified potential partners and networking opportunities with Indian business community. The companies will also receive market research inputs from PA India Office.

For more information about the Trade Mission, the companies may contact : Janet Kolokithas, International Program Manager at the Center for Trade Development. Email: [email protected] Phone: 717.346.0178 .

Article contributed by Supriya K. Pennsylvania Trade & Investment Office - India

7