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INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! 1

Indian Manufacturing & Logistics: On a Roller Coaster Ride!January 2017

INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! 32 INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE!

CONTENTS

INTRODUCTION 4INDIA VISION 2035 6ECONOMIC BACKDROP 8STRONG INFRASTRUCTURE IN MAKING 9INDUSTRIALIZATION & POLICY CHANGES 12TAXATION - GOODS AND SERVICES TAX (GST) 14

INDUSTRIAL REVOLUTION 4.0 16CHANGING MANUFACTURING DYNAMICS 18GETTING THE SKILL SETS RIGHT 19LOGISTICS SECTOR LEAP FROGS 20MODAL PERFORMANCES 21INVESTMENT CLIMATE IN INDIA 22WAY FORWARD 28


INTRODUCTIONIndia currently stands on a path of a phenomenal growth trajectory with its economy well poised to become one of the leading economies of the world. In order to achieve this feat, the country needs to take to some structural strengthening along the four main foundation pillars;

Robust Policy Framework

Strong Infrastructure

backbone

Manufacturing for the future

Efficient Logistics

In this paper, we have tried to travel along a chronological path, reviewing the performances of these four foundation pillars in past and peeking into the future, primarily looking for answers like;

We have also tried to draw a comparison from select emerging (typically BRIC nations) as well developed (typically USA and Japan) economies of the world to understand better the growth dynamics of these countries. Finally, this paper tries to appraise the investment climate in India especially in the manufacturing and warehousing asset class.

Enjoy the chronological roller coaster!

How does India stand in 2035?

Are we on the right track to achieve the future goals?



INDIA VISION 2035

Second largest telecom industry in the world with 969 million subscribers 2 Internet penetration will increase

to 80% from 18% in 20143

Total freight traffic of Road and Rail: 13,000 BTKM

(Billion Tonnes Kilometres) in 2031 – 327

100 Smart Cities by 2022Total road length of India will reach 15 million km from 4.87 km in 20127

Electricity usage in 2035 will be in a range of 2746-

5554 Billion kWh7

1 World Bank. USDA Projections and JLL Analysis.2 TIFAC Technoscape: Technology Vision 2035, pg.12, 2035.3 PWC, ‘Future of India: The winning Leap’, pg-55, 2014.4 TIFAC: Technology Vision 2035, pg-12, 2015.5 McKinsey & Company, ‘Fulfilling the Promise of India’s Manufacturing sector’, March 2012.

Available from [http://www.mckinsey.com/business-functions/operations/our-insights/fulfilling-the-promise-of-indias-manufacturing-sector].

6 TIFAC Technoscape: Technology Vision 2035, pg-7 and 9. PWC, India winning leap.7 TIFAC Technoscape: Technology Vision 2035, pg-7, pg-8, pg-9, pg-5.

INDIA GDP USD 10 Trillion (7.3% of World) from USD

2.1 Trillion in 20151

INDIA POPULATION, 2035 1.53 Billion (18% of World) from 1.3 Billion

in 20151

EXPORT MARKET USD 80 Billion by 20204

MANUFACTURING SECTOR USD 1 Trillion by 20255

MILLION PLUS CITIES, 2035 68, from 53 in 2011 (Census)6

URBAN POPULATION, 2035 650 Million (43% of India’s population)7


G u l f o fM e x i c o

ECONOMIC BACKDROP STRONG INFRASTRUCTURE IN MAKING

Next two decades are expected to put India in game changer position backed on its demographic potentials, urbanization, economic growth and labour force thus accelerating growth in logistics and manufacturing sector.

Growth Potential of Indian Infrastructure sector: India’s GDP is projected to grow at a CAGR of 8.2% (2015-2035) to reach US$ 10 trillion by 2035, making it the 3rd largest economy behind US and China8

India’s share in World GDP to increase from 2.8% (2015) to 7.5% (2035)8

Rapid urbanization, increase in population and labour force is expected to drive Indian economic growth and impetus to manufacturing and Logistic sector.

TOP TEN ECONOMIES 2015 & 2035

INVESTMENT IN INFRASTRUCTURE % SHARE OF GDP vs GDP

Source: Bridging Global Infrastructure reports – McKinsey, Planning Commission, Russian Infrastructure - Industry report. Pg. 1. Gazprom Bank, Enhancing Private infrastructure investment in Brazil. Pg. 3. Oliver Wyman.15

13 Source: Infrastructure development in Asia Pacific (APECO - PwC) and JLL Analysis14 Accessing Asia: Investing in the infrastructure imperative - Morgan Stanley)15 Bridging Global Infrastructure reports – McKinsey, Planning Commission, Russian Infrastructure - Industry report.. Gazprom Bank, Enhancing Private infrastructure investment in Brazil. Pg. 3. Oliver Wyman.

• India’s population to grow by 1.16 times in the next two decades to 1.53 billion to become 18% of world population share.8

• India to overtake China’s working population by 2030.

• India’s working population is expected to cross the 1 billion mark by 2030, and by 2035, 65% of India’s population will be in the working age bracket (15 - 64).8

• Urban population to grow at 6% annually and in next two decades, 650 million people to live in urban areas by 2035.10

• Smart City initiative to improve the efficiencies of city leading to a conducive business environment.

• 12 million people projected to enter India’s workforce every year and its projected that by 2030, it will exceed China.11

• 300 million youth will be trained under the ‘Skill India’ initiative by 2022.12

8 World Bank, Cia World Fact book, USDA Projections and JLL Analysis.10 World Bank, Cia World Fact book, TIFAC: Technology Vision 2035, pg-9. and JLL Analysis.11 Institute for Human Development, “India Labour and Employment Report 2014: Highlights’, pg-6, 2014 &Wall Street Journal, ‘India’s Labor Force: The Numbers’, Available From [http://blogs.wsj.com/briefly/2015/07/22/indias-labor-force/]12 KPMG, ‘India Soars High’, pg-8, 2016.

POPULATION URBANIZATION LABOUR

India’s investment in infrastructure is growing at CAGR of 17% (2006-2015), compared to the rest of Asia which is growing at 7 – 8% annually.13

India offers major infrastructure investment opportunities thanks to large infrastructure construction programmes and governments are actively encouraging the private sector to take a delivery role in India.

In India the investment in infrastructure share of GDP is 10% which is quite high compared to other BRIC economies and developed economies like US and Japan.

Global Infrastructure Investment Index which states the attractiveness of a country as an infrastructure investment market has ranked India 25th on a list of 41 countries.14


Source: World Bank, CIA World Fact book, USDA Projections and JLL Analysis

R1

R2

R9

R3

R1

R2


NATIONAL CIVIL AVIATION POLICY 2016 OBJECTIVES 20

• India to become 3rd largest civil aviation market by 2022 from current 9th position.

• Airports having scheduled commercial flights to increase from 77 in 2016 to 127 by 2019

• Cargo volumes to increase by 4 times to 10 million tonnes by 2027

• Reduction of air cargo dwell time to 24 hrs. (import) and 8 hrs. (export) by 2017

• The Airport Authority of India to invest INR 12,964 crore for infrastructure projects in 13 regional airports.21

AVIATION

India’s domestic aviation market grew at over 20.3% in 2015, which is the highest growth recorded in the world.19

16 SAGARMALA National Perspective Plan, April 1617 “Progress in Dedicated Freight Corridor”, PIB, Ministry of railways, 07 Aug, 2015 .18 “Ministry of Road Transport & Highways sets steep targets for 2016- 17”, PIB, Ministry of Roads and Highways. 19 FICCI-KPMG ‘India Aviation Report, 2016.20 National Civil Aviation Policy, 2016.21 Press clippings, Public Relation department, AAI.

KANDLA

MUNDRA

VADHAVAN

MARMAGAO

NEW MANGALORE

PARADIP

MACHLIPATTANAM

SAGAR ISLAND

KOCHI

TADADI

VIZHINJAM

ENAYAM COLACHAL

TUTICORIN

MUMBAI

BANGALORE

CHENNAI

VISHAKHAPATTANAM

KOLKATA

DADRI

AMRITSAR

JNPT

STRONG INFRASTRUCTURE BACKBONE IN MAKING

WATERWAYS

SAGARMALA PROJECT16 Approved by cabinet on March 2015 to promote port-led development in the country by harnessing India’s 7,500-km long coastline.

• Investment Size: INR 400,000 crore (approx.)• 150+ projects for port modernization and connectivity• 6-8 new ports, 2 international trans-shipment hubs• 14 coastal economic zone to be developed• 400 MTPA capacity to be added within 2020

The National Waterways Act, 2015 was passed in the parliament to develop internal Waterways as cheaper mode of transport.

EDFCWDFC

Major ports

Upcoming ports

Upcoming International trans-shipment End-points of industrial corridor/ DFC hubAmritsar-Kolkata Industrial Corridor

Delhi-Mumbai Industrial Corridor

Bengaluru-Mumbai economic corridor

Chennai-Bengaluru Industrial Corridor

Vizag-Chennai Industrial CorridorParadip Petroleum, Chemicals & Petrochemicals Investment Regions (PCPIRs)

ROAD

Construction of highways has gained momentum with policy initiatives and administrative agility in recent times.

Year

Highway Projects

Awarded (In Kms)18

Construction of highways (in kms)18

2014-15 7,972 4,3402015-16 10,000 6,0002016-17 (target) 25,000 15,000

(WDFC) (EDFC)Total length (km) 1504 1856

Sanctioned cost of project (INR crore) 46,718 26,674Expected traffic Year 2021 -22 (million tonnes) 152.24 153.23

Projected completion Oct-19 Dec-19Land acquired (as of Aug 2015) 91% 80%

RAIL

Ministry of Railways is developing Western Dedicated Freight Corridor (WDFC) and Eastern Dedicated Freight Corridor (EDFC) to decrease freight transit time substantially.17

10 INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE!

Disclaimer: The map is not to scale and the locations marked are indicative only.


INDUSTRIALIZATION & POLICY CHANGESManufacturing stands as one of the major contributors of GDP in Japan, China and India. Here’s a comparison of the industrialization scenario and how these countries adopted to policy changes to reach the current stage.

22 http://countrystudies.us/japan/26.htm 23 http://www.meti.go.jp/english/publications/pdf/journal2015_05a.pdf 24 PWC, ‘People’s Republic of China – A Profile’ 2008.25 CSIS, ‘Made in China 2025’, 2015. Available from – [https://www.csis.org/analysis/made-china-2025]26 IDFC, ‘The Political Economy of Infrastructure Development in Post-Independence India’ 2007.27 Montek S. Ahluwalia, ‘Economic Reforms in India since 1991: Has Gradualism Worked?’, 2002.28 KPMG, ‘India Soars High’, 2016.

CHINA

Evolved

INDIA

Evolving

PRE-INDUSTRIALISATION

PHASE

INDUSTRIALIZATION PHASE PRESENT PHASE

JAPA

N

Japan emerged as the first Asian Industrialized nation before 1940’s because of the establishment of various economic reforms and modern institutional framework, inputs of adoption of western technology and large private investments which created a conducive environment for expansion of industrial economy. 22

Post 1950’s Japan developed an export-oriented economy. It sold majority of its manufactured goods abroad and invested in the purchase of technology, raw materials, management and energy sources for its further industrial development.

Japan has introduced Industrial Value Chain Initiative which aims to establish a structure that will connect even small and mid-sized companies via the Internet beyond and sharing of information across companies and sectors based on the links between manufacturing processes and business operation systems. 23

CHIN

A

In late 1970s, China had a large population which was heavily dependent on agriculture and went through economic crisis24

Post 1978, economic reforms like decentralization of economic policy to promote & ease investments in industry were taken. Special Economic Zones established & FDI promoted. State owned enterprises privatised and reformed to increase efficiency.

Make in China 2025 – Presently have increased their R&D expenditure to promote digitisation and use of technologies to upgrade manufacturing25

INDI

A

Post independence, policies were pro– industrialization but all major sectors were state owned and offered restrictions for doing business26.

After the economic crisis of 1991, comprehensive economic reforms like – liberalisation, privatisation and globalisation were introduced allowing private sector and foreign investments to promote manufacturing sector27

‘Make in India’ initiative to open-up the manufacturing market for FDI on the other hand, ‘Skill India’ initiatives targets to align the workforce to the future need of the industry28

China and Japan at their present stage of evolution

are promoting policies, reforms and investments in R&D and hi –tech industries

walking in line with Industrial Revolution 4.0

Pro investment policies is expected to promoting

investment in various sector will affect industries and

infrastructure.

India 2035 Digital India vision aims to explore technological possibilities to attain India’s

development goals taking into account new opportunities offered by application of

Technology and promoting R&D in myriad sectors.


JAPAN

Matured


TAXATION - GOODS AND SERVICES TAX (GST) India is expecting a major change in taxation structure with GST implementation. Herein, we intend to look back in two successful models of GST (dual and single) in Canada and Australia.

*Disclaimer: Rates for GST slabs mentioned are as per November 2016.Source: Central Board of Exercise and CustomsMinistry of Finance, Government of IndiaFor further update on information please refer the following link: http://www.cbec.gov.in/htdocs-cbec/gst and http://www.finmin.nic.in/GST/index.aspAbbreviations: GST= Goods and Services Tax; HST=Harmonized Sales Tax; PST=Provincial Sales Tax; WST=Whole Sale Tax; CGST= Central GST; SGST=State GSTDisclaimer: The map is not to scale and the locations marked are indicative only.

G u l f o fM e x i c o

CANADA1991 GST

Implemented

INDIA

Expected in 2017

AUSTRALIA

2000 GST Implemented

TYPEPRE-

INDUSTRIALISATION PHASE

NEED FOR GST

CANA

DA

Dual GST System HST = GST+PST

GST Rate 13% -15%

Canada was going through an economic crisis in the 1990s, and levying taxes on inputs was increasing costs and discouraging investments

GST subsumed existing MST, Federal Telecommunication Tax, etc.

Post implementation of GST Short-term increase in prices, decrease in the magnitude of the fluctuations in tax revenue, however the revenues exceeded expectations.

AUST

RALIA Singular GST

System

GST Rate 10%

Australia was going through a sustained economic growth. Singular GST was one of the many economic reforms.

GST subsumed the complex tax structure including Replaced the existing WST, State Government taxes, duties and levies, etc.

Post implementation of GST Short-term increase in prices, decrease in the magnitude of the fluctuations in tax revenue, however the revenues exceeded expectations.

INDI

A

Dual GST System GST = CGST + SGST

Commodity wise variation, what’s GST slabs pegged to be 5%, 12%, 18% & 28% *

There are various indirect tax systems in the present tax framework. Few are levied by the center and rest are levied by the state. GST can help eliminate the inter-state tax hurdles.

Yet to be implemented.

Once implemented, GST is expected to bring-in a major change in the economic, manufacturing and logistics development of the country.

Implementation of GST to promote an resource efficient

supply chain planning, as state boundaries will ‘hypothetically’

vanish for purposes of supply & distribution.



INDUSTRIAL REVOLUTION 4.0

INDUSTRIAL REVOLUTION CHRONOLOGY 29

End of 18th Century

1st Industrial Revolution (IR 1) Mechanical Production Facilities were introduced, which

used the power of Water and Steam.

Beginning of 20th Century

2nd Industrial Revolution (IR 2) Mass production was introduced which used

electrical energy.

Beginning of 1970s

3rd Industrial Revolution (IR 3) Electronics and IT were introduced in Manufacturing sector,

with further automated production.

Present

4th Industrial Revolution (IR 4) Cyber physical production systems and ‘Artificial Intelligence’

are expected to be introduced in manufacturing

Globally, manufacturing is going

through the phase of Industrial

Revolution 4.0 where real and

virtual worlds meet and involves the

full integration of manufacturing

technologies and systems to make a

“smart factory”. 30 Impact of Industrial Revolution 4.0

on Industrial & Logistics Sector

Some Instances to depict the march into Industrial

Revolution 4.0

ARTIFICIAL INTELLIGENCE

Enabling machines to make decisions and perform

activities autonomously.

DIGITALIZATION Application in supply chain to increase the access and fluidity of

data / data flow.

WAREHOUSING Digitalization and Network

Collaboration to allow capacity planning and

demand forecasting for warehousing31

TRANSPORTATION Access to data through Digitalization would aid routing optimization for

efficient transport planning.

SECURITY Digitalization

would increase the transparency of Supply chains making it more secure and reliable31

CONCEPTUALIZATION AND IMPLEMENTATION

OF SMART CITIES

DRIVERLESS CAR

TECHNOLOGY

ROBOTS STARTING TO DOMINATE

FACTORY SHOP FLOOR

PROGRAMMED ‘DRONES’ FOR

LAST-MILE LOGISTIC CONNECTIVITY

29 Deloitte, ‘Industry 4.0: Challenges & Solution for digital transformation and use of exponential technologies’ 2015.30 Industrie 4.0, Smart Manufacturing for the Future, GTAI (Germany Trade and Invest) 2014.

31 AT Kearney, ‘Digital Supply chains: Increasingly Critical for Competitive edge’, pg-2, 2015.

India’s thrust towards the ‘Digital India’ initiative is in line with the IR 4.0 vision.

It is expected that ‘Make in India’ initiative will join hands with the 4th Industrial Revolution (IR 4.0) in India in next two decades.

‘Smart City’ initiative is also expected to have a significant impact on IR 4.0 in India.

16 INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! 17


11 5

CHANGING MANUFACTURING DYNAMICS Strong Manufacturing Sector in India.

GETTING THE SKILL SETS RIGHTLOW-COST LABOR FORCE India offers some of the lowest cost labour in the world (USD 1.72/hour in 2015) while boasting an abundance of engineers, which puts India in a competitive position compared to other BRIC nations.33

‘SKILL INDIA’ INITIATIVE

The Mission has been developed to create convergence across sectors and States in terms of skill training activities.

Seven sub-missions have been proposed: (i) Institutional Training, (ii) Infrastructure, (iii) Convergence, (iv) Trainers, (v) Overseas Employment, (vi) Sustainable Livelihoods, (vii) Leveraging Public Infrastructure.

GLOBAL MANUFACTURING COMPETIVENESS

Deloitte Touche Tohmatsu Limited in its report ‘Global Manufacturing Competiveness Index, 2016’ identified which nations offer the most competitive manufacturing environments globally. India has ranked 11th in 2015 and is expected to improve by 6 positions to global rank 5th by 202032

MANUFACTURING AS % SHARE OF

GDP vs GDP

Source: World Bank and JLL AnalysisNote: Data for Manufacturing % Share of GDP belongs to Year-2014, with the exceptions of China

where the data belongs to Year-2013.

2015 RANK

2020 RANK

INDIA’S MANUFACTURING COMPETIVENESS INDEX

YOUTH WILL BE TRAINED BY 2022

300 MILLION

32 Deloitte, Global Manufacturing Competiveness Index, 2016.Note: Global Manufacturing Competiveness Index evaluates drivers that are key to company and country level competitiveness as well as identify which nations are expected to offer the most competitive manufacturing environments through the end of this decade.

33 http://www2.deloitte.com/global/en/pages/manufacturing/articles/global-manufacturing-competitiveness-index.html

LABOR FORCE vs MANUFACTURING

LABOUR COSTSource: World Bank, Deloitte 33, Trading Economics and JLL Analysis

LOGISTICS SECTOR LEAP FROGS

Note: Logistics Performance Index (LPI) is an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance. It is measured on the parameters like Customs, Infrastructure, International shipments, Logistics quality and competence, Tracking and tracing and Timeliness. Source: World Bank Database for the year 2016. Source: World Bank Database.

LPI SCORES OF DIFFERENT COUNTRIES ACROSS YEARS

INDIA’S LPI RANKING

In the recently released World Bank bi-annual Logistics Performance Index (LPI), India is placed at 35th rank among 160 countries, an impressive 19 position jump from 54th position in the 2014 report.

Introduction of a Single Window Interface for Trade (SWIFT) and other recent reforms at Customs have resulted in improvement in the indicator. This is indeed a clear indicator of improving regulatory climate and ease of doing business and logistics efficiency.

2014 RANK54TH

2016 RANK

35TH

20 INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! 21

RAILWAYS, GOODS TRANSPORTED & RAIL LINES LENGTH

Source: World Bank Database

MODAL PERFORMANCESIndia’s Freight Logistics potential across Rail, Air and Port is underdeveloped and needs to evolve significantly considering the size and expected growth of India’s economy.

AIR FREIGHT & PORT CONTAINER TRAFFIC

Source: World Bank Database

JAPAN

USA

CHINA

INDIA

BRAZIL

RUSSIA


INVESTMENT INTENSIONS Private equity investors and overseas developers are already looking at opportunities to enter India’s industrial and warehousing sector taking advantage of this fact by investing in various development projects.

Investors from China, Japan and Korea in particular have shown a lot of interest industrial development projects

INVESTMENT CLIMATE IN INDIA

WHY INVEST IN INDIA?

WHEN TO INVEST IN INDIA?

RETURNS ON INVESTMENTS

India has the good potential to give a higher returns on investment compared some of the developed nations. India currently gives an average yield of 6.5% on 10 Year government bonds which can be deemed as risk free rate of return.

INCREASING INVESTMENTS IN INDIA

India has also overtaken China as world’s top greenfield foreign direct investment (FDI) intentions announced with US$ 63 billion of FDI in 2015. 34

Source: http://www.investing.com/rates-bonds/ *Note: Risk free rate of return is an average of Q4, 2016 numbers for the countries considered. India’s Government 10-Year Bond

Yield (%) has recently seen a downward trend.

Source: http://www.investing.com/rates-bonds/ Note: The yearly yield data mentioned in the graph is derived from monthly yeild

historical data spanning from CY 2006 to CY 2016.

34Source: fDi Report, fDi Intelligence , 2016. fDi Intelligence is a specialist division of The Financial Times Ltd.

Disclaimer: ‘Greenfield investment’ is a form of foreign direct investment where a parent company builds its operations in a foreign country from the ground up. The fDi data mentioned above are the global greenfield investment intentions

announced in 2015 and don’t necessarily show the actual investment implemented during the period.

RISK FREE RETURN, Q4, 2016*

INDIA - GOVERNMENT 10-YEAR BOND YIELD

TREND (2006-2016)

INTENTIONS ANNOUNCED FOR GREENFIELD INVESTMENT, 2015.

• ‘Wanda Industrial New City’; Dalian Wanda Group

• Industrial Parks by China Fortune Land Development Company Private (CFLD)

• Development of Smart Cities by ZTE Corporation

• Neemrana Japanese Investment Zone

• Mandal Becharaji, Japanese Investment Zone

RISK FREE

RETURN

• SUPA, Japanese Investment Zone

• Chinese industrial Zone in Vadodara, Gujarat

• Ascendas Singbridge exploring exploring multiple portfolios of Industrial and Logistics Park across India.

• Verdion exploring Industrial and Logistics market in India.

• LOGOS looking for land for setting up logistics park in India.

Investor can safely assume a premium over this risk free rate of return for any investments in the country. The risk premium would however, depend on the various aspects of the project like location, size, phase etc. Investing in India’s logistics and manufacturing destination becomes the most logical destination for developed countries.

India’s Government 10-year bond yield performance in last 10 years depicts a stable growth pattern and hence reliable investment climate.

Automobiles & Engineering

Electronics & Communications

Life Sciences (Pharma

& Bio-technology)

Food & FMCG Aerospace Heavy

Industry Apparels IT Locomotives Ship Building

Oil refineries Engineering

WHERE TO INVEST IN INDIA FOR MANUFACTURING?

MANUFACTURING INVESTMENT

PROPOSITION 36

36 Source: http://www.ibef.org/

The Investment details, derived from announcements made by individual companies, are indicative, non-comprehensive and not the actual investment made in the sector. Note: Industrial Entrepreneurs Memorandum (IEM) is an application filled by promoter for setting up manufacturing unit in the state. It happens in two parts. First is filling the

intention to set up the unit and second is to note the establishment or implementation of the intended unit. IEMs Implemented are Actual Investment Reported and IEMs Filed are Proposed Investments.


AUTOMOBILES & ENGINEERING

• Isuzu - USD 450 million - SriCity, Andhra Pradesh.• General Motors – USD 1 Billion – Talegaon, Maharashtra.• Honda Cars - INR 1,380 Crore in Gujarat and Rajasthan.• Suzuki Motors to invest INR 8500 Crore in Gujarat.• Ranult Nissan to invest INR 5000 Crore in Chennai.

LIFE SCIENCES (PHARMA & BIO-TECHNOLOGY)

• RusanPharma – USD 14.8 Million – Kandla, Gujarat.• Indian Immunologicals – USD 44.4 Million – Pondicherry.• Sanofi SA – USD 69.4 million

FOOD & FMCG

• Mondelez International – USD 190 million – Andhra Pradesh• Pepsi – USD 74 million - Maharastra• ITC - USD 117.4 million – Medak, Telangana• Amul – USD 733.6 million

AEROSPACE• Wayne Burt-GE Aviation - USD 25 million - Chennai• Wem Technologies Private Limited and Lockheed Martin -

USD 93 million - Andra Pradesh

HEAVY INDUSTRY

• JSW – USD 1.4 billion – Salboni, West Bengal• NMDC Ltd – USD 2.6 billion - Karnataka• General Electric and Alstom Transport - USD 5 billion -

Patna

ELECTRONICS & COMMUNICATIONS

• Foxcom – USD 5 billion – Mumbai and Pune• Videocon – USD 64 million - Punjab.• Apple – USD 25 million – Hyderabad• Oppo – INR 100 Crore – Noida

MANUFACTURING SECTORAL

PREDOMINANCE

INR 4.21 Lakh Crore IEMs Implemented in the span of 2006-2015, indicates the Actual Investment Reported 35

IEMS IMPLEMENTED (2006 – 15) 35

North Zone 11%

East Zone 9%

South Zone 18%

West Zone 63%

INR 108 Lakh Crore IEMs Filed in the span of 2006-2015, indicates the Proposed Investment 35

IEMS FILED (2006 – 15) 35

North Zone 6%

East Zone 41%

South Zone 21%

West Zone 32%

DELHI NCR

KANPUR/LUCKNOW

PATNA

LUDHIANA

JAIPUR

KOLKATAINDORE

GANGTOK

HYDERABAD

CHENNAI

PUNE

BANGALORE

KOCHI

MUMBAI

AHMEDABAD

VIJAYAWADA

NAGPUR


35 State wise break up of IEMS implemented by December 2015, DIPP.


WHERE TO INVEST IN INDIA FOR WAREHOUSING?

Note: City wise warehouse (WH) stock of 2016 consists of Grade-A and Grade-B. It does not take into consideration the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing companies that are within or beyond their premises.The total warehouse stock constitutes the data for 8 focus cities - Ahmedabad, Chennai, Bangalore, Delhi NCR, Hyderabad, Kolkata, Pune & Mumbai. The minor variation in the total WH figures are due to rounding off / decimal errors.Note: Rental ranges are indicative only with variation / aberrations in select markets. Actual rentals would vary as per specifications provided in a specific property.

LUDHIANA

NCR DELHI

JAIPURKANPUR

LUCKNOW

KOLKATA

PATNA

BHUBANESHWARNAGPUR

AHMEDABADINDORE

PUNE

MUMBAI

KOLHAPUR

HYDERABAD

VIJAYAWADA

CHENNAI

COIMBATORE

KOCHI

BENGALURU

VAPI

GUWAHATI


AHMEDABAD Growth Corridors Changodar- Bhayala | Sanand | Aslali- Goblej | Kalol – Kadi

MUMBAI Growth Corridors JNPT and Uran | Palaspe Panvel | Mankoli | Vadpe | Padga

PUNE Growth Corridors Chakan | Nagar Road | Hinjewadi | PCMC – Bhosari | Shirwal

BANGALORE Growth Corridors Hoskote | Hosur Road | Tumkur Road | Mysore Road

NCR DELHI Growth Corridors Gurgaon | Ghaziabad | Delhi | Sonipat

KOLKATA Growth Corridors Uluberia to Dhulagarh | Dankuni (on NH 06) and Old Delhi Road (on NH 02) | Kalyani

HYDERABAD Growth Corridors Shamshabad | Uppal | Medchal | Balanagar | Mahabubnagar

CHENNAI Growth Corridors Oragadum | MM Nagar | Sriperumbudur | Red-Hills | Periyapalayam |

PRIMARY WAREHOUSING LOCATION

EMERGING WAREHOUSING LOCATIONS

LudhianaJaipur Patna KochiVapi IndoreNagpur KolhapurGuwahati Vijayawada Kanpur/Lucknow CoimbatoreBhubaneshwar

Warehousing Stock 2016 112 MILLION SQ FT

For Grade A and Grade B for 8 Primary Locations

GRADE A & GRADE B WAREHOUSE STOCK 2016

Y-O-Y WAREHOUSE STOCK FOR GRADE-A & GRADE-B (2014-2018)

Rental Warehouse - 2016 (INR/sq ft/month)

Grade-A 17-25 21-28 18-22 20-35 19-22 18-30 12-22 12-20

Grade-B 11-16 11-21 11-16 16-25 10-28 12-28 10-19 11-19


INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! 2928 INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE! 2928 INDIAN MANUFACTURING & LOGISTICS: ON A ROLLER COASTER RIDE!

Investment Models

The investment climate of the country has improved significantly and is expected to improve further with more and more transparency in the real estate domain. The investors are exploring the 4 Investment Models for their entry in the market;

India is on growth path that is expected to put the country among the top global economies. The drivers of growth, if executed as planned, can rightly position India to achieve the growth targets.

WAY FORWARD

Joint Venture Development

Portfolio Acquisition

Sale Lease Back

INVESTMENT MODELS

Turnkey Development

Demonetization

Government of India’s on 8 November 2016, announced the decision to cancel the legal tender character of INR 500 and INR 1,000 banknotes with effect from 9 November 2016 and the issuance of new INR 500 and INR 2,000 banknotes in exchange for the old banknotes. This demonetization exercise is expected to have various impacts on the industrial and warehousing real estate captured below.

Use of Informal Cash to go

down

Increase in Transparency

Rationalization of Land Prices and

Rentals

Gradual shift from Unorganized to

Organized Market

Opportunities to bring in more

Institutional Players

Impact on Warehousing Real Estate

GST Implementation

Make in India

Digital India

Skill India Initiative

Infrastructure

100 Smart Cities

Demonetization

Key Growth Drivers

Simplification of taxation regime to increase the efficiency of supply chain.

Improving the ease of doing business and making India a Global Manufacturer.

Enriching the large workforce to meet the growing need of the industry

Although RERA is primarily targeted for residential real estate, it is probably the first step towards increase in transparency in real estate sector.

Digitally empower Government and Citizen to embrace the Industrial Revolution 4.0

Robust planning and investments in infrastructure setting the backbone strong

Drive economic growth and improve the quality of life of people by enabling local area development and harnessing technology,.

Will lead to favorable long term impact on Industrial and Warehousing asset class.

The manufacturing and logistics asset classes in India is definitely taking a northward turn and gradually becoming competitive globally. India’s journey to becoming a developed economy of the world is all set on a path with many hurdles to overcome. Good governance, transparency, modifications in regulatory regime, investment in infrastructure developments apart from others is definitely going to help to achieve the target.

RERA (Real Estate Regulatory Bill)


Authors

For information on Industrial Services please contact

Chandranath Dey Associate Director & Head Industrial Consulting [email protected] +91 90999 71598 Chandranath Dey joined JLL in May 2006. Based out of Ahmedabad, Chandranath currently leads industrial & logistics consulting business in India. His key experiences include formulation of business plan, entry strategy formulation, business location advisory and site selection studies for some of the largest Fortune 500 companies of the world across multiple industrial sectors. Chandranath with more than 10 years of consulting experience holds a bachelor’s degree in architecture, master’s degree in City Planning from Indian Institute of Technology, Kharagpur and certification on Applied Finance from IIM, Calcutta.

Ishita Kachru Senior Executive, Industrial Consulting [email protected] +91 7043140555 Ishita joined JLL in Feb 2016. Based out of Ahmedabad, Ishita is currently assisting industrial & logistics consulting business in India. She is involved with projects pertaining to feasibility studies, business location consulting, city profiling, real estate advisory and other property development related research. Ishita with more than 2 years of experience holds a bachelor’s degree in architecture, Masters‘ degree in City Planning from CEPT University.

Nirav Kothary National Director, Industrial Services [email protected] +91 79 4015 0015

N Srinivas National Director, Industrial [email protected]+91 98454 45495

JLL Industrial Services: Snapshots


Services nearly 43 Cities in India

920+ acres of land transacted

305+ transactions concluded

102+ consulting work delivered

Team of 28 personnel in 8 cities

23.20+ million sq ft built up area transacted

JLL Industrial Services: Service Offerings

Feasibility & Market Study

Business Plan & Entry Strategy

Formulation

Business Location Advisory

Supply Chain Consulting

Land Acquisition / Disposal

Lease Acquisitions – Ready Built & BTS

Project / Equity partner Search

Individual Asset & Portfolio Acquisition

/ Disposal


About JLL

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. JLL is a Fortune 500 company with, as of December 31, 2015, revenue of $6.0 billion and fee revenue of $5.2 billion, more than 280 corporate offices, operations in over 80 countries and a global workforce of more than 70,000. On behalf of its clients, the company provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. As of September 30, 2016, its investment management business, LaSalle Investment Management, has $59.7 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com

JLL has over 50 years of experience in Asia Pacific, with 36,000 employees operating in 94 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the fifth consecutive year by Real Capital Analytics. www.ap.jll.com

About JLL India JLL is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 8500, the firm provides investors,

developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. The firm was awarded the Property Consultant of the Decade at the 10th CNBC-Awaaz Real Estate Awards 2015 and the Best Property Consultancy in India at the International Property Awards Asia Pacific 2016-17. For further information, please visit www.joneslanglasalle.co.in

About JLL Industrial Services, India

With over 150 man-years of experience in working with high-profile industrial & logistics organizations across India, the team provides industrial consultancy and transaction advisory for many of the Fortune 500 companies of the world. JLL’s integrated industrial services team is well trained to deliver seamless solution to determine optimal long term real estate solutions for its clients. The team employs a multidisciplinary approach towards utilizing the capabilities of Jones Lang LaSalle’s world class suite of industrial services, to develop real estate strategies linked to clients’ core business objectives.

Jones Lang LaSalle Property Consultants (India) Pvt Ltd © 2017. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

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