Modified Manufacturing Ppt[1]

8/6/2019 Modified Manufacturing Ppt[1]

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Manufacturing: The India ValueManufacturing: The India ValuePropositionProposition


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ContentsContents

Market Overview

Government regulations & policy

Business Opportunities and

Advantage India


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Manufacturing has contributed toManufacturing has contributed toIndias economic growthIndias economic growth

y World's second largest small car markety One of only three countries that makes its own

supercomputersy World's largest producer of milk, tea and pulses

and the worlds largest livestock populationy

Second largest producer of food including fruitsand vegetablesy Worlds largest diamond cutting and polishing

centre and the second largest jewellery market

Indias GDP of$1.43 trillion makes it the 11th largest economy in the world and 4th largest in terms of

purchasing power parity

One of the fastest growing economies in the world - growing at over 8 % p.a average for the last 3years

Manufacturing contributes to

79% of FDI investment

16% of India GDP

53% of Indian exports

Source: GoI website, IMaCS analysis


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Indian Manufacturing : AIndian Manufacturing : Amacro perspectivemacro perspective

Indian economyexpected togrow at 8% to10% over thenext decade

The quality of Indian work forceis one of Indias key competitive

advantages

Indian manufacturing sector isexpected to grow at 12% to14 % over the next decade

Indianmanufacturingcompetitively

positioned for a highgrowth rate era

India is a stabledemocracy withstrongmacro-economicfundamentals

The BPOmigration toIndia is gettingreplicated in themanufacturingsector

FDI inflow intoIndia hasdoubled fromUSD 3.4 bn in2001 to USD 8bn in 2005

India is ranked43 in the latest

GCI index (1)ahead of other

BRIC (2)economies

(1) Global Competitiveness Index (2) Brazil, Russia, India, China

Source: National ManufacturingCompetitiveness Council, IMaCSanalysis


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Key sectors in IndianKey sectors in Indianmanufacturingmanufacturing

Auto Industry: The Indian autoindustry is a USD 44 bn

industry (Automotives is USD

34 bn and Auto components is

USD 10 bn)

Chemicals: The size of chemical industry in

India (Petrochemicals toPaints) is USD 30 bn

Electronics: The electronics industry is USD

11 bn (consumer electronics to

electronic components)

Engineering: A USD 22 bn including

including heavy and light

engineering

Food Processing: A USD 70 bn industrygrowing at 9% to 12%

Gems & Jewellery: A USD 13 bn industry

(Gold growing at 15% p.a

and Diamond growing at

27% p.a)

Leather: Industry size is USD 4 bn

Machine Tools: Industry Size is USD 225

mn

Textiles: Industry Size is USD 38bn

These sunrise sectors(1) of Indian manufacturing is enabling higher growth rates for the manufacturing sector

(1) - listillustrativeandnotexhaustive Source: IMaCSanalysis


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Capital GoodsCapital Goods

y Concentration level shows a markedincrease in : Boilers (dominated by the PSU, BHEL)

Chemical Machinery (L&T) Portable Power Generation Sets (Honda SielPower Products and Birla Power Solutions,100%)


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Intermediate GoodsIntermediate Goods

y Concentration level shows a markedincrease in : Polyester Staple Fibre (Reliance: 54%, worlds

5th largest producer of PSF) Viscose Staple Fibre (Grasim: 91%, worldslargest plant for producing VSF)

Paints & Varnishes (dominated by three firms)

Storage Batteries (Exide Batteries: 62%)


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Growth rate and marketGrowth rate and market

sharesharey Concentration level shows a marked

increase in:

Automobile tyres (MRF: 24%) Motorcycles (Hero Honda: 50%)

Bicyles (Hero Cycles: 40%)

Three-wheelers (Bajaj Auto: 75%)

y Each of these industries have one majorfirm with a high market share


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Domestic Competitiveness Export Competitiveness

India'smanufacturing output is

USD 450 bn

Domestic and Export competitiveness in

manufacturing : Key drivers

Indias liberalization, key policyinterventions, competition andinfrastructure build up have been keydrivers

Indiasmanpower advantage,indigenous technology advantagehave played a leading role inachieving domesticcompetitiveness

Many Indian sectors (e.g. Textiles,Glass, Automotive, Jewellery, Leather,

Agro based, Pharmaceuticals, etc)have achieved export competitiveness

Regional FTAs, FDI in select sectors,stable currency, stable economicregime have been key drivers

This interplay has

enhanced Indias

competitiveness

Indianmanufacturing exports havebeen growing at a CAGR of 14%for the last five years

Source: IMaCSanalysis


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75% of75% ofIndias manufacturing exportsIndias manufacturing exports

Leather Jewellery

TextilesChemicals

75% of

mfg

exports

Engg

Goods

Gems

The balance 25% exports are from sectors like 1) Automotive 2) Cement

3) FoodProcessing 4) Drugs/Pharmaceuticals5) Telecomequipt 6) IT hardware/Electronics7) Paper 8) MineralsandMetals

Indianmanufacturing is forecasted to grow at 12%-14% over the next decade and sectors like

Automotive, Food Processing and Pharmaceuticalsare expected to be the growth drivers

Source: National Manufacturing Competitiveness Council

India is presently at the cusp of a

Manufacturing take-off


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Where does the advantage ariseWhere does the advantage arisefrom.....from.....

Indias manufacturing cost advantages vis--vis high-cost locations

a) Production design and Savings to the extent of 80% vis--vis plants in developedProcess Engineering cost markets

(due to the lowcost, high qualityengineeringtalentin India)

b) Capital Cost efficiency Savings to the extent of 30% to 60% vis--vis plants in developedmarkets(dueto local fabricationand labourintensiveness)

c) Higher Asset utilization Manymanufacturing units in India follow a 3 shift seven day week(unlikea 2shift-5dayweekin high cost locations)


A sustainable competitive advantage for India in Manufacturing


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ContentsContents

Market Overview


Business Opportunities and Advantage

India


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Regulatory Scenario for IndianRegulatory Scenario for Indianmanufacturersmanufacturers

1) Government of India offers a five

year tax holiday for

a) Powerprojects

b) Firmsengagedinexports

c) Newindustriesinnotifiedstatesd) UnitsinElectronichardware,

softwareparks

e) EOUsandFree Trade Zones

2) Tax deductions of 100% on export

profits

3) Deduction of 30% on net income for

10 years for new industries

4) Deduction in respect of certain inter-

corporate dividends

1. Each state & Union Territory (UT)

offers their unique industrial and

sectoral policy and incentives

2. The policies offered relate to

industrial estates, taxes, powertariff, capital investment subsidies

3. States and UT in India typically

follow a Single Window Clearance

(SWC)mechanism

4. Competition among the states and

UT to attract investment hasproven to be beneficial for

investors

5. Customized packages designed

for capital intensive projects

Regulatory

advantage

Better project

economics

Central (Federal) Government State (Provincial) Government

Source: GoIwebsite, IMaCSanalysis


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Foreign Investment Policy relating toForeign Investment Policy relating tothe manufacturing sectorthe manufacturing sector

Indian capital markets are open to FIIs

Decision on all foreign investment proposalswithin 30 days of application

FDI approval are processed through theautomatic route or the FIPB(1) route

FDI (automatic route) => No approval of GoIor Reserve Bank of India reqd

FDI (FIPB route) => Subject to approval ofthe board and the respective sector wiseguidelines

Some of the sectors in which 100% FDI is allowed

1) Airports 10) Mining

2) Coal 11) SEZ / FTZ

3) Agro & allied 12) Rubber

4) Roads 13) Construction

5) Ports 14) Petroleum(2)

6) Coffee

7) Tea

8) Telecom equipment

9) Hazardous Chemicals

(2) Exceptrefining

Source:FDI policy 2006, GoI

(1) FIPB:Foreign InvestmentPromotion Board

FDI inflow into India has doubled

in the last five years


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expected toexpected tofacilitate manufacturingfacilitate manufacturing

Investment in infrastructure is estimated to reach USD 125 bn between 2005 - 2010

Roads

Four laning 6000 kms of

highways that link Indias top 4

metros has been nearly

completed (GoldenQuadrilateral)

The project linking the ten major

ports of the country to the GQ

mentioned above is nearing

completion

FDI investment upto 100%

permitted in the road sector

Ports

Indias long coastline (7517

kms) and the 12 major ports

cater close to 90% of Indias

foreign trade in volume terms

and 70% in value terms


permitted in the port sector 18

port privatization projects

worth USD 1.39 bn are under

way (Private participants are

P&O, PSA, Maersk, Gammon

India, CWC and Dubai PortAuthority)

Airports

India has 450 airports

including 11international

airports

India plans to invest USD

5.07 bn in the next five

years


permitted in the port sector

The privatization of New

Delhi and Mumbai airportshave been completed

Emphasis on infrastructure development would support Indian manufacturing to be

competitive



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ContentsContents

Market Overview


Business Opportunities and Advantage

India


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Attractiveness of India as aAttractiveness of India as amanufacturing destinationmanufacturing destination

1. Economics and Ease of operations

2. Favourable economic policies,

flexiblemanufacturing practices in

terms of design, scale and delivery

3. Robust domestic demand for the

manufactured goods

4. Infrastructure support, Favourable

legal systems, Policy framework,

Ancilliary linkages and Services

support

5. Skilled and Productive labour force

Investors ex

pectationsmanufacturing locations

Indias manufacturingcompetitiveness

1. Economical labour costs and

business transactions costs

2. Manymanufacturing companies

have emerged as centres ofmanufacturing excellence

3. The aspirational huge Indian

middle class is a readily

availablemarket

4. Competition among states/UTs

to attract investments is

addressing these issues

5. Large pool of well qualified

manpower

India has

compelling

advantages


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to a preferred manufacturingto a preferred manufacturingdestinationdestination

Manpower advantage: Over 58 % of the Indian population is under the age of 20 (Approx.

564 mn people)

Market advantage: The 300 million aspirational Middle-class is growing at 5% per annum

Technology Advantage:Around 100 Fortune 500 have their R&D base in India


Over the next few decades India can overtake the economic growth rate of

Brazil, Russia, China (the other fast growing economies)@

@BRICreport by Goldman Sachs


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A conglomerate of 96 operating companies in several sectors with revenues of USD

72 bn (5% of India GDP) in 2010. The Tata brand is a household name in India

One of Indias largest private sector enterprise, with interests in downstream

petrochemicals. Group revenues are about USD 44bn. Reliance Industries Limited is a

Fortune 500 company

Pepsi is one of the biggest FMCG brands in the country. The company plans to investaround USD 1 billion in India this year

Ford is one of Indias popular brands in the carmarket. Ford manufactures around100,000 cars per annum in India

Key players in IndiaIllustrative, not exhaustive


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Coca Cola is one of the largest beverage player in the country. The company hasinvestedmore than USD 1 bn since its entry into India

Wockhardt is one of Indias leading companies with interests in pharmaceuticals

and healthcare with a market capitalization of USD 1.3 bn and an annual

turnover of over USD 300 mn

A US$ 30bn conglomerate, with a market capitalisation of US$ 45 bn, it is

anchored by 82,000 employees belonging to over 20 different nationalities

Present in India for over 50 years. Leading player in the power sector. Employs

over 4,000 people in India; has its global R&D centre in Bangalore

Key players in IndiaIllustrative, not exhaustive


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Facts of the Indian CementFacts of the Indian CementIndustryIndustry


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IntroductionIntroduction

y From 1914 till 1924, nascent stage

y Signs of growth during 1924-41, severecompetition, depressing prices and profitability;and Associated Cement Company (ACC)

y Production and distribution under direct control in1942


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Nature of the IndustryNature of the Industry

y India is the Worlds second largestcement producing country

y Factories clustered in a few locationsdepending on raw material availability

y Regional in naturey Southern region (largest market,

insulated from competition)y Eastern region (isolated, monopoly in

serving north-eastern states)y

Western region (most open tocompetition)y Emergence of a few big players through

M&As


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Facts onFacts on indianindian Steel IndustrySteel Industry


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IntroductionIntroduction

y Highly heterogeneous and fragmentedindustry, with widely differentiatedproducts

y Strong public sector presencey Complete abolition of price and

distribution controls during earlynineties


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Competition ConcernsCompetition Concerns

y Differential Pricing Downstream producers compete with integratedproducers for the same end-product

Allegations of differential pricing between the

intermediate and the end producty Cartelisation?

Threat of imports, public perception, users of HRCconstitute a large lobby

Suspicions of concerted action by steel majors

(PSUs operation) Cartelisation, when the market is strong, but notwhen it is weak

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Modified Manufacturing Ppt[1]