The Dollar Business Magazine-July 2014

8/11/2019 The Dollar Business Magazine-July 2014

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3/100 JULY 2014 II THE DOLLAR BUSINESS 1

LETTER FROM THE EDITORINCHIEF

Iwont classiy this a case o missing the woods or the trees. Nothing unusual. Just plaingeography with a dash o oreign trade spare a glance at the world map. Spot where Indiasits, afer centuries o continental drifing. Its a sweet sight or any exporter willing to trade bythe skin o his teeth. As snugly as pegs settled into holes in a pegboard, India finds its curvesperectly placed on the map. With markets like Arica and the Middle-East on one side (West)

and an already rapidly advancing battery o South East Asian consumer and production economieson another (East), the arrangement bears the appearance o a cartographers oul play. More believ-able however is the act that the very purpose o this divine design was to serve a trader-nationsbeyond the pond motive in the 21stcentury.

Not to say India isnt living up to expectations. In the past decade-and-a-hal, our exports haveincreasingly moved away rom developed economies, towards emerging markets. Diversification

is the word. Digest the ollowing numbers. Te worlds largest economys contribution (USA) to ourexports stood at 21.7% fifeen years back. oday, its down to just 12.5%. Similarly, that o EU (theworlds largest trading bloc) has allen rom 29.2% to 16.45%. Te tale o First World Orders com-promise is well explained by the generosity that is being shown to developing nations.

Definitely a stark contrast. o its east, exports to ASEAN in the decade-and-a-hal leading toFY2014 (that mostly consists o developing nations), have risen rom 4.9% to 10.7%. o its West,Indias exports to Aricas 55 nations have risen rom 6.3% to 10.0%, and those to Latin America haverisen rom 1.5% to 3.5%.

It would have been unimaginable or an Indian oreign trade data scientist living in the 20 thcen-tury to imagine that fifeen years hence, the-then much ignored and politically unstable Aricancontinent, recession-struck Latin America and a predominantly still-emerging ASEAN group (withhal o this group mired in a severe economic crisis) would create demand or almost the samepercentage o Made in India products as the two big daddies o global trade US and EU. Whatsmost encouraging about this change in trade flow is that it clearly shows how Arica, Latin America

and developing Asian economies have become the big bulls in Indias shop. It depicts a change inperspective o our export community, one that has moved away rom Uncle Sam and royal Europe.

As it appears, Indias export community has the right outreach plan in place. It is reading theradar right. But the flight control is in the hands o our policymakers. Te new Foreign rade Policy(2014-19) that is expected to be announced in August this year will determine whether this runalong the right path o diversification will culminate into good tidings or Indias august group oexporters. Will amendments to Special Focus Initiatives make incentives (FMS and MLFPS) sub-stantially generous, and exemption schemes (EPCG, DFIA and Advance Authorisation) more at-tractive? Will the EPCs be made more accountable? Will labour-intensive and high-tech industries both get the desired fillip? Will more Niryat Bandhu schemes (that was conceptualized ormentoring and encouraging first-gen entrepreneurs in the last FP) be launched? Will the MAIand MDA schemes be expanded and extended? Will more direct tax incentives be introduced tomake India a manuacturing hub? Will services sector-related schemes be introduced and polishedto offer real time advantage (like the SFIS) and will this contributor to Indias GDP be given a more

motherly treatment by including it in FMS? Will duty credit script value be raised rom the current10% (under the Agri Inrastructure Incentive Scrip scheme) a move that could potentially solvethe inrastructure mystery or exporters and importers? Will the new FP help us get closer to the$400 billion in exports mark this fiscal? Yes, our exporters have hit the right chord. Tey have a clearstrategy in mind diversiy beyond the First World and re-route to Arica and Latin America andother lucrative regions. But without the right policy throttle, our export craf-loaded-with-strategieswill be incapable o a lifoff!

And i the diversification strategy meets the right policy, guess who will win... [Join the firstalphabets o each o the previous paras to know.]

@SPWarner www.thedollarbusiness/blogs/steven

As snugly as pegs settled

into holes in a pegboard,

India finds its curvesperfectly placed on the map.

And as it appears, Indias

export community has the

right outreach plan in place.

It is reading the radar right.

A STRATEGY SANS

POLICY WONT DO

Steven Philip Warner Editor-in-Chie, Te Dollar Business [email protected]


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News &Analysis

JAPAN

BUTTER IMPORTS

For that oneperfect toast

LATVIA-CHINA TRADE

DAIRY AND MEAT PRODUCTS

Beyond the Great WallLatvian farmers and food manufacturers have expressed in-terest in exporting dairy and meat products to China. Lat-vian Minister of Agriculture Janis Duklavas shared this withZhi Shuping, the Chinese Minister of State Administration ofQuality Supervision, Inspection and Quarantine, who was on abrief visit to this Baltic nation recently.

Duklavas also assured the Chinese minister that LatvianState Food &Veterinary Services periodically undertakesinspections in order to ensure that all dairy and otheragriculture products meet safety requirements andare suitable for the domestic market as well as ex-port destinations. Shuping indicated that Chinais interested in Latvian dairy and meat prod-ucts and expressed his satisfaction that Latvian

institutions were capable of monitoring foodproduction in order to ensure that consumersreceive safe and qualitative products. For re-cords, Latvias export of dairy and meat prod-ucts to foreign countries have been rising overthe last few years.

During the meeting, the ministers inked protocols onquarantine and veterinary requirements needed for muttonand beef exports from Latvia to China.

Janis DuklavasMinister of

Agriculture, Latvia

Japans Ministry of Agriculture, For-estry & Fisheries (MAFF) has an-nounced an emergency import of7,000 tonnes of butter this year forindustrial use, making it the coun-trys biggest-ever emergency butterimport. Tis is in addition to the3,000 tonnes, which Japan had al-

ready committed to import this year.Japans milk production hasslumped by 2-4% since 2013 due toextreme weather conditions. Tis hasresulted in a drop in butter produc-tion by 23.5% (in February, 2014).Official sources claim that shortageof fodder and a decline in the num-ber of dairy farmers are also reasonsfor the decline. On the other hand,per capita milk consumption isgrowing in Japan due to a rise in thepopularity of bakery products. At thesame time, higher demand for creamand natural cheese has reduced theavailability of fluid milk for the pro-duction of butter.

Who gains from this? Of course,New Zealand the main exporter ofbutter to Japan. Apart from New Zea-land, EU and USA are also rushingin to supply dairy products to Japanwhere the demand for these productsis likely to keep on increasing due tochanging food habits.

COLD WAR 2.0

TIGHTENING THE NOOSE

More than whatmeets the eyeUS has tightened export regulations against fiveRussian firms and added them to the list of un-checked partners. According to the official jour-nal of the federal government of the United Statesi.e. Federal Register, the Russian firms included inthe list are Fryazino branch of the Russian Acad-emy of Sciences Institute of Radio-Engineering &Electronics, JSC Voentelecom, Business SecurityAcademy, Pumps Ampika Ltd. and Nuklin Ltd.Although export supplies to these firms have notbeen banned, they now require licensing, negoti-ation and registration on special stringent rules.However, supplies on preferential terms are notpermitted anymore. Te decision of the Bureauof Industry &Security to put these firms on thecontrolled list comes by the fact that the Bureaufailed to carry out a detailed check of these firmsto find an end user of products they buy. Interest-ingly, US had earlier zeroed in on 29 firms fromChina, Russia, Hong Kong and UAE to be labelledas unchecked.

The Herbert C. Hoover Building

in Washington, D.C. The building

serves as the headquarters for

the United States Department of

Commerce


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12/10010 THE DOLLAR BUSINESS II JULY 2014

INDIA

TRADETHIS MONTH

AUTO EXPORT

GM INDIAS EXPORT TO CHILE

Latino attractionGeneral Motors India will begin exporting vehicles next year,with Chile slated to be its first overseas market. Te companywill initially export lef-hand-drive Chevrolet Beat, the pro-

duction o which will commence at its alegaon plant in thesecond hal o 2014. Te first batch o exports have been sched-uled or the first quarter o 2015.

Commenting on the move, GM India President and Man-aging Director Arvind Saxena said, Te start o Beat exportsunderlines GMs commitment to India and demonstrates thequality o the countrys growing supplier base. He urther said,Te exports will create more employment opportunities with-in GM India and the supplier community while helping im-prove capacity utilisation at the alegaon Plant.

Its worth noting that the company has been struggling tomaintain its sales momentum in the domestic market due to a

slump in demand. In May 2014, the companys sales declinedby 42.76% to just 4,865 units (including 1,716 units o Beat) asagainst 8,500 units in the same month last year.

SUGAR SUBSIDY

TURNAROUND HOPES

Good days are coming?With the Centre recently extending the export incentivescheme on raw sugar till September 2015, there is optimismin the industry about a turnaround this financial year. Accord-ing to the scheme, the government offers Rs.3,300 subsidy orevery tonne o raw sugar exported. Although the intention othese subsidies is to bail out the domestic sugar industry, itsalready become a conentious issue at WO, with Brazil andAustralia raising serious concerns on Indian subsidies.

Te subsidies are expected to help increase the sugar indus-trys cash flow by Rs.13,200 crore during the entire 18 monthperiod ending September 2015. O this, a sum o Rs.1,200 croreis expected to go to armers directly while the remaining will beallocated or subsidy reund to sugar mills. According to ISMA,Indias sugar industry will turnaround this year provided mills

are able to export the entire allocated quantity o 4 milliontonnes at a price higher than that prevailing in India.

PRECIOUS METALS: GOLD AND SILVER

TARIFF VALUE HIKE

All for the sake of reducing CAD?Te Indian government has once again hiked import tariff on gold andsilver to $411/10 gram and $632/kg respectively in response to risingglobal prices in the wake o escalating violence in Iraq. During the firstortnight o June, tariff value on imported gold stood at $408/10 gramand silver at $617/kg. Te changes have been notified by the CentralBoard o Excise and Customs. Te import tariff value base price atwhich customs duty is determined to prevent under-invoicing is re-vised on a ortnightly basis, taking into account global prices. In the lasttwo weeks, global gold prices have increased due to rising violence inIraq that has spurred sae haven demand or precious metal.

Indias gold imports declined by over 74% in April (y-o-y) to $1.75billion due to restrictions imposed by the government on inbound ship-ments in an attempt to narrow the current account deficit (CAD). Goldis Indias second largest import item afer petroleum. Due to severalcurbs, Indias total gold and silver imports dropped by 40% to $33.46billion in FY2014 as compared to $55.79 billion in FY2013.

Indias sugar & sugar confectionery exportsSugar exports from India dance to the tunes of policymakers

2,500

2,000

1,500

1,000

500

0FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Source: Ministry of Commerce; gures in $ million

Indian government continues to curb gold imports

Chevrolet Beaton display at an

auto show



News &Analysis

OILSEEDS IMPORT

WEAK MONSOON FEARS

Tryst with another drought?Deficient monsoon could adversely impact Indias oilseedsoutput this year resulting in more dependence on imports.According to a paper released by ASSOCHAM, Indias oil-seeds import bill is likely to shoot up to $14 billion in the

current financial year rom $9.3 billion in FY2014 as produc-tion o oilseeds is expected to be hit by as much as 8.3% dueto insufficient rainall. As per initial indications, rainall in theedible oil growing states o Gujarat, Rajasthan, Madhya Pradesh,Maharashtra, Karnataka, amil Nadu, West Bengal andAndhra Pradesh would be deficient due to El Nino reducingoutput, which in turn will result in higher import dependence.ASSOCHAM Secretary General, D. S. Rawat recently pointedout that demand or edible oil will continue to grow by 15% perannum due to increasing income levels and ast changing eat-ing habits in rural India. Te demand or edible oil is likely totouch 203.54 lakh M during FY2015, resulting in an import

bill o $14 billion.Te ASSOCHAM paper titled Indias likely tryst with Ed-ible Oil: Impact o El Nino actor reveals that the countryimported edible oils worth $9.3 billion in FY2014, a substan-tial all rom $11.2 billion during FY2013. Despite increase inproduction, close to hal o Indias domestic demand is met byimports. Te paper also points out that India aces droughtprospects every fifh year, the last one being in 2009, indicatinga possible drought in 2014.

FORD MOTOR COMPANY

EXPORT HUB INDIA

Fords next bet: India?Ford Motor Company has decided to make India itsexport hub. Revealing this inormation, Ford MotorCompany President and CEO Alan Mulally said, Wehave decided that India will be an export hub or Ford.

We are exporting to over 50 countries rom here and areincreasing it all the time. He urther added that the de-cision was taken keeping in view Indias position as oneo the astest growing markets. It is because our oper-ations are great, our quality is great and our efficiencyis great. Its just that the location o India is great orus, Mulally added. Ford India has two manuacturingplants in India one in Gujarat and another at Mara-imalai Nagar in amil Nadu.

Responding to a question on whether Ford Indiahas lived up to expectations, Mulally said, Remem-ber Ford was in trouble in September eight yearsago. We had the worst report in 2006. I will remindyou that there was $17 billion loss to the company.I you are in business, you are going to have brack-ets around your numbers. We grew decisively. Notonly have we survived but are also prospering now.Mulally pointed out that as soon as Ford attained pro-itability, the company turned its attention to Asia Pa-cific. Our investments have been tremendous in Indiaand China. Tese are the astest growing markets in theworld, he added.

Te Detroit giant is now ocussing on delivering bet-ter quality and uel efficient vehicles and is operating asone global company.

Indias oilseeds importsIndia imported over $350 million worth of oilseeds in FY2014

400

350

300

250

200

150

100

50

0FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Source: Ministry of Commerce; gures in $ million

Linseed oiland fax

seeds. Indianoilseeds

imports areexpected to

surge thisyear

Alan Mulally, CEO ofFord Motor Company,at the North AmericanInternational Auto Show2014 in Detroit, US



INDIA

TRADETHIS MONTH

LIQUEFIED NATURAL GAS

DUTY EXEMPTION

Get this gas off-duty. Now.A high-level government panel, headed by former PlanningCommission Member Saumitra Chaudhuri, has proposed thatthe government should exempt liquefied natural gas (LNG)from the existing 5% import duty. Te panel has been institut-ed to develop Indias Auto Fuel Vision.

According to a report released by the panel, for many yearsnow, import duty on crude petroleum has been nil, while pre-viously it was 5% and before that 10%. However, the importduty on LNG except when directly imported for power gen-eration continues to be 5%. Tere is no logic for the separatetreatment to petroleum and LNG. Tey go towards similar usesand LNG is in many ways a preferable substitute for liquid fu-els, the report added.

Te panel also has proposed sharing the burden of stricter

green fuel norms with consumers by imposing a special fuelup-gradation cess of 75 paise/liter of diesel and petrol. Indiaplans to introduce the stricter Bharat Stage V emission normsby 2020 to curb growing air pollution. In addition, the commit-tee has recommended closing the 75 paisa price gap between

TEXTILE EXPORTS

ZERO DUTY

Dressing up the world

irupur Exporters Association (EA) has urged the Centreto remove duty on man-made fibres and special machineryused for the manufacturing of synthetic garments. In a mem-orandum submitted to Commerce and Industry MinisterNirmala Sitharaman and extiles Minister Santhosh KumarGangwar, EA President A. Shaktivel said zero duty on man-made fibres will not only increase its usage and production ofgarments but also help exports of man-made fibre garments.He said the import of special machinery on zero duty willattract more investment in the manufacturing of syntheticgarments, a trend that is picking up globally. He also urgedthe Centre to introduce Goods and Services ax in the up-coming Union Budget, which would enhance Indias com-petitiveness in the global market.

Te memorandum also urged for an early signing of theproposed Free rade Agreement with the European Union(EU) the main destination for Indian knitwear. Tis wouldenable importing of value added fabrics under zero dutybasis and re-exporting to EU as garments.

Te association also requested the textile minister toreduce customs duty on import of synthetic/blended andspecialty fabric of cotton. In order to protect the industryfrom high interest rates, a separate chapter is required in themonetary policy, Shaktivel added.

Stage III and IV fuel by imposing a high sulphur cess. Goingforward, the plan is to implement Bharat Stage VI standards by2024, which will require automobile manufacturers to put inplace technological improvements.

While theres no duty on crude oil, LNG imports attract a 5% duty

India is increasingly

losing out to Bangla-

deshi textile exports



News &Analysis

ONION

MINIMUM EXPORT PRICE

Prevention is better than cureIn an endeavour to contain rising prices o onion, the Cen-tre has set a minimum export price (MEP) o $300/M. Teintroduction o MEP is expected to improve local supplies inthe coming months. According to officials, India has enoughstock to cope with domestic demand till September 2014, whenkhari crop enters the market. But the reason why the govern-ment is introducing MEP is that it wants to ensure that onlyhigh value exports take place and local supplies are not disrupt-ed. Earlier in March, the government had removed MEP ononion as prices had crashed to Rs.6-7 per kg. In December lastyear, the Ministry o Commerce had brought down MEP rom$350/M to $150/M in order to scale up exports and eventu-ally arrest drastic dip in domestic prices. Te government hadset MEP last year afer retail prices shot up to Rs.80-100 perkg in major cities and towns. Its worth noting that India hadexported around 1.3 million M o onion in FY2014, out o atotal production o 19.2 million M.

MYSORE

EXPORT PUSH

More than just a helping handWith an eye to acilitate exports rom Mysore, Mandya and Chamarajanagar districts,the Mysore Industries Association (MIA) is going to set up the Mysore Export Centrein Hebbal Industrial Area. According to P. Vishwanath, President o MIA, the up-coming Centre, when it becomes operational, will help more than 40,000 industriesin the area tap global markets. With 45% o the businesses in the area belonging tosmall and medium enterprises (SMEs), the Centre is expected to become a gamechanger. It will have all necessary acilities to organise seminars, workshops and willalso have provisions to showcase products on a permanent basis. Suresh Kumar Jain,Secretary General o MIA, added that currently annual exports rom the Mysore re-

gion is around Rs.7,000 crore and MIA is determined to achieve Rs.17,000 crore inthe next five years.

IRON ORE

DUTY WITHDRAWAL

For greater efciencyLeading industry body, Federation o Indian Mineral Indus-tries (FIMI) has urged the Union Government to completelywithdraw export duty on iron ore as it eels unless this is done,achieving zero-waste mining is not possible.

FIMI members recently had a lengthy meeting with UnionSteel and Mines Minister Narendra Singh omar, duringwhich they told the minister that i India wants to ully utiliseits resources, without impacting the domestic steel industry, itshould make Indian exports competitive by withdrawing theexport duty completely. Currently, there is a 30% export dutyon iron ore in India.

A conveyor belt carrying iron ore from the warehouse to the

production facility

The Nandi bull on Chamundi Hill is a

notable statue that dates from 1659 and is

one of the main identities of Mysore city inKarnataka

Imposition

of MEP on

onion export

will help in

stabilising

its prices in

the domestic

market


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Beijings Central Business District, Oct 25, 2010: Sights of clogged roads like the one shown

makes China an attractive market. The nations protective policies play the repellent

Beijing,China, Apr.14, 2011: China is the

worlds largest consumer market for cars

and car parts. 20 million units of cars (and

buses &trucks) were sold in China in 2013

June 26, 2013, Chicago: USA is the worlds

largest importer of automobile and auto

parts. Its imports in 2013 were 161% more

than that of the #2 importer (Germany)

Pasadena Freeway into downtownLA, California: Morning rush hour

trafc is a headache for commuters

and a joyful sight for exportersacross emerging markets like India

auto production encourages nearly everycountry to somehow capture those mag-

ical jobs. India has made great strides inthe past decade and shows signs of be-coming a major player. Tere are a greatmany benefits to gain from a successfullaunch in China. Tere are also a numberof companies that were unable to survivein the brutally competitive market.

BEYOND CHINA: ASEAN...

Indian companies could seek to boostexports into ASEAN countries andsmaller but expanding markets. BothFord and GM have announced in recentweeks that they will utilise their Indianbased plants as a major export hub. GMwill export the Chevrolet Beat from thealegaon Plant. Ford will export the Eco-Sport from the Maraimalainagar facility.

...AND WAGE ADVANTAGE

Te relative lower wage rates in Indiahelps to make Indian companies an in-triguing business case. According to aSeptember 2012 UBS Prices and Earn-ings report, India has lower wage rates

than China. UBS determined that Delhinet hourly pay rates were $2.10 per hr,

Mumbai $2.30, Beijing $4.50, Shanghai$5.40, Chicago $20.30&NY $25.20.Having the lowest international wage

rates are never a guarantee for success.Wages go up and tend to increase atdifferent rates over time. According themost recent AON Hewitt study, wages inIndia increased 10% the lowest increasein a decade with the automotive segmentlagging industry average at 9.5%.

What is impressive about the Indianindustry is its embrace of world-classbusiness and work practices. Accordingto ACMA India has 576 auto suppliersthat are ISO 9001 certified. India also has12 Deming Award (quality-related) win-ners, the most outside of Japan. GlobalOEMs do not like to take risks with qual-ity. Te intense focus on quality in Indiawill place increasing pressure on suppli-ers across other low-cost manufacturingnations and establish India as a major ex-port hub for automobiles and auto parts.

Tat the global auto industry hasmoved away from US, Japan and West-

About the author:Art Wheaton is a Work-

place and Industry Education Specialist for

the Institute for Industry Studies at Cornell

Univeristy ILR School. His expertise includes

industry education and workplace training,

high performance work systems, negotiations

and confict resolution, and auto &aerospace

industrial relations. Prior to joining the ILR fac-

ulty in 1999, Art was with MITs Labour Aero-

space Research Agenda. Art has also served

as executive board member for the American

Federation of State, County and Municipal

Employees, AFL-CIO in Michigan in the past.

ern European domination is good newsfor Indian exporters. At the same time

however, both Indian auto and autocomponent makers have to be careful tochoose the right markets to move into.

Tink beyond China and US if entrybarriers and saturation is a headache.alk about opportunities in markets likeBrazil and Russia is common today. Per-haps Indian exporters could begin withthe ASEAN markets. Tis is particularly arelatively safer bet for small-to-medium-sized exporters in the auto industry.

Writtenincoordinationwith:StevenPhilipWarner,Editor-in-Chief,TheDollarBusiness



OVERSEAS TALK MARIE-JOSE CHARBONNEAU &ROSALINE KWAN, HIGH COMMISSION OF CANADA

(L) Rosaline KwanSenior Trade Commissioner,High Commission of Canada in India

Marie-Jose CharbonneauCounsellor &Head Advocacy Programme,High Commission of Canada in India



DB: In the four years leading toFY2014, Canada accounted for under0.7% of Indias merchandise exportsand imports. Te $3 billion mark hasnever been breached in either exportsor imports. Where lies the concern?Rosaline Kwan (RK):Lets focus on thetrend. Not absolute numbers. Since 2010,trade between India and Canada hasbeen growing at a CAGR of 30%. Tatspromising. Even at a micro level, activityis increasing. I am sure, trade numberswill look much better in future.

DB: But do you not agree that tradebetween Canada and India is lowerthan what it could potentially be?Marie Josee Charbonneau (MJ):I dontthink so. Maybe I can start with theComprehensive Economic PartnershipAgreement (CEPA). We have completedeight rounds of negotiations and thereare two or three chapters that are stillunder negotiations. We need to build aframework so that Canadian exporters

to India and Indian exporters to Canadafeel they have that safety net. So, I thinkthere are no real worries all we need iswork on to build that framework.RK: Just to reinforce the point of havinga framework for bilateral trade, Canadais very keen to work with the new gov-ernment in India. And I am sure, tradebetween the two countries will grow ex-ponentially in the near term.

DB: A study by the Canada-IndiaBusiness Council stated that CEPA willgive Canadian goods and services theopportunity to have improved accessto Indias market and boost Canadianeconomy. At the same time, for India,the dividends will be high. How willCEPA impact export communities atboth ends?RK:Agreements and frameworks alwaysoffer something for both sides. 85-90%of Canadas economy is driven by smallor medium-sized businesses. So, weare perfectly in sync with the needs of

In recent years, bilateral trade between Canada andIndia has not grown as expected. To make sense

of whats playing spoilsport and to understandthoughts in the Canadian camp on the prevailingissue, The Dollar Businesssat down with two of

Canadas senior diplomats in India Marie JoseeCharbonneau and Rosaline Kwan. Excerpts:

BY NEHA DEWAN

TRADE CAN

PROSPER ONLY IF

YOU EMPOWER EVENTHE SMALLEST OF

COMPANIES


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GLOBETROTER STATE BANK OF INDIA

The year 2008 changed the waythe global banking industryfunctioned. Massive deregula-tion and a very loose interest

rate policy to tide over the twin crisis ofthe dot-com bust and 9/11 attacks meantthat credit had been allowed to flow into

the broader economy at a rate never be-fore seen in human history. Consumercredit had soared, house prices skyrock-eted and bankers had their hands full.But with interest rates near-zero, it wasdifficult for a bank to make a killing inthe traditional way. So, what had fol-lowed was financial engineering of themost bizarre kind and, as always, the epi-center of this was US.

From mortgage-backed securities(MBSs) to credit default swaps (CDSs);from collateralised debt obligations(CDOs) to collateralised bond obliga-tions (CBOs) every penny lent was

packaged and repackaged and speculat-ed on. To ensure a steady flow of suchproducts, multi-million dollar loanswere given to even those who had theworst possible credit profile some ofthese loans colloquially being called noincome, no job, no asset (NINJA) loans.

Rating agencies also saw this as an op-portunity to make hay and gave AAAratings to even the most risky debt. Aslong as the music played, the party con-tinued. But when it stopped, banks hadnowhere to hide.

While the bursting of the credit bub-ble mostly affected western banks, thosein India were not entirely immune. Anykind of exposure to the US and Europe-an housing market was looked at withsuspicion and the toughest of questionsasked. What helped Indian banks tideover the storm unscathed though wastheir limited exposure to the westernhousing market, thanks to strict reg-ulations of the Reserve Bank of India,which was admired all over the world forits role in curbing the animal instincts ofIndian bankers.

With this backdrop and barely fiveyears since the credit crisis, it must besurprising to many that Indian banks areactually looking outward to fuel growth.And the largest among them State

IN ANEXPENSIVEGLOBAL RACEThe respect and benets that come with being a truly global bank are immense.From making the brand a trustworthy household name, to catapulting theexecutives to rockstar status, the lures of it are massive. But should the State Bank

of India pursue this drean at the cost of protabilityBY SHAKTI SHANKAR PATRA

AT THE END OFFY2014, SBIS TOTALCONSOLIDATEDASSETS WEREABOUT TWICE THEGDP OF PAKISTAN



Headquartered in

Mumbai, State Bank

of India operates out

of 15,869 branches


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GLOBAL

MANAGER DR. ALOK BHARADWAJ, EXEC. VICE-PRESIDENT, CANON INDIA

INTERVIEW BY STEVEN PHILIP WARNER, EDITOR-IN-CHIEF, THE DOLLAR BUSINESS

WE NEED A

NON-INDIAWITHIN

INDIA TO MAKE ITA MANUFACTURING

AND EXPORTS HUB

With questions still being askedwhether India can ever become

a manufacturing hub, The DollarBusiness caught up with Dr. Alok

Bharadwaj, EVP, Canon India(andChairman of CIIs Ofce Automation

and Imaging Division) to learn hisviews on the subject. India cant x itsmanufacturing overnight, but it can x

its manufacturing policy, believesDr. Bharadwaj. We couldnt agree more


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GLOBAL

MANAGER DR. ALOK BHARADWAJ, EXEC. VICE-PRESIDENT, CANON INDIA

here. Government alone cannot help thecause o making India an R&D-rich na-tion. Tirdly, we are not giving high pri-ority to patent-filing. India will have tobuild very strong patent protection laws.

TDB: For players in the IT and elec-tronics business, rupee devaluation has

been a big concern. You think so?DAB: More the consumption, more thevulnerability. And we are in a Catch 22situation today. Te more India devel-ops, more will be its dependence on Iand electronic imports, thereore therewill be a greater exposure to movementsin the rupee value. Rupee exchange rateis a very big concern or the I industrybecause o two reasons. One is that it isvery unpredictable and suddenly rendersa profitable business unprofitable.

TDB: So has the rupee movement im-pacted Canon in recent months as well?DAB: Yes. It impacts all importers. Can-on as a company, whenever we import,we get supply credit. So a devaluingcurrency syndrome brings in this basicproblem that we always have to pay morethan the cost o imported products. For

many companies, i we talk about long-term government contracts, when therupee devalues, the contract transormsinto a death trap or many companies inthe I industry. A volatile rupee is a bigpain or the industry.

TDB: What would you say about estab-lishing IT and electronics manufactur-ing zones as an effective way of dealingwith rupee volatility?DAB: I we have to become a net ex-porter o I and electronics, one o theelements is to establish an ecosystem ormanuacturing which is best done in anSEZ or a manuacturing zone. Tat is theway it is worldwide. Issue is how do wemake these zones almost like non-India?So what is an Indian system? Te typi-cal characteristic o an Indian system isthat there is no predictability. You are notsure when you will have the goods deliv-ered due to delays in transport or somecustoms issue, etc. What is required isnear 100% predictability in supply chain

and processes to make India a real man-uacturing hub and a net exports market.Anything short o that wont do. We needto create a non-India within India. Andthat will only be possible when the ruleso the land and inrastructure are madedifferent rom what they currently are.We have to invest in ports and highways.

TDB: So is that the complete solution?DAB: No. Its only one part o the solu-tion to make India a world-class man-uacturing centre and net exporter. Tepolicies and tax laws should be abso-lutely immune to change. We make lawsand change them in no time. Tis onlyincreases the actor o unpredictabili-ty. Whenever a new state governmenttakes charge, it changes laws. We mustannounce policies that are immune tochange. Even i we adopt a bad policyand realise that afer ten years India haslost because o that policy, we should re-tain it. Long-term planning & stabilitycan as such come to pass.

Concrete ormation o rightpolicies is important. And itis critical that we delight ourbig oreign investors. Stable policies willadd to India becoming a manuacturinghub.

[email protected]

ESTABLISHING

SEZSAND

MANUFACTURING

ZONES IS JUST

ONE PART OF THE

SOLUTION. WE NEED

LONG-TERM LAWS

AND TAX RULES

GOOD OR BAD!


35/100



CHARTED TERRITORY HJF 2014

The 7thedition of the Hyderabad Jewellery Pearl andGem Fair (HJF) was a marvellous showcase of skillsthat go into designing an aesthetic and splendorousarray of jewellery. The fabulous range of gems andpearls on display were a feast for the eyes andattracted the Whos Who of the business

BY JAYASHANKAR MENON

GEMS, GLITZAND GLITTER

he seventh edition of Hyder-abad Jewellery, Pearl & GemFair (HJF), held at the HIEXexhibition centre between June

7 and June 9, 2014, was one of the biggestexhibitions of its kind in India. Tis yearsedition not only ensured participationof over 120 manufacturers, wholesalers,retailers, importers, exporters, suppliersand representatives of various trade bod-ies, but also felicitated those who havebeen paying heed to the growth of the in-dustry. Joji George, Managing Director,UBM India, inaugurated the three-dayB2B event. Speaking to Te Dollar Busi-ness, George said, UBM hosts in excessof 20 large scale exhibitions and 40 con-ferences across the country every year,thereby enabling trade across multiple

industry verticals. And 2014 edition ofHJF has only taken things to the next levelof commitment offering excellent businessopportunities to all stakeholders.

A gateway to the Indian jewellerymarket, HJF 2014 provided an excellentplatform for buyers and suppliers to con-nect, network, exchange ideas, discoverupcoming trends and generate businessopportunities. At the trade fair, exhibi-tors presented a wide spectrum of mer-chandise including diamonds, pearls,gemstones, exquisite gold jewellery andthe latest machinery and equipmentused in the manufacturing process.

Te exhibition, since its debut in 2008,has created right business opportunitiesfor the industry and has been attractingexhibitors and buyers from both domes-

tic and international markets. And thisyear wasnt different. Many prominentplayers in the jewellery business includ-ing Emrals from Coimbatore; Krizz fromChennai; Peeyar Manufacturers, SanghiJewellers and P. Mangatram from Hyder-abad; and Hari Krishna Exports, MuktiGold and Shanti Gold from Mumbaiamong others, showcased their designs.

Despite having a global footprint, theIndian gems &jewellery industry has sofar been a laggard when it comes to theuse of technology, a participant told TeDollar Business. Well, it is discrepancieslike this that trade fairs like HJF shouldnow start addressing. Its time we takethat next big leap. he added.

[email protected]



Glimpses of seventh edition of Hyder-

abad Jewellery, Pearl and Gem Fair (HJF)

held at HITEX exhibition centre between

June 7 and June 9, 2014

TDB: What promotional activities are you conducting in South India?GVS: Our primary goal is to bring the entire industry on one platorm tomaintain unity and integrity. Te second objective is to educate jewellers,crafsmen, designers and help them move to the next level. We want toensure that jewellery is sold as a product and not a commodity. Now thatthe new government is in power, we have a lot o expectations rom it. Inact, now things are starting to look up. As ar as southern region is con-

cerned, its witnessing a boom. Right rom Kerala to amil Nadu, romAndhra to Karnataka, the demand or gems and jewellery is increasinglike never beore. Now that awareness about compliance is spreading, itis good or the industry. GJF is confident that India is going to be thenumber one in the world in production o jewellery, given the proactiveapproach o the new government.

TDB:Have you made any recommendations to the government?GVS:Yes. We have requested the government to withdraw the 80:20 ruleand cut customs duty rom 10% to 2%. Apart rom this, we are also sup-porting the government on every issue. We are with the government tosolve all outstanding issues.

TDB: You were talking about making Hyderabad a hub for manufac-turing jewellery. Can you elaborate?GVS:Basically, Hyderabad specialises in ruby, flat diamond and Chakridiamond jewellery. Tis has been restricted only to the South India. It hasnot really made inroads into the North. Trough these kind o events, weare trying to increase awareness. Footalls are certainly increasing yearafer year. Tis is a serious business meet, where buyer-seller interactionsalso happen.

TDB:What about training local jewellers?GVS: GJF is trying to educate the entire industry, especially jewellersrom the hinterlands to observe compliance. I that happens, the entirejewellery industry will become transparent. And once it becomes trans-parent, we will go to the next level. Now we have the hallmarking system,which is a value added service. Tis gives lot o confidence to jewellers.

TDB:Could you shed more light on skill counselling?GVS: We have various training modules. A ew years ago, a worker usedto work under extreme conditions in a highly disorganised way. odaythings have changed. Now proper inrastructure, convenience, clean en-vironment and more are provided. So, even youngsters are opting or jobsin this industry. In act, it is more like a laboratory and they are treatedlike metallurgists unlike a menial in the past.

Cut duty from 10% to 2%G. V. Sridhar, Regional Director (South), All IndiaGems &Jewellery Federation (GJF), has huge expec-tations rom the new government. On the sidelines o

HJF-2014, he spoke to Te Dollar Businesson a wholehost o issues concerning the gems and jewellery in-dustry in India. Excerpts:


38/10036 THE DOLLAR BUSINESS II JULY2014

THE SECRET INGREDIENT TURMERIC

FOR INDIAN BRIDES&FOREIGN BUYERSAs wisdom dawns upon the globe about the amazing array of Indias herbalresources, the international science and medical fraternities (besides justculinary connoisseurs) are waking up to the potential of a product native toIndia turmeric. Whats better is the fact that with 80% of the worlds totalturmeric being produced in India, this spice has the potential to work wonders forexporters. Actually, were talking about Rs.650 crore in exports-a-year already!

BY SACHIN MANAWARIA



39/100




A farmer harvesting turmeric. Exports of fresh turmeric has nosedived over the last decade

exports of turmeric from India in the lastfive years. Since India is the only majorproducer, consumer and exporter of tur-meric still, future prospects of this Indi-an spice appear, well... quite spicy.

AS DIVERSE AS INDIA

urmeric is widely grown in the south-ern peninsular region of India. AndhraPradesh and amil Nadu are the two ma-jor turmeric producing states contrib-uting nearly 70% to the total produce,followed by Odisha, West Bengal, Maha-rashtra, Karnataka and Kerala.

India produces a wide variety of tur-meric, each unique in itself for its innateproperties and values. Te Alleppey ur-meric grown in Kerala is popular for itsrich content of curcumin around 6 to6.5%. It usually varies from deep yellowto orange yellow in colour. Tis type ofturmeric finger is usually the preferredvariety of turmeric exported to USA inan unpolished form.

On the other hand, Madras urmericis widely grown in districts like Salem,Erode, Coimbatore, Dharampuri areasof amil Nadu. Tis variety is usually

traded in the Erode market, which is oneof the biggest trading centers of turmericin India. Tese mustard yellow colouredrhizomes underground root of thickmass comprise nearly 3-3.5% of cur-cumin. Madras urmeric is generallypreferred in Europe and UK and is ex-ported in polished and raw form.

Similarly, Andhra Pradesh, the big-gest turmeric producing state in India, isknown for Nizamabad urmeric grownin Nizamabad, Guntur, Karimnagar andKadapa districts of the state. Tis type ofturmeric is pale yellow and the curcum-in level is not more than 2%. Te MiddleEast is one of the major markets for thisvariety of turmeric.

Another variety Rajapuri urmericis largely grown in Maharashtra and is

marketed through Sangli and Mumbaitrading centers. It is slightly superior tothe Madras variety with curcumin con-tent of 3.5-4.0%. Tis type of turmeric ismostly exported to the Japanese marketin polished form. Some of the other wellknow varieties are Duggirala urmer-ic grown in Guntur district of AndhraPradesh, Dehradun local, Daghi andLakadong produced in the North Eastregion with high curcumin content, anda few other commercially grown variet-

ies like Krishna, Suroma, Rasmi, Suvar-na, IISR Prabha and IISR Pratibha.Surprisingly, the productivity of tur-

meric in India has been on a decline overthe last few years due to a couple of fac-tors. According to estimates of the SpicesBoard of India, the total area under tur-meric cultivation went down to 1,92,916hectares in FY2013 with an output of9,73,098 tonnes from 2,37,720 hect-ares under cultivation with an output of12,46,220 tonnes in FY2012. wo majorcyclones, coupled with unseasonal rainsin Andhra Pradesh and surroundingcoastal areas during last couple of years,have lowered the yield of turmeric inthese belts. But then experts believe it tobe a temporary factor affecting business.

THE INDIA ADVANTAGE

India is by far the largest producer, con-sumer as well as exporter of turmeric (toall major destinations across the globe).Although it is grown in few pockets ofChina, Pakistan, Bangladesh and Myan-

Top export destinations forIndian turmericOver 13% of Indias total turmericexports in FY2014 was to Iran

Leading turmeric producingstates in IndiaAndhra Pradesh accounts for over 35%of the total turmeric produced in India

Iran

Japan

Malaysia

UAE

USA

UK

Andhra Pradesh

Tamil Nadu

Odisha

Karnataka

Maharashtra

Others

Sri Lanka

Saudi Arabia

South Africa

Spain

ROW

Source: Ministry of Commerce; All values for FY2014 Source: Spices Board of India; Provisional Figures for FY2011

4%

4%

4%

3%

35

39%

37%

22%

16%

7%

5%

13%

8%

7%

9%

5%

14%



mar, India accounts or 70-80% o glob-al turmeric trade. It consumes nearly80-85% o its own produce and exportsless than 10%. In terms o competition,theres nothing that comes close to In-dian turmeric given its high curcumincontent, bright colour and aroma.

SPICING UP THE WORLD

Over the past ew years, Indian turmer-ic exports has shown an encouragingtrend. In dollar terms, Indian exportshave grown at a CAGR o 10% betweenFY2009 and 2013, while volume-wise ithas surged at a CAGR o 13.5% duringthe same period. Going by past trends,UAE, Iran, USA, Malaysia and Japanhappen to be the top markets or highquality Indian turmeric. Apart romthese, UK, France and Germany too arenow emerging as new markets.

urmeric is usually exported in ourdifferent orms. Amongst these orms,resh turmeric is losing sheen as an ex-port commodity. Exports o this varietyhas allen by 76% in the past decade.

Oleoresins rom turmeric are in highdemand globally in the present times.Tis highly processed liquid o turmericis o brownish dark-yellow appearanceand finds usage in pharmaceutical andood industry all over the world. Tis isthe reason or turmeric oleoresins ex-ports witnessing a CAGR o 24% in thelast five years. Categories o dry turmericand powder turmeric exports have alsogrown at a CAGR o 11% and 16% re-spectively in the past five. Te reason orsuch increase can be attributed to actorslike rise in use o turmeric in curry pow-der and spice mixes globally (due to itstherapeutic properties), and a shif awayrom synthetic colour.

During the ten-year period leading toFY2014, the share o resh turmeric inoverall turmeric exports has come down

rom over 38.5% to just 2.7%, while thato dry turmeric has increased rom a lit-tle over 26.1% to 43.6%. Similarly, shareso powder and other varieties o turmer-ic have also increased rom 31.06% and4.25% to 42.02% and 11.5% respectively.

GOLD DUST. LITERALLY!

Prices o the best grades o turmericfingers such as Duggirala, Kadapa andSalem are currently hovering betweenRs.60-70/kg and are being sold in theMiddle East at Rs.90-120/kg. Similarly,premium grades o Alleppey Fingers with high curcumin content o 5-6% are currently trading in the Rs.110-120/kg price range in India but is being soldat about $1.65/lb (~Rs.218.25/kg) inUSA. Since there are no duties on tur-meric imports in USA, profit margins o

25-30% are easily available to Indian ex-porters post shipping and other admin-istrative costs (see table).

While large parts o the globe are yetto wake up to turmeric and its thera-peutic values, things are headed in theright direction or exporters o this crop.Further, a large expatriate Indian com-munity is only helping raise awarenessabout this wonder spice globally. Withnot much existing or expected compe-tition and a gentle cap on productionvolumes, even a marginal rise in demandwill send prices soaring. And rejoice willthe hordes o Indian exporters.

Tis product, as it appears, has a co-lourul personality, yet is just...turmeric!Now, did you imagine its business worththe last time you saw it on the kitchenshel? Seriously, it deserves attention!

Breakup of Indias turmericexports (FY2005)10 years ago, exports from India was

dominated by fresh turmeric...

Breakup of Indias turmericexports (FY2014)...currently, dry and powder turmeric

lead Indias exports

Fresh Dry

Fresh Dry

Powder Other Turmeric

Powder Other Turmeric

Source: Ministry of Commerce Source: Ministry of Commerce

INDIA ACCOUNTEDFOR OVER 76%OF THE GLOBALTURMERIC EXPORTSIN 2013, FOLLOWEDBY MYANMAR

India accounts for about 80% of the worlds total turmeric production

42%

43%

12%

39%

26%

31%

4% 4%



DB: Apart from Andhra Pradesh [thelargest producer of turmeric], whichare the other key trading and process-ing centers to procure good quality tur-meric in India?SS:Te key varieties come from Erode inamil Nadu and Kadapa, Dugirala andNizamabad in Andhra Pradesh. How-ever, all such volumes of turmeric go toSangli in Maharashtra as it is one of thebiggest centers for processing and pol-ishing turmeric in India. Although goodquality turmeric is grown in Sangli, it ismore famous for processing and that hasbeen in vogue for generations. In fact,Sangli accounts for almost 40-50% of In-dias total turmeric processing.

DB: India is already the biggest ex-porter of turmeric in the world. Butare Indias exporters really realising thecrops full potential? Isnt there a scopefor further improvement?SS:urmeric export from India is pret-

ty less as compared to other spices likecoriander and chilly because of lowglobal awareness. But it will surely catchup in years to come as more and morepeople across the world are becominghealth-conscious. I expect it to, slowlybut steadily, become an essential com-modity even in other parts of the world.

DB: Which are the key markets forIndian turmeric?SS: We mainly export to USA and Ger-many. Te tanning industry in Iran isalso maturing and hence, use of turmer-ic in that industry is on an upswing. So,exports to Iran are also on a rise. In fact,Iran is one market that all turmeric ex-porters should watch out for in the nearterm. Other places where turmeric is tra-ditionally exported from India are SaudiArabia, Malaysia, Japan, Indonesia andthe whole of Europe.

DB: What about competition? Is

EXCLUSIVE

INTERVIEW BHASKAR SHAH, MANAGING DIRECTOR, JABS INTERNATIONAL

IRAN COULDBE THE NEXT

BIG MARKETFOR INDIANTURMERICGoing by the attention turmeric is enjoying in

recent times, the future looks promising for thiswonder spice. The challenge, however, is toexpand awareness about its usage and medicinalvalues. In an exclusive interaction with The DollarBusiness, Bhaskar Shah, Managing Director, JABSInternational, gives a 360-degree view of Indiasturmeric trade

there any, considering that India is thebiggest producer of turmeric globally?SS:Worldwide, there are very few coun-tries that cultivate turmeric. Even amongthem, very few can match the quality ofIndian turmeric. Hence, we dont evenconsider them as competition. Te chal-

lenge for us is to expand the awarenessabout turmeric.

DB: Te price of turmeric has beencontinuously rising over the last fewmonths? At what level do you see it sta-bilising in near future?SS: Prices are now stable and I expectthem to remain stable going forward.Te entry of speculators in the turmericbusiness should be a very positive thingfor Indian farmers. In fact, the forwardmarket commission (FMC) has playeda very crucial role as far as all spices areconcerned. Earlier, the market was solelydriven by demand and supply. But now,the market is driven by three factors demand, supply and the speculators. Dueto this speculative element, Indian farm-ers have gained a lot during the last fiveyears. In the case of most spices, priceshave at least doubled and in some cases,they have risen threefold.

[email protected]

INTERVIEW BY SACHIN MANAWARIA


43/100

About us

The vision behind The Dollar Business is to become the

most desired destination of information on foreign trade in

the country!

DescriptionThe journey of The Dollar Business has wonderfully begun. It belongs to the house of Vimbri

Media Pvt. Ltd., a media company headquartered in Hyderabad.

The Dollar Business is an India-based magazine for India-based exporters and importers and

the so-called, multinational giants that believe in the magic of trade beyond borders. There

are many business magazines in the country that claim to be essential reads. They have

many-a-claim to fame usually without much reason or proof, like being number one in India

across many dimensions. How uninteresting. The Dollar Business doesnt claim to be number

one. Its the only one in India. And it doesnt know many dimensions. Just one global trade!

From an industry that records a turnover of close to 10 times of Indias GDP each year, there

is much to be learnt. Actually, there much to earn too! The Dollar Business has a focused

reach. We dont cater to the everyday Toms who want to ip pages to catch a glimpse of Marilyn

Monroe or read what a novice has heard through the grapevine about some business going

bust. Our content isnt priceless in that respect. Our readers desire serious information that

either supports their case or gives them an understanding that can be priced. Our readers are

either stakeholders in the business of export-import, or have a keen interest in what this indus-

try has to offer. Like we say, we just know one dimension global trade, and most denitely, all

our readers have a serious interest in both our articles and the advertisers.

To cater to such a focused reader group, we dont just do with everyday content creators

and eld reporters who know little about the vast subject of foreign trade. We have content

specialists on board who have dealt with foreign trade as a platform for decades. This expert

editorial panel functions pan-India from the nancial capital of India (Mumbai) to the political

capital (Delhi), from the Silicon Valley of India (Hyderabad) to the former capital of British India

(Kolkata). In fact, the next time you sit sipping Darjeeling tea, there is a chance that we actu -

ally would have a fat-glassed analyst roaming the sloped hills where tender apical tea shoots

are being plucked. His task to make our reader something more than just a tea-sipper. How

abouta tea exporter with a turnover of a few crore rupees? Excited?



THE MIDAS TOUCH CYCLES

With rising green awareness, health consciousness, and soaring fuel prices,the global bicycle industry is witnessing a boom. Although Indias share inglobal bicycle exports is less than 1%, Africa seems to have taken a special

liking to our cycles. Last year alone, India exported $31.5 million worth ofbicycles to Africa, about 18.3% of the continents total imports of the product.

And if trade analysts are to be believed, this number will only rise goingforward. Its time Indian bicycle exporters pedal their way faster to Africa

BY NEHA DEWAN

In CY2013, China exportedover $3 billion worth ofbicycles more than a thirdof total global cycle exports

PEDAL YOUR WAYTO HEALTH

AND FORTUNE



In the latest Hero Cycles VC,people are seen pedaling their wayaround rocky terrains in Indianand oreign locales and breeze past

rough weather. And, almost everyone women, children and corporate execu-tives alike shown in the commercial isa beaming owner o the humble bicycle.

But in reality, are cycles usuallydubbed as the poor mans vehicle inIndia finding universal acceptance?And has India really got the potential toemerge as a leading exporter o cycles tointernational markets?

PART OF US

A study by industry body Assocham onthe Future o Indian Bicycle Industrypegs India as the worlds second largest

bicycle producer afer China, account-ing or about 10% o global bicycle pro-duction. With an estimated market sizeworth $1.5 billion, the Indian bicycleindustry produces about 15 million fin-ished cycles annually.

According to All India Cycle Manu-acturers Association (AICMA), mostbicycle components and bicycle spareparts in India, except or ree wheels, aremanuactured by small scale industries(SSIs), while large scale units manuac-

ture bicycle rames, chains and rims orcaptive consumption. Te organisedsector, on the other hand, dominates the

Indian cycles: top destinationsAfrica is the top market for Indian cycles

Mozambique Nepal UK

Zambia Malawi Bangladesh

Nigeria Congo Germany

Uganda Other

Source: Commerce Ministry; Breakup for FY2014

Profit estimate for bicycle exportsBicycle exports to Africa are mostly done at par;the profit is made thanks to duty drawbacks

Cost of Cycle (INR/Unit) * 2,500.00

Cost of Cycle (USD/unit)** 41.67

Transportation cost from Ludhiana to 1.35

Mumbai (USD/Unit) ***

Freight &Insurance (USD/Unit) # 10

Final Cost (USD/unit) 53.02

Price in Mozambique (USD/unit) *** 52.00

Prot ## (-3.02)

Prot Margin (%) ## 11.00

* Price of Hero Jet in India** At a USD/INR rate of 60*** The Dollar Business Intelligence Unit# Cost of Shipping from Nhava Sheva in Mumbai to Beirat in Mozambique## Indian cycle exporters essentially owe their prots to export incentives of 16.7%

(11.7% duty drawback and up to 5% under FPS) provided by the government

19%

16%

9%

7%6%5%

5%

5%

5%

3%

21%


46/100



o get a real sense of Indias bicycle market and how our ex-ports are doing, Te Dollar Businesscaught up G. D. Kapoor,Executive Director Sales &Marketing, Hero Cycles. He notonly spoke at length about issues pertaining to the industry,but also explained the need for a higher duty drawback

Profit margins on bicycleexports can range anywherebetween 10-12%

G. D. Kapoor

Executive Director,Sales &Marketing, Hero Cycles

INDIANS HAVE BEEN

DOING BUSINESS

WITH AFRICANS FOR

OVER 150 YEARS

NOW AND THERE IS

AN ATMOSPHERE OF

TRUST FOR US

TDB:Hero Cycles is the countrys lead-ing manufacturer of cycles. What ex-actly is your market share?GDK:Te overall size of the bicycle in-dustry in India is approximately 15.5million units per annum. Hero Cyclescommands a 35% market share.

TDB: What are the main differencesbetween the Indian and the interna-tional cycle market?GDK: Te differences are wide rangingin the two markets. As is known, mar-kets in the West are far more engagingand mature. For example, people do notmind cycling to work a trend nowhereto be seen in India. Even in terms oforganising sporting events, the West isdefinitely far ahead of us.

TDB: As a leading exporter of bicycles,

what are your expectations from thenew government?GDK: Tere is a definite need for setting

up world-class design &testing centers.At present, our exports are serious-ly hampered due to non-availability ofthese facilities. An Indian cycle manu-facturer depends heavily on China andaiwan for design and testing facilities,which I think is really hampering ourbusiness. Te price difference in rawmaterials is also enormous. Steel, whichaccounts for roughly 65% of the cost ofa bicycle, has become dearer in India byapproximately Rs.7,000-8,000/M. Tis,

along with other cost differences andincentives, makes a Chinese exportersignificantly competitive. As far as du-ties are concerned, there needs to be ahigher duty drawback and transportsubsidies should also be made availablefor factories upcountry.

TDB: Which are Hero Cycles majorexport destinations? On an average,how many units do you export annual-ly and what is the growth rate?GDK: Mozambique, Nigeria, Bangla-desh, United Kingdom, Poland and Fijiare the major markets for our cycles. Weexported about 1,00,000 units in FY2014and have set an ambitious target of5,00,000 units for this fiscal.

TDB:Which are the new markets thatyou have set your eyes on?GDK:Europe and USA. With a 45 mil-lion unit per annum market, these twoare the largest, both in terms of value

and volume. However, they also pose theultimate challenge to a bicycle manufac-turer, in terms of the use of high technol-ogy and quality.

TDB: What kind of profit margins areavailable to Indian bicycle exporters?GDK: Profit margins can range any-where between 10-12%. While export-ing to developed countries the tangiblebenefits may appear to be less, but otherfactors such as exposure to latest tech-nology, designs and systems act as a greatvalue adds.

TDB: You have entered the luxurymarket with Urban Trail. You have alsorecently launched the Disney range ofcycles. What has been the response tothese two offerings?

GDK: Te premium market is growingat almost 40% within India. Urban railhas been accepted very well in the mar-ket. Urban rail currently offers prod-ucts for kids in Rs.4,000-8,000 range andfor adults in Rs.10,000-35,000 range. Wewill soon also be launching cycles pricedat Rs.1 lakh and even higher, giving stiffcompetition to all international brands.

TDB: What are the main challengeswhen it comes to exporting to your big-

gest market, Africa?GDK: Presently, most African econo-mies are where India was 25-30 yearsago. Tey are going through the build-ing processes which we have alreadyexperienced. Tey are convinced thatIndian products and technology are bestsuited for their development. Africa is acontinent of opportunities where Indi-ans have been doing business for over150 years now. Tis has certainly helpedin building an atmosphere of mutualtrust and reliability.


48/100


49/100

Our Vision

We intend to become the foremost authority on foreign trade in the country by giving its readers

an unbeatable package of knowledge and business edge in the eld of foreign trade. Our aim

is not just to educate readers the way commoners do, but to empower them to evolve. Thats

why we were born. And thats why we breathe.

The 4Es that defne our 5th E Existence are:

EXPERTISE:Who creates content at The Dollar Business We have veterans in the realm of foreign trade to

do that. We have experts who analyse the outcome of a choice of product or place for export

or import or the impact of a certain policy change. Each member of our editorial team has been

carefully handpicked so that we create what can be priced as a product that is respected by all

and one who understands or wants to understand the business of export-import.

EDUCATION:We are not in love with Friedman, but we completely admire his idea of a at world. Globalisa-

tion of capitalism is there a bigger need to educate India on why beyond borders is the next

playeld to discuss and explore? From pinpointing constraints in cross-border opportunities

to identifying market and product-specic tactical gambitswhy leave it all to just plain luck?

EMPOWERMENT:To think and not to act, is sin. Precisely why we believe in empowering while educating. The

mineeld of treasures that The Dollar Business is, will not only change the way oracles in the

world of foreign trade think, but also how they act, while importing, while exporting.

EVOLUTION:We communicate. We empower. We change lives for businesses, entrepreneurs and the mil-

lions of hopefuls who make claims of good news beyond borders. With The Dollar Business,

evolution will occur. Not only how information in the world of foreign trade is shared, but why it

is sought and how it is exploited.



IMPORTONOMICS PECTIN

PECTIN HAVE YOUHEARD ABOUT IT?Its an integral part of the processed food industry and while you might beconsuming it on a daily basis, odds are that you would have never heard aboutPectin. While very little domestic production have seen Indias pectin importsrising, lack of awareness ensures that it offers lucrative margins to an importer

BY JAYASHANKAR MENON

What is that unique ingre-dient that helps jams &jellies, marshmallows,marmalades and a host o

other delicacies gel? Which is that prod-uct that is most sought afer by FMCGmajors like Hindustan Unilever, Nestle,GlaxoSmithKline, Kelloggs and innu-merable ood processing companies?And which is that product that perhapshas no substitute? Chances are that youwouldnt have heard about it.

Well, i you are still wondering, letsmake your task easier. Tis magicalingredient is called Pectin. Its a natu-ral compound extracted rom differ-ent sources o vegetative origin. It isproduced rom lime, orange peels andapple. While the level o pectin in anapple is only 1-1.5%, in citrus peel itsaround 30%. Te key raw materials orpectin production are dried citrus peelsand apple pomace, both by-products ojuice production. Pectin is a gelling and

thickening agent and is also a stabiliserin ood. Pectin gives the jelly-like con-sistency to jams and marmalades, whichwould otherwise be just sweet juices.Pectin is also being increasingly used tostabilise acidic protein drinks includingdrinking yogurt, besides being a at sub-stitute in baked ood products.

According to Switzerland based Inter-national Pectin Producers Association(IPPA), pectin is one o the most versa-tile stabilisers available. Its gelling, thick-

Strawberry and strawberry

jam bottles on display. Jam

manufacturers are amongst the

biggest consumers of pectin



ening and stabilising attributes make itan essential additive in the production ofmany food products. raditionally, pec-tin was primarily used in the productionof jams and fruit jellies industrially aswell as at home and in products withhigh sugar content. Reason: Pectin se-cures the desired texture, limits the cre-

ation of water/juice on top of the surface,and ensures an even distribution of fruitin the product.

With changes in lifestyles, pectin isnow being primarily sold for industri-al use. In some European markets, it isstill sold to consumers as an integratedcomponent in gelling sugar. Pectin isgenerally regarded as an extremely safefood additive and its composition anduse is regulated under various food ad-ditive laws. It is also recognised under

the International Codex Alimentarius,recognised by FAO and WHO. Te Unit-ed States Food and Drug Administra-tion (USFDA) too recognises pectin asa GRAS (Generally Recognised as Safe)for the use in all non-standardised foods.

As far as the business viability of theproduct is concerned, the IPPA is of theview that at present, good quality organ-ically produced pectin raw materials arenot available in large quantities and thesituation is not likely to change withinthe next five years. Good news for thosewho want to enter the business with seri-ous long-term commitment.

THE PROTAGONISTSGermany with exports valued at $186.70million, Mexico with $69.13 million,Brazil with $46.70 million, Czech Re-public with $42.60 million and Chinawith $27.40 million were the top export-ers of pectin during CY2013. On theother hand, USA with imports valuedat $89.60 million, Germany with $74.80

million, Japan with $45.1 million, Francewith $29.10 million and Russia with$27.20 million were the major import-ers of pectin during FY2013. Accordingto information contained in Chemical& Engineering News, a magazine pub-lished by the American Chemical Soci-ety, around $850 million worth of pectinis sold annually across the world.

Import of pectin to India is on therise for the last few years. According tothe Ministry of Commerce (GoI), In-dias pectin imports almost doubled

from $4.84 million in FY2012 to $8.15million in FY2013. Tis trend contin-ued in FY2014 with imports valued at$10.14 million. Multinational playerssuch as Hindustan Unilever, Nestle,GlaxoSmithKline, Kelloggs and manyothers import pectin from various globalmarkets. All major food product makersand diary product producers also useimported pectin.

When it comes to Indian food prod-uct manufacturers they rely on Chinaand Brazil as these countries offer pec-

PECTIN: MANUFACTURING PROCESSTHERE ARE FOUR MAIN STAGES IN PECTINPRODUCTION: HYDROLYSIS, PURIFICATION,

SEPARATION, AND STANDARDIZATION

USFDA HAS GIVEN

THE GENERALLY

RECOGNISED AS

SAFE STATUS TO

PECTIN FOR USE IN

NON-STANDARDISEDFOODS

Apple pomace or

citrus peel

Hydrolysis of protopectinwith acid in hot conditions

Separation

Filtration

Concentration

Precipitation in alcohol

Washing

Drying / Milling

Batch control

Demethylation

Controlson the fnal products

Pre-shippingcontrols

Shipping

Washing

Batch control

Blending for standardizationpurposes

Blending for standardizationpurposes

HM Pectins LM Pectins

Depectinized

dry residues

(pomace/peels)

Alcohol

recovery

and distillation

Raw materials

Extraction

Separation

Coagulation

Ground pectins

Final

product

Shipping


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BESTSELLER WINE

BY NEHA DEWAN

hey say that wine is poetry ina bottle. Te dry, sweet notes ranging from plum, tea leaf,black cherry, raspberry, et al,

emanating from classy-glassy flutesmesmerise you with the beauty that sur-rounds such fluty poetry! And, if you area wine aficionado, your wine cellar prob-ably tells more about you than even your

library.Statistics on imported wine in In-

dia narrate the story quite vividly.As per a report by consulting firmechnopak Advisors, imported

wine accounts for 30% of thetotal wine market in India andis growing at a steady rate of25-30% y-o-y. In addition toleading hospitality chains,

several swish and fine diningrestaurants have sprung upacross the country servingthe choicest wines sourcedfrom across the world.

Anintriguingsenseof respectoverpowers youwhen a connoisseurtorpedoes you with abattery of rare wine variety

proper nouns. A sparkle in theeye escorts the vocal demonstration;a sign that the beverage is a close-to-the-heavens sign of celebration. And whatpairs well with a ritual glass of this beverage(for any importer) is the fact that its alreadya multi-million dollar industry in India withpotential margins that call for a rell


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COVER FEATURE BRAZIL

A NEIGHBOURS ENVY

With abundant natural and human re-sources, Brazil is today one o the mostpromising emerging markets in theworld. It is the seventh-largest economyboth in terms o nominal GDP and pur-chasing power parity. Characterised bymoderately ree markets, the Brazilianeconomy grew at a brisk pace during thefirst decade o the current century buthas been plagued by a bit o a slowdownsince 2010. However, it has steadily out-paced many other countries in terms oGDP growth and might soon be rankedthe fifh largest economy in the world.

Te Brazilian labour orce is estimat-ed at 100.77 million, 16% o which isinvolved in agriculture, 13% in industryand 71% in the services sector. Tis pres-

ents a ar more balanced picture than In-dia where agriculture contributes about

13-14% to the GDP, while its share inemployment is almost 50%.

SPLIT AND DOUBLE

Te only time a country hosted a soc-cer World Cup and Summer Olympicsback to back earlier, like Brazil is doingnow, was USA in 1994 and 1996. Butthose were the roaring 90s. Ten, theUS economy was on a roll, it had neces-sary inrastructure already in place, andhence, the cost o hosting the two eventswas just $30 million and $1.8 billion orthe World Cup and the Summer Olym-pics respectively. As compared to that,Brazil has already spent $11 billion onjust the FIFA World Cup, with multiplecost overruns that are likely to continue.While the twin events will do their bit or

the Brazilian GDP, with tourism getting aboost, they are likely to be a major drain

on an economy that is nowhere close toits glory days yet.

Brazil bid or the 2014 FIFA WorldCup in 2007 a time when the econo-my was growing at a rate o knots. Tenthe global financial crisis struck and Bra-zils economy went into a tailspin. Whilethere was an immediate rebound in2010 and Brazils GDP (at current pric-es) crossed the $2 trillion mark or thefirst time, it has been a laboured progresssince then, with several quarters o neg-ative growth.

But since then, matters have worsenedso much that the Brazilian real (its cur-rency) has lost hal its value in the lastthree years and Standard & Poors hascut Brazils sovereign rating to BBB mi-nus the lowest investment grade. In

this kind o an environment, the lavishspending on the World Cup has not gone

Trafc on Avenida Paulista, one of the

most important avenues in So Paulo,

Brazil. The 2.8 kilometre thoroughfare is

known for headquartering a large number

of nancial and cultural institutions


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Brazilian fans during the 2014 FIFA World Cup opening ceremony at So Paulo. According to

E&Y, the event may result in an increase of 79% in the tourist inow to Brazil in 2014

in Paraguay. Te aim of this frameworkagreement was to create conditions andmechanisms for negotiations by grant-ing reciprocal tariff preferences and ne-gotiate a free trade area between the twoparties in conformity with the rules of theWO. As a follow up to the agreement,a Preferential rade Agreement (PA)was signed in New Delhi on January 25,2004. Te aim of this PA is to expandand strengthen existing relations betweenMERCOSUR and India and promote theexpansion of trade by granting reciprocalfixed tariff preferences.

Te PA consists of a list of 452 Indianproducts, which get tariff concessions inMERCOSUR (a list of 450 MERCOSURproducts get tariff concession in India;the PA comprises rules, safeguards and

dispute settlement procedures). Te ma-jor products covered in the Indian offerlist are meat and meat products, organic&inorganic chemicals, dyes&pigments,raw hides &skins, leather articles, wool,

Demand-supply gap analysis: Indian exports Brazilian importsBroad summary of Brazils top 20 imports show that Indian exports are non-existent in 12 of them

HS Code Product Total Imports Potential PotentialImports From India for Indian (%) Enhancement

exports Factor #

2710 Petroleum Oils (not Crude) 17,756,951 3,364,061 14,392,890 81.05 4.28

2709 Crude Petroleum Oils 16,319,993 0 16,319,993 100.00 NA

8703 Cars (including station wagons) 9,081,176 119 9,081,057 100.00 76311.40

8708 Parts &Access. of Motor Vehicles 8,296,706 179,816 8,116,890 97.83 45.14

2711 Petroleum Gases 7,997,946 0 7,997,946 100.00 NA

8517 Electric App. for Line Telephony 5,036,185 13,554 5,022,631 99.73 370.56

8542 Electronic Integrated Circuits 4,748,725 990 4,747,735 99.98 4795.69

3004 Medicament Mixtures (put in dosage) 3,734,309 126,648 3,607,661 96.61 28.49

8529 Parts suitable for use in televisions 3,565,667 199 3,565,468 99.99 17916.92

3104 Mineral or Chemical Fertilizers 3,356,145 0 3,356,145 100.00 NA

8704 Motor Vehicles (for transport of goods) 3,340,644 188 3,340,456 99.99 17768.38

3002 Human &Animal Blood, Toxins 3,187,046 17,740 3,169,306 99.44 178.65

3808 Insecticides, Fungicides, Herbicides 2,999,751 171,447 2,828,304 94.28 16.50

3105 Nitrogen, Phosphorous Fertilizers 2,628,785 1 2,628,784 100.00 2628784.00

2701 Coal; Briquettes, Ovoids 2,453,571 0 2,453,571 100.00 NA

1001 Wheat and Meslin 2,414,821 0 2,414,821 100.00 NA

8411 Turbo-jets, Turbo-propellers 2,323,109 17 2,323,092 100.00 136652.47

3102 Mineral or Chemical Fertilizers 2,242,837 1 2,242,836 100.00 2242836.00

2933 Heterocyclic Compounds 2,240,626 159,409 2,081,217 92.89 13.06

8473 Parts &Accessories of computers 2,203,783 2,897 2,200,886 99.87 759.71

Source: International Trade Centre; all gures in $ thousands (for CY2013)# Enhancement factor is the number of times Indian export value has to be raised, in the absence of policy restrictions and latent demand, from the current levels to meet total demandof the destination market (Brazil)


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TDB: Indo-Brazilian trade is todayabout 10 times of what it was a decadeago. Are you satisfied?CY:rade between Brazil and India hasgrown tremendously in the last few years from $828 million in 2001 to $9.48 bil-

lion in 2013. India already is one of themain trade partners of Brazil, but thereis still plenty of room for bilateral tradeto grow. One of the issues of our bilateraltrade, however, is that it is highly concen-trated on oil and its derivatives. In 2013,around 50.69% of Brazilian exports toIndia consisted of crude oil and 52.60%of Brazilian imports from India were ofdiesel. Any change in the oil market willsignificantly affect our bilateral trade.

TDB: Indo-Brazilian trade is lesser invalue than that of even Indo-Venezue-lan trade. What do you think is the pri-mary reason for such state of affairs?CY: India is a country with significantenergy demands, resulting in consider-able imports of oil. Venezuela is a majoroil exporter. It is therefore natural that anincrease in Indian demand for oil wouldimpact the amount of trade between thetwo countries. As mentioned before, al-though Brazil-India trade has enjoyedstrong growth in the last decade, thereis still room for both quantitative andqualitative expansion. Tis means wecan have more trade in the traditionalproducts, as well as diversify.

A recent study concluded by APEX(the Brazilian rade & Investment Pro-motion Agency) gives a detailed profileof economic, political and commerciallandscape of India, as well as a set ofbusiness opportunities for Brazilian ex-porters in the Indian market. Tese are:

1) Food, Beverage & Agribusiness; 2)Home &Construction; 3) Machinery &Equipment; 4) Fashion &Personal Care;and 5) Multi-Sector &Other. Opportu-nities in agribusiness seem particularlyattractive, due to rising population and

incomes in India, all within limited ex-pansion of local production.

Among mechanisms established toboost bilateral trade, it is worth notingthree: the Bilateral rade MonitoringMechanism, the CEO Forum, and theIndia-MERCOSUR Preferential radeAgreement, whose scope gives marginfor further expansion.

TDB:Do you think Brazil not havinga large Indian community has affected

trade between the two countries?CY: Te fact that there is only a smallIndian community in Brazil might havecontributed to the perspective that Bra-zil is too far or too different. However,during the last few years, as developingcountries gained greater political andeconomic space, a different concept hasdeveloped. As large developing coun-tries, Brazil and India are more similarin political, economic and social aspectsthan first looks may reveal.

TDB: What has been Brazils strategyto attract Indian football fans for theongoing FIFA World Cup?CY: Te Brazilian government is com-mitted to promoting tourism in Brazil,especially through Embratur a gov-ernment agency entirely devoted to thepromotion of tourist destinations in thecountry. Every year, Brazil reaches newrecord numbers of foreign visitors, allsearching for great experiences from

beaches to business. In this sense, the2014 FIFA World Cup as well as theOlympic and Paralympic Games in 2016in Rio de Janeiro, will be milestones forBrazilian tourism. For this years WorldCup, visa requests from Indians have

been almost double the usual number.Tis speaks for itself in terms of the in-terest Brazil is generating in this country.

TDB: Does Brazilian government haveany plans to issue visa-on-arrival to In-dia tourists?CY:Brazil is being promoted as a greatdestination among Indian travel agen-cies and tour operators together withworkshops to train Indian operators onBrazilian sights and features. Moreover,

Brazil has signed a bilateral Air ServiceAgreement with India, with a strategyto establish direct flights between thetwo countries. As far as visa-on-arrivalis concerned, Brazil does not have sucharrangements with any country. Exist-ing procedures, however, are clear andstraightforward.

TDB: Brazils exports to India aremostly raw materials. Do you have anystrategy to increase the export of fin-ished goods and hi-tech products?CY: Brazilian raw materials are verycompetitive in international trade and,as a result, play a large role in its exports.Te bilateral trade between India andBrazil is still concentrated on few prod-ucts, mainly oil, whose price variationssignificantly impact numbers. Diversi-fication is therefore a major challengewhich is being tackled through mea-sures such as profiling opportunities forBrazilian exporters in the Indian market.

In an exclusive interaction with Te Dollar Business, Chloe

Rocha Young, Secretary, Economic&

Commercial Section, atthe Embassy of Brazil in India, talks at length about India-Brazil trade relations and explains why there is enough roomfor both quantitative and qualitative expansion. Excerpts:

Brazil is neither too far, nortoo different from India



COVER FEATURE BRAZIL

HS Product Brazils imports Indias exports Indias exports OpportunityCode from the world to the world to Brazil

1001 Wheat &Meslin 2,414.8 1,260.3 0.0 2,414.8

2710 Petroleum Oils (not Crude) 17,756.9 67,075.2 3,364.0 14,392.9

2933 Heterocyclic Compounds 2,240.6 1,575.2 159.4 2,081.2

3004 Medicament Mixtures (put in dosage) 3,734.3 10,313.9 126.6 3,607.7

3808 Insecticides, Fungicides, Herbicides 2,999.7 2,133.2 171.4 2,828.3

4011 Pneumatic Tires of Rubber 1,641.6 1,778.6 52.2 1,589.4

7403 Refned Copper &Copper Alloys 1,823.8 2,354.2 2.5 1,821.3

8481 Tap, Cock, Valve for Pipe, Tank 1,468.8 1,213.1 14.4 1,454.4

8504 Electrical Transformer, Static Converter 1,111.0 1,006.3 9.0 1,102.0

8517 Electrical Apparatus for Line Telephony 5,036.2 3,444.6 13.5 5,022.7

8703 Cars (including Station Wagons) 9,081.2 5,556.5 0.1 9,081.1

8708 Parts &Accessories of Motor Vehicles 8,296.7 3,912.8 179.8 8,116.9

8802 Aircraft &Spacecraft 1,525.4 2,590.3 0.1 1,525.3

8803 Aircraft Parts 1,333.2 1,527.0 0.0 1,333.2

Low hanging fruitsItems imported by Brazil in large numbers, exported by India in large numbers but still offering billion dollar opportunities

Source: International Trade Centre; gures for 2013 ($ million)# Criteria: Brazilian imports of more than $1 billion, Indian exports of more than $1 billion, opportunity of more than $1 billion

DB:India still seems to be ignoringBrazil as a market. Whats Brazils truepotential as an export destination?AS: Brazil is one o the most importantmarkets in Latin America. Unortunate-ly, the past year wasnt good or Indianexports to Brazil, due to the sofening ocommodity and metal prices. Many othercountries like Venezuela and Argentinaalso put restrictions on both current andcapital goods transers. Some o themalso introduced automatic licensing to

restrict imports.

Documents

The Dollar Business Magazine-July 2014