Come, Invest in India

Come, Invest in India

Post Covid-19 Pandemic, a new world order is set to emerge. Priorities set to change. Many “New normals” are going to emerge. The “renewed thinking” will also apply to growth strategies of international companies / business / small & medium entrepreneurs.

The fight for supremacy in technology and military, the trade wars, intellectual property rights, and geo-political issues, are here to stay. Therefore, foreign companies which heavily depended on single country may now want to look to diversify the risk to their supply chain by moving out of that particular country. And India offers them the best alternative.

India, the world’s fifth largest economy with an abundant labour force, offers the best alternative in terms of depth and size of the markets. With the median age of 27 and around 900 million “working-age” population, India is a young and aspirational economy.

In the past, China used its huge labour force in manufacturing by attracting FDI — it’s time for India to do the same, particularly when foreign firms are looking for an alternative manufacturing base. According to a UNDP report, India will have a working age population of 1.14 billion, with rising urbanisation and a populating middle-class by 2025, creating a huge domestic market. India is also a resource-rich country. Therefore, India has its stage set to attract both market-seeking and resource-seeking FDI.

The Prime Minister’s call for Atmanirbhar Bharat (self-reliant India) can be just the right impetus for our domestic manufacturing. The world including India is currently overly dependent on a single country for raw materials and now is the right time to challenge this hegemony, as companies look for alternative manufacturing hubs in their bid to de-risk.

Huge scope exists in sectors such as pharma, electronics, automobiles and defence machinery, not only to be self-reliant but also capture a decent slice of the global supply chain

 “Assemble in India for the world” into Make in India

• ?Make in India (launched in 2017) + Assemble in India
• ?Make In India 2.0 was launched in 2019 and aimed at making India a $5-trillion economy by 2024-25
• ?In addition to 25 sectors, enhance Focus on futuristic segments – robotics, genomics, chemical feedstock and electrical storages.

WHY India?

• ?Political Stability
• ?Business Friendly Attitude and Policies
• ?Huge Domestic Market
• ?Growing Consumer Segments
• ?Skilled Manpower
• ?Ancillary and Auxiliary Industries.

Why India – Government Initiatives

In May 2020, The Government of India announced significant initiatives to strengthen the economic credentials of the country and make it one of the strongest economies in the world.

?India is fast becoming home to startup companies focused on high growth areas such as mobility, e-commerce and other vertical specific solutions - creating new markets and driving innovation.

?Current government is striving to move steadily to minimise structural and political bottlenecks and bring back investment and economic performance back to the path.

?Foreign Direct Investment in India averaged 1211.71 USD Million from 1995 until 2016, reaching an all time high of 5670 USD Million in February of 2008 and a record low of -60 USD Million in February of 2014

?Existing government focused high on delivery

?    Creating infrastructure

?    Reducing red-tape

?    Investment friendly policies.

Why India – Ease of Doing Business

• ?A jump of 79 positions to 63 in 2019 from 142 in 2014 in World Bank’s Doing Business rankings
• ?Various reforms taken by the Government of India have led to increase in India’s ranking in the World Bank’s Ease of Doing Business Index from 130 in 2017 to 100 in 2018
• ?India’s ranking in the taxation and insolvency parameters improved by 53 and 33 spots, respectively, on the back of administrative reforms undertaken by the Government of India in the areas of taxation and passage of Insolvency and Bankruptcy Code (IBC), 2016
• ?To improve the ease of doing business in the country, the government has taken various initiatives to improve contract enforcement. Over 1,000 redundant legislations have been scrapped.

Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission)

?On May 14, 2020 - Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission) was announced by PM Modi

?It would include an economic package — worth Rs 20 lakh crore (USD 265 Bn) or 10% of India’s GDP in 2019-20 — aimed towards achieving this mission.

Significant Structural Reforms in Key Sectors

1.   Coal and Mineral

• Commercial Mining allowed
• Pvt Investments increased

2.   Defense

·      Enhancing of self-reliance

·      Policy Reforms

3.   Civil Aviation

·      Global Hub for MRO

·      More airports thru PPP

4.   Power - Pvt of Discoms in UTs

5.   Space and Atomic Energy

Other Key Push Factors -

• ?Enhanced private participation
• ?Fiscal Stimulus declared to mitigate the impact of Covid-19 on economy (Direct and Indirect measures)
• ?Dividend Distribution Tax - India’s top 25 dividend paying MNCs, including HUL, Maruti Suzuki, Nestle, and Colgate-Palmolive, are likely to save more than Rs 2,800 crore collectively after the government’s move to abolish the levy on distributing dividends.

Mega Planning

Indian Government has drawn up a list of ten mega clusters across nine states as the most attractive destinations for companies to set shop based on sectoral requirements and tax incentives to promote the country as an alternative business continuity plan destination amid the ongoing Covid-19 pandemic.

1.   Noida (Uttar Pradesh)

2.   Hyderabad (Telangana)

3.   Mumbai (Maharashtra)

4.   Pune (Maharashtra)

5.   Aurangabad (Maharashtra)

6.   Vadodara (Bharuch-Ankleshwar Cluster / Gujarat)

7.   Bengaluru (Karnataka)

8.   Chennai (Tamil Nadu)

9.   Tirupati-Nellore (Andhra Pradesh)

Major Investment Centers - Maharashtra, Gujarat, UP.

The Maharashtra Story 

Maharashtra is the third largest state in India, occupying approximately 9.4% of the country's total geographical area. The state is well connected to all the major markets with 4 international and 7 domestic airports, over 303,000 km of road network and 6,165 km of rail network. The state’s coastline of 720 km and presence of 55 ports facilitate about 22% of the total cargo transport in India. Jawaharlal Nehru Port Trust (JNPT), the largest container port in the country, is connected to 34 Container Freight Stations (CFS) and 46 Inland Container Depots (ICD). The state has a total installed power capacity of over 43,000 MW. 

Maharashtra has a good presence of industrial clusters, especially automobile, IT & ITeS, chemicals, textiles and food processing clusters and offers lucrative investment opportunities in these sectors. Maharashtra’s Gross State Domestic Product (GSDP) was $387 bn (2017-18). Mumbai, the state's capital is known as the financial capital of India and houses the headquarters of major corporate and financial institutions. Maharashtra is major part of the automobile manufacturing hub of the country.

Which Sectors likely to have better future? 

While automobile and electronic manufacturing sectors have been mainstay of the industrial landscape in Maharashtra, Covid-19 pandemic could add a few more sectors that would hold greater promise in years to come.

• In the given scenario, First and foremost, will be all elements of modern healthcare infrastructure - e.g. medical equipment (from ventilators to beds, whatever comes in the healthcare ecosystem) manufacturing. This is essentially a small and medium sector activity, with a few big flagbearers.
• During lockdowns, we also learned that Work from Home (WFH) is a workable option for conducting activities – most in services sector and some-to-many in manufacturing. This will give rise demand for digital devices – like laptops, smartphones, routers etc in services, and internet enabled infrastructure in manufacturing (IoT will come in a big way)
• The model of deliveries too would change for sure. Earlier many customers would walk to one vendor (MCtOV). But due to lockdown, we saw how vendors leveraged technology to reach many customers at one go (One vendor coming to many customer - OVtMC). The relationship model changed. And this change is likely to persist for some time. Thanks to digitalization - platforms for selling, aggregating etc ensured that customers got most of what they wanted - at least in the metro cities. So, there exists huge scope for these platforms to extend their success to tier 2/3/4 towns. This will create demand for smart warehouses
• Demand for wearable will also rise
• Delivery of entertainment has changed – instead of cinema halls – entertainment is now served more on handheld devices or digital TVs- thanks to platforms like Netflix, Amazon Prime and many more

All this will need infrastructure – tech, telecom, devices.

So, which sectors are likely to gain the MOST after Covid-19? 

Other than the usual ones like FMCG, automobile, consumer goods, textile (including medical textile like PPE/masks) and education, some of the sectors that could see more activity could be -

• Pharmaceutical, R&D
• Companies making physical elements of the modern healthcare infrastructure
• Computer Hardware – laptops, desktops, servers, data centres
• Telecom – networks and devices
• Handheld Devices
• Smart Devices (internet enabled)
• Defense equipment manufacturing is an evergreen sector, given a perpetual threat of conventional warfare and terrorism attacks
• E storage like battery
• Edutainment / Online Education Delivery

All this equipment, machinery would need smarter devices. Meaning more chips and computing devices. So, my cherry pick, is Chip Making. I am of the opinion that it could emerge as a big beneficiary of the pandemic.

Spot the Opportunity

Somehow, India hasn’t been given its place in global semiconductor industry.

Although, India has a very fast-growing electronics system design manufacturing (ESDM) industry. India also has a strong design base with more than 120 units. According to the Department of Electronics and Information Technology (DeitY), nearly 2,000 chips are being designed every year in India and more than 20,000 engineers are working on various aspects of chip design and verification. 

Now that the government has a strong focus in developing the ESDM ecosystem in India, it is a good opportunity for the entrepreneurs to look at this space more enthusiastically. States should also make more attempts to bring investment in these value-based sectors (semiconductor, fabless manufacturing, smart cards, microelectronics). Main players in chip making are Intel (USA), Qualcomm (USA) and ST STMicroelectronics, (France). 

The three areas in the ESDM sector which can be brought to India in two years’ time are-PCBAs (Printed Circuit Board Assembly), display and the energy source (or battery packs).

Desired Push is already there

Central Government is keen on rebooting this space. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme, were notified by the Ministry of Electronics and IT (MietY) on April 1, and have a total outlay of Rs 50,000 crore.

Under the scheme, the government aims to attract top 5 global mobile manufacturing companies who control 80 per cent of the global market in the segment and also promote five local companies in expanding their business as national champions.

This include major sectors of electronics such as Consumer electronics, ICT, CPE (customer premises equipment like routers) products, Computers, Medical Electronics etc. 

How to Succeed in India?

• ?In order to succeed in India, it is very essential for a supplier / marketer / brand owner to know its consumers / customers - their types/ behaviors , market potential and future trends for each end-use segment.
• ?Failures do occur as partners and sales agents lack proper market information (market size, new opportunity, risks etc).
• ? “One Size Fits All” approach is NOT always implementable / successful in India
• ?Market segments may emerge as well defined, it is crucial for the local partner as well its foreign partner to be on the same level of understanding as far as the market potential, especially when some of the segments in India are growing faster. This facilitates making MORE achievable sales forecasts / results. 

"Your best partner for Succeeding in India"

Contact for more, with an assured 24-hour turnaround –

https://in.linkedin.com/pub/dhananjay-deshmukh/7/b10/78

Namaste.

(This note is based on secondary research and analysis. All credits are duly acknowledged with thanks hereby. The author is an independent market research and business consulting professional, focused on India Entry Strategies.)

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