India
business & trade Indian enterprise. Global opportunities
DEC 2019
` 150
“INDIA-CHINA TRADE DEAL COULD BE STEPPING STONE” - Professor Manoj Pant, Director Indian Institute of Foreign Trade
“MOBILITY OF HEALTH WORKERS HAS OPPORTUNITIES”
- Rupa Chanda, RBI Chair Professor of Economics
NEXT
BIG DEAL
IBT analyses the most potential partners for trade agreements with India in a postRCEP scenario
Trade Promotion Council of India
Department of Commerce Ministry of Commerce and Industry
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From the Chairman’s desk Dear Readers,
business & trade Indian enterprise. Global opportunities
Vol 1 | Issue 6
Dec 2019
TPCI CHAIRMAN: Mohit Singla
India’s withdrawal from RCEP, pending effective resolution of its concerns, was clearly the flavour of the month in November. Supporters of free trade in the prevalent atmosphere of protectionism would certainly view this as a setback. But one has to understand the practical considerations that prompted the Government to take such a decision. RCEP is highly strategic for India in the context of global trade. But it also comes across as a very atypical case study in India’s context. Our trade deficit with RCEP nations has grown from US$ 7 billion in 2003-04 to US$ 105 billion in 2018-19, which is greater than our trade deficit with the rest of the world. Also, China accounts for around US$ 54 billion of that deficit. The possible surge in imports post-RCEP, and its potential impact on our SMEs and farmers, had to be factored into India’s calculations. India’s proposals for change in base year, auto trigger mechanism to prevent import surge, differential commitments for China on tariff liberalisation and stricter rules of origin (especially given its experience with ASEAN), haven’t been satisfactorily addressed by RCEP members. Also, the shoe is on the other foot when it comes to services trade. RCEP partners are wary of taking up “binding and commercially meaningful” commitments to simplify trade in IT and business services and facilitate easy movement of skilled professionals through Mode 4, as demanded by India. Even though Mode 4 implies temporary residence for delivery of the service, these nations fear its impact on their domestic employment. The other 15 RCEP countries have committed to discussions to address India’s concerns, and get it on board, if possible, before the deal is signed next year. But even if India stays away from RCEP, this does not have to mean a hitch in its Act East policy. India is already reviewing its existing agreement for trade in goods with ASEAN members. There are still bilateral mechanisms where India does and will continue to engage with RCEP members, especially China. These bilateral engagements can serve to progressively address trade issues and build the right atmosphere for India’s possible entry into RCEP in the coming future. Meanwhile, India should also explore other potential countries/ regions, where it can have a more equitable partnership. It is true that FTAs cut import duties, but this is only one of the factors that decide whether exports will grow. Also, non-tariff barriers are generally not negotiated in FTAs and have to be taken up bilaterally. I am sure that the government must have factored these issues before taking this prudent decision of not signing on the RCEP. Simultaneously, a sustained government-industry engagement is necessary, to understand industry-specific FTA concerns and work on all possible measures to improve India Inc’s competitiveness in strategic sectors in mission mode.
EDITORIAL DIRECTOR: Sameer Pushp EDITOR: Virat Bahri WRITERS: Abhishek Jha, Nikhaar Gogna, Sneha Varma, Shivi Takkar
DESIGN SR. ART DIRECTOR: Prakash Shetty DESIGNER: Ajay Kumar Singh India Business & Trade is a monthly magazine published by Trade Promotion Council of India, 9, Scindia House, Connaught Circus, New Delhi- 110001, India and printed at SR Advertising, B-198, 2nd Floor, Okhla Industrial Area, Phase-1, New Delhi. Material in this publication may not be reproduced in any form without the written permission of TPCI. Editorial/external opinions expressed in this magazine are not necessarily those of TPCI, and TPCI does not take responsibility for the advertising content, content obtained from third parties and views expressed by any independent author/contributor. For editorial queries/feedback, contact: editorial@tpci.in For advertising queries, contact: advertise@tpci.in
MOHIT SINGLA Chairman, TPCI
TPCI.IN
22 US
EU GCC CA
AFRI
TABLE OF
EAEU
CONTENTS 15
4
TPCI News Buzz Latest trade and business news updates from across the world.
CATR DATA CRUNCH 10 Statistics: Non-Tariff Barriers An analysis of NTBs like SPS, price control, TBTs & quality control applied on India by rest of the world.
LAST MILE
PERSPECTIVES
Dr. G. Raghuram, Director, IIM-B, emphasises on ease of mobility, energy intensity, and cost.
12 Logistics: Key to India’s economic success 15 “Coastal shipping is still an under-exploited opportunity” 16 Services trade: The unresolved dilemma of Mode 4 18 Demystifying India’s hunger problem 20 India’s endless struggle for crude oil security
32
COVER STORY 22 Next Big Deal Post withdrawal from RCEP, IBT analyses potential partners for India based on bilateral trade dynamics 32 “India needs more preparedness” Prof Sachin Chaturvedi, DG, RIS, feels that India needs to reassess its approach to RTAs.
REASSESS RTAS Prof Sachin Chaturvedi, Director General, RIS, feels that India must be better prepared in its approach to RTAs
2 | India Business & Trade • December 2019
33 “RCEP could make possible the success of the ‘Make in India’ programme” JNU’s Dr. Amita Batra counters that RCEP could be a platform to enhance India’s participation in GVAs. 34 India-China trade deal could be a stepping stone to RCEP Prof Manoj Pant, Director, IIFT, asserts that RCEP doesn’t provide immediate gains to India
FOCUS EXPORT: HEALTHCARE
39
36 Quest for the ‘X’ factor India can significantly enhance its share in health care services via Mode 1 & 2. 39 Accreditation of hospitals is a must RBI Chair Prof. Rupa Chanda asserts that medical tourism can improve through hospital accreditation.
FOCUS SECTOR: TEA 40 Assam Tea Industry: On the brink of a catastrophe? The tea industry in Assam is crippled by rising production costs, low realisation of output in international markets and quality issues.
FOCUS COUNTRY: CANADA
HEALTHCARE Prof. Rupa Chanda asserts that medical tourism can increase by accreditation of Indian hospitals
48
42 The fault in the numbers Considering the potential, annual Indo-Canada bilateral trade should be much higher than the current value of around US$ 6 billion.
EXPORTER PROFILE 46 Adding spice to your life! Ramdev Spices has traversed a long journey from a neighbourhood startup in 1965 to the country’s largest seller of spices in consumer packs.
FOCUS PAYS Sanjay Grover, VP, Kirloskar Pneumatic, on the company’s earto-the-ground approach
FOOD TRENDS 48 Focused country, focused approach Sanjay Grover, VP, Kirloskar Pneumatic Co Ltd, stresses on the importance of the company’s ear-tothe-ground approach in its global expansion.
52
50 Indian food beyond Butter Chicken India’s culinary diversity across regions is far richer than butter chicken & tikka, and deserves to be aggressively marketed globally
WHAT’S THE LATEST @ TPCI 52 I nternational events & engagements TPCI successfully organised India Pavilion at Qatar, Source India Myanmar, India-Vietnam Business Forum and BSMs at Riyadh & Jeddah in November.
LATEST@TPCI Buyer Seller Meet at Saudi Arabia for F&B exporters
December 2019 • India Business & Trade | 3
News buzz
International
15 countries seek compensation over Brexit
A
ustralia and fourteen other countries, including India, US, New Zealand, China and Canada have demanded compensation from EU and UK for the export disruption caused by Brexit at a World Trade Organization meeting in Geneva. WTO members are liable to impose lower import tariffs than what they usually impose on a limited quantity of certain products. In some cases, the tariff is reduced to zero. However, with Brexit, the countries exporting agricultural products to Europe and Britain will have smaller opportunities. EU limits the volume of agricultural imports that can enter its trading bloc without full tariffs.
Brexit will take away some of the tariff rate quotas (TRQs) available to exporters, a matter of concern for these countries. US has argued, for instance, that this could adversely affect their sales of wine and pork and they might get zero access at reduced tariffs for grape juice to EU or pizza
cheese to UK. Australia said that its beef and lamb exports had already been severely affected by Brexit confusion. They stopped exports of these products for Christmas due to uncertainty on whether they will be able to utilise these quotas. A spokesman for UK’s Department for International Trade commented, “We have set out our Goods Schedule at WTO to maintain the existing balance of rights and obligations between UK and our trading partners.” The demand for compensation being made by these countries from EU & UK would generally mean reducing tariffs on other goods at WTO.
EIB ends funding for fossil fuels
F
ollowing months of negotiations, the European Investment Bank (EIB) has agreed to stop its lending policy for fossil fuel projects. The bank will end its financing of coal, oil
and gas projects after 2021. This development will make the EIB the world’s first ‘climate bank’. Since 2013, the EIB has financed nearly US$ 13 billion worth of fossil fuel ventures. It supported
4 | India Business & Trade • December 2019
nearly US$ 2 billion of fossil fuel projects last year. Energy projects emitting less than 250 grams of CO2 for every kilowatt-hour of energy produced will be qualified for funding under the new scheme. This means gas projects using carbon capture and storage technology could still get funding. EIB’s vice-president Andrew McDowell said, “This is an important first step - this is not the last step.” Environmental organisations, though disappointed with the one-year delay in the decision, have happily welcomed it. An economist at the World Wildlife Fund, Sebastien Godinot, commented on the development. “Hats off to the European Investment Bank and those countries who fought hard to help it set a global benchmark today.”
Hong Kong hit by recession
NUMBER GAME
1-2% Global growth
F
in container demand in 2019^, a cut from previous forecast of 1-3%. to a contraction of 1.3% from an earlier estimate of 0-1%. “Ending violence and restoring calm are pivotal to recovery... The government will continue to closely monitor the situation and introduce measures as necessary to support enterprises and safeguard,” the government added.
11th BRICS Summit in Brazil
(L-R) Chinese President Xi Jinping, Indian PM Narendra Modi, South African President Cyril Ramaphosa, Brazilian President Jair Bolsonaro & Russian President Vladimir Putin
T
he 11th BRICS summit on the theme “Economic Growth for an Innovative Future” was held on November 14, 2019 in Curitiba, Brazil. In this summit of the world’s five largest emerging economies, member nations discussed terrorism, technology, trade, innovation & culture. Prime Minister Shri Narendra Modi in a tweet mentioned, “We had fruitful dialogues on cementing ties in trade, innovation, technology
and culture. The focus on futuristic subjects will surely lead to deeper cooperation that will benefit the people of our respective nations.” Describing India as the world’s most open and investment friendly economy, PM Modi urged BRICS nations to build and grow their presence in the country. He addded that simplifying intra-BRICS business will be key to enhancing mutual trade (to a target of US$ 500 billion) & investment.
1.31 million
Housing starts* in US in October, a 12-year high, indicating a rebound in the housing market
US$ 8 trillion ~
Asia’s projected spend on food by 2030, growing at a CAGR of 7%
December 2019 • India Business & Trade | 5
*Source: US Commerce Department, Housing starts reflects number of privately owned new houses on which construction has been started in a given period; ^Maersk; ~PwC, Rabobank & Temasek
or the first time in a decade, Hong Kong’s economy plunged into a recession due to the escalating US-China trade war and increasingly violent anti-government protests in the city. The economy contracted by 3.2% in July-September from the previous quarter. It was the second consecutive quarter with negative growth, which confirms that the economy is in a recession. Amid protests, the stock market is faltering, tourists are cancelling bookings and retailers are suffering. The Hong Kong government said in a statement, “Domestic demand worsened significantly in Q3, as the local social incidents took a heavy toll on consumption-related activities and subdued economic prospects weighed on consumption and investment sentiment.” The projected full-year growth for Hong Kong’s economy has been revised
IN QUOTES
Plastic imports hurt Indonesia
Jack Ma Co-founder and Former Chairman Alibaba Group Holding Ltd
US-China relationship could face 20 years of turbulence.
Søren Skou Chief Executive AP Moller-Maersk
Business leaders are worried, They’re less confident about the future. Either the consumer wins and things will be better, or businesses will be right and we’re heading for low growth or even a recession in the next few years.
T
he impact of plastic waste exports to south-east Asia is visible in the extreme levels of toxins entering the human food chain in Indonesia. These are the findings of a study titled Plastic Waste Poisons Indonesia’s Food Chain, by researchers from the global environmental health network IPEN beside the Arnika Association and several local Indonesian
organisations. This recent study is the first to demonstrate food chain contamination in south-east Asia with high levels of hazardous chemicals due to plastic waste mismanagement & imports. According to the report, eating just one egg from a free-range hen foraging within the neighbourhood of the tofu factory in Tropodo would surpass the European Food Safety Authority’s tolerable daily intake for chlorinated dioxins by seventy-fold. “These stark findings illustrate the dangers of plastics for human health and should move policy makers to ban plastic waste combustion, address environmental contamination, and rigorously control imports” said the report’s coauthor, Lee Bell. “This study pulls back the curtain on how plastic waste carries toxic chemicals into the food chain. Reducing plastics production and the toxicity of plastic materials is really the only option for a toxin-free future,” added Jindrich Petrlik, who also authored the report.
Bill Gates reclaims title of world’s richest person
T
ech billionaire Bill Gates reclaimed the title of world’s richest person, overtaking Amazon’s chief executive Jeff Bezos, whose worth is approximately US$ 109 billion. According to Bloomberg, Bill Gates had a net worth of US$ 110 billion as of November 16, 2019. With Microsoft winning the Pentagon’s cloud-computing contract valued at US$ 10 billion over Jeff’s Amazon, its share rose by 4%, while the shares of Amazon have declined by 2% since the announcement. Bill Gate’s 1% stake in Microsoft has helped him in achieving the title again as Microsoft’s stock has risen by 48% this year. However, Jeff would have been
6 | India Business & Trade • December 2019
Bill Gates, Co-Chair & Trustee, Bill & Melinda Gates Foundation
way richer if he had not faced divorce proceedings, which made him lose a quarter of his stake in Amazon to his wife, MacKenzie. But on the other hand, Bill Gates has also donated around US$ 35 billion to the Bill and Melinda Gate’s foundation since 1994. Bill recently expressed his concern regarding the wealth tax that has been proposed by some Democratic Presidential candidates including Elizabeth Warren.
News buzz
National
India still open to RCEP membership: CIM
I
ndia has decided to stay out of the world’s ‘biggest free trade pact’, Regional Comprehensive Economic Partnership (RCEP), stating that it did not receive any credible assurance on market access and non-tariff barriers. In a joint statement released after this major announcement, RCEP members said that all participating countries will work together to
RCEP leaders at the 3rd RCEP Summit in Bangkok, Thailand on November 4, 2019
resolve the outstanding concerns raised by India in a mutually satisfactory way. At the same time, however, India has clarified that for now, its decision of keeping out of the regional pact is final. Commenting on India’s position, Commerce and Industry Minister, Shri Piyush Goyal affirmed that India is still open to joining the China-led trade deal
(RCEP); provided all its concerns are met. “The doors are not shut for anybody. If the 15 RCEP nations make a sincere effort to resolve our concerns, to give us confidence and help us to balance the trade inequality, which Prime Minister has raised, then every nation should talk to their friends. We have not become enemies of each other,” he assured the media.
Govt. to form producer groups for farmers
F
inance Minister Smt Nirmala Sitharaman has said that in order to ensure that farmers get the correct price for their produce, the government will form 10,000 farmer producer organizations. She also coaxed states, while addressing the sixth World Congress on Rural & Agriculture Finance in New Delhi, to dismantle Agriculture Produce Marketing Committees (APMCs) and switch to National Agriculture Market (eNAM). eNAM is a pan-India electronic trading platform that networks the existing APMC mandis to create a unified national market for agricultural commodities. The minister also highlighted the role of self-help groups (SHGs) in rural development and added that the government had in the budget
said it will provide Rs 1 lakh to each of these SHGs to promote growth in rural parts. She also encouraged farmers to cultivate oilseeds in place of other crops. “We are telling farmers which crops will give them a better price in the area. We are
also telling them what all crops can be irrigated or cannot be irrigated on the rainfed land,” she opined. The minister added that edible oil consumption is a matter of great concern, since India imports a lot of it, especially palm oil.
December 2019 • India Business & Trade | 7
NUMBER GAME
3.4 million bpd
Oil imported by India from OPEC in October, its lowest share since 2011
Trade deficit narrows in Oct
I
ndia’s exports contracted for the third month in a row in October by 1.11% year-on-year to US$ 26.38 billion, according to the Department of Commerce data released on November 15, 2019. This was primarily on account of a significant dip in shipments of petroleum, carpet, leather products, rice and tea. The country’s imports, too, declined by 16.31% to US$ 37.39 billion in October, reducing the trade
deficit to US$ 11 billion. The trade deficit stood at US$ 18 billion during the same period last year. However, there were a number of labour-intensive sectors, such as gems & jewellery, engineering goods, drugs & pharmaceuticals and marine products, where exports saw a rise. Albeit marginal, this increase awakened hopes in the industry of a possible recovery in overseas demand in the months ahead.
16.8% YoY decline in India’s plastic exports for the month of September 2019 to reach a value of US$ 649 million
2 lakh
Indian students visiting the US in 2018-19, the second highest number with YoY growth of 3%
Anti-cancer kit gets recognition
A
medical invention (called Cytotron) developed by a Bengaluru-based scientist, Rajah Vijay Kumar, has been labelled as a “breakthrough device” by the US Food and Drug Administration (FDA)’s Centre for Devices and Radiological Health. Created to cure liver, pancreatic and breast cancer, Cytotron aids in tissue engineering of cancer cells, altering how specific proteins are regulated to stop these cells from multiplying and spreading. It is intended to cause degeneration of uncontrolled growth of tissues. Kumar had developed Cytotron at Centre for Advanced Research
8 | India Business & Trade • December 2019
and Development after nearly 30 years of research into cellular pathways. “It is a great feeling that after so many years of hard work, against all odds, an institution like the USFDA is designating our work as a breakthrough in the treatment of three types of cancers,” Kumar stated.
US wins WTO case vs India
U
S has won a major case against India over the latter’s export promotion subsidies. WTO’s dispute settlement panel has ruled that these schemes violated several provisions of the body’s subsidies and countervailing measures. The three-member dispute settlement panel stated that India must withdraw all the schemes within a time period of 90-120 days, after it is adopted by the WTO’s dispute settlement panel within a month (as required under the
TRADE TERMINOLOGY
dispute settlement understanding). The panel said that under Article 3.1 of the WTO’s SCM Agreement, India is not entitled to provide subsidies contingent upon export performance as its per capita gross national product also crossed US$ 1,000 per annum. It added, “In cases where there is an infringement of obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment of benefits.”
SANITARY AND PHYTOSANITARY MEASURES The Agreement on the Application of Sanitary and Phytosanitary Measures (the “SPS Agreement”) entails rules on how governments can apply food safety and animal and plant health measures (SPS measures). Member countries are encouraged to use international standards, guidelines & recommendations where they exist. However, they may use measures, which result in higher standards if there is scientific justification.
IN QUOTES
S Jaishankar External Affairs Minister Government of India
The recent debate about RCEP offers lessons in foreign policy as much as in the trade domain... embracing the new dogma of globalisation without a cost-benefit analysis is equally dangerous.
Kiran Mazumdar-Shaw Chairman & Managing Director Biocon
Digital healthcare comes with interesting opportunities. Agriculture is also an area, which has amazing technologies... This sector will have big opportunity in India and also worldwide.
December 2019 • India Business & Trade | 9
CATR Data Mining 1
Top 5 countries imposing NTBs on India Technical Barriers to Trade (TBT) measures have been most applied to Indian exports under NTBs. The top five countries when it comes to number of NTBs on Indian exports are China, US, New Zealand, Canada and Thailand. Moreover, China has imposed the maximum number of export-related measures on Indian exports, while US has imposed the maximum number of Sanitary and Phytosanitary measures on Indian exports.
China 1
3,954 USA
2
2,512 New Zealand
3
1,381 Canada
NTBs imposed on India India is involved in various bilateral/regional free trade agreements and is negotiating many more with strategic trade partners. Though these agreements reduce tariffs, the presence of non-trade barriers (NTBs) limits the gains from such trade. NTBs have emerged as an important hindrance to world trade since the 1970s. They may include any policy measures other than tariffs that can impact trade flows. NTBs are of different types - quantity control measures, price control measures, technical barriers to trade etc. This section gives an overview of NTBs faced by India in its trade with the rest of the world.
10 | India Business & Trade • December 2019
4 1,145 Thailand 5 1,047
Source: (1) UNCTAD; (2)-(5) Global Trade Alert Database
Centre for Advanced Trade Research (CATR) is a premier research division of economists and researchers in TPCI. The division facilitates its diversified stakeholders including Government and industry with inputs on trade and economic development matters.
2
Number of new liberalising interventions per year Overall, the number of new liberalising interventions doesn’t follow a specific trend. However, the number has been falling since 2017 and dropped drastically in 2019.
3
Number of new harmful interventions per year The number of harmful NTB interventions has reduced in last two years. There has also been a steep dip in the number of harmful interventions in 2019.
500 250
450
200
350
400 300
150
250 200
100
150 100
50 0
4
50 0 2008
2010
2012
2014
2016
2018
2020
Harmful commercial policies imposed on India While the share of harmful NTB interventions has reduced between 2011 and 2019, the impact of these interventions has diversified among different products over the years.
100 90 80 70
87 74 68
60
60
50
47
64
68 69
5
2010
2012
2016
Electric motors, generators and transformers, and parts thereof
154
Pumps, compressors, hydraulic and pneumatic power engines, and valves, and parts thereof
159
Vegetable oils
184
Machinery for mining, quarrying and construction, and parts thereof
187 219
Pharmaceutical products
239 345 382
Basic iron and steel Other fabricated metal products
20
Products of iron or steel
502 580 0
Harmful interventions still in force
Products affected by all implemented harmful interventions
2011
Products affected by surviving harmful interventions
All interventions Harmful interventions implemented since Nov 2008 that use that are harmful “murky” instruments
2019
2020
Maximum number of NTBs are imposed on products of iron or steel followed by other fabricated metal products. EU & US have imposed a majority of the NTBs on steel and related products.
Motor vehicles, trailers and semi-trailers; parts and accessories thereof
10
2018
Top ten most often affected sectors*
30
0
2014
Basic organic chemicals
56 46
40
2008
100
200
300
400
500
600
700
To ensure high-quality standards, safety of infrastructure & environment and public health, maximum NTBs are imposed on iron/steel products. But countries are also turning protectionist on these products amidst a slowdown in demand and low capacity utilisation.
December 2019 • India Business & Trade | 11
PERSPECTIVES
Logistics: Keeping India Inc firmly on the move While infrastructure development is key to make logistics a catalyst of economic growth, the vision cannot be achieved sans a holistic focus on better coordination, strong customer centricity, skills training & digital transformation. BY CATR
“T
he world is a global village,” so goes the popular adage; and nowhere is this notion more applicable than in the field of economics. Ever since the world embraced the idea of globalisation, more and more countries became enmeshed in the global supply chain network. Having a competitive edge in logistics is even more relevant today, as an array of corporate honchos are exploring newer markets as an aftermath of the USChina trade war. The central government’s strong focus on reforms is evident from the World Bank’s Ease of Doing Business Report, where India
jumped 14 spots from 77 in 2018 to 63 in 2019. However, India is still struggling to compete with other smaller developing nations like Thailand & Vietnam as a preferred investment destination, particularly for manufacturing. This is, in part, to do with the overtures being made by countries like Thailand through a string of investor-friendly packages. But a number of intrinsic factors in India also play a role; and one of them that comes up often in discussions is logistics. This is a serious issue for any economy since the contribution of logistics cannot be underestimated. According to the findings of Economic Survey 2018, the
12 | India Business & Trade • December 2019
country’s logistics industry is expected to touch US$ 215 billion by 2020, growing at a CAGR of 10.5%. Further, it provides employment to more than 22 million people. Finally, apart from boosting trade, a robust logistics network will augment programmes like Make in India, and also enable India to be an important part of the global supply chain. What has prevented logistics from being the driver of the Indian economy’s growth is the fact that this sector is mired by a repertoire of challenges. This is quite evident when one looks at India’s performance on the Logistics Performance Index calibrated by the World Bank in 2016 (35) versus
CROSS-COUNTRY COMPARISON OF LOGISTICS PERFORMANCE INDEX
4 3 2 1
India
Vietnam
China
Thailand
es in el m Ti
co Lo m gi pe st te ics nc e Tr traack ci ing ng &
In sh ter ip na m tio en n ts al
s In fra st ru ct ur e
C
us to m
I
0 LP
its performance in 2018 (44). The country’s lackadaisical performance becomes even more apparent when seen in comparison to some other developing countries – China (26), Thailand (32), South Africa (33), Vietnam (39) and Malaysia (41). One of the major challenges confronting the Indian economy is the lack of proper infrastructure across the country. Businesses lament about inadequate and low-quality modal and terminal transport infrastructure, inefficient and ill-designed storage facilities for cargo and containers, unproductive operational and maintenance protocols, lack of end-to-end connectivity and poor adoption/ adaptation of technology. The fact that all’s not well with India’s infrastructure sector is also corroborated by the fact that core sector growth entered negative territory for the first time in over four years in August’19, as five out of the eight sectors constituting the index shrank in size. In September, the output further fell by 5.2%, the worst in 14 years. Seven out of eight sectors contracted, with only fertilisers witnessing a growth over September 2018. Declining investments in infrastructure make the turnaround all the more challenging. Apart from this, logistics companies are plagued by inadequate organizational skills, weak leadership qualities at the mid-tier and managerial levels & inadequate working conditions. Moreover, there are limited institutes for soft skills, and operational and technical training. Arun Goyal, Director, CTC Freight Carriers Pvt Ltd, elaborates, “We do not have till date any such mechanism to hire fully trained drivers, certified by any institutes or government agency about their credentials etc., We do hire drivers (who are most important part of this industry) from mouth-to-mouth publicity and just with a hope that the person whom we are hiring is well qualified and expert in his job. The third major challenge crippling the performance of this
South Africa Source: World Bank
sector is the lack of full-scale adoption of new age digital technologies like IoT, Big Data Analytics and AI. As a result, the country’s logistics ecosystem is fraught with grave operational inefficiencies.
Arun Goyal Director, CTC Freight Carriers Pvt Ltd
WE DO NOT HAVE TILL DATE ANY SUCH MECHANISM TO HIRE FULLY TRAINED DRIVERS, CERTIFIED BY ANY INSTITUTES OR GOVERNMENT AGENCY ABOUT THEIR CREDENTIALS ETC, WE DO HIRE DRIVERS FROM MOUTH-TOMOUTH PUBLICITY AND JUST WITH A HOPE THAT THE PERSON WHOM WE ARE HIRING IS WELL QUALIFIED AND EXPERT IN HIS JOB.
DELIVERING THE GOODS Understanding the crucial role of this sector, the government is aiming to reduce logistics costs to less than 10% of GDP by 2022. A National Logistics Portal is also being developed by the Ministry of Commerce and Industry to facilitate ease of trading in the international and domestic markets. The creation of a dedicated Department of Logistics and encouraging constructive dialogue between the public and private sectors is another welcome move. The Eastern and Western Dedicated Freight corridors, once complete, will also be a major boost to the sector’s performance. Further, Goods and Services Tax (GST) is set to boost efficient movement of cargo within the country as this movement, as well as placement of warehouses, can now respond to purely economic considerations. Sagarmala and Bharatmala programmes promise benchmark transformations in India’s roadways and waterways connectivity. But transformation of the logistics industry is incomplete
December 2019 • India Business & Trade | 13
without a more holistic outlook towards planning, coordination and efficiency. From service providers to consumers, everyone needs to be on the same page. We also need multi-modal transportation to bring about smoother transformation of the sector. Better infrastructure planning creates the need for a National Logistics Policy in India. Malaysia, for example, developed a National Logistics Plan 2006-20, which focused on goals like intensifying the application of new ICT in the industry and ensuring an adequate supply of competent workforce to meet the long term requirements of the industry. The policy is also clamorous for facilitating coordination and transforming the sector from a ‘point-to-point’ to a ‘hub- and-spoke’ model. The government’s stated goal of making Malaysia the preferred logistics gateway for ASEAN offers growth opportunities for players. “Indonesia, Malaysia, Vietnam and Thailand are global and regional leaders. Along with Singapore, they are the first in ASEAN to simplify, automate and integrate trade procedures through use of a single window that all ASEAN members are to adopt by the end of the year,” according to Andy Vargoczky, SVP, Sales & Marketing Asia-Pacific, Agility GIL.He also adds that importance of these countries in global supply & transport chains is growing every year. TECHNOLOGY WINS Technology is another essential element in facilitating integration, and enhancing the overall effectiveness and efficiency of the logistics system. As NITI Aayog states in its September ’18 report titled Goods on the Move, “A digitized platform to integrate supply chain, right from demand forecasting to load consolidation and truck routing and dispatch scheduling, can reduce the delivery time and costs.” Thus, be it tracking shipment, automation or online documentation, technology makes a lot of things easily accessible and assessable for
SAGARMALA PROGRAMME AT A GLANCE • Port modernization & new port development: De-bottlenecking and capacity expansion of existing ports and development of new greenfield ports • Port connectivity enhancement: Enhancing the connectivity of the ports to the hinterland, optimizing cost and time of cargo movement through multi-modal logistics solutions including domestic waterways (inland water transport and coastal shipping) • Port-linked industrialization: Developing port-proximate industrial clusters and Coastal Economic Zones to reduce logistics cost and time of EXIM and domestic cargo • Coastal community development: Promoting sustainable development of coastal communities through skill development & livelihood generation, fisheries development, coastal tourism etc. • Coastal shipping & inland waterways transport: Impetus to move cargo through the sustainable and environment-friendly coastal and inland waterways mode. Source: http://sagarmala.gov.in/about-sagarmala/vision-objectives
Dr. V. Sivakumar Associate Professor Department of Logistics Management, Alagappa University
DIGITAL TECHNOLOGY IS KEY TO MAKING LOGISTICS SECTOR MORE PROFITABLE. IT IS NOT ADOPTED BY MANY EXISTING PLAYERS. THE FOREMOST REASON IS COST AND I FEEL THAT THE GOVERNMENT MAY THINK OF PROVIDING A SOFT LOAN OR ENCOURAGE PLAYERS TO ADOPT DIGITAL ENVIRONMENT.
14 | India Business & Trade • December 2019
stakeholders and reduces a lot of transaction time. Dr. V. Sivakumar, Associate Professor, Department of Logistics Management, Alagappa University, tells IBT, “Digital technology is the key for making logistics sector more profitable. It is not adopted by many existing logistics players. The foremost reason is cost and I am of the view that the Government may think of providing a soft loan for this or encourage the players to adopt digital environment. Countries like Germany, Singapore, Hong Kong and US, which possess more sophisticated logistics networks, have showcased how digital transformation has benefited their entire logistics value chain, including warehousing operations, freight transportation, and last-mile delivery. For example, Germany’s Port of Hamburg uses ‘smartPort Logistics’ technology platform for predictive and preventive maintenance. In case of India, Big Data can be employed improving demand projections and reducing safety stock holdings; digitisation of blocks and signals in the rail network and using electric vehicles in transportation systems. Similarly, technologies like cloud computing can help the Indian logistics sector by optimizing the asset utilisation and enabling storage and easy access to data.
DR G RAGHURAM
modal coordination could still be a challenge. To be customer responsive, systems need to evolve more, especially in the rail sector. In the road sector, safety needs to be addressed. Coastal shipping is still an underexploited opportunity, where again multi-modal coordination needs to come in. IBT: What is your opinion on the considerations necessary to draft a National Logistics Policy? Dr. G. Raghuram: Firstly, it is good that a Logistics Division has been set up, under the Ministry of Commerce, with the intent of coordinating across the different nodal Ministries. However, the balance of power in driving execution, across the Ministries, needs to evolve. The legitimacy of a Logistics Policy could help in this. The key considerations one should keep in mind are ease of mobility (speedy and streamlined flow from origin to destination), energy intensity and cost.
“Policy must cater to mobility, energy intensity & cost” Dr G. Raghuram, Director, IIM Bangalore, discusses how India’s logistics sector can serve as a stepping stone for the country’s economic success. IBT: In the recent Ease of Doing Business report, India jumped 14 places to 63 in 2019. What is your take on India’s performance, especially in the logistics sector? Dr. G. Raghuram: It is notable that India has moved up consistently in the ‘Ease of Doing Business’ rankings. One of the important parameters, related to logistics, is ‘trading across borders’, where we have been improving. We have also shown improvement in related parameters like electricity and construction. However, there is a concern on how these parameters are measured. For example, for ‘trading across borders’, logistics along specific routes are assessed. It is always possible that our performance is better on the measured sample rather than across the board. Similarly, for the assessment of electricity, it is
possible that there is an understated demand, often due to pricing distortions. It is a reality that power cuts are still prevalent in many parts of India. The construction sector is also not all above board, while professionalism is definitely on the rise. Overall, my take is that while there have been improvements, we have a long way to go, especially in the logistics sector. IBT: What are the significant infrastructural/logistical challenges that constrain the Indian economy? Dr. G. Raghuram: Our transport infrastructure is still below par in terms of capacity and reliability on important routes in the country. Both rail and road infrastructure need further enhancement. In the rail sector, the Dedicated Freight Corridors, which should become operational by 2021, would make a difference. However, multi-
IBT: What can be done to enhance the role of digital technology? Dr. G. Raghuram: Providing supply chain visibility of goods and vehicles is important for better coordination. This is best done through digital technology, including global positioning systems and sensor systems. Often, technology is not as much the bottleneck as the attitudes and analytics to use it. This can be addressed through better exposure, skill development and education at various functionary levels. IBT: What lessons can India learn from international counterparts to enhance logistics share to GDP? Dr. G. Raghuram: The countries that do well in logistics are firstly because infrastructure is more a facilitator than a constraint. Secondly, there is a basic value of customer orientation, wherein the need to provide information and adhere to timeliness of delivery, is given a high emphasis. With these perspectives and consequent execution, logistics’ contribution to GDP can be enhanced.
December 2019 • India Business & Trade | 15
Services trade: Unresolved dilemma of Mode 4 A strong, commercially meaningful outcome in mode 4 will have huge potential benefits for services trade for both developed as well as developing countries. But for now, it remains a contentious issue. BY CATR
T
he services sector is the most important economic sector for a majority of countries when measured as a share of overall production, and is the single largest source of employment. The World Trade Organization’s General Agreement on Trade in Services (GATS), adopted in January 1995, represented the first attempt at the multilateral level to lay the groundwork for services trade liberalization. The GATS mandates WTO members to progressively open up trade in services through successive rounds of negotiations. Part IV text of the GATS talks about the
Progressive Liberalization and the associated text talks of achieving “a progressively higher level of liberalization” through successive rounds of negotiations. However, the level of liberalisation achieved or committed to is quite modest so far. At the same time, since the entry into force of the GATS on January 1, 1995, WTO members around the world have concluded more than 150 regional and subregional arrangements containing disciplines on trade in services. A critical question that must obviously be asked is whether the daunting issues associated with services trade and investment liberalisation
16 | India Business & Trade • December 2019
actually had any impact in causing this shift. Moreover, what are the potential implications for the multilateral trading system, GATS as a vehicle for further liberalization? One of the daunting issues in this regard is the implementation of stringent policy for movement of natural persons through Mode 4. It has been observed that Mode 4 of services is the most restricted and least liberalized when it comes to policy formulation. The importance of trade in services is further underscored when taking into account the principal means of supplying services, which is through a commercial presence abroad,
i.e. Mode 3. This mode accounts for about 60% of world trade in services, compared to 26% for cross-border supply, which is Mode 1, 10% for consumption abroad i.e. Mode 2, and just 4% for movement of persons i.e. Mode 4. Since Mode 3, which also involves FDI, is, overall, the main mode of supply for services trade, services are also the predominant component of FDI. Mode 4 covers only temporary entry and stay in a Member’s territory to supply services and does not interfere with government policies regarding entry and temporary stay of natural persons or even flexibility in application of visa restrictions. Governments are free to regulate entry and temporary stay, provided these measures do not nullify or impair the commitments. Despite this fact, Mode 4 remains more restricted than other modes of services delivery owing to concerns over the implications for labour markets. Many countries allow for the entry of highly skilled labour such as transfers within corporations, while limiting entry for lower-skilled labour, for which developing countries and LDCs have sought an opening. Effective market access for services supplied through Mode 4 could be provided through increased labour quotas, removing economic means tests, or setting clear criteria for such tests. Both the quantity and quality of Mode 4 commitments continue to be limited in the Doha Round offers, restricting the movement of natural persons at all skill levels. With 93% of global migrant stock being economic migrants, including suppliers of services, liberalizing Mode 4 can be a win-win situation for both developed and developing countries. Estimated development gains for developing countries from opening OECD labour markets by 3% will be over US$ 150 billion. A strong, commercially meaningful outcome in mode 4 will therefore have huge potential spill-over benefits for both developed and developing countries and LDCs. Global economies along with
the international community have set an ambitious target in the Programme of Action for the Least Developed Countries for the Decade 2011–2020 (Istanbul Programme of Action) that half of the LDCs should be able to graduate out of the category by 2020 and the share of LDCs in global exports should double by 2020. To achieve those targets, preferential market access for services exports from LDCs is as important as duty-free
WITH 93% OF GLOBAL MIGRANT STOCK BEING ECONOMIC MIGRANTS INCLUDING SERVICES SUPPLIERS, LIBERALIZING MODE 4 CAN BE A WIN-WIN FOR ALL NATIONS
SHARE OF SERVICES TRADE
4%
26%
60%
Mode 1 Mode 3
10%
Mode 2 Mode 4 Source: UNCTAD Report, 2017
and quota-free treatment for their exports of goods. This mechanism will become commercially imperative to LDCs only when the substance of preferences given to them covers sectors and modes of export interest to them, especially in Mode 4 (including low- and medium-skilled services providers), an area in which all LDCs have expressed a keen interest. Meanwhile, it is important to ensure that preferences given to LDCs should be in addition to MFN treatment so as to not raise barriers for other developing countries. From India’s perspective, the Indian IT industry is already experiencing the uncertainty caused by the Hire American-Buy American movement. This is despite the obvious benefits that H-1B workers from India have provided to the US economy. The EU General Data Protection Regulation (GDPR) has also been rolled out last year, which will create challenges for the outsourcing industry. One of the major stumbling blocks in the conclusion of the India-EU free-trade agreement negotiations has been the issue of data privacy, apart from automobiles. Of course, it was also one of the major deal breakers that compelled India to walk out of the RCEP, since other partners weren’t too keen on Mode 4 commitments. In such a scenario, what is the way forward for India? The most practical options remain Mode 3 and Mode 2. India needs to focus on ways to grow its services trade through these modes, as they are still quite liberal.
December 2019 • India Business & Trade | 17
Demystifying India’s daunting hunger problem Despite being a leading producer and exporter of food products, India still ranks abysmally low on the Global Hunger Index. Efficient management of food processing and distribution must be ensured to remedy this situation. BY CATR
A
s a developing economy, India has progressed substantially in the last two decades mainly with respect to its economic growth. With rising proportion of middle class and changing eating habits, the common man’s platter has witnessed a dynamic shift. To further add, India’s cereal produce has continuously surged in the last couple of years from 275.11 million tonnes to 283.37 million tonnes. The decadal growth rate compounded annually for cereal production in India has remained at 2.3%, which indicates a continuous increase in basic food availability per capita. From the trade point of
view also, India has remained a net food exporting economy over the past two decades. In 2014, India’s net agri exports were at US$ 19.54 billion, which slightly plummeted to US$ 15.56 billion in 2018. India is riding high on the agricultural success story it has written over the past few years. On an aggregate basis, India’s agricultural production is in surplus. We import only a few items and are net exporters. The country exports as much as 12 million tonnes of rice. It would seem absolutely inane to think that net food grain availability per person has not increased. There are many definitions of food grains. According to some,
18 | India Business & Trade • December 2019
it comprises only wheat and rice. Others say cereals and pulses are both food grains. When we discuss food grain availability, we discount other important horticultural products. If we look at the aggregate food basket, which includes cereals, vegetables, fruits, coarse grains, milk, meat, eggs and fish, then the per capita availability is very high. At present, we produce more fruits and vegetables than food grains and even consume more. According to APEDA data, India is the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric, black pepper and coffee. It also has the world’s largest cattle population (281 million).
Furthermore, it is the second largest producer of wheat, rice, sugar, groundnut and inland fish. It is the third largest producer of tobacco. India accounts for 10% of the world fruit production with first rank in the production of banana and sapota. We recently achieved selfsufficiency in pulses. SURPLUS OR DEFICIT? Despite being a leading producer and exporter of food products, India’s performance in eradicating hunger remains shockingly abysmal. India’s rank according to Global Hunger Index report of 2019 is 102 out of total 117 countries considered. Economies like North Korea, Niger, Cameroon fared better than India, according to the report mentioned. Neighbouring countries, too, bagged relatively improved positions like Sri Lanka (66), Nepal (73), Pakistan (94) and Bangladesh (88). It is even more startling to learn that India is ranked lower than some sub-Saharan African countries. India’s hunger indicators have a huge impact on the total indicators of the region owing to its large population, as per the index. What could be the issue? Paucity and accessibility of good quality food is one reason, but low quantity of food intake is also a significant factor. When both are present, children grow up abnormally as
INDIA’S AGRICULTURAL TRADE
40 30 20 10 0 2014
2015
2016
Exports
Imports
‘wasted’ or ‘stunted’. Children living in an unhygienic environment with difficulties in access to safe drinking water suffer from water-borne diseases and diarrhoea, which results in underweight children and subsequent wasting. Infant mortality, too, exacerbates the hunger scenario as it is also high at 4.8% due to undernourishment and poor healthcare. When it comes to stunting in children under five, the country has seen a decline, but it’s still high at 37.9% in 2019 from 42% in 2010. Hence undernourishment can be attributed to a large number of reasons, but perhaps the main reason could be persistent low
60% 50% 40% 30% 20% 10% 0% 2005
2018
Net exports
Source: ITC Trade Map, figures in US$ billion
INDIA ON VARIOUS HUNGER INDICES
2000
2017
2010
2019
Proportion of undernourished in the population Prevalence of wasting in children under five years Prevalence of stunting in children under five years Under-five mortality rate Source: https://www.globalhungerindex.org/india.html; values pertaining to indicators identified in the Global Hunger Index report
incomes of households as well as lack of sanitation, potable water, and regular health check-ups. To climb up the hunger index ought to be the top priority for India, which is staking its claim to becoming a global power. Until we solve our hunger problem, we cannot claim to have a surplus in food grains. The US has a policy to first feed its people and livestock, and then export it. India does not have such a policy. On paper India may be a net food exporting country, but we need to explore another angle. If we distribute food grains equally among people during the years of surplus production, we will prove to be in deficit. Instead of producing in surplus then, we are actually struggling to be self-sufficient. States like Punjab, Haryana, Maharashtra, Karnataka and Uttar Pradesh do have surplus production, but poor management leaves many hungry. We do not have infrastructure such as cold storage and transportation facilities to manage surplus produce. The more these states produce, more there is to rot. If the situation persists, India will soon become a net food importing country. Therefore, we should revisit our assumptions of self-sufficiency in food and manage our food processing and distribution more efficiently, so that India is able to effectively address its daunting hunger problem.
December 2019 • India Business & Trade | 19
India’s endless struggle for crude oil security Since India’s dependence on crude oil imports will persist for a longer period of time, diversification of crude sourcing can mitigate the risk of concentrated market power.
I
ndia’s economic progression since 1990 has been sharper than ever before. During, 2000-10, India’s economy added US$ 1.2 trillion compared to US$ 147 billion in the previous decade. During 20112018, the Indian economy added an average of US$ 135.5 billion annually – just US$ 11.5 billion lower than the decadal growth in 1991-2000. Economic transitions fueled by reforms – globalisation, liberalisation & privatisation – supported domestic production & consumption. Higher economic activities invariably necessitated greater demand for energy at all levels; primary energy consumption quadrupled from 191 million tonnes of oil equivalent (MTOe) in 1990 to 809 MTOe in 2018. During the same period, domestic oil production rose from 34 million metric tonnes (MMT) to just 40 MMT and India’s refinery capacity increased from 1,122 thousand barrels per day (KBPD) to 4,972 KBPD. Rising oil consumption and domestic oil production – lower than the expected level – resulted in escalated crude imports. Multiple factors including commercial and geo-political,
influence selection of crude sourcing decision. In 1999-00, India’s top destinations for crude sourcing used to be Nigeria, Saudi Arabia, UAE, Kuwait, Iran, Malaysia, Egypt, and Iraq. Now, Iraq and Saudi Arabia occupy the top positions in terms of crude supply to India. Over the years, India’s crude purchase bucket widened; currently it includes about 45 countries compared to 15 in 1999-2000. India has been heavily dependent on Middle-East for securing its crude import. In 2018-19, India sourced 143 MMT of crude oil from MiddleEast, just over 63% of its total crude import of 226 MMT. Despite all global geo-political developments, Saudi Arabia and UAE remain as the most reliable suppliers of crude oil to India. In 2018-19, with 57.8 MMT, they contributed around 40% of India’s crude import from the Middle-East. Iran and Iraq faced the wrath of the US – the world’s most powerful economy, at different points in time. Similarly, Venezuela – having the richest petroleum reserves (48 billion tonnes) – faces political turmoil on a continuous basis, resulting in sub-optimal oil production. Imposition of sanctions
20 | India Business & Trade • December 2019
by US on Venezuela’s state oil company – Petróleos de Venezuela, government, and central bank are some of the reasons behind declining production in Venezuela. USA’s oil embargo against Petróleos de Venezuela not only hurts Venezuela, but also oil buyers. EU’s recent sanction against Venezuela further complicates the matter. IRAQ India’s old friend Iraq toppled Saudi Arabia as the largest supplier of crude oil in 2017-18. Post the Iraq war, New Delhi has been playing its role in the rebuilding of Iraq, with significant focus on providing necessary assistance in terms of improving quality of life in the country. Owing to US invasion of Iraq in 2003, economic and trade relations between India-Iraq suffered heavily. After significant recovery, the war-ravaged Iraq improved its economic and trade activities with India. Iraq’s exports to India reached US$ 22.37 billion in 2018-19 compared to US$ 2 million in 200506. Import of crude oil constitutes 92.5% of India-Iran bilateral trade. SAUDI ARABIA In 2018-19, India-Saudi Arabia bilateral total trade was valued at US$ 34 billion, to which Indian export and import contributed 16% and 84% respectively. India’s trade
US & RUSSIA India’s struggle for crude oil independence will continue for a longer period of time as import dependence remains central cause of concern. Ensuring mitigation of supply risk seems to be a better choice for the time being. Even construction of strategic petroleum reserves can de-risk for a limited period. Rather than worrying about scarcity, the government and refiners are looking for sweet deals to ensure stable supply from
Import
Total trade
Trade balance
Crude import
Crude import share
Iraq
1,789
22,372
24,161
-20,584
22,265
99.52%
Iran
702
13,526
14,228
-12,823
12,111
89.54%
Saudi Arabia 5,562
28,479
34,041
-22,917
21,381
75.08%
UAE
30,127
29,785
59,912
341
9,512
31.94%
Russia
2,389
5,840
8,229
-3,451
1,181
20.22%
USA
52,406
35,549
87,956
16,857
3,589
10.10%
Venezuela
165
7,259
7,424
-7,094
7,248
99.84%
Angola
282
4,027
4,309
-3,745
3,282
81.51%
Brazil
3,800
4,406
8,206
-606
1,596
36.23%
2,637
Algeria
940
1,697
Total
98,162
152,941 251,103
-757
1,206
71.08%
-54,780
83,372
54.51%
INDIA’S TOP SOURCES FOR CRUDE IMPORT
50,000 40,000 30,000 20,000 10,000 0 i A Ira ra q bi Ir a Ve U an ne A zu E N ela ig e Ku ria M wai ex t ic o An US M go al la ay s Br ia a Q zil at R ar us s Eg ia Al yp ge t Tu ria rk O ey m Su an Ka B dan za run kh ei st a C Ch n ol a om d C on G bia go ha P na G Rep Eq C abo ut an n l a C Gu da am in e ea E ro Az cua on er do ba r ija n
UAE UAE is the largest trading partner from Middle-East with total bilateral trade of US$ 59.9 billion with India. It is one of those countries where India enjoys a slender trade surplus. Crude import is only 16% of total trade and 31.94% of the total import from UAE. So, India’s trade engagement with UAE is more than oil trade. UAE is moving towards a service economy, where India can play an important role.
Value Export (million US$)
ud
IRAN Iran – a conventional ally and friend of India – has been facing sanctions from the US. The 2nd largest supplier of crude in 2018-19 will be gradually taken off the crude basket. Iranian crude import volume and value have come down to 1,974 thousand tonnes and US$ 995 million respectively in April-August 2019. Loss of Iranian crude could be compensated by sourcing from US, Russia, Iraq, and Saudi Arabia.
India’s trade with select countries in 2018-19
Sa
deficit amounting to US$ 22.9 billion with Saudi Arabia is a concern but it provides crude oil supply comfort. It is expected that in the near future India’s oil dependence on Saudi Arabia would increase, thereby widening the trade deficit. Currently, only ‘cereals’ exports touch the US$ 1 billion mark to Saudi Arabia. India must explore avenues for enhancing exports of vehicles, articles of steel, copper, iron, ceramic products, apparel & clothing, man-made staple fibers, organic chemicals, and petrochemicals to the Kingdom.
1999-00
2009-10
2018-19
2019-20 (Apr-Aug)
Source: Department of Commerce, figures in thousand tonnes
international market. Diversification of crude sourcing mix offers opportunity to mitigate risk of concentrated market power. Market structure and dynamics indicate that to a greater extent, Indian consumers have begun to strengthen ‘buyer power’ (refiners). Due to improvement in technology, logistics, and gain in learning experience, refiners are in a better position to derive value from the crude oil available across the globe. Hence, today ‘Maya’ crude and Russian crude make economic sense to Indian refiners. Higher crude import from the US is bound to improve India-US trade ties. Similarly, Russians investing in
the oil & gas sector in India would certainly bring more crude to the country. These two new sources could reduce the overdependence of India on any crude supplier. SANJAY KUMAR KAR Associate Professor*, Rajiv Gandhi Institute of Petroleum Technology. ROHIT BANSAL Assistant Professor*, Rajiv Gandhi Institute of Petroleum Technology. *Department of Management Studies
December 2019 • India Business & Trade | 21
COVER STORY
22 | India Business & Trade • December 2019
NEXT BIG DEAL
CATR presents a comprehensive analysis of potential partners India should engage with more actively, after its hotly debated exit from the RCEP deal.
I
ndia’s withdrawal from the RCEP trade deal in November 2019 wasn’t entirely unexpected, though it continues to be questioned by many trade experts. If concluded successfully, RCEP would be the world’s largest trading bloc – constituting half the planet’s population, 30% of global GDP and 40% of global trade. For India, there were opportunities for greater market access, resolution of trade issues, and connecting to powerful regional value chains of East Asia. But one must note that India’s trade deficit with RCEP nations in 2018-19 at US$ 105 billion was higher than its trade deficit with the world (US$ 104 billion). Even if partner countries agreed to Mode 4 commitments, trade gains in services would fall well short in terms of balancing the rise in trade deficit. The potential increase in imports, especially from China, is worth considering, as it means risking the future of Indian SMEs as well as millions of farmers.
However, this impasse is not the end of negotiations, and India would continue to press on its terms that include keeping 2019 as base year for tariff reductions, different tariff concessions for China, strict rules of origin and auto trigger mechanism to prevent a surge in exports. Engaging bilaterally with RCEP members is important even as other RTA negotiations continue parallelly. An obvious concern that emerges is about India’s level of preparedness to engage with the world on its terms. India’s position is not, and shouldn’t ever be against free trade agreements in principle. They are necessary in a dysfunctional multilateral trade framework at WTO, and can bring several benefits in terms of higher trade volumes, economic growth, employment and also the much needed push to competitiveness. So India should pursue agreements, but with extreme caution and diligence. The first level of this diligence involves a selection
of the right partners. TPCI’s Centre for Advanced Trade Research (CATR) has identified five such key countries/regions – US, European Union (EU), Gulf Cooperation Council (GCC), Eurasian Economic Union (EAEU) and Africa. CATR has analysed them in terms of their trade complementarity index (TCI) and Trade Intensity Index (TII), from the perspective of India’s exports. Our analysis concludes that these diverse regions have good potential for India to enhance its exports in key sectors. Moreover, given India’s past trade trends and import basket vis-à-vis these geographies, there is lesser risk of damage to India’s domestic industry from an import surge, as is the case with RCEP. Provided pending issues are resolved, agreements with these regions can catalyse India’s trade growth, and also better prepare the domestic industry for a contentious agreement like the RCEP in the coming years.
December 2019 • India Business & Trade | 23
Uneasy eagle & elephant tango A limited trade deal that addresses immediate concerns and paves the way for further dialogue will be fruitful for both nations.
I
ndia and US remain uneasy partners on the multilateral forum, being on opposite ends of issues like subsidies, e-commerce and S&DT. US has withdrawn GSP benefits to India, resulting in retaliatory tariff action by the latter. But India and US have more in common than they would openly admit, beyond being the world’s largest and oldest democracies respectively. The very fact that India and US walked out of the two mega ‘regional’ trade agreements of this decade (RCEP and TPP) is enough to give you food for thought. US was India’s top export destination in 2018-19 with exports of US$ 52.41 billion, along with the highest trade surplus of US$ 16.86 billion from India’s perspective. US has a Trade Complementarity Index of 94.2 when it comes to exports from India. Even the Trade Intensity Index score is greater than 1, showing that India’s exports to US are greater than expected, given India’s importance in world trade. The USISPF estimates that bilateral trade will grow to US$ 238 billion by 2025, from US$ 90 billion presently. This means greater potential for India, particularly in sectors like automotive, pharmaceuticals, seafood, IT and travel services. For US, this implies better prospects in defence, commercial aircrafts, oil and LNG, coal, machinery and electronics. Issues often expressed by US vis-à-vis its India partnership have to do with market access for farming and manufacturing products, dairy products and medical devices as well as import duty cuts on some products like motorcycles, whiskies and ICT. American firms have also expressed their reservations on subsidies, e-commerce and data protection norms as well as India’s IP regime. They would also want India to withdraw the retaliatory hike in tariffs on 29 US export products.
INDIA-US TRADE (2018)
Trade Complementarity Index
94.2
Trade Intensity Index
1.18
India’s exports to US (US$ billion)
51.6
India’s imports from US (US$ billion)
24 | India Business & Trade • December 2019
32.6
India, on the other hand, would look at greater market access for various sectors like engineering, agriculture, automobiles and auto components and a cut in duties for some steel and aluminium products; apart from restoration of GSP benefits and IP protection for key industries like software, pharma and entertainment. On the services front, India is seeking reduced complexity in H-1B norms, which have got tougher under the Trump administration. The US argues that India’s average tariffs are high, but practically this may not be true. The large difference between India’s actual average tariffs and its MFN trade-weighted applied average tariffs arises inter alia due to the several exemptions and concessions that it provides on its MFN tariffs. The two countries also have differing perspectives on harmonisation of standards. A key sector where US has been requesting market access is dairy products. However, the US is unable to certify that its dairy products do not come from cattle fed with ruminant material. Given that countries like EU, Australia and New Zealand are able to give this certification, there is significant possibility of working this out. On the other hand, Indian fresh and cooked meat products are not allowed in US on grounds that the former’s meat inspection system is not at par. India argues that it is meeting similar requirements as imposed by Japan and EU. While they work around these niggling issues in agri trade, there is significant potential for partnership in food processing technology, where US is a leader. As US counters India’s policies on e-commerce regulations and data protection norms, it must appreciate that countries across the globe
are evolving their policies in this arena. This is especially relevant since global e-commerce trade is dominated by large corporate entities housed in a few countries, who aggressively lobby for their interests. Conclusive negotiations on e-commerce, could be a major step forward, since they could also serve as a template for its resolution at the WTO. India should firmly put up its concerns on tightening H-1B visa norms impacting its tech firms in the US. Around 70% of H-1B recipients in the past decade have been Indians. Research by American Immigration Council has concluded that H-1B workers complement US workers, fill employment gaps in many STEM occupations and expand job opportunities for all. It counters the general perception that the programme is detrimental to interests of American natives. In fact, between 1990 to 2010, the increase in STEM workers through H-1B has been found to be positively correlated with an increase in wages for collegeeducated Americans across 219 US cities. A 1% point increase in foreign STEM workers’ share of a city’s total employment is linked with a rise in wages by 7-8% points for both STEM and non-STEM collegeeducated natives, and 3-4% points for non-college educated Americans. There could also be a push by India for easier access for sectors like accounting and paralegal services. Lastly, US has designated India
Indian PM Shri Narendra Modi with US President Donald Trump
as one of the most difficult places in the world for the protection and enforcement of IP. It has kept India on its Priority Watch List in its Special 301 report this year. While India claims compliance with multilateral norms and promotes access to technology, the US has been critical of high import duties on sectors like pharma as well as medical devices, solar energy equipment, ICT products & capital goods. India has normally treated this report as a unilateral perspective of US. Developing countries like India have worked hard on gaining flexibilities on patent rules in situations involving public health. Providing some protection to generic drug makers is important to keep
INDIA’S BILATERAL TRADE WITH US
60 50 40 30 20 10 0
2014
2015 India’s exports to US
2016
2017
2018
India’s imports from US Source: ITC Trade Map, figures in US$ billion
TEN FOCUS AREAS FOR EXPORTS BY INDIA TO US 1. Diamonds 2. Pharmaceuticals 3. Jewellery of precious metals 4. Automobiles 5. Ready Made Garments for Women/Girls 6. Rice 7. Unwrought Aluminium 8. Tableware and Kitchenwares 9. Flat-rolled products of iron or non-alloy steel 10. Crustaceans prices under control. This is at odds with the Big Pharma lobby in the US, which seeks greater access to developing markets. However, India’s legal rights and flexibilities on public health obligations are protected by the TRIPS agreement. India and US are reportedly close to a trade deal, expected to be finalized before the end of this year. Disagreements over e-commerce, data protection and IPR could prevent a larger trade agreement from happening soon, but the two sides can secure concessions on issues like standards harmonisation and tariffs on some products as well as H-1B visas. This is important to move the dialogue forward, which is imperative given the immense potential of Indo-US trade.
December 2019 • India Business & Trade | 25
Still a work in progress? EU has been quite active on trade deals lately, but differences on NTBs, investor protection, data security, IP, e-commerce, apart from tariffs, continue to stall India-EU BTIA talks.
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he EU represents a mega economy as a bloc with a GDP of US$ 18.8 trillion in current US$ (World Bank) and GDP per capita of € 25,000 across a market of 513 million consumers. It is also the world’s largest trading bloc and is considered to be one of the most open markets, with 70% of goods entering at low or zero tariffs. Out of the world’s top 20 nonfinancial MNCs ranked by foreign assets, 12 are from the EU. The EU is the largest investor in India with US$ 81.5 billion of cumulative FDI. Currently, close to 6,000 EU companies are present in India, providing direct employment to 1.7 million workers and indirect employment to 5 million. There is still a large difference between Indian and EU economies in terms of aggregate and per capita GDP. However, strong growth recorded by India in recent years has made it the world’s seventh largest economy by nominal GDP. The Indian economy almost grew over eight times faster than the EU during the last decade. In 2018-19, India’s economy grew at a healthy pace of 6% plus, giving competition to Chinese economic growth.
EU literally prides itself as being one of the most pro-free trade regions in the world. In 2015, the European Commission committed to annual reports on the region’s progress with respect to Free Trade Agreements. EU has concluded and started applying new trade agreements with Ecuador, Canada, Japan, Economic Partnership Agreement (EPA) with Southern African Development Community (SADC), interim EPAs with Ghana and Côte d’Ivoire and the Deep
INDIA-EU TRADE (2018)
Trade Complementarity Index
84.96
Trade Intensity Index
0.55
India’s exports to EU (US$ billion)
57.4
India’s imports from EU (US$ billion)
26 | India Business & Trade • December 2019
52.1
and Comprehensive Free Trade Area (DCFTA) with Ukraine. Recent progress is even more impressive. In 2018, 31% of EU trade in goods with world was covered by preferential partners. With the addition of more trade agreements this year, the figure is expected to increase further to nearly 40%. However, India-EU trade agreement negotiations have remained inconclusive, despite negotiations for a broad-based FTA (BTIA) being launched in June 2007. After 12 formal rounds and several technical meetings, negotiations were brought to a de facto standstill in 2013, due to mismatch of interests. Again, discussions have restarted to assess if sufficient progress can be made on key outstanding issues before considering a possible resumption. In 2018, India’s bilateral trade with EU stood at US$ 110 billion and it has a small trade surplus with the region. The EU’s main exports to India are pearls and precious stones, machinery, nuclear reactors, electrical and electronics equipment, optical photo equipment, aircraft and spacecraft, iron and steel, etc. Interestingly, the top 10 among these account for three fourths of the EU’s exports to India. Trade complementarity is reasonably high at 84.96, but the trade intensity score is rather low at 0.55. This shows that India is exporting much less than would be expected to the European Union. It is also apparent that India is not a large export destination for EU. However, India relies heavily on the EU for mainly machinery and nuclear reactors; optical and photo equipment; aircraft and spacecraft and vehicles other than trains. The EU may point to these sectors as showing potential for further growth during FTA negotiations. Further, EU’s top imports from India include mineral fuels, oil, distillation
products, organic chemicals, articles of apparel, accessories, etc. The share of these sectors is very small in EU’s total imports, suggesting that the EU prefers to look towards other sources. Already, India faces a significant disadvantage in apparels vis-a-vis Bangladesh (which has LDC status) and Vietnam (which now has an FTA with EU). Indian exports have suffered significantly due to non-tariff barriers such as SPS and TBT in the EU market. Stricter labelling, trademarks and MRL issues have cropped up, leading to stalling of Indian shipments. The EU has been imposing stringent labeling requirements and trademark norms, for instance, which have dented India’s agri exports. The EU stopped shipments of Alphonso mangoes, brinjal, taro, bitter gourd and snake gourd from May 1, 2014 to December 2015 citing pesticide issues. This impacted exports worth millions of dollars. Basmati rice exports from India dropped by 38.3% YoY to reach US$ 226.7 million in 2018-19. According to the Global Trade Alert Database, EU has implemented 642 harmful trade interventions that have impacted India between 2009 and 2019. Top sectors impacted were basic organic chemicals, motor vehicles, pharma and vegetables. Like US, EU is also expecting India to adopt a tougher IP regime, especially for the pharma sector, well beyond its current commitments to the WTO. EU has been sticky on tariffs for auto and auto parts, wines and spirits, agriculture products, services and rules of origin, apart from a stronger IP regime and a chapter on sustainable development. It is also looking for a comprehensive investor-state dispute settlement (ISDS), after India cancelled 20 bilateral investment protection treaties with different EU countries in 2016. India wants access for Mode 4 services and status of a data secure nation, so that its software players can benefit from reduced compliance costs. But EU nations may not be very keen on allowing Mode 4 access, as they are still
INDIA-EU BILATERAL TRADE FIGURES
70 60 50 40 30 20 10 0
2014
2015
2016
2017
2018
India’s imports from EU
India’s exports to EU Source: ITC Trade Map, figures in US$ billion
in the midst of a migration crisis coupled with economic slowdown. An Investment Facilitation Mechanism (IFM) for promoting EU’s investments in India was set up in July 2017. Under this mechanism, EU’s delegation to India and Department for Promotion of Industry and Internal Trade (DPIIT), are holding regular meetings to facilitate ease of doing business for EU investors. Invest India has created a single-window entry for EU companies that need assistance at the central or state level. EU also remains an important investment destination for India. According to RBI, EU was the second largest recipient of Indian FDI in 2018 after Singapore, amounting to US$ 4.4 billion, which accounts for 23%. EU-India trade in services reached US$ 37.6 billion in 2017 according to Eurostat figures.
TEN FOCUS AREAS FOR EXPORTS FROM INDIA 1. Diamonds 2. Pharmaceuticals 3. Turbojets and Gas Turbines 4. Footwear 5. Ready Made Garments for Women/Girls 6. Knitted Vests and T-Shirts 7. Automobiles 8. Crustaceans 9. Synthetic Filament Yarns 10. Processed & Value added food
Out of total services imported by EU from India, 46% comprise of other business services, which includes outsourcing services. On the other hand, 84% of EU’s services exports to India comprise telecom, IT, transport, travel and other business services. At the EU-India summit during October 2017, the leaders expressed their shared commitment to relaunch the negotiations for a comprehensive and mutually beneficial FTA. Drawing inspiration from conclusions reached at the summit, the Business Support to the EU-India Policy Dialogues project aims to spur enhanced bilateral business cooperation. This project looks to tap into opportunities in areas like environment, energy, climate, mobility, urbanisation and ICT, where we already have advanced cooperation. But protracted negotiations between the two partners show that it will not be easy to reconcile their differences. Issues on investment, e-commerce, IP and data protection may continue to cast their heavy shadow on negotiations, even if some of the tariff issues get resolved. Both sides may have to adopt a highly accommodative approach to arrive at a consensus agreement. At the minimum, simplification of norms and mutual alignment of standards to enhance ease of doing business may be a good place to start.
December 2019 • India Business & Trade | 27
Heads we win. Tails, no one loses! India-GCC business relations have progressed extremely well despite stalled talks for a trade agreement. Early conclusion of the same will be extremely beneficial to both regions.
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he Gulf Cooperation Council (GCC) region has become increasingly strategic for India over the past few years. It has always been a prime source of India’s energy needs, accounting for 33% of India’s mineral fuel imports in 2018-19. Between 2006-2016, the share of GCC countries in India’s exports doubled. US stake has progressively reduced in the region due to a higher degree of energy selfdependence; compelling GCC countries to widen their engagement
with other emerging powers. In this regard, India’s expanding trade gives it a strong stake in relations with the GCC in areas of defence, protecting lines of communication as well as combating piracy and drug trafficking. Moreover, any instability in the region is a major issue of concern for India, due to the presence of the huge Indian diaspora in this region. India’s trade with the GCC was pegged at US$ 121.3 billion in 2018. Exports of India to GCC stood at US$ 41.6 billion while
imports reached US$ 79.7 billion. Mineral fuels dominate the import basket, accounting for US$ 55.67 billion or 70% of India’s imports from the region by value. The next most imported category of natural or cultured pearls accounts for just around 10%. Exports by India are more diversified, led by natural or cultured pearls (US$ 10.6 billion); mineral fuels (US$ 7.5 billion); electrical machinery (US$ 2.36 billion); cereals (US$ 2 billion); ships, boats and floating structures (US$ 1.8 billion); and articles of apparel and clothing, not knitted or crocheted (US$ 1.5 billion). This also shows that while India is a major crude oil importer, it is also exporting a significant value of petrochemical products to GCC countries. The GCC region scores very high on both trade complementarity (99.52) and trade intensity (4.66) when it comes to exports from India. Going forward, India has a high potential for export growth in rice, processed food products, plastic and rubber products, chemical products, spices, non-ferrous metals, textiles and RMG products, tea, machinery and instruments and pharmaceuticals. The GCC
INDIA-GCC TRADE (2018)
Trade Complementarity Index
99.52
Trade Intensity Index
4.66
India’s exports to GCC (US$ billion)
40.53
India’s imports from GCC (US$ billion) Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi
28 | India Business & Trade • December 2019
77.68
region also scores relatively better in terms of harmful trade interventions affecting India, which number 103 between 2009 and 2019; with iron & steel and plastics being the most affected product categories. A major issue that emerged with Saudi Arabia recently was regarding minimum residual levels (MRL) in Basmati Rice. This has a severe impact on the industry, since Saudi Arabia is the second largest importer of Basmati Rice from India. Within the region, UAE and Saudi Arabia count among India’s top five exporting partners and dominate India’s trade with the region. UAE, which conferred the Order of Zayed Award (UAE’s highest civilian award) to Indian PM Shri Narendra Modi recently, is India’s second largest export destination after the US, with exports recorded at US$ 30.12 billion in 2018-19. India has much more potential to explore vis-à-vis Saudi Arabia on the other hand, where exports were just around US$ 5.6 billion during the year. When we compare UAE’s largest sources of imports, India ranks second after China, accounting for 8.8% of UAE’s total imports. But in the case of Saudi Arabia, India’s share is much lower at 4.2% and it was ranked 5th among top exporters to the country in 2018. Exports to Qatar were at US$ 1.6 billion during the year, while Bahrain, Oman and Kuwait don’t even feature among India’s top 25 trade partners. But judging by announced intentions of just these two countries for investments in India, you will get an idea of an immense strategic shift. The largest GCC investing country for India, UAE, has invested US$ 6.7 billion between April 2000 and June 2019, but has committed US$ 75 billion in India over the next few years. Abu Dhabi National Oil Co (ADNOC) signed initial pacts to build strategic underground oil reserves in Mangalore and Padur last year. Key focus sectors of investment for UAE include renewable energy, food, ports, airports and defence manufacturing. Saudi Arabia, on the other
INDIA’S BILATERAL TRADE WITH GCC
100 90 80 70 60 50 40 30 20 10 0
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2015
2016
India’s exports to GCC
2017
2018
India’s imports from GCC Source: ITC Trade Map, figures in US$ billion
hand, is looking to invest US$ 100 billion primarily in petrochemicals, infrastructure and mining. Saudi Aramco’s investment for 20% stake in the refining and petrochemical business of Reliance Industries, is an indicator of the growing strategic nature of the investment partnership. To put this in perspective, Saudi Arabia has just invested US$ 228.9 million in India between April 2000 and June 2019. Indians living and working in GCC region are indeed the most critical aspect of our relations with these countries. India has the largest diaspora in GCC estimated at over 8 million, which plays an enormous role in the functioning of these countries. In UAE, the Indian diaspora at 2.6 million accounts for around 30% of the population. India is the largest receiver of remittances globally at US$ 79 billion in 2018. UAE (US$ 13.8 billion), Saudi Arabia (US$ 11.2 billion), Kuwait (US$ 4.6 billion), Qatar (US$ 4.1 billion) and Oman (US$ 3.3 billion) are among the leading contributors. As GCC economies look to diversify beyond oil, India’s strengths in services and low cost, efficient and English speaking human resource pool would play an increasingly important role. A report by HSBC projects India’s services exports to UAE to grow at a CAGR of 11%, ultimately eclipsing Saudi Arabia as UAE’s largest source of services. The Gulf is already a vivid reminder of India’s growing
TEN FOCUS AREAS FOR EXPORTS FROM INDIA 1. Rice 2. Processed food products 3. Plastic and rubber products 4. Chemical products 5. Spices 6. Non-Ferrous metals 7. Textiles and RMG products 8. Tea 9. Machinery and instruments 10. Pharmaceuticals soft power, being the top market for Indian films & accounting for 25-30% of overseas box office collections of Hindi movies. This market is expected to grow further in coming years, with Saudi Arabia allowing the opening of cinemas last year. India had entered into a Framework Agreement on Economic Cooperation with GCC in 2004. Only two rounds of negotiations were held in 2006 and 2008. Till date, there is no progress as the GCC has deferred all its negotiations, though India is pressing for an early conclusion. Industry and agricultural products from India have a huge potential, due to high degree of complementarity, and the GCC’s relatively non-diversified industrial base. Moreover, a trade agreement could give a great boost to SME exporters from India. Overall, given that trade imbalance is minimal, and bilateral trade and investments have progressed extremely well in the natural course of things, this FTA should be an obvious priority.
December 2019 • India Business & Trade | 29
A partnership for the future As growing economies at the centre of global attention, both India and Africa need to actively explore potential for exploiting mutual synergies.
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espite being one of the world’s most resource-rich nations, Africa accounts for just around 2% of global trade. It also has the lowest percentage of intra-regional trade globally at 18%. But at current levels of economic growth, most African countries are expected to reach middle income status by 2025, according to the World Bank. It is not surprising that Africa is the focus of attention for countries across the world. The signing of African Continental Free Trade Area (AfCFTA) this year between 54 African countries is considered a major step forward. It is expected to increase intra-Africa trade by 52.3% by 2022. This is also expected to boost investment as it will help manufacturing companies build scale across borders. India’s exports to Africa stood at US$ 28.5 billion in 2018-19, a CAGR of nearly 14% over the past two decades. Exports are led by mineral fuels, vehicles, pharma products, nuclear reactors, cereals and electrical machinery. Africa is the market for around 20% of India’s pharma exports. India is also playing a major role in helping bridge the
INDIA-AFRICA TRADE (2018)
Trade Complementarity Index
99.4
Trade Intensity Index
2.79
India’s exports to Africa (US$ billion)
26.95
India’s imports from Africa (US$ billion)
41.51
TEN FOCUS AREAS FOR EXPORTS FROM INDIA 1. Rice 2. Pharmaceuticals 3. Motor vehicles and parts 4. Chemicals 5. Ferrous products 6. Raw plastics 7. Textiles and RMG products 8. Metal products 9. Sugar 10. Processed food
India hosts thousands of African students every year
30 | India Business & Trade • December 2019
digital divide, is a key partner for a number of development projects and host to thousands of African students every year. Conversely, mineral fuels account for 59% of Africa’s exports to India of US$ 41.1 billion during the year. India’s Trade Intensity Index score with Africa is quite high at 2.79. Africa also scores high on the Trade Complementarity Index (99.4). A joint report by African ExportImport Bank (Afrexim Bank) and the Export-Import Bank of India (Exim India) in 2018 concluded that there are a number of avenues for trade expansion between the two regions. The export potential of the top 25 products identified in this analysis is in excess of US$ 35.1 billion. India and Africa need to sort out some major impediments to growth in bilateral trade and investment. Among the most prominent constraints for India in Africa are lack of sustainable finance support and weak infrastructure. On the other hand, many least developed countries (LDCs) in Africa have not been able to take advantage of the Duty Free Tariff Preference Scheme (DFTP) offered by India due to low awareness. DFTP could be also further extended to the entire African region in order to boost trade and investment. As growing economies, both India and Africa need to explore potential for exploiting mutual synergies. Exports from Africa have the potential to evolve beyond crude oil and primary commodities to manufactured, non-traditional and agro-processed products. India can also greatly enhance its exports of manufactured products and services to Africa with the help of an FTA. Moreover, with India moving up the value chain on technology, exports of technology and IP-based products from India to Africa could also witness an increase in the coming years.
Gateway to better horizons India and EAEU have strong trade complementarity, but trade is way below potential.
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he EAEU, which is a free trade bloc including Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, has a population of 183 million and an annual GDP (PPP) of US$ 5 trillion. India and EAEU signed a joint declaration on launching negotiations for an FTA at St. Petersburg International Economic Forum on June 3, 2017. A joint group conducting a feasibility study on the FTA concluded that mutual liberalisation of trade would lead to GDP increase in all EAEU countries and India. In September 2019, the two sides announced completion of preparations for negotiations. Besides the trade boost, EAEU also opens up new vistas for India in Central Asian markets. Current Indian trade with Russia stands at around US$ 10 billion, and both sides are already looking to expand this trade to US$ 30 billion by 2024. Russia is eagerly supporting Indian investments in its Far Eastern region (with its mineral opportunities) and Siberia, as well as cooperation in the Arctic region. With Chabahar Port in operation, an FTA will help India leverage the improved connectivity on the North-South International Transport Corridor to transport its goods to Azerbaijan and Russia. EAEU is highly interested in enhancing its agricultural exports including cereals, vegetable oils, vegetables, beverage, including bottled mineral water to India, apart from industrial exports like fertilizers, machinery and equipment, vehicles, some types of turbojet engines, salt, steel products, timber, chemicals, rubber and plastics. India’s trade complementarity index with EAEU is the highest among the five regions at 99.97. But the trade intensity index is quite low, however, at 0.48 in 2018, showing that there is significant potential to be tapped. India’s exports to EAEU stood at US$ 2.6 billion in 2018,
Indian Prime Minister Shri Narendra Modi with Russian President Vladimir Putin
INDIA-EAEU TRADE (2018)
Trade Complementarity Index
99.97
Trade Intensity Index
0.48
India’s exports to EAEU (US$ billion)
2.58
India’s imports from EAEU (US$ billion)
7.82
TEN FOCUS AREAS FOR EXPORTS FROM INDIA 1. 2. 3. 4. 5. 6. 7. 8.
Pharmaceutical products Meat and meat products Auto components Plastic products Textiles and RMG products Pearls and precious stones Oilcakes New pneumatic tyre of rubber 9. Preserved and fresh fruits and vegetables 10. Footwears
while imports were at US$ 7.82 billion. Imports are led by mineral fuels, natural or cultured pearls, fertilisers and ores. Exports from India are led by pharma (US$ 478 million) electrical machinery (US$ 249.1 million) and coffee, tea, mate and spices (US$ 159.7 million). Respondents in a FICCI Survey admitted that an India-EAEU FTA could help in the following areas diversification of the trade basket; provision of necessary framework to help alleviate trade barriers; improved logistics & connectivity, better consular regime and making India a hub for knowledge-based services. Main barriers identified for Indian exporters were financial issues (60%), logistics and connectivity (24%) and market access issues including import duties and customs barriers (22%). Ironing out these issues should give a much desired boost to trade. Besides enhancing exports, accessing resources and leveraging a gateway to EU, India would also look to benefit from advanced technology capabilities of EAEU nations in aircraft engineering, metallurgical engineering, chemical industry and smart cities.
December 2019 • India Business & Trade | 31
“India needs more preparedness and assessment of its competitiveness” IBT: How do you view India’s highly debated decision to withdraw from RCEP? Prof Sachin Chaturvedi: It was not easy for the government and for the Prime Minister, in particular, to keep away from the joining of RCEP. It was an extremely difficult moment. It was courageous on the part of the PM to come out of it. As a nation, we should acknowledge this move, realizing that more preparedness would be required for global competitiveness. Explicitly, it was not an easy decision. India’s withdrawal from RCEP does not bring down the quality of the agreement, given that all other members except India were in some sense committed to regional FTAs with each other and additional commitments as part of the RCEP deal would be readily absorbed. India also has bilateral agreements with ASEAN, Singapore, Japan and South Korea. India so far has not signed any trade agreement with China, Australia and New Zealand. India’s review of its trade agreements in the region and working closely with the partners should enable it to leverage the commitments it seeks from the RCEP members. IBT: How can India’s concerns related to the potential of rising imports be addressed? SC: Systemic course correction is required. There were 28 rounds and two heads of state level summits. Our preparedness through resolving the issues with the sectoral agencies should have been up to the mark and full proof. A main area of concern for competitiveness of Indian products is post-production costs. Besides, we should also asses our ability to meet our infrastructure deficit. IBT: Given India’s unique economic trajectory and business ecosystem, what can India gain from getting on
signed in the past. FTAs are a good instrument for enhanced connect with other economies. They have also enhanced effectiveness and efficiency. India should review its FTA policies. However, having faced difficulties in leveraging the RCEP, it is natural that India now needs more preparedness and assessment of its sectoral competitiveness and gains, when it comes to negotiating FTAs with advanced country markets.
Prof Sachin Chaturvedi, Director General at the Research and Information System for Developing Countries (RIS), feels that India needs to carefully reassess its approach to RTAs and the specific fears of domestic industry board the RCEP? SC: There are two to three tracks to remain engaged with RCEP member countries. The first and foremost is to engage with them bilaterally. Much more diplomatic efforts are required to remain engaged with the process of RCEP itself for arriving at a solution in the near future. In no circumstances, should India give out any impression that we are withdrawing from one of the most dynamic regions of the world. IBT: What should be the blueprint for India in other global trade agreements going forward, assuming that it continues to stay out of the RCEP deal? Is India prepared to engage with other potential FTA partners? SC: India’s should revisit its policy of free trade agreement. The trade quantum has gone up; imports and exports have also gone up in the case of all the FTAs that India has
32 | India Business & Trade • December 2019
IBT: As it has decided to move out of RCEP, which key trade agreements should India now pursue aggressively in the current context for enhancing its external trade, and why? SC: It is not true that India has moved out of the RCEP and it is only buying time. India is not looking at disengaging from the RCEP as a region. Equally important is to see how Indian institutions have fallen in line with global commitments that have geo-strategic and geo-political implications. Production and post production competitiveness of Indian products has to be boosted to promote exports, which remain critical to maintain a favourable balance of payment situation and create jobs. IBT: There is a general consensus that the window is fast closing for Indian industry to boost its competitiveness if it stays out of any major trading blocs? How can this be addressed? SC: Within the country, open dialogue consultation should be held with the sectoral interlocutors such as, diary industry, automobile components, IT industry, agriculture commodities, etc. We should draw out clear lessons out of the consultations and understand the precise scope and contours of their fears. We also need to identify ways and means to come out of that.
“RCEP could make possible the success of the ‘Make in India’ programme” IBT: What is your view on the benefits and drawbacks for India if it takes up RCEP membership, given its huge trade deficit of over US$ 100 billion with RCEP nations? Dr. Amita Batra (AB): I see many benefits as far as India’s entry into RCEP is concerned. The biggest benefit is that this becomes the entry point for India to enter global and regional value chains. Secondly, there is no doubt that this is the most economically dynamic region in the world today. So, connecting with this region through value chains and this trade deal is likely to be highly beneficial for the country. I don’t think that one should be looking at deficits as far as individual nations are concerned. It’s not really the bilateral deficits that matter; but an overall deficit that makes a difference. If India is able to enter the RCEP, & through it, into the regional and global value chains, then, that entry could make possible the success of the ‘Make in India’ Programme, promote its manufacturing sector and boost India’s exports. That would be a mechanism to correct the deficit, rather than being worried about it for not entering the RCEP. IBT: What are your views on the fears of dumping of goods by China and capturing of India’s dairy sector by New Zealand & Australia? AB: I think that the government has done very well to evolve trigger mechanisms to safeguard the industry from import surges. Moreover, the WTO, too, has these mechanisms included in international trade agreements to watch out for import surges from some specific countries. We could also have separate mechanisms for imports from those countries, where imports in sensitive sectors are likely to be greater. So, it is really important for us to negotiate the agreements in order to extract the benefits for ourselves.
At a time when dark clouds are hovering over India’s RCEP membership, JNU’s Dr. Amita Batra counters that RCEP could be a key platform to enhance India’s participation in regional and global value chains.
IBT: What are the considerations that India should keep in mind, if it ultimately decides to go ahead? AB: The government would have had meetings with the stakeholders and done its share of background research for this deal. Sensitivities have to be analyzed in terms of identifying these sectors. Research needs to be done when it comes to drawing safeguards for these sectors. On a broader level, we feel the MSME sector will be impacted; I think we should have special packages for these industries that could be drawn along with RCEP, which the government can announce to take care of them. For example, we could draw financial packages for them to enable easy credit access. Also, in any trade agreement, there are some sectors that will lose and some sectors that will win. We need to calculate which sectors would be negatively impacted,
and which are the ones that would get competitive advantages in the longer run. The trade agreement will play itself out dynamically in the medium term. As it progresses, the outcome would be very different from that which we predict ex ante. We have to be ready to adjust and accommodate accordingly through policies like financial packages for MSMEs and reskilling of labour deployed in the losing sectors and fostering their employment in the winning sectors. So, we need constant research as well as constant monitoring in the context of the trade agreement panning itself out. These are some of the mechanisms that we should be evolving in order to take advantage of the agreement. IBT: India’s stance for greater mobility of professionals is not being accepted by RCEP professionals. Why is this a sour point among countries and what can be the way to resolve this impasse? AB: My view is very different as far as India’s Mode 4 is concerned. There are overlaps as far as comparative advantages of the ASEAN countries in some category is what we are asking for. I’m not privy to what the negotiations are, so I don’t know what sectors we are asking in the context of Mode 4 mobility. I think we should not be excessively focusing only on Mode 4 as far as services liberalization is concerned because we have advantages in many other services sectors. We will also evolve our service sector advantages as we move along the implementation of the FTA because new services will be created as our value chain participation is enhanced. So, there are services associated with manufacturing where we may have advantages. The government should identify these. A lot of background technical work needs to be done to take advantage of the FTA.
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“India-China trade deal could be a stepping stone to RCEP” IBT: While 15 countries have concluded negotiations on all 20 chapters of RCEP, India has decided to stay out. How do you view the future of RCEP sans India? Prof Manoj Pant: India’s opting out of RCEP was expected. The larger objective of the RCEP was meant to be China’s response (economic and political) to the Trans-Pacific Partnership (TPP), which the US has now opted out of. However, India does not share Chinese political estrangement with US, which is reflected in the ongoing USChina trade war. It is my belief that once the trade war ends (which may be sooner than expected), China may lose interest in RCEP. At the same time, India has had political differences with China in the sub-continent and also on issues in the South China seas. Hence, there is no strategic objective for India being part of the RCEP at this point. For the RCEP countries minus India, the standard trade pattern has been exports of intermediates/inputs to China, which are then assembled for exports of final product to the markets of the EU and US. This trade is large and will continue, so that RCEP minus India merely restates the current trade pattern in these countries. IBT: India has not signed RCEP due to certain concerns like rising imports from China and mobility for services professionals. Are these concerns addressable? If so, how? MP: It is very clear that India’s manufacturing sector has been protected from external competition, even from producers in South and South-East Asia. It is not surprising that 80% of India’s trade deficit is with ASEAN and China. This is mainly because India’s average manufacturing tariffs are high compared to these countries and any agreement to reduce the traffic will give a greater price advantage to exporters from the RCEP
Indian manufacturers.
Prof Manoj Pant, Director, IIFT, asserts that RCEP does not provide any immediate gains to Indian manufacturers, but India must explore RTAs, as they will allow gradual adjustment to competitive forces in a multilateral setting. countries. India’s bargaining power and advantage at the moment seems to lie in services. India is now a major player and accounts for about 3.5% of world exports of commercial services. Including a crucial chapter on services, which sets out a clear road-map for sectors and finalization of Mutual Recognition in Agreements (MRAs) would be a useful way of bringing India on board the RCEP. A start needs to be made. IBT: Given India’s unique economic trajectory and business ecosystem, what is your view on how RCEP would benefit India? MP: The general benefit of any RTA for India is to slowly reduce tariffs and inducing its industrial sectors to become more competitive. However, any trade agreement has gainers and losers, and commodity centred agreements like RCEP do not indicate any immediate gains to
34 | India Business & Trade • December 2019
IBT: What is the blueprint for India in global trade agreements if it stays out of RCEP? MP: It is important for India to continue to engage in Regional Trade Arrangements (RTAS) given that the multilateral WTO route has been more or less blocked for the last two decades. RTAs also allow India to gradually open up its economy in terms of market access. On the other hand, bilateral trade agreements are extremely dangerous as they leave little scope for bargaining. One principle of RTAs is to negotiate with an important trade partner and here the US does fit the bill. However, the strength of the US economy in terms of negotiating muscle can make a US-India trade agreement extremely difficult to implement, given that the US is unlikely to accept any of India’s concerns on service trade and, in particular, on Mode 4-related issues. IBT: Which key trade agreements should India pursue now and why? How important are RTAs for India? MP: It is my view that India should be looking seriously at trade agreements with the EU, UK, countries of Africa and the Middle East. These are India’s major trade partners. I do believe that a seriously negotiated India-China bilateral would be a good stepping stone to a possible future entry of India into the RCEP. There is no doubt that the Indian manufacturing and agricultural sectors are still uncompetitive as average tariffs are still quite high compared to even other developing countries. It is important to get India into RTAs as this allows gradual adjustment to competitive forces in a multilateral fora, where extreme competition sets in from day one. The RTA prepares India for a future multilateral setting.
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CHASING THE TRILLION DOLLAR
EXPORT DREAM India’s exports can evolve to be a major driver of GDP growth. But achieving this potential will require a significant transformation in the business ecosystem, with active support from the government.
FOCUS EXPORT
Healthcare: India’s quest for the ‘X’ factor India can significantly enhance its share in the healthcare space by building credibility and gaining certifications for its professionals as well as institutions. BY SHIVI TAKKAR
T
he Indian healthcare sector has expanded rapidly over the last decade, propelled by technology and innovation, public-private partnerships, wider coverage and better infrastructure. It became the fourth largest employer in India in 2017, employing a total of 319,780 people. Almost 75-80% of hospitals in India are presently being managed by the private sector. It is expected to reach a size of US$ 280 billion by 2020 with a CAGR of 12%. Growing incidence of lifestyle diseases, technological advancements, increase in demand for affordable healthcare services, rapid health insurance penetration, emergence of telemedicine and government incentives are driving the Indian healthcare market. Within this sector, the medical value travel (MVT) segment, which grew at a CAGR of 20% (US$ 9 billion) between 2012- 2018, shows immense potential. It is projected that by 2023, India will account for
36 | India Business & Trade • December 2019
6% of the global MVT market share. In recent years, India has been regarded as one of the most popular destinations for medical value travel, because of high-quality healthcare service delivery, proximity to major countries and low cost. Growing compliance with international quality standards, more doctors getting trained in western countries including UK and US, strong pharma market, availability of latest medical technology and cheap flights and lower cost of living further make the sector competitive. A key factor contributing to rising medical tourism in India is the presence of a well-educated, English-speaking medical staff in diagnostic and other health services. The global MVT market is expected to reach US$ 163 billion in 2023 from US$ 61 billion in 2016, at a CAGR of 15%. The total number of medical tourists arriving in India more than doubled from 233,918 in 2015 to 495,056 in 2017. In 2017, the maximum number of medical tourists to India came from Bangladesh to India followed by Afghanistan and Iraq. According to the tourism ministry, Bangladeshis accounted for around 55% of medical tourists to India in 2017. Developed regions like UK, US, Singapore and Malaysia are major MVT hubs across the globe, while regions like China, Russia and Latin America are also emerging. In India, the majority of inbound MVT is accounted for by African countries like South Africa, Kenya and Nigeria and SAARC countries like Maldives, Bangladesh and Afghanistan. However, there has also been a spurt
from regions like Myanmar, Russia and key CIS countries in recent years in India. The diaspora is also a huge market. Medical tourists come to India for various kinds of medical services like cardiac surgery, cancer treatments, dental care and transplants. India accounts for the highest number of doctors and paramedics in South Asia. So there is immense capability and competency for adoption of newer technologies along with fresh treatment methods and innovation. SO NEAR, YET SO FAR India is still operating below its potential in the healthcare services sector, considering the resources it has at its disposal. The country has significant opportunities to expand in Mode 1 and 2. In Mode 1, India can expand its online consultation, telediagnostics, medical transcription services, etc. But these should be certified/accredited by the importing country and this is a very sensitive issue across most markets. The same challenge persists in Mode 4, even though India has a good pool of paramedics, nurses, etc. Mode 3, which implies setting up facilities abroad, requires significant investments, and most Indian hospitals lack the requisite resources to invest. Moreover, generating returns on the investment requires huge economies of scale. Mode 2 is the most important to expand services, as this is where India has control through easier visa processes, facilitative environment, pre and post check ups, etc. While the government has taken a number of steps in this regard, a major constraint that remains is international certification of hospitals that affects inflows. Accreditation is a major source of competitive advantage. India, however, has just 34 hospitals accredited by Joint Commission International (JCI), compared to 214 for UAE, 102 for China and 66 for Thailand. The high cost of JCI certification remains a deterrent. Rupa Chanda, RBI Chair Professor of Economics, explains the repercussions, “You don’t have recognition of what you are providing
COST ARBITRAGE OF INDIA VIS-À-VIS DEVELOPED COUNTRIES AND OTHER ASIAN PEERS Treatment (US$) US
UK
Thailand
Singapore
India
Heart surgery
100,000
40,000
14,000
15,000
5,000
Bone marrow transplant
250,000
290,000
62,000
150,000
30,000
Liver transplant
300,000
200,000
75,000
140,000
45,000
Knee replacement
48,000
50,000
8,000
25,000
6,000
Source: ICICI Securities
by the foreign insurance provider, it’s only domestically accredited. You can only attract those patients who can pay out of their pocket. So that is a limitation.” Thai hospitals were among the first in Asia to be medically accredited by the Joint Commission International (JCI). Due to this first-mover advantage, some of its major private facilities have established themselves in the market. Thailand’s main advantages are low cost of medical treatments, high quality of medical professionals, Thai medicines, herbal products,
THERE IS IMMENSE CAPABILITY IN INDIA FOR ADOPTION OF NEW TECHNOLOGIES ALONG WITH FRESH TREATMENT METHODS AND INNOVATION
massage and good medical infrastructure. Singapore is also known for its fine quality medical treatment and high cleanliness standards and thus is the costliest among the Asian markets. Dr Pralok Gupta, Associate Professor (Services and Investment), Centre for WTO Studies, IIFT, believes that Singapore and Thailand are major competitors for India. Though these countries may be slightly more expensive than India, their services are perceived to be better. India needs to bring more standardisation and build global credibility through its well established hospitals to boost its attractiveness. He further suggests, “For those patients who are not suffering from life-threatening ailments (like cosmetic surgery), India can offer its medical services as a package with other tourism services.” This is where Thailand plays to its advantage, since it already has a strong brand equity as a tourist
MEDICAL TOURIST ARRIVALS IN INDIA
600,000 500,000 400,000 300,000 200,000 100,000 0 2008
2009 2010 2011 2012 2013
2014 2015 2016 2017 2018 Source: Ministry of Tourism
December 2019 • India Business & Trade | 37
destination.
Dr Pralok Gupta Associate Professor Centre for WTO Studies, IIFT
INDIA SHOULD LOOK TO PROJECT ITS MEDICAL SERVICES AS A PACKAGE. FOR THOSE PATIENTS WHO ARE NOT SUFFERING FROM AILMENTS THAT ARE LIFE-ENDANGERING (LIKE COSMETIC SURGERY), INDIA CAN OFFER ITS MEDICAL SERVICES AS A PACKAGE WITH OTHER TOURISM SERVICES.
Dr Arpita Mukherjee Professor ICRIER
BRINGING INDIA INTO PLAY India can leverage much higher gains from its medical tourism sector if it focuses on adequate value creation and also on opportunities for diversification in services. It has considerable scope as a provider of Ayurvedic, Yoga and Naturopathy, Unani, Siddha and Homeopathy (AYUSH) to international travellers and this can be part of the package it offers to visitors. Prof Arpita Mukherjee from ICRIER feels that India is not yet capitalising on its potential as a provider of traditional healthcare products and services as well as healthtech. She opines, “India needs to map the goods and services it can offer by markets. There’s a need for studies to identify how India can diversify its export basket by country & sub-sectors.” There is equally a need to identify and implement specific policy support initiatives, which could make India the global hub of health services. A brand needs to be created at the international level for Indian healthcare, which also promotes holistic wellness packages with healthcare services. Issues around accessing quality hospitals, hygiene perception, stringent medical visa regulations, following up treatments, lack of amenities for medical tourists at the airport (ambulance service, language interpreters, etc), standardisation of treatment, infrastructure, etc have to be addressed on priority. India must simplify the process
INDIA NEEDS TO MAP THE GOODS AND SERVICES IT CAN OFFER BY MARKETS. IT NEEDS TO TARGET DEVELOPING COUNTRIES SUCH AS THOSE IN AFRICA. THERE’S ALSO A NEED FOR UNDERTAKING STUDIES IN ORDER TO IDENTIFY HOW INDIA CAN DIVERSIFY ITS EXPORT BASKET BY COUNTRY & SUB-SECTORS.
38 | India Business & Trade • December 2019
of medical visa, provide visa exemptions and all possible facilitation to medical tourists of focus countries, especially the neighbouring and other South Asian countries. To avert apprehension associated with quality of care, gain credibility and improve its reputation as an MTV hub, India should legitimise and accredit medical tourism professionals, hospitals and strive for insurance portability. For Mode 1 exports, it also needs to get into agreements for exporting its nurses, paramedics, etc with requisite certifications in key markets that have demand for these professionals. MEDICAL TOURISTS TO INDIA IN 2017 Country
Medical tourist arrivals
Bangladesh
221,751
Afghanistan
55,681
Iraq
47,640
Maldives
45,355
Oman
28,157
Yemen
11,903
Uzbekistan
8,309
Nigeria
5,530
Pakistan
1,785
Kuwait
1,000+
Seychelles
939
United Kingdom
755
USA
649
Germany
109
France
97 Source: Ministry of Tourism
RUPA CHANDA
Accreditation of hospitals is a must Rupa Chanda, RBI Chair Professor in Economics, asserts that medical tourism can greatly improve through hospital accreditation & portability of insurance IBT: What are the major drivers of growth of medical tourism sector? Rupa Chanda: Actually we don’t really have numbers on this, so we keep saying it’s a big market, but nobody has put a finger on the exact number, or the number of people coming. The emergence of world class hospitals, some of which are internationally accredited, will attract tourists. The fact that we have countries in neighbouring areas and central Asia etc, which don’t have affordable healthcare and don’t even provide specialized or critical healthcare facilities is also creating opportunities for India. It’s a fact that we have international class players who are providing services at a very low cost compared to abroad. We also have alternative treatments such as Ayurveda. Some people come for that as well. IBT: How can India further expand and diversify its trade in healthcare services? Rupa Chanda: Our capacity is limited as of now, since we are restricted to few big cities and players. And it’s not like we have huge hospitals if you go by international standards. I think capacity is an issue. The second is that we ourselves have such a large population, so we do not have that large exportable surplus beyond the domestic market. So, the capacity has to be
increased. But this involves huge infrastructure and other costs. In healthcare, economies of scale are very important. There are huge set up costs & investment in technology intensive equipment. You can bring costs down only by having scale. The third is of course insurance portability. You don’t have recognition of what you are providing by the foreign insurance provider. You can only attract those patients who can pay out of their pocket. So that is a limitation. We need insurance providers who can pay for the treatment here. You need recognition of qualification of your professionals and standards. Most hospitals are not internationally accredited, they are only domestically accredited - voluntarily under NABH but not JCI accredited. It’s very expensive. Not everybody can afford it. Now if you look at alternative treatments, those are also not recognised and again that is paying out of the pocket. There are a whole lot of limitations that affect our ability to export. Some are capacityrelated, some are regulationrelated, some require us to be more proactive and to get into bilateral deals with other countries. IBT: Which sectors should be explored within healthcare to reap the maximum benefits for exports? Rupa Chanda: Telemedicine actually has a lot of scope. Of
course, many things will have to be delivered physically. But in terms of preventive and diagnostic parts, there is a lot of scope, especially because we need to reach out to the remote places and the less affluent where we are not going to invest much in infrastructure. From the trade aspect, all of these go together. If you strategically export, make your investments, bring your people, you can do telemedicine from here and partner with foreign entities. This is a very complimentary way of doing things, but only if you could get out of some of the constraints like visa issues, etc. Mobility of health workers is also going to be an area with the most opportunities, because there are physical and real shortages, like in the case of nursing. It’s a winwin area where we should look for bilateral arrangements with other countries. We have a few countries like Denmark. Germany is also trying to get into the arrangement with us - many of these countries are short of workers. So, I think that medical tourism and movement of healthcare workers - these are two ways in which exports will happen. Alongside, you can also get inflow of foreign investment, either through JVs or subsidiaries and can also partner with overseas entities. You will also get access to standards, technology, management practices etc. through investments.
December 2019 • India Business & Trade | 39
FOCUS SECTOR
Assam tea: On the brink of a catastrophe? India’s iconic Assam tea industry is plagued by issues of rising costs, overproduction and quality, which threaten its sustainability. BY NIKHAAR GOGNA
S
ome time around 1823 Scottish explorer, Robert Bruce discovered a native variation of the Chinese tea plant, known today as Camellia sinensis var. assamica, during his encounter with the people of Singpho tribe in the Himalayas. In 1834, British East India Company began to assess its commercial potential. Initial reports proved positive, prompting investors to replace vast tracts of agricultural land for tea plantations. A rich legacy of rejuvenating enterprise began to blossom, which continues to enthrall tea lovers globally, nearly 200 years later. The black tea produced in Assam is well known for strong, bold, brisk, malty flavours and dark liquor. It is an ideal tea to wake you up, and an integral part of the popular English Breakfast and Irish Breakfast tea blends.
Assam is the world’s largest tea producing region and produces around 50% of Indian tea. It is the only region besides Southern China to have its own native tea plant and also the only region in the world where tea is grown in the plains. However, this industry is facing challenges of sustainability that threaten livelihoods, and also the future of this very important GI from India. The most serious stumbling block is rising cost of production. “While prices have grown at around 1%, the cost of vital inputs like coal, gas, sulfur etc has increased by 6-7% in the past few years. Wages for tea garden workers increased by around 22% in 2018 in Assam, thereby increasing the financial stress of the industry further,” says Vivek Goenka, Chairman of Consultative Committee of
40 | India Business & Trade • December 2019
Plantation Associations (CCPA) and Indian Tea Association. The rise in wages gives margins a big squeeze, since it accounts for about 65% of total production cost, according to experts. Selling prices of Indian tea have not been able to rise parallelly as Sujit Patra, Secretary, India Tea Association, reasons, “Absorption level (consumption plus export) of tea has not kept pace with production level, resulting in oversupply year after year. Growth in production in the last few years is attributed to the emergence of the small grower/ bought leaf sector that contributes to 50% of the total production and is growing steadily.” This is augmented by inclusion of social benefits like health, shelter, power, water and subsidized food. Diminishing availability of labour
is already constraining tea garden owners, as youth in the region is moving to cities in search of more lucrative job opportunities. Low productivity & high energy costs involved in plantations have also escalated the cost of tea cultivation in India. Most of these tea estates are situated in remote hilly areas that have an undulating topography. This has made it tough to introduce mechanisation of field operations. Thus, a lot of production depends on rudimentary technology and unskilled labour. Added to this is the problem of dismal infrastructure - broken approach roads to gardens, inadequate warehousing at ports, constrained availability of containers, placements of vessels and high ocean freight charges. These logistical barriers further inflate the production cost of Indian tea, and put exporters at a cost disadvantage in global markets. The solution to the simmering crisis in Assam’s tea industry entails first and foremost the development of facilitating infrastructure. This calls for the holistic modernisation of the tea industry, encouragement to electronic tea auctions and highly efficient supply chain management. Secondly, there should be some labour-related reforms. This should encompass imparting training and skills to these workers. Thirdly, given the weak prices that Indian teas fetch in international markets, the government can support the industry by enhancing its access to credit through attractive
financial aid packages. Offering them working capital loans with interest subvention for a short period of time, say 2 years, is another step in the right direction. At the same time, the industry does not want the government to lower the import duty. Moreover, Indian tea is facing quality issues that are hampering its realisation in both domestic and export markets. According to the Tea Board of India, growth of tea consumption slowed down to 2.4% in 2018 (9.7% in 2017) to 1,084 million kg (mkg), primarily due to fewer choices and stagnation of quality. It has been reported that teas imported from outside the country are re-exported by some deceitful elements without adhering to Plant Protection Code (PPC) and FSSAI norms. This raises earnest questions over the caliber and genuineness of Indian tea.
ASSAM’S TEA INDUSTRY IS STRUGGLING DUE TO RISING PRODUCTION COSTS AND INABILITY TO RAISE SELLING PRICES ACCORDINGLY
WORLD’S TEA PRODUCTION IN THE LAST 5 YEARS Tea production
2014
2015
2016
2017
2018 (P)
China
2,095,717 2,248,999 2,404,957 2,496,412 2,616,000
India
1,207,310 1,208,660 1,267,360 1,321,760 1,311,630
Kenya
445,105
399,211
473,011
439,858
492,999
Sri Lanka
338,032
328,964
292,574
307,720
303,843
Vietnam
175,000
170,000
180,000
175,000
168,000
Indonesia
144,369
132,615
137,015
134,000
131,000
Others
803,435
796,426
818,733
823,236
832,942
Total
5,208,968 5,284,875 5,573,640 5,697,986 5,856,414 Source: Tea Board of India (Qty. in M. tonnes)
Thus, it is notable that while the prices of Indian tea dropped from US$ 2.08/kg in 2014 to US$ 2.02/ kg in 2018 according to Tea Board of India, those of tea from Kenya & Sri Lanka rose from US$ 2.03/kg to US$ 2.43/kg and US$ 3.53/kg to US$ 3.58/kg during the same period. A report by Crisil in December 2018 attributes the higher realisation of tea sourced from Kenya & Sri Lanka, compared to India, to the better quality of their tea. This is a call for urgent intervention by stakeholders in all tea regions of India to ensure that the quality of tea is not compromised. Surprise inspections of tea farms and tea factories is one way to monitor tea quality. Dr Parashram J Patil, Adviser at APEDA, opines, “Indian tea, especially Assam tea, has been rejected by global players because of the high content of nitrogen and pesticide residues. When there is a shortfall of green leaves, tea gardens procure from small tea farmers, who use excessive fertilisers and manures to boost production; thereby failing to live up to international standards of quality.” Without stricter labelling and monitoring the quality of tea from the source, this problem can ot be addressed. Dr Patil stresses on the need for a certification mechanism, facilitated by establishing green leaf analysis centres for chemical analysis at the time of procurement. Also a report by Pollock in 2018 suggests that shutting down tea estate operations by December 15 every season will help remove about 35 million kg of tea from the market, which is considered bad tea. Recently, the Tea Board has also launched a mobile app christened as Chai Sahayak, in order to monitor the quality of tea leaves. Similarly, FSSAI accredited labs are also being set up to ensure sale of quality teas both in domestic and foreign markets. Awareness regarding such apps & labs needs to be generated in the industry to ensure that customers get nothing but the best. This is also vital in building the value of Indian tea as a whole in international markets.
December 2019 • India Business & Trade | 41
FOCUS MARKET
Canada: The fault in the numbers Given the natural complementarities of their economies, annual Indo-Canada bilateral trade should be much higher than the current value of around US$ 6 billion. BY ABHISHEKH JHA
C
anada is one of the highly developed economies of the world. It is the 10th largest economy as per nominal GDP and second largest nation in terms of area. Canada closely reflects the US in its market-oriented economic system, framework of production, and high standards of living. Leading sectors of Canada include automotive and other manufactures, forest products, minerals and petroleum. The government is emphasizing on trade diversification, export promotion, and support for small businesses and domestic
industries affected by protectionism. It has also maintained an expansionary fiscal policy, and business investment has grown. Gradual monetary tightening by the central bank, however, has kept inflation contained. Canada’s economic competitiveness has been sustained by the solid institutional foundations of an open-market system and a high degree of regulatory efficiency. Also, Canada’s economic freedom score is 77.7, making its economy the 8th freest in the 2019 Index. The Canadian economy is
42 | India Business & Trade • December 2019
projected to grow by 2% in 2019. However, growth is expected to slow to below 2% from 2020. The economy has been driven by robust household spending in recent years. The current weakness is largely the result of low investment in mining. The economy grew by a strong 3.7% in Q2, 2019, but this came after two successive quarters of near-zero growth. Increase in residential investments over six quarters was the only real positive according to a Deloitte report. Consumption, which is the largest component of the economy, grew at
TRADE FLOWS OF CANADA
500
CANADA
400 300 200 100 0 -100 2014
2015
Imports of Canada
2016
2017
Exports of Canada
2017 Trade balance
Source: ITC Trade Map, 2019, in US$ billion
MACROECONOMIC INDICATORS OF CANADA GDP of Canada at Nominal Price
US$ 1.73 trillion
GDP at PPP
US$ 1.9 trillion
Expected GDP growth rate
2%
GDP per capita at Nominal Price and PPP
US$ 46,213 & US$ 50,725
GDP rank at Nominal Price and PPP
10 and 17
Inflation
2.2%
Unemployment
5.7%
Ease of doing business ranking
22
Contribution of agriculture, industry and services in GDP
1.6%, 28.2% & 70.2% respectively
Credit ratings
AAA
Population
37 million Source: Various research reports
its slowest pace in seven years at 0.5% (annualised). Business investment is expected to post solid growth as the new USMexico-Canada trade deal lowers uncertainty and businesses respond to high levels of capacity utilization. The economy has operated below full capacity over the last several years. However, it is projected to reach full capacity in 2020. After that, economic growth is projected to be limited to an average of 1.8%. Canada has the fourth highest total estimated value of natural resources, valued at US$ 33.2
trillion. It has the world’s third largest proven petroleum reserves and is the fourth largest exporter of petroleum. It is also the fourth largest exporter of natural gas. Canada’s exports and imports to the world remained sluggish in the last five years; merely increasing by 0.1%. Major exporting destinations of Canada are US, China, UK, Japan, Mexico, South Korea, Germany, Netherlands and India. On the other hand, key sources of import for Canada include US, China, Mexico, Germany, Japan and South Korea.
INDO-CANADA RELATIONS India’s exports to Canada in the past three years surged at a CAGR of 19% from US$ 1.97 billion to US$ 2.79 billion. On the other hand, imports of India from Canada slightly plummeted from US$ 3.64 billion to US$ 3.47 billion. Investments by Canadian companies in India have gone up to over US$ 25 billion from US$ 4.5 billion in last few years. Canada and India have longstanding bilateral relations built upon shared traditions of democracy, pluralism and strong interpersonal connections. Canada
December 2019 • India Business & Trade | 43
is home to one of the largest South Asian communities abroad per capita, with approximately 5.6% of Canadians being of Indian origin. Major products which India exports to Canada include iron and steel, pharmaceuticals, automobiles, crustaceans, articles of jewellery, heterocyclic compounds, rice and bed linen & toilet linens. Imports by India are led by coal, diamond, chemical potassic fertilizers, petroleum oils, dried leguminous, ferrous waste and scrap and chemical wood pulp. Playing to its strengths, Canada is looking at investments in buttressing India’s energy security aspirations through increased exports of conventional and nuclear energy as well as renewable energy technology and supplying India’s urban and transportation infrastructure needs through financing, equipment, technology and engineering services. In the services space, Canada is a strong attraction for Indians when it comes to higher education and even skilled jobs. As US has tightened H-1B processes, Indian IT professionals are exploring Canada more actively. In 2017, the Canadian government announced the Global Skills Strategy, which targeted 310,000 new permanent residents in 2018 and 330,000 new residents in 2019. Moreover, the Global Talent Stream (GTS) opportunity offered by Canada is particularly lucrative for STEM professionals. According to talent firm StackRaft, a number of Indian professionals are making a beeline for Canadian immigration, particularly in financial services, artificial intelligence, healthcare and clean technology. Indians accounted for 36,310 invites out of a total of 86,022 in 2017, which increased by 13% to 41,000 invites in 2018. INDIA-CANADA CEPA When it comes to finalizing and inking the trade agreement between India and Canada, negotiations are going on at a rather slow pace. The announcement of launch of India-Canada CEPA negotiations
INDIA-CANADA BILATERAL TRADE FIGURES
6 5 4 3 2 1 0 -1 -2 -3
2016
2017
2018
India’s exports to Canada India’s imports to Canada India’s balance of trade with Canada Source: Trade Map, figures in US$ billion
Indian PM Shri Narendra Modi with Canadian PM Justin Trudeau
TRADE BASKET OF CANADA Product exported Values in US$ billion
Product imported Values in US$ billion
Total
450.75
Total
459.89
Mineral fuels
99.30
Automobiles and auxiliary products
75.45
Automobiles and auxiliary products
60.51
Machinery and mechanical appliances
68.90
Machinery and mechanical appliances
34.48
Electrical machineries
44.85
Gems and jewellery
20.42
Mineral fuels
36.81
Wood and wood products
18.32
Plastics and plastic products
17.02
Plastics
14.26
Optical and medical instruments
12.59
Electrical machineries
13.62
Pharmaceuticals
12.51
44 | India Business & Trade • December 2019
Source: ITC Trade Map
CANADA F&B FOCUS
Canada is geographically vast and demographically diverse. This results in a complex market that makes it imperative for exporters to understand their target group thoroughly and devise the appropriate market specific strategy. The food and drink consumer base in Canada will see consistent growth due to salary hikes. A huge demand exists in the Canadian food and drink market for material inputs and retail products that are ready for consumption. Consumption trends are influenced by the diversity in consumer profiles in Canada. Canadian consumers are price conscious, tend to opt for cheaper alternatives and favour private labels. Convenience and ease of availability majorly impact the Canadian consumer’s food choices, making the country a potential market for products that save time. The organic food industry in Canada has tripled since 2006 and consumers are willing to spend more for food that is environment-friendly and healthy. For instance, makhana’s demand is growing in Canada and is definitely going to compete with popcorn. Similarly, demand for oily snacks is going to slow down in Canada. It is also important for Indian exporters to build physical presence in the Canadian market and approach it from a long-term perspective. The Indian diaspora obviously provides opportunities, but it is important to go a step further. A key point that comes up in meetings with Canadian F&B importers is that Indian food exporters need to invest in brand recognition and improving acceptability of their products in the Canadian market. This will require a thorough understanding of the specific nuances and peculiarities of Canadian consumers across diverse geographical and demographical consumer segments. POTENTIAL PRODUCTS FOR INDIA TO EXPORT IN CANADA
Refined cane or beet sugar
Coffee, not Onions and roasted, not shallots, fresh decaffeinated or chilled
T-shirts, singlets
Motor vehicle parts
Wooden Furniture
POTENTIAL SERVICES FOR INDIA’S EXPORTS
Education
Research and Development
Medical Tourism
IT and ITES
Hotels and Business & Restaurants management consulting services
was made in November 2010. Both countries formed a Joint Study Group in 2008 to explore possibilities of a Comprehensive Economic Partnership Agreement for trade in goods and services. The study concluded that growth in bilateral trade can raise the GDP of India by 0.5% and Canada by 0.4%, provided the trade barriers are removed. The two sides are still discussing CEPA and Bilateral Investment Promotion and Partnership Agreement (BIPPA/ FIPA). Canadian pension funds have invested around US$ 12-14 billion in Indian equity markets. Once BIPPA is finalized, this is expected to be much higher. CEPA will be covering trade in goods, trade in services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade and other areas of economic cooperation. CEPA has not been concluded so far due to differences on expectations and negotiating styles. For instance, India wants to protect its agri sector and that means restrictions on products like pulses - Canada’s largest export to India. Canada uses a negative list of services, which means that services that are not a part of the agreement will also be affected by the liberalizing aspects of the agreement. India follows the WTO template, which does not allow this provision. It is in the interest of both countries to resolve these differences. India’s top ten exports to Canada account for only around 0.9% of Canada’s total imports of these products in 2018, according to the ITC Trade Map. Given the natural complementarities of the Indian and Canadian economies, their mutual trade should be much higher than the current US$ 6 billion, apart from US$ 2 billion of cumulative bilateral FDI. Over 400 Canadian companies are present in India and over 1,000 are actively seeking a foothold. Clearly, there is far more potential to the IndiaCanada relationship than what present numbers indicate.
December 2019 • India Business & Trade | 45
EXPORTER PROFILE
Adding spice to your life! Ramdev Spices has traversed a long journey from being a neighbourhood startup in 1965 to becoming the country’s largest seller of spices in consumer packs as well as a leading exporter of 600 products to 24 countries. BY CATR
I
f there’s one thing that Indian cuisine is known for, it will be its piquancy! For foreigners across the globe, India’s food has been synonymous with its spiciness. Indian spices have gained immense popularity throughout the world right since time immemorial and inspired wave after wave of curious travellers, led by the Portuguese explorer Vasco da Gama himself. Archives from history suggest that spices and herbs (e.g., black pepper, cinnamon, turmeric, cardamom) were being used by Indians for thousands of years for both culinary and health purposes. It is hardly surprising that the popularity of Indian spices gained currency all over the globe. Indian spices have found mention as early
as 7,000 years ago in the ancient civilisations of Egypt, Mesopotamia, Sumeria, Arabia and China, far before the Greek and Roman civilisations came into being. Spices were an important commodity traded on the silk route, too. Capitalising on the grandeur of this rich culinary heritage of Indian spices across the world, Ramdev Spices started its journey five decades ago. Back in 1965, Late Shri Rambhai Chhaganbhai Patel laid the foundation of this brand by catering to the pulses and spices required in his neighbourhood. This humble beginning was institutionalised and taken to new horizons by his son, Hasmukhbhai Patel, who established Ramdev Food Products Private Limited and scaled up the
46 | India Business & Trade • December 2019
business to encompass the entire state of Gujarat. The period 1989-92 was pivotal for the company as it diversified its product portfolio and managed to fast track its journey towards being a global brand in the food and beverage segment. Another major landmark was the year 2006, when the company registered itself as an ISO 22000-2005 certified company. It also adheres to HACCP standard from the Bureau Veritas, Denmark. What has helped the company expand its business by leaps and bounds is a dedicated team, which is constantly driven by a quest for innovation and the firm resolve to settle for nothing less than high quality products for its vast customer base. This has been achieved by
setting up state-of-the-art production facilities, which include an in-house Agmark approved laboratory. The unit is equipped with vast capabilities in food & commodities sourcing, processing, cleaning, packing, blending, warehousing and dispatching. To make sure that the credibility of their products is indubitable, the company’s products and ingredients undergo Sudan & Aflatoxin tests. From time to time, samples from of their spices are also inpected in the laboratories of the Spices Board of India. For its unwavering commitment, Ramdev Spices bagged the National Award for the outstanding quality of its products. The fact that this company has an impressive business footprint and loyal customers across the world is in itself a testimonial of Ramdev’s penchant for consistently delivering the finest grades of spices in multifarious forms year after year. This Changodar-based brand is a leading FMCG with a presence in over 700 shops across India like Big Bazaar, D-mart, Reliance Mart, Big Basket etc. The company also has its own e-commerce website www. ramdevstore.com, with threefold rise in sales and availability of products across leading market places such as Amazon, Flipkart, Paytm and Snapdeal. Besides this impressive pan-Indian presence, the brand has succeeded in paving its way to the markets of 24 countries including US, UK, Australia, Canada, China, Japan, Singapore, New Zealand, UAE, Qatar, Mozambique, Kenya, Uganda, Reunion (France), Angola, Republic of South Sudan, South Africa, Asia Pacific, Middle East & Africa. This leading spice exporter today ships a wide range of over 600 products to these regions. They have something for everyone - basic spices, premium basic spices, asafoetida (hing), blended spices,
Laxman Singh Rathore VP, Business Development Ramdev Spices
DIFFERENT CUISINES ACROSS THE GLOBE HAVE TRANSCENDED BORDERS AND OUR PRODUCT PORTFOLIO, HAS EXPANDED TO CATER TO INTERNATIONAL PALATES
premium blended spices, instant mixes, raw crisps (papad), namkeen and wafers. It has developed over 19 varieties of snacks. Apart from these, the firm also has Whole Wheat Toast, Khari, Mukhwas Punawala, Papad, Khakhra, Dry Dates, Elaichi Toast, Crunchy Toast, Pudina Khari, Jeera Khari, Peanut Salted, Potato Wafers, Mamra, Sabudana & many more in pack sizes of 200g & 400g, especially for its export basket. These innovations are propelled by the zeal to experiment and to bring something new to the customers. But they are also driven by a proper market research on consumption patterns in the industry. For example, in 2015, after spotting a gap in the market for traditional Indian snacks, the company started manufacturing snacks and potato chips. As Mr Rathore emphasises, “Being one of the first to introduce spices in attractive and convenient consumer packs, Ramdev has set a new trend in the Indian spice market. Today, with the world becoming a village, different cuisines across the globe have transcended borders and with that our product portfolio, too, has expanded to cater to international palates.” Ramdev has also undertaken private labelling for famous brands like Deep, Kathoomba & Sartaj. Rathore expresses a desire to enhance the brand’s overseas presence, especially in the MENA Region. “We welcome our business associates who can import and distribute Ramdev products in their own territories, by offering exclusive distribution and exceptional business opportunities,” he adds. As a participating exhibitor in IndusFood 2020, Ramdev Spices plans to leverage the event to build its brand awareness, visibility and business connect with domestic and overseas buyers visiting the show.
December 2019 • India Business & Trade | 47
SANJAY GROVER
formed, which is a public listed company today. We have four divisions where we largely provide our services into: air compressors; air conditioning refrigeration compressors (first manufactured by us in 1965); process gas division (specializing in oil & gas segment); and the transmission division, where we make gear boxes and pinions.
“Focused country, focused approach” Sanjay Grover, VP-Int. Business & Marketing, Kirloskar Pneumatic Co Ltd, stresses on the importance of the company’s ear-to-the-ground approach to its global expansion in this interview with Sneha Varma of IBT
P
ioneering industrial revolution in India, Kirloskar group has contributed immensely in every field of its operation during its 120 year-long journey, and holds a place of repute in the industry for its good business values as well as customer focus. Driven by commitment and working with a focused vision and approach, Kirloskar Pneumatic Company Ltd., a core company of the renowned Kirloskar group, remains a constant choice for its clientele in the global industry. Sanjay Grover, Vice President, International Business and Marketing, KPCL speaks to Indusfood-Tech and shares his company’s strategic plans for expansion through its participation in the upcoming trade show. Below are few excerpts from the interview: IBT: Tell us about the company’s
formation and growth story? How have you evolved as a business in India and abroad? Sanjay Grover: Kirloskar is large engineering conglomerate in India. We started our journey as a group in the year 1988. We are a more than 31-years-old hardcore engineering group. Kirloskar Pneumatic Co Ltd (KPCL), which is one of the core companies of the Kirloskar group, was formed in the year 1958. It all started when our founder incepted a concept of iron-plough somewhere in the year 1988, when irrigation used to be the major issue in agriculture. Our founder immediately took this into notice and innovated centrifugal pumps and engines, which paved the path for a new company called Kirloskar Oil Engines. Gradually, over the years, a number of milestones were achieved and in 1958, Kirloskar Pneumatic Company Ltd was
48 | India Business & Trade • December 2019
IBT: What are the key product categories you cater to and what are the major end use sectors, where you are witnessing good demand for your equipment? SG: Our air compressors, which we had innovated in 1958, created a huge buzz immediately after their launch in the domestic as well as global markets; as it is a utility item and finds its vast usage and implementation largely in the Food & Beverage Industry, besides many other sectors. Today, I can proudly say that we are the world’s largest manufacturers of refrigeration compressors, which are widely used in the entire food industry. Our equipments are well placed in industries like cold storages, ice plants, seafood industries, meat plants, dairy, beverages and breweries. Worth mentioning, our refrigeration compressor is our flagship product for our export market as well! Besides, our gear boxes find their usage widely in the sugar industry. Furthermore, I believe, there is a lot of demand upsurge in the cold storage segment. From
WE ARE THE WORLD’S LARGEST MANUFACTURERS OF REFRIGERATION COMPRESSORS, WHICH ARE WIDELY USED IN THE ENTIRE FOOD INDUSTRY.
the government’s perspective also, there are initiatives in this arena. You see, almost 40% of the agricultural produce is being wasted. So, it is high time to combat this huge food wastage where cold chains & storages can be looked as the best option. So, for the next 10 years, cold chain and storage of horticulture products are emerging as key area for us to diversify into. IBT: What are the latest trends in evolution of packaging equipment industry? How are you adapting to them as a company? SG: The reciprocating, centrifugal and screw compressors are the ones that are in trend and are in huge demand. We, at KPCL, are fully equipped and geared up with the latest & trending equipments and technologies, which the world is adapting to. IBT: How do you plan to expand your business in the next five years? SG: Currently, we have reference base of our refrigeration compressors in over 40 countries. We have offices in Dubai, Johannesburg looking after the operations in Africa and Bangkok, which looks after the operations in South-East Asia. Further, I am happy to mention that we are very systematically increasing our footprints across the globe. In India, we have three factories as of now; the corporate office and a colossal factory in Hadapsar Pune, one at Saswad, Pune and the other manufacturing unit in Nasik. There is a conscious effort by the organization from the last couple of years, where we are focusing on our engineering and are trying to pace up with new technological innovations. Pertinent to this approach of ours, we have also created a separate department for research and engineering at KPCL. Secondly, with a clear defined vision, we are setting-up a new factory, equipped with state-of-theart facilities in Nasik, which would be earmarked for the manufacturing of top-quality air compressors. We have also successfully explored
TODAY, OUR PRODUCTS AND MACHINERIES ARE PROBABLY AS GOOD AS OR EVEN BETTER THAN EUROPEAN AND AMERICAN MANUFACTURERS
some strategic tie-ups with European companies for sourcing new technologies. Hopefully, we would be commercially ready by next year. IBT: What has been the progress of your business on the export front and which are the main markets you have successfully penetrated? What is your strategic approach to tap your potential target markets? SG: We have been exporting our compressors for the last three decades or so now. But to mention, from last few years, there has been a focus area from the company perspective. We have been increasing our infrastructure in terms of setting up our own operations in the overseas market. Secondly, identifying the potential countries and developing channel partners across various locations has been our other focus area. We had a clear vision i.e., “Focused country, focused approach”, which certainly made us pre-known to what product of ours goes into which market. So, the fact that we sketched a blueprint has made us achieve huge success on the international platform. Today, our products and machineries are, probably as good as, or even better than those of European and American manufacturers and find strong presence in the countries of Africa, South-East Asia and Middle East. We also have good plans to move to Europe and the US, further. Currently, we are growing at a
rate of 10-11% YoY and we plan to expand with around 40% of KPCL’s turnover from exports in the near future. Furthermore, through IndusfoodTech, we would like to focus on and source buyers from MENA (Middle East & North Africa) region and Southeast Asia. We would also like to promote two of our major product lines: refrigeration compressors and refrigeration & gas packages in the upcoming edition of Indusfood-Tech. IBT: How do you see the investment opportunities and business environment for the food processing industry as well as the food equipment industry in India? SG: Of course, it is getting better now. With changing food habits, the food processing sector is set to increase. The demand in the ready-to-cook segment, especially chopped & packed vegetables, is growing. The initiatives by the Government of India are pretty exciting and encouraging. Foreign investors are wooed to invest in the Indian market like never before. Having clubbed all these factors, the growth in the sector is pretty certain. Since the food processing industry is itself expected to grow double in, say, next seven to ten years, naturally the allied equipment industry is also envisaged for an enormous growth. IBT: How do you see IndusFoodTech as a platform for the growth of the industry? SG: I was astonished to see the hosted-buyer concept of IndusfoodTech. It is for the first time that I am seeing the government investing money in bringing buyers to India from across the world. It is something that we as a private sector do. But the Government of India doing something like this is commendable. The enthusiasm shown by the Government is amazing and appreciated! In short, we see Indusfood-Tech catalyzing our meetings with the buyers from across the globe and also accelerating the results.
December 2019 • India Business & Trade | 49
FOOD TRENDS
Indian food beyond Butter-chicken
India’s culinary diversity is far richer than the widely popular butter chicken and tikka, and deserves to be marketed to global and even domestic audiences.
W
e live in a country where recipes change every few kilometers. There are local recipes, there are family favorites, there are secret preparations and the list is unending. It is quite impossible in one’s lifetime to document or trace the diverse yet rich culinary heritage of our country.
Just to cite a few examples, there are more than 50 varieties of ‘sambhar’ (lentil-curry) preparations, with Karnataka sambhar being different from that of Tamil Nadu or Andhra Pradesh! Similarly, there are more than 100 different kinds of ‘biryani’ (an aromatic rice preparation) available in our country Doi Maach
–starting from the very famous Hyderabadi, Lucknawi or Kolkata Biryani, to the lesser-known ones like Bhatkai or Dindikul biryani. When we take a macro look, from the point where the world sees Indian food, what we have been savoring till now and offering to the world, barely scratches the surface of our culinary treasures. We are sitting on a gold mine of gastronomic diversity, which is ready to be excavated. These untapped and unspoken treasures are yet to be truly savored by the world. During my travel and stay in countries like Germany, France, Holland and US, I have observed that Indian food is usually known by crunchy naans, succulent tikkas and lip smacking curries. The goodwill of butter-chicken amongst non-vegetarians, however, steals the show. I have nothing against butter-chicken or tikkas; in fact, I enjoy them immensely! However, it is unfortunate that the vast array of Indian food, is not even known to the larger global audience. Only a few tried and tested recipes dominate the mindsets of customers wanting to taste Indian cuisine. WHAT IS THE SOLUTION? People need to be exposed to the array of various cuisines that India can offer. Only then conversations about oft ignored/lesser known Indian food will happen. There is a pressing need to have tie-ups in food festivals in different parts of the world showcasing ‘regional’ Indian cuisine. I emphasize the word – regional – because that is where the real treasure exists. Have samplers distributed from food trucks so that the locals can sample and get used to the unique taste. Set up demos in food fairs or shopping malls so
50 | India Business & Trade • December 2019
that people can learn how to make Indian food. Familiarity with taste and cooking methods is likely to make Indian food resonate at the top of customers’ minds. This will make people fall in love with our regional cuisine. Gastronomies that have not been showcased yet include the brilliance of state foods like Assamese, Oriya, Bihari and Telangana recipes. There are so many choices, that people will just get lost in the wide variety. Original recipes, forgotten recipes, grand-ma’s secret recipes – the choice is simply unending. Let me give you a few delectable regional dishes that are sure to leave the global audience enchanted by this amazing Indian culinary affair. The tang in ‘machor tenga’ (light tangy fish curry), or the delightful homemade sweets ‘pithas’ in Assamese cuisine, are very appetizing. The robust taste of Bihari mutton with puffed rice or ‘litti chokha’ (stuffed dough balls), is mouthwatering. The ‘dalma’ (veg and lentil combo) and ‘macho besara’ (mustard fish curry) from Odisha are simply delicious. To name a few more, the spicy ‘golichina mamsam’ (spicy mutton curry), or the dishes prepared with ‘gongura’ (sour leaf) and the delectable ‘qhubani ka mitha’ (apricot dessert) from Telangana cuisine, makes you crave for more. Now, let me highlight some outstanding dishes from my home state - Bengal. Speaking about Bengali cuisine, the first thing that comes to people’s mind is sweets. But now many are starting to realize, that Bangla cuisine offers a wide range of enticing dishes for both vegetarian and non-vegetarian palates. From the savory delights of ‘Kobiraji Cutlet’ (a type of croquette), to the enriching bitterness of ‘Shukto’ (a bitter-sweet veg curry); from the sourness of ‘Doi Maach’ (fish in yoghurt sauce), to the spicy ‘Mochar Ghonto’ (a banana blossom preparation), the diversity and versatility is quite unparalleled. The good news is that the trend these days is to try the untried dishes, to explore the unexplored,
Kobiraji Cutlet
Shukto
Litti Chokha
WE ARE ACTUALLY SITTING ON A GOLD MINE OF GASTRONOMIC DIVERSITY, WHICH IS READY TO BE PROPERLY EXCAVATED BY OUR INDUSTRY and try the ones that have so far escaped the spotlight. The not so good news, however, is that most of these star regional dishes are confined within the small territory of the respective states. Even the rest of India is yet to realize the brilliance of their innate taste. These dishes are then required to be rolled out to the rest of the world, for others to savor the yummy-oomph India can offer. However, many Indian dishes can be adapted to local palates. Reduce the chillies, add a local flavour, change the masala a bit – and yet retain the innate originality
of the regional cuisine. This is the reason why you will find Chinese food all over the world. Their dishes have been adapted to local taste, retaining the look and feel of the Chinese variety. The plus point that we have today is that the world has become a much smaller place, with people being exposed to TV, social media and are also widely traveled. Affinity and knowledge is helping uniting the un-united world. Indian cuisine cannot be left far behind. Butter chicken is a small sub-set of what India can offer. Regional cuisine has the possibility to butter the palates of the world with its taste, feel and flavour. CHEF ANANYA BANERJEE Chef Ananya was awarded the best home chef for achieving excellence in Bengali cuisine. She is a lawyer by education and has a penchant for painting and globe-trotting too.
December 2019 • India Business & Trade | 51
What’s the latest
@ TPCI
December 2019
India Pavilion at Food & Hospitality, Qatar
India-Vietnam Business Forum Trade Promotion Council of India along with the embassy of Vietnam in India organised the IndiaVietnam Business Forum in New Delhi. The meeting was attended by HE Pham Sanh Chau, Ambassador of Vietnam to India, Do Quoc Hung, Deputy Director General, Ministry of Industry & Trade of Vietnam and business leaders of companies from both sides. TPCI’s delegation was led by Mohit Singla, Chairman and Suresh Makhijani, Joint Director General. The B2B meeting saw good engagement across multiple sectors. Companies got the opportunity for one-to-one matching with their respective partners and closed on-spot business deals. The energy and enthusiasm during the meetings indicated an eagerness to leverage opportunities arising from mutual trade complementarity. Ambassador of Vietnam to India invited all Vietnamese companies to participate in IndusFood 2020.
TPCI with the support of Ministry of Commerce and Industry recently organised an India Pavilion at Food and Hospitality, Qatar. This is one of the premier B2B trade fairs for the Food & Beverages sector, which is a vibrant and lucrative platform to tap into opportunities in Qatar’s market. The Indian pavilion was inaugurated by H.E Shri P. Kumaran, Hon’ble Ambassador of India to Qatar, Surinder Bharat, First Secretary-Commerce, Embassy of India, Qatar and Azimuth Abbas, President, Indian Business & Professional Council, Qatar. Around 45 Indian exporters participated in this pavilion. The delegation was led by Sandip Das, Director, TPCI.
Event: Food & Hospitality, Qatar Sector: Food & beverages Date: November 12-14, 2019 Venue: Doha
Event: India-Vietnam Business Forum Sector: Food & beverage, handicrafts, metal Date: November 15, 2019 Venue: Ambedkar International Centre, New Delhi
Source India Myanmar Trade Promotion Council of India organised the “Source India” Show in Yangon, Myanmar concurrently with Myanfood Exhibition. The Pavilion was inaugurated by HE Shri Saurabh Kumar, Hon’ble Ambassador of India, HE U Zaw Aye Maung, Minister, Ministry of Ethnic Affairs, Myanmar and HE Alessandra Schiavo, Ambassador of Italy to Myanmar. The TPCI delegation was led by Deepak Vohra, Sr. Deputy Director. More than 70 attendees from India from the food & beverage, food processing & packaging technology industries participated in this event & Assocham also participated with their members. This is the largest Indian food industry participation in Myanmar, so far.
52 | India Business & Trade • December 2019
Event: Source India Myanmar Sector: Multiple Date: October 31November 2, 2019 Venue: Myanhotel
India
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December 2019 • India Business & Trade | 53
BSM RIYADH NOVEMBER 16-17 TPCI organised an F&B BSM at Lulu Hyper Market, Regional Office, Riyadh on November 16. Shehim Mohammed, Director, Kingdom of Saudi Arabia, gave a presentation on Lulu Hyper Market, followed by B2B meetings of Exporters & Category Buyers of Lulu. Some of the other prominent personalities of Lulu at the meeting were Hatim, Regional Manager, Shamnas Pallikandy, Buying Head – KSA;
Group photograph of BSM Delegation with Lulu Hypermarket Management & Buying Team
Ahmed Kutty KM, Buying Manager (Spices) – Riyadh Region; Shihab Haneefa, Key Accounts
Executive (Sweets & Confectionary); Justin Pulikkottil, Central Buyer (Consumer Food/Honey/
Organic Food) and Syed Ali M, Asst. Manager, Product Development, Lulu Group International.
(L) TPCI team handing over souvenir to Dr. Pradeep Singh Rajpurohit, Deputy Chief of Mission, Embassy of India, Riyadh; (R) Group photograph of BSM delegates with Dr Rajpurohit
TPCI delegates had an engaging and productive interaction with Dr.
Pradeep Singh Rajpurohit, Deputy Chief of Mission, Embassy of India, Riyadh.
Key challenges posed by Saudi Food & Drug Authority (SFDA) were
discussed & he assured everyone of full support from the Embassy of India.
A BSM was organised with Carrefour at Hotel Crown Plaza, Riyadh Palace. The TPCI delegation led by Ashok Sethi, Director; Nupur Kumaria, Assistant Director & Masrur Anwer, Protocol Officer, had a successful B2B meeting with the Carrefour Management & Buying team comprising of Alain Molles, VP, Merchandise; Philippe Favri, GM, Merchandise and Noushad Thacharakandy, Head of Merchandise along with other Category Managers.
Group photograph of BSM Delegation with the team of Arabian Development Company for Trading
Group photograph of BSM Delegation with Carrefour Management & Buying Team, Riyadh
54 | India Business & Trade • December 2019
TPCI organised a Buyer-Seller Meet (BSM) for Indian F&B exporters with the Arabian Development Company for Trading, Riyadh. The team from the Arabian Development Company for Trading was led by its MD Fares Farouk Beshiti.
TPCI organised a BSM of F&B exporters with the Nesto Group, which was represented by Noufal, Director; Abdul Nasser, Director, Business Development; Fazal, Buying Head, Saudi Arabia; Abdul Nazar, K.I. Import Manager; and Fayiz, Buyer. Ashok Sethi, Director; Nupur Kumaria, Assistant Director & Masrur Anwer, Protocol Officer represented TPCI.
Group photograph of BSM Delegation with Nesto Management & Buying Team
BSM JEDDAH NOVEMBER 18
A group photo of the BSM delegates with Lulu GM and Category Managers
A B2B meeting was organised at the Jeddah Chamber of Commerce. This meeting commenced at 10:30 am and lasted till 4:30 pm. It was a successful F&B Buyer Seller Meet, which was attended by around 100 prominent importers and distributors in Jeddah.
(U) Inauguration of BSM at Jeddah Chamber Of Commerce by H. E. Dr. M Noor Rehman Sheikh, Consul General of India in Jeddah and Respected Mazin Khalid Ghasim Kutbi, Asst. Secretary General, Jeddah Chamber of Commerce
On November 18, TPCI organised a visit of the BSM delegates to Lulu Hyper Market, Marwah Branch. This was done to offer them an overview of products and pricing before holding the BSM. Rafeek Mohamed Ali, Regional Director and Anas Haneefa, General Manager of Lulu, Jeddah, were instrumental in making the visit a success. This was followed by High Tea as a mark of hospitality.
Exporters were very happy and satisfied with the Saudi BSM. Many of them booked good orders across the table & most of them found lucrative opportunities for futuristic business.
(R) BSM in progress
December 2019 • India Business & Trade | 55
TPCI signed a MoU with the Monetary Authority of Singapore (MAS) TPCI has signed a MoU with the Monetary Authority of Singapore (MAS) to boost SME exports from India to key global markets through a landmark online trade platform called Business Sans Borders (BSB). High Commission of India in Singapore has played a key role in supporting this platform. This MoU will link TPCI server with a global trade platform and promote Indian business with technologies of future such as Artificial Intelligence & block chain. The MoU was signed in the presence of High Commissioner of India to
Singapore Jawed Ashraf on the sidelines of an ongoing fin-tech festival. Business sans Borders is a hybrid business data and digital solutions hub, which leverages AI to facilitate the matching of demand and supply of goods and services between businesses, including small and medium-sized enterprises. High Commissioner of India to Singapore Jawed Ashraf with TPCI representative, Rajiv Dewan
Chairman, TPCI meets President & Vice- President of China National Furniture Association (CNFA) TPCI’s Chairman Mohit Singla met Xiangnam, President and Tu Qi, Vice-President of China National Furniture Association (CNFA) in Beijing, China on November 19, 2019. Both sides explored future possibilities of collaboration, looking at the potential India holds in the furniture sector. Founded in 1989, CNFA is composed of individuals, civil societies, public organisations and businesses from areas like manufacturing, management, R&D and education in the furniture industry and related industries. So far, CNFA has assumed Director membership of the National
Mohit Singla, Chairman, TPCI, with Tu Qi, Vice-President, China National Furniture Association (CNFA) in Beijing, China.
56 | India Business & Trade • December 2019
Technical Committee 480 on Furniture of Standardization Administration of China, Vice Chairmanship of China National Light Industry Council, Chairmanship of Council of Asia Furniture Associations and Chairmanship of World Furniture Confederation. Major work of CNFA includes hosting furniture exhibitions, promoting industrial clusters, providing information, training professionals, encouraging development of designs, joining ISO/ TC136 and SAC/TC480 for standardization and promoting exchange & communication between domestic & overseas industries.
Department of Commerce Ministry of Commerce and Industry
FOOD CHEM
India’s Largest B2B Sourcing Trade Fair for Food & Health Ingredients 08 | 09 | 10 January, 2020 India Exposition Mart, Greater Noida
KEY FEATURES
BUYER SEGMENT
500+
Global Hosted Buyers From 40 Countries
1000+
Top Food Processers & Distributors from India
Co-located Trade Shows
• • • • • • • • •
Dairy Bakery and Confectionary Sweets and Snacks Ready to Cook & Ready to Eat Spices Pulses, Grain, Rice, Sugar & Oil Tea & Coffee Beverages FMCG
Contact SHIVAM GIRI Mobile: +91-8287900311 Email: exhibitor.ifc@tpci.in
VISHAL TALIA Mobile: +91-9205883435 Email: info.ifc@tpci.in
www.indusfoodchem.co.in TRADE PROMOTION COUNCIL OF INDIA 9 Scindia House, 2nd Floor, Connaught Circus, New Delhi - 110001, India Phone: +91 (11) 40727272 | Email: tradefair@tpci.in
See you at IndusFood-2020
08
& 09 January, 2020
#IndusFood