India-US
trade data for the first ten months of 2002
January
- October 2002 compared to January - October 2001
Indian
exports to USA
- Worldwide merchandise
exports to USA declined by (-0.7%).
Only 9 of the top 25 countries exporting to USA registered
growth in their exports to USA and India’s performance has been the best
amongst them: India (+20.3%), Ireland (+19.1%), China
(+17.4%), Brazil (+7.8%), Malaysia (+7.5%), Israel (+4.2%), Sweden
(+2.3%), Netherlands (+2.1%), and Mexico (+1.7%).
- Merchandise
exports from India to USA have grown +20.3%, from $8.33 billion to $10.03
billion. Major Indian export growth sectors include diamonds/gold
jewellery (+43%), woven apparel (+6%), knit apparel (+21%), textiles
(+21%), fish & seafood (+39%), machinery (+20%), carpets (+19%), iron
and steel (+199%), and pharmaceuticals (+127%).
- 9
of the top 10 items that India exports to USA witnessed export growth (the
exception - “organic chemicals”). Practically every sector where
special efforts were made in 2002 has seen satisfactory export growth,
confirming the validity of the focus in our Medium Term Trade Action Plan
for USA.
- India
is currently the 19th largest exporter to USA in 2002 (22nd
in 2001) with 1.05% share of US imports (0.86% share in 2001). 2002
is likely to be the first year when US merchandise imports from India
would exceed 1% of total US merchandise imports.
In
October 2002 merchandise exports from India to USA has
continued to grow very strongly, increasing by +36.9%, compared to
October 2001. Present high growth
trend in Indian merchandise exports to USA is expected to be maintained
during remaining two months of 2002.
In
addition to our merchandise exports, Indian IT/software exports to USA are
growing at 20% and are set to touch $5.7 billion this year. Nevertheless,
2002 may well end up being the first year in recent years when the rate of
growth of India’s merchandise exports to USA has matched (if not
marginally exceeded) that of our IT/software exports to USA.
US exports to India
Worldwide
merchandise exports from USA dipped by (-6.2%),
declining to 23 of the top 30 US export destinations. It has grown
to only 7 amongst them, viz., UAE (+40.3%), Australia (+19.4%), Malaysia
(+15.3%), China (+14.4%), India (+4.8%), South Korea
(+1.0%), and Taiwan (+0.9%). {Note: Growth in US exports to
India by 4.8% so far this year should be viewed against the backdrop of a
6.2% decline in overall US exports. US exports to India of diagnostic/
laboratory reagents and insecticides/herbicides have grown at a fast pace
during 2002.}
As per US DOC data, USA
exported services worth $2.8 billion to India in 2001 (compared to $2.5
billion in 2000). It can reasonably be assumed that US services exports to
India would be growing during 2002 at approximately last year’s pace of
12%. On that basis, US services exports to USA are expected to touch $3.1
billion during calendar year 2002.
Projections:
Extrapolating 10 months
(January-October 2002) India-US trade data for the calendar year 2002 at
present growth rates (actual trade figures for calendar year 2001 are
given in brackets for comparison purposes), it emerges that let alone the
total trade gap, even the merchandise trade gap of US$ 8 billion in
India’s favour in its trade with USA is more than India’s trade with
any other country.
India - USA
trade composition
Top
ten exports from India:
Precious
stones, metals (worked diamonds & gold jewellery)
Woven
apparel
Knit
apparel
Miscellaneous
textile article (linen, etc.)
Fish
and seafood (frozen shrimp)
Textile
floor coverings (knotted and woven carpets)
Iron/steel
products (household articles, cast iron, tubes/pipes)
Organic
chemicals
Machinery
(taps, valves, transmission shafts, gears, pistons, etc)
Iron
and steel (hot rolled, galvanized/coated steel, stainless steel, etc)
Top
ten imports from USA:
Machinery
(computers and components, gas turbines, telecom, etc)
Electrical
machinery (recording/sound media)
Medical
and surgical equipment/instruments
Aircraft,
spacecraft (small aircraft)
Precious
stones,metals (diamonds, not mounted or set, jewellery
Miscellaneous
chemical products
Organic
chemicals
Plastic
Cotton
and cotton waste
Woodpulp,
etc. (waste and scrap of paper and paper board)
India-US
trade: 2002 estimate (2001
actual figures in brackets)
1.
India merchandise exports to USA =
$12.0 billion ($9.7
billion)
2.
USA merchandise exports to India = $4.0 billion ($3.8
billion)
3.
India-USA merchandise trade [1+2] = $16.0 billion ($13.5 billion)
4.
India IT/software exports to US
= $5.7
billion ($4.8
billion)
5.
Total Indian exports to USA [1+4] = $17.7
billion ($14.5 billion)
{Merchandise + IT/software
exports}
6. US services exports to
India
= $3.1 billion ($2.8 billion)
7. Total US exports to
India [2+6] =
$ 7.1 billion
($6.6 billion)
{Merchandise + Services}
8. Total India - USA trade
[5+7] =
$ 24.8 billion
($21.1 billion)
{Merchandise + Indian IT/software exports + US Services exports}
9.
Merchandise trade gap [1-2] =
+ $8.0 billion
(+$5.9 billion)
10.
Total trade gap [5-7] =
+$10.6
billion (+$7.9
billion)
India-
US trade and Investment – some success stories
Given
below are some success stories pertaining to US trade and investment in
India as well as sectors in which India has proved to be an attractive
partner and destination for US investment:
General Electric:
A majority of GE’s businesses worldwide have a presence in India –
aircraft engines, broadcasting, capital services, lighting, medical
systems, etc. Nearly 19,000 GE professionals are based in India.
GE has established its largest laboratory worldwide - the John
Welch Technology Centre - in Bangalore. The multi-discipline laboratory
covers research in hot-air gas paths, materials, design and computer
science.
Whirlpool:
The largest manufacturer of appliances in the world, it has already
consolidated its position in the domestic Indian market by becoming the
market leader in fully automatic washing machines and refrigerators. Now
it plans to consolidate its position in the export market by doubling
export sales to 20 per cent in the next couple of years from current level
of 10 per cent of sales. It has already invested $200 million in the
Indian market and plans to spend $20-80 million every year on new brands.
Ford
(India): Ford's established a partnership in India with Mahindra
and Mahindra Limited in 1995 in which it has an 84% stake. It launched the
“Escort” model in India in 1996. Ford has invested over $400 million
in its state-of-the-art integrated manufacturing plant in Maraimalai Nagar,
near Chennai, Tamil Nadu, and is now exporting its popular “Ikon”
model to South Africa and Mexico. Ford expects to become profitable in
India by the year 2004.
3M:
In India, 3M manufactures over 2000 products with applications in
industrial, automotive and specialty materials, electrical and telecom,
health care, traffic and safety, electronics, construction and consumer
and office products markets. Over the past several years it has developed
a firm foundation in India and earned a reputation for quality. 3M is
based in Bangalore and has a manufacturing facility at the Electronics
City on the outskirts of Bangalore. It employs over 300 persons and has
sales offices in 13 Indian cities. 3M had a turnover of US $400 million in
2000 in India, with profits of just over US$2 million.
Owens Corning India:
Its glass fiber manufacturing plant has developed in two years into the
largest exporter in Maharashtra, with annual foreign exchange earnings of
over $50 million. It employs
400 graduates, and is Owens Corning’s most successful venture in Asia.
Tecumseh Products (India) Limited:
Employs 2,500 workers in Haryana and Andhra Pradesh, and operates the only
air-conditioning compressor manufacturing plant in India.
Pepsi:
With 3000 employees and 43 plants (20 owned, 23 franchised), Pepsi sells
upwards of 160 million cases annually through 750,000 retail outlets
across India. It also has a growing snack food business “Frito Lay”
and a presence in the packaged juice market with its “Tropicana”
brand.
Proctor and Gamble (India):
This fast moving consumer goods manufacturer with operations based in
Mumbai, generated good profits in India last year.
Microsoft:
It is investing over $50 million in its software development centre
located in Hyderabad.
Intel:
Intel Corp, the world’s largest chip manufacturer, has a
three-year-old software centre in Bangalore, its largest non-manufacturing
site outside the United States. In India Intel doubled its staff size in
2001 to about 800 and in April this year announced that India will
be among five global markets on which it intends to focus its growth plans
(besides Brazil, China, Mexico and Russia). On August 29th
2002, Intel announced that it would be investing $130 million in its
operations in India and hire over 2000 engineers over the next three
years. The company announced plans to set up a chip design center in India
to work on the high-end 32 bit architecture.
IBM Corporation: On April
17, 2002, IBM signed a strategic partnership with India’s Wipro Systems
aimed at breaking into the global biotechnology market and also to
increase IBM’s market share in India and the Asia-Pacific region.
EDS:
EDS set up a liaison office in
India in 1995 and in 1996 became the first company in India to sign a
multiyear outsourcing contract. EDS presently has a fully owned subsidiary
in India and has expanded its operations via operations in Chennai and
Gurgaon.
Sun Microsystems:
has invested US$100 million in India for development of its engineering
centre and expects that its India operations will this year add $1 billion
in revenue flows.
Adobe Systems Inc.: Adobe Systems Inc., the U.S.-based publishing software maker announced in October 2002 that it plans to invest up to $50 million over a period of five years in India to expand infrastructure and research and development activities. The expansion will make Adobe Systems India the second largest facility, after San Jose. Adobe established its India operations in January 1998 and the Indian operation of the company are responsible for development of key products like PageMaker and the Acrobat Readers used in mobile devices. The company's state-of-the-art facility at Noida, near New Delhi has been set up with an investment of $10 million with the capacity to accommodate 370 software engineers. The company currently employs 140 engineers in India.
Agilent
Technologies Inc.: In India, Agilent supplies test and measurement
solutions including for applications in the wireless communications
industry, and was ranked the number one Test and Measurement
(T&M) Vendor of 2001.
Oracle
Corporation: In November, 2002,
Oracle Corp. announced its pick of India
as the main development center for its global software initiatives. Oracle
is moving a large portion of its developmental work from its developmental
centers in California, Sydney and Dublin, and took the decision because
"the benefit of moving work from our other international centers to
India is (based) not only in terms of cost but also because of the
superior quality of services we get”.
Texas Instruments:
On October 3rd
2002, the
US chip maker Texas Instruments unveiled plans that it would be
entering into partnerships with Indian companies like Wipro and Tata Elxsi
for designing and developing "embedded software". The
announcement was made by Tom Engibous, the Chairman and CEO of the $8
billion company during a visit to Bangalore.
The R&D Center set up by Texas Instruments in Bangalore in 1985
is its largest R&D facility outside the US and employs over 1,000
software engineers. Texas Instruments, India, posted a revenue of $35
million in 2001 and has invested $1.5 billion in research and development.
Wal-Mart:
Now the world’s largest company, Wal-Mart has with effect from 1st
February 2002 terminated its relationship with its third party sourcing
agent based in Hong Kong. Instead, it has opened branches of its own
sourcing operations (Wal-Mart Global Sourcing), including in Bangalore. It
has considerably expanded its purchases from India during 2002.
Hertz:
The car rental company Hertz, which
recently began its operations in India, has already announced that in 2002
it will be focusing on expanding its product portfolio in India by
aggressively promoting newer products, besides expanding to more cities.
Hertz views the potential for the car rental business in India as immense.
Following
sectors in India have
also proved attractive for US trade and investment:
Banking
FDI
in banking is permitted up to 49%. Success stories in this sector include
Citicorp, GE Capital, and American Express.
In
March 2002, American Express
announced plans to further expand its operations infrastructure in India
with the establishment of a new service centre in Gurgaon, Haryana.
American Express presently operates its “Financial Resource Center –
East” in New Delhi, providing in-house back-office accounting support to
Amex operations in the entire Asia-Pacific region.
IT enabled services/outsourcing
Many
US companies have already started reaping the advantages offered by
India’s IT sector, such as a large pool of trained, english speaking
personnel, offering huge cost benefits and a 12
hour time difference with USA and other major markets that enables India
to offer virtually round the clock, year round (24 x 365) services
US
companies taking advantage of the opportunities offered by India’s IT
Sector include American Express,
Citicorp and Microsoft. New companies that
have set-up operations include Dell, Hewlett-Packard, HSBC, Standard
Chartered and Convergys. Other Fortune 500 companies such as Morgan
Stanley, AT&T, Reebok, GM, Fujitsu, Boeing, Pepsi, Swissair, Coca-Cola
and British Airways have identified India as their outsourcing partner.
Many more corporations across the globe are following suit.
Information Technology
New
opportunities in the Indian IT industry are emerging in embedded software
development (use of “smart” devices in internet applications),
Broadband Networking Solutions, Multimedia Content Management (TV
platforms, set-top boxes, data mining), Bio-informatics (automated genome
analysis, modeling of protein structures from primary sequences, creation
of relational databases from unstructured pharmaceutical and clinical
data), Health Insurance Probability and Accountability (to streamline US
health care industry).
Telecommunications
India’s
32.4 million line basic telephone network (and 3.6 million cellular mobile
network) is the 8th largest in the world and third largest
among the emerging economies (after China and Korea). It is growing
annually at 22% for basic services and over 100% for cellular and internet
services. Amongst major US companies that have entered the Indian market
are AT&T and Qualcomm.
Internet Telephony
Deregulation
of the national long distance and international long distance services in
India in April 2002 provides an opportunity for service providers to enter
the high-growth long distance market using Voice-over-Internet-Phone. US
companies are actively seeking market share, including Net2Phone.
Biotechnology
There
are over 800 companies in India operating in various sectors of the
bio-technology industry. A substantial portion of the Indian bio-tech
industry would be focusing on research and technical services. Over 50
R&D labs are in place with over twenty of them conducting research in
frontier areas of bio-technology. Several research laboratories are
working on genome sequencing and genomics, pharmacogenomics, gene
annotation and proteomics.
Bio-informatics (BI)
India
is expected to lead in BI. The value of the global BI market is estimated at $1–$3
billion, but is projected to grow exponentially over the next decade. BI
involves extensive application of information technology for collating,
organizing and analyzing large amounts of data pertaining to genomics,
proteomics, drug screening and medical chemistry. India’s attractiveness
are its enormous potential in leveraging its well established core
competencies in the IT area, its large resource pool of molecular
biologists, statisticians and software engineers, that are expected to
enable it to garner a large share of this market.
Insurance
The insurance
sector has been recently opened up for upto 26% FDI. Untapped potential is
huge. US companies that have successfully entered this field in India
include New York Life, AIG and Chubb.
Other
countries:
United
Kingdom:
Banking:
The Barclays Bank, UK has raised its profile in India and has infused
fresh investment of $50 million in July, 2002. Its decision was based on
strategic considerations to further develop an integrated sales, trading
and debt capital market operations.
Breweries:
Scottish & Newcastle, the UK's biggest brewer is to enter the Indian
beer market in a tie-up with United Breweries, maker of the Kingfisher
brand. It will invest £60m to set up a venture with United Breweries.
Japan:
Electronics:
The Indian subsidiary of Japan’s Sony Corporation announced on October 3rd
2002 that it would buck the uncertain nature of its parent company's
business outlook and would target a turnover increase of 25 percent this
fiscal year. It believes that India had absorbed the brunt of the
uncertain global conditions and offered a lucrative market for the
company.
Indian investments in USA
In
recent years, investment by Indian companies in the USA has also been
growing. India’s UB has bought breweries in the US while companies such
as Dr. Reddy’s Laboratories and Ranbaxy have bought pharmaceutical
manufacturing units in the US.
In
the IT sector, Tata Infotech, Sathyam, Infosys and WIPRO have large
operations based in the US. Wipro India announced, November 12th,
that it had entered into a definitive agreement to acquire the global
energy practice of American Management Systems for an aggregate
consideration of $26 million, payable in cash. The move strengthens
Wipro’s end-to-end IT solutions capability in the energy and utilities
market.