Market of the Month – India
The world’s business is coming to India, are YOU?
The Indian market, with more than one billion people, presents lucrative and diverse opportunities for U.S. exporters with the products, services, and commitment that can meet the country’s needs. India’s requirements for equipment and services for major sectors such as energy, environmental, healthcare, high-tech, infrastructure, transportation, and defense will exceed tens of billions of dollars in the medium-term as the Indian economy further globalizes and expands.
To meet growing domestic and export demands, Indian companies are increasingly manufacturing finished products and sourcing sophisticated, efficient products and equipment from the United States. There is also a growing trend in utilizing U.S. expertise in the fields of education, energy, environmental, engineering consulting, management consulting, retail and telecommunication.
Map of India
India’s sustained and forecasted GDP growth makes it one of the fastest growing economies in the world, and the second fastest in Asia. While its size and growth make it attractive as a market, the most compelling reason for investors to be in India is the high return on investment. India is a free-market democracy with a legal and regulatory framework that rewards free enterprise, entrepreneurship and risk taking. Now is the time for U.S. companies to enter the rising Indian market.
India is a fast-growing economy with a dynamic and robust financial system. The highly diversified Indian economy has shown rapid growth and remarkable resilience since 1991, when economic reforms were initiated with the progressive opening of the economy to international trade and investment. The result was an average annual GDP growth of over 6.5% in the past decade, with 8% per annum expected in the long term.
- Civil Nuclear Energy is perhaps the biggest market opportunity in terms of potential export value to U.S. companies, valued at more than $150 billion over the next 30 years. The recent opening of the civil nuclear sector provides a huge market opportunity (reactors, raw materials, supplies) for U.S. companies.
- Renewable Energy (RE) market is estimated at $500 million and growing at an annual rate of 15%. Solar energy, wind energy, small hydro projects, waste-to-energy, biomass and alternative fuel are the major investment areas. Only about 3500 of the estimated potential of 100,000 RE megawatts (MW) are currently used. In addition, the government’s new RE policy of generating 10,000 MW through renewable and a non-conventional source by 2012 is expected to further boost the participation of U.S. energy companies.
- Aerospace and Defense sector ranks among the world’s most dynamic, with airlines in India in the process of buying over 300 aircraft between 2007 and 2012. India is also a large and growing market for air defense equipment, especially for U.S. suppliers seeking joint-venture opportunities.
- Mining and Coal sector has shown healthy growth over the past few years and will likely continue, given the emphasis on coal production to overcome a projected shortfall. An estimated $21 billion investment in opencast mining and $5 billion in underground mining will be required to attain the target production level by 2025. Although Indian firms manufacture mining equipment, U.S. firms are competitive for providing high-end, higher-size equipment and advanced technologies. India will also require a coal washing capacity of 810 million tons by 2025, an eight-fold increase from the current installed capacity, indicating a $3 billion investment.
- Safety and Security industry has been growing at 20-25% during the last 5-7 years. Following the recent terror attacks in Mumbai, users are looking to procure hi-tech surveillance, detection, access control, perimeter security, fire fighting and specialized security equipment and services for rail, air, urban infrastructure, industry, schools, malls, hotels, and other strategic establishments to counter terrorism and other security threats. According to industry contacts, the security industry is estimated to grow from the current $2 billion to over $5 billion in the next 3-5 years.
- Healthcare - the growing demand for quality healthcare and the absence of delivery mechanisms pose a great opportunity, and challenge, for U.S. industry. Currently valued at $35 billion, the Indian healthcare industry is expected to reach over $75 billion by 2012. With 14.5% growth in the medical infrastructure market, the demand for medical equipment could nearly double to $5 billion by 2012. Imports account for over 65 % of the entire medical equipment market, most of which come from the U.S., Germany and Japan.
- Retail: Beauty and Personal Care market is currently estimated at $1.5 billion and growing rapidly. Increasingly, Indian shops and boutiques are stocking cosmetics from around the world. Many U.S. companies have immense export potential since U.S. products are considered to be of very high quality and are in high demand.
- Franchising is the second fastest-growing industry, with the nascent $2.7 billion sector booming at an impressive 25%. Ten percent of the 700 franchise systems are run by international companies. Franchising is expected to grow to half of the overall organized retail trade. Though the current economic downturn could slow the growth temporarily, the avid interest in franchises in India will continue to increase, especially in smaller and medium-sized cities. The best prospects for U.S. firms include education and training, food and beverage, health and fitness, beauty salons and supplies, real estate and professional services, and clothing.
- - India is emerging as the world’s fastest growing passenger car market, with the second largest two-wheeler and fifth largest commercial vehicle manufacturing centers in the world. The auto parts sector holds enormous potential for U.S. auto parts suppliers as it is expected to grow from $18 to $45 billion by the year 2015. Currently, imports account for nearly $5 billion of that amount. According to the government’s Automotive Mission Plan (AMP), 2006-2016, the projected automotive sales revenue is estimated to grow from $34 billion to $122-159 billion by 2016.
Taj Mahal
- Finding partners and agents: New businesses must address issues of sales channels, distribution and marketing practices, pricing and labeling, and protection of intellectual property. Relationships and personal meetings with potential agents are extremely important. Due diligence is strongly recommended.
- Geographic diversity: U.S. companies, particularly small and medium-sized enterprises, should consider approaching India’s market on a local level. Good localized information is a key to success in such a large and diverse country. U.S. Commercial Service posts in India provide indispensable local information and advice and are well plugged in with local business and economic leaders. Often multiple agents are required to serve each geographic market in the country.
- Market entry options: include a subsidiary relationship, a joint venture with an Indian partner, or using a liaison, project, or branch office.
- Customs duty: The levy and rate of customs duty in India are governed by the Customs Act 1962 and the Customs Tariff Act 1975. Imported goods receive a basic customs duty, additional customs duty and education cess. The rates of the basic customs duty are specified under the Tariff Act, with the peak rate reduced to 12.5% for industrial goods. The additional customs duty is equivalent to the excise duty payable on similar goods manufactured in India. Education cess at 2% is leviable on the aggregate of customs duty on imported goods. Customs duty is calculated on the transaction value of the goods. Customs duties in India are administrated by Central Board of Excise and Customs under Ministry of Finance.
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L&H is a leading after-market supplier in the mining industry. It is an established rebuilder of heavy mining equipment and engineer, design and manufacture alternative replacement parts for the surface mining industry. Voltas is a leading engineering solutions company in India, a part of the TATA Group of industries, involved in design/manufacture/marketing of industrial equipments. In September 2007, CS India contacted L&H regarding participation in IME 2008, a mining trade show in Calcutta. After L&H showed preliminary interest, CS India provided event details and explained the opportunities that could open up for the company in India.
CS India provided additional research to address L&H’s queries, which resulted in their participation in the January 2008 trade show. Based on interactions with exhibitors and potential agents identified by CS India, L&H initially shortlisted seven Indian companies. CS India then provided information which helped L&H shorten the list to three best prospects. At this stage, L&H requested that CS India prepare detailed company reports on two of the shortlisted companies. Based on all the information and assessment provided by CS India, L&H finally decided to enter into an agreement with Voltas India to represent its product line in India. The team effort from CS India helped L&H finalize its market entry in India within a short cycle of eight months. L&H thanked CS India for their continued help and support in a follow-up email.
- Population: 1.16 billion (May 2009)
- Languages: Hindi (national language and primary tongue of 30% of population); English enjoys associate status, but is the most important language for national, political, and commercial communications
- Currency: Indian Rupee (Rs)
- Capital City: New Delhi
- Financial Center: Mumbai (formerly known as Bombay)
- GDP: $1.16 trillion
- Per Capita (PPP): $4,139 (2007-08)
- U.S. Exports to India (2008): $32.44 billion, a 85% increase from the previous year
- U.S. Imports from India (2008): $39.89 billion, a 65% increase from the previous year
- Major imports: machine tools, food processing equipment, textile machinery, medical equipment, high voltage electrical equipment, premium building materials, healthcare, telecommunication equipment, machinery for oil & gas, HVAC products and electronic and computer hardware
CS India produces market research reports to help U.S. companies determine market potential, market size and potential competitors. Visit our site to access our reports, including these recent market research reports:
- October 29-31, 2009 - IFSEC India 2009 - Security & Fire Technology Trade Show
- Oct-Nov, 2009 - Focus Franchising: U.S. Wellness, Beauty & Healthcare Franchise Concepts
- November 7-13, 2009 - Aerospace Trade Mission to India
- November 16-20, 2009 - Energy Efficiency Mission to India
- February 14 -19, 2010 – 2nd Solar Energy Trade Mission to India
- March 3-7, 2010 - U.S. Pavilion at India Aviation 2010, Hyderabad
- March 8-13, 2010 - Medical Trade Mission to India 2010
Varanasi
In 2008, the U.S. Commercial Service helped companies export over $2 billion of goods and services to India. Visit CS India’s web site to learn how we can help you today.
Carmine D'Aloisio, Minister Counselor for Commercial Affairs
Dale Tasharski, Commercial Counselor
U.S. Commercial Service
The American Center
24 Kasturba Gandhi Marg
New Delhi 110 001, India
Tel: (91-11) 2331 6841-48
Fax: (91-11) 2331 5172
Email: New.Delhi.Office.Box@N0SPAM.mail.doc.gov
In addition to the New Delhi office, the U.S. Commercial Service has offices in Mumbai, Chennai, Kolkata, Ahmedabad, Bangalore and Hyderabad.