INDIA'S SILK ROUTE TO TRADE SUPREMACY
India's business acumen has blended delicacy with aggressiveness towards leading economies
By JAWAD GILANI
Apr 04 - 10, 2005
Take a walk down the Wall Street and ask any business analyst to take his pick on India. The probable answer will more or less be the same: IT outsourcing. However, in recent times, things seem to have taken another favorable turn for this country. The consistency in the conventional wisdom of India's think-tank is finally beginning to pay off in terms of its GDP, which has grown by 7.4% in the second quarter of 2003-2004 leaving most doomsayer's expectations behind by miles. But where is all that sudden kick coming from? It cannot be IT sector alone. In fact, there is also a manufacturing sector contribution of nearly 25% in Indian exports. Foreign investors with bags full of money making queue for investment opportunities in India, which has almost a 'dream come true' environment for anyone who is willing to accept the challenge.
Think-tanks of India have responded magnificently to even remote opportunities that the country has been presented with and for that reason alone, India seems to be the only economy that might be able to pull off a challenge to China, which has a positive trade balance with almost all the western countries.
With corporations like Baharat Forge, Tata and Mahindra & Mahindra in its line up, India seems to have all the artilleries that it needs to outplay any challenging economies. Although if looked at individually, Indian corporations do not represent very exciting figures in comparison with some of the world's leaders, however, their combined effect on the economy is almost mind-blowing. To put icing on the cake, Prime Minister Manmohan Singh's government is willing to put another $177 billion into the manufacturing sector.
India's business acumen has blended delicacy with aggressiveness towards leading economies. India has slowly but surely, outsmarted the United States in mutual trade balance ever since the big brother started to get warmed up with the country.
INDIA-US MUTUAL MERCHANDIZE TRADE
(US $ million)
(Source: US Department of Commerce, Bureau of Census/News Reports)
Mutual merchandize trade between US and India touched US$ 15.92 billion marking 118% increase since 1993. Merchandise exports from India to USA grew by 21.4% in 2002 compared to 2001, rising from $9.74 billion to $11.82 billion. Exhibit-1 shows that this is the highest annual percentage growth in Indian exports to USA over the past decade. It is particularly noteworthy as it has occurred against a lackluster growth in worldwide exports to USA in 2002. For this remarkable performance, India should thank India-US Business Council, a trade body, which has worked endlessly in organizing trade events between Washington and New Delhi. In addition, an India Interest Group was setup by US manufacturing giant General Electric, after being hugely rewarded by entering the Indian market. The group contains high-end representatives from some of the major US corporations, looking to explore, maintain and strengthen business opportunities with India.
Moreover, world's leading appliances giant Whirlpool, recently has invested $200 million and has further plans to invest another 20-80 million every year for its new brands, that will be manufactured in India and to be exported to rest of the world. An investment venture started by 3M, one of world's largest manufacturers with more than 2000 products has seen healthy profits ever since it started in 1988. Intel Corporation has set up its largest non-manufacturing site outside of US in Bangalore, whereas its chip design center operating in Bangalore is one of the world's largest design facilities of high-end 32 bit architecture.
INDIA-JAPAN MUTUAL TRADE
Indian exports to Japan touched US$ 2179 million for the first time in 1998. Japan is one of the top five importers of India only after US, Germany, UAE and England. Looking from Japanese exports side, it is the 5th largest exporter to India only after US, Switzerland, Belgium and England. Indian imports from Japan stood at US$ 2,409 million in 1998, an increase of 25.8% over the previous year.
However, Indian think-tank is working hard to improve the trade balance with Japan. India-Japan Business Corporation Committee (IJBCC), which was setup in 1966, is working actively with Federation of Indian Chambers of Commerce and Industry to further improve trade ties between the two countries. Also the Electronics and Software Export Promotion Council of India (ESC) has developed close ties with Japan System House Association (JASA) which enables mutual cooperation in IT sector as well as critical Human Resource Development and technical cooperation to further enhance trade between the two countries. Special emphasis has been laid on attracting investment from Japan. So far Japanese investment has been concentrated mainly in electronics, chemicals and automobiles. However, ministries like Civil Aviation, Labor and Employment, Information and Broadcasting have become actively involved in the collective effort in attracting foreign capital; especially from Japan, which is supported by a survey conducted by EXIM bank Japan on Most Promising FDI Destination, ranked India 3rd on long-term loans and 4th on medium-term loans in the world.
If above figures are not impressive enough, take a look at local manufacturing in India, Mahindra & Mahindra (M&M) and TATA Motors are exporting their "mini's" to Europe and yet the domestic demand of their products are so high that they can hardly keep up. Domestic car sales saw an increased demand in by 25% in just one year with more than 1 million vehicles sold, while the automotive parts exported saw 30% increase in its demand. Hyundai Motor Corporation is using India as it manufacturing base for its exports to European markets. Forty percent of Bharat Forge's total production is taken by companies like DaimlerChrysler and Cummins Engine Corporation. Toyota Motors Co. in collaboration with Toyota Kirloskar Motor Private Limited (TKM) exported 150,000 vehicle transmissions to other Toyota plants around the world in the last one year only.
The opportunities in India seem to be never ending. Korea's multinational giant LG is preparing to invest US$ 150 million in a new plant which will produce Televisions and Refrigerators. Finland's Elcoteq Network which produces cellular phone for Nokia will be shipping out its first breed of handsets produced in Bangalore by the end of this year while their biggest competitor Ericsson is investing in a radio transmitter plant in Jaipur.
India is one of the few countries in the world that has a separate ministry for production of steel and there is a valid reason for that. A ministry currently held by Federal Minister, Shri Ram Vilas Paswan, has seen some serious growth anticipation in the industry. Indian Steel industry is aiming US$ 105 billion capital expenditure towards a very fast paced growth plan. Tata steel alone is looking to spend US$ 3.2 billion in overseas acquisitions to help Indian Steel industry expand its production capability from 3 million tonnes to 7.5 million tonnes per year. A report by Bombay Researcher, 'Projects Today' reveals that in total, a sum of $440 billion will be spent in public and private sector projects in the next five years.
Indian Corporate giants like Gujarat Ambuja, Sterlite and Tata are giving India the fearless strength to meet the ever-rising demand of steel and cement by China and the Middle East. A fairly large piece of the Indian government's capital expansion program is going into automotive industry, export of auto parts, pharmaceutical and textile industries.
The current position that India enjoys in world economy has not turned up overnight but has taken decades of planning and hard work by the public and private sectors. The key to Indian success story is the network of different working groups it has been able to put together within and outside of India. Truth of the matter is that India hardly followed any model of business but created one of its own by developing an excellent example of communication and coordination between its production and business units.
It is time for Pakistan, to develop better business and trade coordination within and outside the country, besides improving business relation with India, in order to give itself a chance to learn, from the world's fastest growing economy, the skills of communication and coordination.