The Dollar Business Magazine-July 2014

For Indian brides
& foreign buyers

With 80% of the worlds total turmeric
being produced in India, this spice can
work wonders for exporters
How SFIS almost
became famous
The objective of the Served From
India Scheme was to boost exports of
services from India. But has it, really?
Pectin bet you
havent heard about it
A great example of the direct
correlation between information
asymmetry and rate of return
Is Indias darling
port losing its sheen?
Many claim that all is not well at
Kandla, Indias No.1 major port.
Can it silence its critics?
www.thedollarbusiness.com Vol.1 Issue 7 July 2014 100 $5
FOREIGN TRADE DECODED
DESTINATION
BRAZIL
Is this booming Latin American market a delight for Indian exporters?
COLUMN:
Arthur C. Wheaton
Director, WNY Labour and Env.
Programs, Cornell University
INTERVIEWS:
Dr. Alok Bharadwaj
Executive Vice President,
Canon India
R. Ramesh Kumar
Executive Director,
Council for Leather Exports
Yaduvendra Mathur
Chairman & Managing Director,
EXIM Bank
Marie-Jose Charbonneau
Counsellor & Head,
High Commission of Canada in India
EXCLUSIVE INSIDE
JULY 2014 II THE DOLLAR BUSINESS 1
LETTER FROM THE EDITORINCHIEF
I
wont classify this a case of missing the woods for the trees. Nothing unusual. Just plain
geography with a dash of foreign trade spare a glance at the world map. Spot where India
sits, afer centuries of continental drifing. Its a sweet sight for any exporter willing to trade by
the skin of his teeth. As snugly as pegs settled into holes in a pegboard, India fnds its curves
perfectly placed on the map. With markets like Africa and the Middle-East on one side (West)
and an already rapidly advancing battery of South East Asian consumer and production economies
on another (East), the arrangement bears the appearance of a cartographers foul play. More believ-
able however is the fact that the very purpose of this divine design was to serve a trader-nations
beyond the pond motive in the 21
st
century.
Not to say India isnt living up to expectations. In the past decade-and-a-half, our exports have
increasingly moved away from developed economies, towards emerging markets. Diversifcation
is the word. Digest the following numbers. Te worlds largest economys contribution (USA) to our
exports stood at 21.7% ffeen years back. Today, its down to just 12.5%. Similarly, that of EU (the
worlds largest trading bloc) has fallen from 29.2% to 16.45%. Te tale of First World Orders com-
promise is well explained by the generosity that is being shown to developing nations.
Defnitely a stark contrast. To its east, exports to ASEAN in the decade-and-a-half leading to
FY2014 (that mostly consists of developing nations), have risen from 4.9% to 10.7%. To its West,
Indias exports to Africas 55 nations have risen from 6.3% to 10.0%, and those to Latin America have
risen from 1.5% to 3.5%.
It would have been unimaginable for an Indian foreign trade data scientist living in the 20
th
cen-
tury to imagine that ffeen years hence, the-then much ignored and politically unstable African
continent, recession-struck Latin America and a predominantly still-emerging ASEAN group (with
half of this group mired in a severe economic crisis) would create demand for almost the same
percentage of Made in India products as the two big daddies of global trade US and EU. Whats
most encouraging about this change in trade fow is that it clearly shows how Africa, Latin America
and developing Asian economies have become the big bulls in Indias shop. It depicts a change in
perspective of our export community, one that has moved away from Uncle Sam and royal Europe.
As it appears, Indias export community has the right outreach plan in place. It is reading the
radar right. But the fight control is in the hands of our policymakers. Te new Foreign Trade Policy
(2014-19) that is expected to be announced in August this year will determine whether this run
along the right path of diversifcation will culminate into good tidings for Indias august group of
exporters. Will amendments to Special Focus Initiatives make incentives (FMS and MLFPS) sub-
stantially generous, and exemption schemes (EPCG, DFIA and Advance Authorisation) more at-
tractive? Will the EPCs be made more accountable? Will labour-intensive and high-tech industries
both get the desired fllip? Will more Niryat Bandhu schemes (that was conceptualized for
mentoring and encouraging frst-gen entrepreneurs in the last FTP) be launched? Will the MAI
and MDA schemes be expanded and extended? Will more direct tax incentives be introduced to
make India a manufacturing hub? Will services sector-related schemes be introduced and polished
to ofer real time advantage (like the SFIS) and will this contributor to Indias GDP be given a more
motherly treatment by including it in FMS? Will duty credit script value be raised from the current
10% (under the Agri Infrastructure Incentive Scrip scheme) a move that could potentially solve
the infrastructure mystery for exporters and importers? Will the new FTP help us get closer to the
$400 billion in exports mark this fscal? Yes, our exporters have hit the right chord. Tey have a clear
strategy in mind diversify beyond the First World and re-route to Africa and Latin America and
other lucrative regions. But without the right policy throttle, our export craf-loaded-with-strategies
will be incapable of a lifof!
And if the diversifcation strategy meets the right policy, guess who will win... [Join the frst
alphabets of each of the previous paras to know.]
@SPWarner www.thedollarbusiness/blogs/steven
As snugly as pegs settled
into holes in a pegboard,
India fnds its curves
perfectly placed on the map.
And as it appears, Indias
export community has the
right outreach plan in place.
It is reading the radar right.
A STRATEGY SANS
POLICY WONT DO
Steven Philip Warner
Editor-in-Chief,
Te Dollar Business
steven@thedollarbusiness.com
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.
LETTING YOU ON THE SECRET BEHIND
THE WAUGHS, THE CHAPPELS AND THE
WOODIES
A blissful marriage of health and taste
LETTER FROM THE EDITORINCHIEF
I
wont classify this a case of missing the woods for the trees. Nothing unusual. Just plain
geography with a dash of foreign trade spare a glance at the world map. Spot where India
sits, afer centuries of continental drifing. Its a sweet sight for any exporter willing to trade by
the skin of his teeth. As snugly as pegs settled into holes in a pegboard, India fnds its curves
perfectly placed on the map. With markets like Africa and the Middle-East on one side (West)
and an already rapidly advancing battery of South East Asian consumer and production economies
on another (East), the arrangement bears the appearance of a cartographers foul play. More believ-
able however is the fact that the very purpose of this divine design was to serve a trader-nations
beyond the pond motive in the 21
st
century.
Not to say India isnt living up to expectations. In the past decade-and-a-half, our exports have
increasingly moved away from developed economies, towards emerging markets. Diversifcation
is the word. Digest the following numbers. Te worlds largest economys contribution (USA) to our
exports stood at 21.7% ffeen years back. Today, its down to just 12.5%. Similarly, that of EU (the
worlds largest trading bloc) has fallen from 29.2% to 16.45%. Te tale of First World Orders com-
promise is well explained by the generosity that is being shown to developing nations.
Defnitely a stark contrast. To its east, exports to ASEAN in the decade-and-a-half leading to
FY2014 (that mostly consists of developing nations), have risen from 4.9% to 10.7%. To its West,
Indias exports to Africas 55 nations have risen from 6.3% to 10.0%, and those to Latin America have
risen from 1.5% to 3.5%.
It would have been unimaginable for an Indian foreign trade data scientist living in the 20
th
cen-
tury to imagine that ffeen years hence, the-then much ignored and politically unstable African
continent, recession-struck Latin America and a predominantly still-emerging ASEAN group (with
half of this group mired in a severe economic crisis) would create demand for almost the same
percentage of Made in India products as the two big daddies of global trade US and EU. Whats
most encouraging about this change in trade fow is that it clearly shows how Africa, Latin America
and developing Asian economies have become the big bulls in Indias shop. It depicts a change in
perspective of our export community, one that has moved away from Uncle Sam and royal Europe.
As it appears, Indias export community has the right outreach plan in place. It is reading the
radar right. But the fight control is in the hands of our policymakers. Te new Foreign Trade Policy
(2014-19) that is expected to be announced in August this year will determine whether this run
along the right path of diversifcation will culminate into good tidings for Indias august group of
exporters. Will amendments to Special Focus Initiatives make incentives (FMS and MLFPS) sub-
stantially generous, and exemption schemes (EPCG, DFIA and Advance Authorisation) more at-
tractive? Will the EPCs be made more accountable? Will labour-intensive and high-tech industries
both get the desired fllip? Will more Niryat Bandhu schemes (that was conceptualized for
mentoring and encouraging frst-gen entrepreneurs in the last FTP) be launched? Will the MAI
and MDA schemes be expanded and extended? Will more direct tax incentives be introduced to
make India a manufacturing hub? Will services sector-related schemes be introduced and polished
to ofer real time advantage (like the SFIS) and will this contributor to Indias GDP be given a more
motherly treatment by including it in FMS? Will duty credit script value be raised from the current
10% (under the Agri Infrastructure Incentive Scrip scheme) a move that could potentially solve
the infrastructure mystery for exporters and importers? Will the new FTP help us get closer to the
$400 billion in exports mark this fscal? Yes, our exporters have hit the right chord. Tey have a clear
strategy in mind diversify beyond the First World and re-route to Africa and Latin America and
other lucrative regions. But without the right policy throttle, our export craf-loaded-with-strategies
will be incapable of a lifof!
And if the diversifcation strategy meets the right policy, guess who will win... [Join the frst
alphabets of each of the previous paras to know.]
@SPWarner www.thedollarbusiness/blogs/steven
As snugly as pegs settled
into holes in a pegboard,
India fnds its curves
perfectly placed on the map.
And as it appears, Indias
export community has the
right outreach plan in place.
It is reading the radar right.
A STRATEGY SANS
POLICY WONT DO
Steven Philip Warner
Editor-in-Chief,
Te Dollar Business
2 THE DOLLAR BUSINESS II JULY 2014
GLOBETROTTER
STATE BANK OF INDIA
Why the banks global aspirations
seem to be out of sync with that of
its shareholders
EDITORIAL & RESEARCH
Editor-in-Chief: Steven Philip Warner
Editor: Manish K. Pandey
Executive Editor: Shakti Shankar Patra
Deputy Editor (Online): Bidhu Bhushan Palo
Senior Editors: Jayashankar Menon, Satyapal Menon
Assistant Editor: Sisir Kumar Pradhan
Special Correspondent: Neha Dewan
Principal Correspondent: Sachin Manawaria
Senior Correspondent: Purba Das
Editorial Coordinatior: Sayyada Shama Unissa

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Founder & Editor: Anil Goyal
Publisher: Avnish Goyal
Chief Consulting Editor: Dr. A. K. Sengupta (Former Dean, IIFT)
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Copyright 2014
No part of this magazine may be reproduced in whole or in part without an ex-
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A KEY BRICK IN BRICS
Why despite having the lowest import/GDP ratio among all major
economies, Brazil offers $56 billion worth of low hanging fruits to
Indian exporters...
INDIA TRADE -
THIS MONTH
With the Union Budget and FTP
just days away, demands are
fying thick and fast for the newly
elected government
INFOGRAPHIC
WATCHES &
CLOCKS
Of Chinese volume, Swiss quality
and a coma-struck Indian exports
MONOLOUGE
PEOPLE SPEAK
A new government in India, Cold
War 2.0 and Iraq on the boil
means, opinions are pouring in
SPOTLIGHT
USA
Is the dollars reserve currency
status the only thing thats going
for the land of the free and home
of the brave?
GLOBAL TRADE -
THIS MONTH
News and analyses of everything
you need to know about global
trade in the month of June
COVER STORY
10

05

14

24

26

06

56

GLOBAL MANAGER
DR. ALOK BHARADWAJ,
EVP, CANON INDIA
Challenge to making India a
manufacturing powerhouse
CHARTERED
TERRITORY
HJF - 2014
A visa to Hyderabads pearls?
SECRET INGREDIENT
TURMERIC
Rising awareness & zero duties in
US - what more can one ask for?
MIDAS TOUCH
BICYCLES
Keeping the environment,
health and exporters happy
IMPORTONOMICS
PECTIN
Not having heard is no excuse
to not make dough
EXCLUSIVE COLUMN
ARTHUR WHEATON, ILR SCHOOL, CORNELL
Decline of the Detroit biggies, rise of the Japanese giants
and where Indian auto exporters stand
16

30

52

74

78

84

94

34

36

42

48

66

EXCLUSIVE INTERVIEW
SUBHASH GOYAL,
CHAIRMAN
SERVICES, FIEO
Why Indias policymak-
ers need to reconsider their stance
on the services sector
YADUVENDRA
MATHUR, CMD,
EXIM BANK
Empowering Indian
exporters without compromising on
asset quality
77

90

DOCKYARD
KANDLA PORT
Still holding on to No. 1
status, but for how long?
UNLOCKING CASH
Trying to make the job of Indian
exporters easy
BESTSELLER
WINE
High duties have never
deterred its lovers
INSIDE OUT
SFIS
No place for compromises
while building brand India
POLICY FOCUS
INDIAS POWER EXPORTS
When policymakers
misunderstand social service
PRIME FOCUS
TRIPS
Protecting innovation
OVERSEAS TALK
INDO-CANADA TRADE
Top Canadian diplomats discuss the India-Canada bilateral trade
20

inbox
T
he Dollar Business magazine is superb
in all accounts: coverage, topicality and
production value. There is no magazine in
the market dedicated to exporters. Con-
gratulations on bringing out a much needed
product.
AJAY SRIVASTAVA
Joint Director General of
Foreign Trade,
Ministry of Commerce & Industry, GoI
A
fter going through the pages of The
Dollar Business I must state that
such a magazine focusing on foreign trade is the
need of the hour. The data and the content pub-
lished are very useful to exporters. Let the new
Minister of Commerce, Ms. Nirmala Sitaraman get
a copy of this magazine while fnalising the new
Foreign Trade Policy of India. Do maintain the
standard.
RAMESH P. KOATH
Joint Director,
Fed. of Indian Export Organisations (FIEO)
I
take this opportunity to express my congratula-
tions to all members of Vimbri Media for publishing
an excellent magazine, The Dollar Business, the
Bible for the imports and exports industry. I read the
articles and interviews, which are to the point and
relevant in todays international trade environment.
I think The Dollar Business will be a great motiva-
tor for the exporter community, especially new en-
trepreneurs who need a little extra push. I strongly
believe, in future, The Dollar Business will be a us-
er-friendly and educational tool for the entire export-
er community for identifying new export markets.
SUMAN KUMAR MUKHOPADHYAY
Chapter Head Jharkhand and Bihar,
editorial@thedollarbusiness.com
WE VALUE YOUR FEEDBACK, WHETHER CRITICISM OR APPRECIATION.
AND HERE ARE A FEW THAT HIT OUR MAILBOXES IN JUNE 2014
T
he focus of your magazine on
Foreign Trade is very different
from other magazines/newspapers
and is a welcome sign. I hope The
Dollar Business will be useful for new
entrepreneurs who are venturing into
exports. Existing exporters can also be
immensely beneftted by your analytical
reporting. I wish grand success to the
publication.
D. K. SINGH
Additional Director General of
Foreign Trade,
C
ongratulations to The Dollar Business for the
excellent layout, range of subjects and the
depth of issues covered in the pre-inaugural issue.
I wish you all the best for the new venture.
K. C. ROUT
Additional Director General of Foreign Trade,
I
found the content of The Dollar Business very in-
formative and useful. I look forward to reading the
magazine with great interest.
PROF. JEEMOL UNNI
Director,
Institute of Rural Management, Anand (Guj.)
T
he Dollar Business magazine is highly infor-
mative on currently relevant issues related to
business within and beyond India. I believe it will
be of great value to the management students
of LIBA.
PROF. R. MARIA SALETH
Director,
LIBA, Loyola College, Chennai
100
PRE-INAUGURAL
ISSUE
WHEELING &
DEALING IN
AUTO
COMPONENTS
The Dollar Business
presents insights
into the world of auto
component exports
Kishore Tanna
Chairman, IOPEPC
How MEP reduction could
be a game changer for edible
oil exporters
Ajay Sahai
DG & CEO, FIEO
Why the focus of the new
policy should be on exports
of services
G.V. L. Satya Kumar
Deputy Chairman, VPT
What really makes Vizag a
better choice over other ports
on the East Coast
Vol.1 Issue 6 June 2014
Ethiopia a land of promises
for Indian exporters?
How the $13 billion-plus import market is
a compellingly attractive shipment destination
Who moved your cheese?
Why importing Cheese into India makes for a
mathematically proftable business
E
X
C
L
U
S
I V
E
I N
T
E
R
V
I E
W
S
inbox
T
he Dollar Business magazine is superb
in all accounts: coverage, topicality and
production value. There is no magazine in
the market dedicated to exporters. Con-
gratulations on bringing out a much needed
product.
AJAY SRIVASTAVA
Joint Director General of
Foreign Trade,
A
fter going through the pages of The
Dollar Business I must state that
such a magazine focusing on foreign trade is the
need of the hour. The data and the content pub-
lished are very useful to exporters. Let the new
Minister of Commerce, Ms. Nirmala Sitaraman get
a copy of this magazine while fnalising the new
Foreign Trade Policy of India. Do maintain the
standard.
RAMESH P. KOATH
Joint Director,
I
take this opportunity to express my congratula-
tions to all members of Vimbri Media for publishing
an excellent magazine, The Dollar Business, the
Bible for the imports and exports industry. I read the
articles and interviews, which are to the point and
relevant in todays international trade environment.
I think The Dollar Business will be a great motiva-
tor for the exporter community, especially new en-
trepreneurs who need a little extra push. I strongly
believe, in future, The Dollar Business will be a us-
er-friendly and educational tool for the entire export-
er community for identifying new export markets.
SUMAN KUMAR MUKHOPADHYAY
Chapter Head Jharkhand and Bihar,
WE VALUE YOUR FEEDBACK, WHETHER CRITICISM OR APPRECIATION.
AND HERE ARE A FEW THAT HIT OUR MAILBOXES IN JUNE 2014
T
he focus of your magazine on
Foreign Trade is very different
from other magazines/newspapers
and is a welcome sign. I hope The
Dollar Business will be useful for new
entrepreneurs who are venturing into
exports. Existing exporters can also be
immensely beneftted by your analytical
reporting. I wish grand success to the
publication.
D. K. SINGH
Additional Director General of
Foreign Trade,
C
ongratulations to The Dollar Business for the
excellent layout, range of subjects and the
depth of issues covered in the pre-inaugural issue.
I wish you all the best for the new venture.
K. C. ROUT
Additional Director General of Foreign Trade,
I
found the content of The Dollar Business very in-
formative and useful. I look forward to reading the
magazine with great interest.
PROF. JEEMOL UNNI
Director,
Institute of Rural Management, Anand (Guj.)
T
he Dollar Business magazine is highly infor-
mative on currently relevant issues related to
business within and beyond India. I believe it will
be of great value to the management students
of LIBA.
PROF. R. MARIA SALETH
Director,
LIBA, Loyola College, Chennai
100
PRE-INAUGURAL
ISSUE
WHEELING &
DEALING IN
AUTO
COMPONENTS
The Dollar Business
presents insights
into the world of auto
component exports
Kishore Tanna
Chairman, IOPEPC
How MEP reduction could
be a game changer for edible
oil exporters
Ajay Sahai
DG & CEO, FIEO
Why the focus of the new
policy should be on exports
of services
G.V. L. Satya Kumar
Deputy Chairman, VPT
What really makes Vizag a
better choice over other ports
on the East Coast
Vol.1 Issue 6 June 2014
Ethiopia a land of promises
for Indian exporters?
How the $13 billion-plus import market is
a compellingly attractive shipment destination
Who moved your cheese?
Why importing Cheese into India makes for a
mathematically proftable business
E
X
C
L
U
S
I V
E
I N
T
E
R
V
I E
W
S
monologue
With the collapse of the rupee, its been
both wise and prudent on the part of Indians
to own gold. To 1.2 billion people, gold
represents savings and security. My
guess is theres more gold in India than
anywhere else.
MONEY MORNING RESOURCE SPECIALIST
PETER KRAUTH
The new sanctions will continue
to increase economic pressure on
those responsible for the crisis
in Ukraine.
CANADIAN PRIME MINISTER STEPHEN
HARPER AFTER ANNOUNCING FRESH
SANCTIONS AND TRAVEL BANS
AGAINST RUSSIAN AND UKRAINIAN
INDIVIDUALS
Exports have driven one-third
of the economic growth in our
recovery and now support over
11 million US jobs. Last year,
we exported $2.3 trillion in goods
and services, which was an
all-time high.
US PRESIDENT BARACK OBAMA, AT
EXPORT COUNCIL MEETING
We are creating a powerful and
attractive centre of economic
development, a major regional
market bringing together over 170
million people.
RUSSIAN PRESIDENT VLADIMIR PUTIN
AFTER THE ANNOUNCEMENT OF AN
ECONOMIC UNION BETWEEN RUSSIA,
BELARUS AND KAZAKHSTAN
I hope the poorest of the
poor will see better days,
and I hope our exports
will increase. I hope
doing business in India
will become easier. I hope
they will create lots of
jobs.
INFOSYS FOUNDER
N. R. NARAYANA MURTHY,
IN A PHILOSOPHICAL
MOOD ABOUT HIS
EXPECTATIONS FROM
THE NEW GOVERNMENT
Over the six months
to May, G-20 members
have continued
to introduce trade
restrictions albeit at
a slightly slower rate
than before. While
some liberalising
measures have
also been
introduced, it
is clear that the
coat of trade
restrictions
has grown a bit
thicker over
this period.
WTO,DG
ROBERTO
AZEVEDO, ON
RECENT TRADE
DEVELOPMENTS
GLOBAL
TRADE
THIS MONTH
News & Analysis
THAILAND
RICE EXPORTS
Feeding the world
Tailand claims that it has regained its position as the worlds
largest rice exporter afer three years, mainly due to low pric-
es. According to the Tai Rice Exporters Association (TREA),
Tailand exported about 3.93 million tonnes of rice between
January 1 and May 20, 2014, slightly more than Indias 3.74
million tonnes. Tailand used to be the worlds top rice ex-
porter for over two decades until 2011, when the government
increased the rice purchase support price to almost double the
market price under the rice pledging programme. Tis result-
ed in Tai rice millers and exporters reducing purchases and
government rice stocks swelling to up to 18 million tonnes
almost half of total global rice trade. Indias return to the export
market in late 2011, afer a three-year ban on non-basmati rice
exports, made matters worse for Tai rice exports.
Tis led to the interim Tai government scrapping the
controversial rice pledging programme and aggressively sell-
ing rice this year. Tailand is also eyeing to increase exports
to Iran and other countries in the Middle East in order to
improve sales. TREA expects Tailands full year rice ex-
ports to reach 9 million tonnes in FY2014, which is in line
with the United States Department of Agriculture (USDA)
predictions. In fact, delayed monsoon in India, and Irans con-
cerns over the quality of Indian rice might help Tailand ship
even more. Tats what we call a comeback!
Worlds top rice exporters (by value)
India and Tailand account for more than half of global rice exports
Porters loading
sacks of rice on
a ship, docked at
Chao Phraya River in
Bangkok, Thailand.
Thailands rice ex-
ports are recovering
after the government
scrapped the contro-
versial rice pledging
programme
Source: International Trade Centre ($ million)
India
Thailand
USA
Pakistan
Vietnam

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
9,000.0
8,000.0
7,000.0
6,000.0
5,000.0
4,000.0
3,000.0
2,000.0
1,000.0
0.0
GLOBAL
TRADE
THIS MONTH
News & Analysis
THAILAND
RICE EXPORTS
Feeding the world
Tailand claims that it has regained its position as the worlds
largest rice exporter afer three years, mainly due to low pric-
es. According to the Tai Rice Exporters Association (TREA),
Tailand exported about 3.93 million tonnes of rice between
January 1 and May 20, 2014, slightly more than Indias 3.74
million tonnes. Tailand used to be the worlds top rice ex-
porter for over two decades until 2011, when the government
increased the rice purchase support price to almost double the
market price under the rice pledging programme. Tis result-
ed in Tai rice millers and exporters reducing purchases and
government rice stocks swelling to up to 18 million tonnes
almost half of total global rice trade. Indias return to the export
market in late 2011, afer a three-year ban on non-basmati rice
exports, made matters worse for Tai rice exports.
Tis led to the interim Tai government scrapping the
controversial rice pledging programme and aggressively sell-
ing rice this year. Tailand is also eyeing to increase exports
to Iran and other countries in the Middle East in order to
improve sales. TREA expects Tailands full year rice ex-
ports to reach 9 million tonnes in FY2014, which is in line
with the United States Department of Agriculture (USDA)
predictions. In fact, delayed monsoon in India, and Irans con-
cerns over the quality of Indian rice might help Tailand ship
even more. Tats what we call a comeback!
Worlds top rice exporters (by value)
India and Tailand account for more than half of global rice exports
Porters loading
sacks of rice on
a ship, docked at
Chao Phraya River in
Bangkok, Thailand.
Thailands rice ex-
ports are recovering
after the government
scrapped the contro-
versial rice pledging
programme
India
Thailand
USA
Pakistan
Vietnam

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
9,000.0
8,000.0
7,000.0
6,000.0
5,000.0
4,000.0
3,000.0
2,000.0
1,000.0
0.0
News & Analysis
JAPAN
BUTTER IMPORTS
For that one
perfect toast
LATVIA-CHINA TRADE
DAIRY AND MEAT PRODUCTS
Beyond the Great Wall
Latvian farmers and food manufacturers have expressed in-
terest in exporting dairy and meat products to China. Lat-
vian Minister of Agriculture Janis Duklavas shared this with
Zhi Shuping, the Chinese Minister of State Administration of
Quality Supervision, Inspection and Quarantine, who was on a
brief visit to this Baltic nation recently.
Duklavas also assured the Chinese minister that Latvian
State Food & Veterinary Services periodically undertakes
inspections in order to ensure that all dairy and other
agriculture products meet safety requirements and
are suitable for the domestic market as well as ex-
port destinations. Shuping indicated that China
is interested in Latvian dairy and meat prod-
ucts and expressed his satisfaction that Latvian
institutions were capable of monitoring food
production in order to ensure that consumers
receive safe and qualitative products. For re-
cords, Latvias export of dairy and meat prod-
ucts to foreign countries have been rising over
the last few years.
During the meeting, the ministers inked protocols on
quarantine and veterinary requirements needed for mutton
and beef exports from Latvia to China.
Janis Duklavas
Minister of
Agriculture, Latvia
Japans Ministry of Agriculture, For-
estry & Fisheries (MAFF) has an-
nounced an emergency import of
7,000 tonnes of butter this year for
industrial use, making it the coun-
trys biggest-ever emergency butter
import. Tis is in addition to the
3,000 tonnes, which Japan had al-
ready committed to import this year.
Japans milk production has
slumped by 2-4% since 2013 due to
extreme weather conditions. Tis has
resulted in a drop in butter produc-
tion by 23.5% (in February, 2014).
Ofcial sources claim that shortage
of fodder and a decline in the num-
ber of dairy farmers are also reasons
for the decline. On the other hand,
per capita milk consumption is
growing in Japan due to a rise in the
popularity of bakery products. At the
same time, higher demand for cream
and natural cheese has reduced the
availability of fuid milk for the pro-
duction of butter.
Who gains from this? Of course,
New Zealand the main exporter of
butter to Japan. Apart from New Zea-
land, EU and USA are also rushing
in to supply dairy products to Japan
where the demand for these products
is likely to keep on increasing due to
changing food habits.
COLD WAR 2.0
TIGHTENING THE NOOSE
More than what
meets the eye
US has tightened export regulations against fve
Russian frms and added them to the list of un-
checked partners. According to the ofcial jour-
nal of the federal government of the United States
i.e. Federal Register, the Russian frms included in
the list are Fryazino branch of the Russian Acad-
emy of Sciences Institute of Radio-Engineering &
Electronics, JSC Voentelecom, Business Security
Academy, Pumps Ampika Ltd. and Nuklin Ltd.
Although export supplies to these frms have not
been banned, they now require licensing, negoti-
ation and registration on special stringent rules.
However, supplies on preferential terms are not
permitted anymore. Te decision of the Bureau
of Industry & Security to put these frms on the
controlled list comes by the fact that the Bureau
failed to carry out a detailed check of these frms
to fnd an end user of products they buy. Interest-
ingly, US had earlier zeroed in on 29 frms from
China, Russia, Hong Kong and UAE to be labelled
as unchecked.
The Herbert C. Hoover Building
in Washington, D.C. The building
serves as the headquarters for
the United States Department of
Commerce
GLOBAL
TRADE
THIS MONTH
News & Analysis
USA
TRADE DEFICIT
Blame it on the
Polar Vortex
US trade defcit has widened to $174 bil-
lion in the January-April period, due to
rising imports. According to the Depart-
ment of Commerce, US exported goods
and services worth $767.3 billion in Jan-
uary-April 2014, up about 2% (y-o-y),
while imports stood at around $941.4
billion, up about 3.3% (y-o-y). Total
trade defcit for the period stood at $174
billion, up around 8% (y-o-y). In April
2014, the defcit stood at $47.2 billion
(exports of $193.3 billion and imports of
$240.6 billion), up from $44.2 billion in
March. Some claim the defcit grew due
to the unusually cold weather that ham-
pered exports, while others claim USAs
import of automobiles, capital goods and
consumer goods reached record highs in
April. Well, you decide!
Malawi President Arthur Peter Muthari-
ka recently announced that his govern-
ment will double the countrys export
base in the next fve years. Te President
made this announcement while opening
the 26
th
Malawi International Trade Fair
in Blantyre, Malawis centre of fnance
and commerce. As per him, the target
will be achieved through a persistent
implementation of the National Export
Strategy, which has a set roadmap for
developing the countrys manufacturing
base and ensure both export competi-
tiveness & economic empowerment.
Mutharika also acknowledged that
business environment in Malawi had
deteriorated in recent years due to
macro-economic, security & structur-
al challenges. Tis has eventually led
to several economic problems such as
low foreign direct investment, anaemic
industrial output and unsustainable
structural trade defcit. Mutharika says
his government would go that extra
mile to overcome these challenges by
Peter Mutharika
President,
Republic of Malawi
MALAWI
EXPORT PUSH
No more of living beyond ones means
carrying out much needed regulatory
and institutional reforms, aimed at ad-
dressing bottlenecks that are impact-
ing enterprise development in Malawi.
Further, the government is also looking
at improving the countrys rank on the
World Banks Ease of Doing Business
Index. Mutharika plans to place the pri-
vate sector at the core of this drive to
enhance competitiveness of Malawian
products in the international markets.
3,000
2,500
2,000
1,500
1,000
500
0
0
- 200
- 400
- 600
- 800
-1,000
-1,200
-1,400
-1,600
-1,800
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Export Value (L-axis) Import Value (L-axis) Trade Defcit (R-axis)
Malawis exports, imports & defcit
In 2012 and 2013, Malawis trade defcit was bigger than its total exports
PAKISTAN-TAJIKISTAN TRADE
TEXTILE DEVELOPMENT
Every penny counts
Te governments of Pakistan and Tajikistan have
signed a memorandum of understanding (MoU) on
collaboration in textiles development, during a recent
visit of Pakistani Prime Minister Nawaz Sharif to the
Central Asian nation. As per the MoU, both nations
will exchange information on cotton, organise training
programmes, exchange visits of experts and trade dele-
gations, and establish joint enterprises.
Te memorandum also mentions
that Pakistans National Textile Univer-
sity and Tajik Technological University
would facilitate research in fbre devel-
opment and textile related technolo-
gies. During the visit, Pakistani Prime
Minister Sharif and Tajikistans Presi-
dent Emomali Rahmon also agreed to
set a target of bilateral trade to $500
million over the next three years and
to work towards a Preferential Trade
Agreement (PTA).
Nawaz Sharif
Prime Minister,
Pakistan
GLOBAL
TRADE
THIS MONTH
News & Analysis
USA
TRADE DEFICIT
Blame it on the
Polar Vortex
US trade defcit has widened to $174 bil-
lion in the January-April period, due to
rising imports. According to the Depart-
ment of Commerce, US exported goods
and services worth $767.3 billion in Jan-
uary-April 2014, up about 2% (y-o-y),
while imports stood at around $941.4
billion, up about 3.3% (y-o-y). Total
trade defcit for the period stood at $174
billion, up around 8% (y-o-y). In April
2014, the defcit stood at $47.2 billion
(exports of $193.3 billion and imports of
$240.6 billion), up from $44.2 billion in
March. Some claim the defcit grew due
to the unusually cold weather that ham-
pered exports, while others claim USAs
import of automobiles, capital goods and
consumer goods reached record highs in
April. Well, you decide!
Malawi President Arthur Peter Muthari-
ka recently announced that his govern-
ment will double the countrys export
base in the next fve years. Te President
made this announcement while opening
the 26
th
Malawi International Trade Fair
in Blantyre, Malawis centre of fnance
and commerce. As per him, the target
will be achieved through a persistent
implementation of the National Export
Strategy, which has a set roadmap for
developing the countrys manufacturing
base and ensure both export competi-
tiveness & economic empowerment.
Mutharika also acknowledged that
business environment in Malawi had
deteriorated in recent years due to
macro-economic, security & structur-
al challenges. Tis has eventually led
to several economic problems such as
low foreign direct investment, anaemic
industrial output and unsustainable
structural trade defcit. Mutharika says
his government would go that extra
mile to overcome these challenges by
Peter Mutharika
President,
Republic of Malawi
MALAWI
EXPORT PUSH
No more of living beyond ones means
carrying out much needed regulatory
and institutional reforms, aimed at ad-
dressing bottlenecks that are impact-
ing enterprise development in Malawi.
Further, the government is also looking
at improving the countrys rank on the
World Banks Ease of Doing Business
Index. Mutharika plans to place the pri-
vate sector at the core of this drive to
enhance competitiveness of Malawian
products in the international markets.
3,000
2,500
2,000
1,500
1,000
500
0
0
- 200
- 400
- 600
- 800
-1,000
-1,200
-1,400
-1,600
-1,800
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Export Value (L-axis) Import Value (L-axis) Trade Defcit (R-axis)
Malawis exports, imports & defcit
In 2012 and 2013, Malawis trade defcit was bigger than its total exports
PAKISTAN-TAJIKISTAN TRADE
TEXTILE DEVELOPMENT
Every penny counts
Te governments of Pakistan and Tajikistan have
signed a memorandum of understanding (MoU) on
collaboration in textiles development, during a recent
visit of Pakistani Prime Minister Nawaz Sharif to the
Central Asian nation. As per the MoU, both nations
will exchange information on cotton, organise training
programmes, exchange visits of experts and trade dele-
gations, and establish joint enterprises.
Te memorandum also mentions
that Pakistans National Textile Univer-
sity and Tajik Technological University
would facilitate research in fbre devel-
opment and textile related technolo-
gies. During the visit, Pakistani Prime
Minister Sharif and Tajikistans Presi-
dent Emomali Rahmon also agreed to
set a target of bilateral trade to $500
million over the next three years and
to work towards a Preferential Trade
Agreement (PTA).
Nawaz Sharif
Prime Minister,
Pakistan
News & Analysis
Te two Latin American neighbours Argentinaand Brazil have signed a new bi-
lateral car trade pact giving the former more favourable terms. Te one-year pact,
which allows Brazil to export $150 worth of automobiles for each $100 worth of
the same product it imports fromArgentina (without paying tarrifs), has been
designed to restore trade volumes and fll in the widening gaps in their external
accounts. Reason: Automotive industry accounts for more than half of the $36
billion trade between the two countries which have been involved in several in-
dustrial disputes over the last few years. Te key issue is the volume of trade, and
the ratio agreed certainly favours the free fow of commerce between both coun-
tries, Brazilian Trade Minister Mauro Borges told reporters at a news conference
in Buenos Aires afer signing the pact.
Te previous accord that favoured Brazil at a ratio of 1.95:1, had come to an
end last year afer a dispute over its terms. Under the new pact, both countries
will freeze their current share in each others market. Tis means Brazilian cars
cannot account for more than 44% of sales in Argentina, while Argentine cars
cannot be more than 11% of sales in Brazil. Te revival of the accord will help in
restoring the bilateral trade relation between the two nations. Afer all, its a win-
win situation for both!
USA
CRUDE OIL RE-EXPORT
From Washington,
with Love!
Te US Department of Commerce ap-
proved 13 crude oil export and re-export
licenses in May 2014. As such, the coun-
try has approved 52 oil export licens-
es in the last six months. Te approved
permits include, one license each for
re-exports of foreign origin oil to Chi-
na, Spain, South Korea, the Netherlands
and UK, seven licenses for exports of US
oil to Canada, and one re-export license
that could be issued to any of the follow-
ing countries (US has not yet specifed
the name) Argentina, Belgium, Brazil,
Canada, Chile, Finland, France, Ger-
many, Greece, Israel, Italy, Japan, Korea,
Malaysia, Morocco, Netherlands, Nor-
way, Poland, Singapore, Spain, Sweden,
Switzerland, Taiwan, Tailand, Turkey
and UK. Its worth noting that US does
not allow export of its own oil (except to
Canada). It allows the re-export of for-
eign oil. All licenses are valid for only
one year and exports under the exemp-
tion need to be approved by the depart-
ments Bureau of Industry and Security.
BRAZIL-ARGENTINA
BILATERAL PACT
A barter beyond the border
Aerial view of an oil tanker: US approved 13
crude oil export and re-export licenses in
the month of May 2014 alone
Brazils exports to Argentina Argentinas exports to Brazil
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Brazil-Argentina car trade
Over 87% of Brazils total car exports in 2013 went to Argentina
Cars waiting to be exported at the Port of Santos, So Paulo, Brazil
INDIA
TRADE
THIS MONTH
News & Analysis
AUTO EXPORT
GM INDIAS EXPORT TO CHILE
Latino attraction
General Motors India will begin exporting vehicles next year,
with Chile slated to be its frst overseas market. Te company
will initially export lef-hand-drive Chevrolet Beat, the pro-
duction of which will commence at its Talegaon plant in the
second half of 2014. Te frst batch of exports have been sched-
uled for the frst quarter of 2015.
Commenting on the move, GM India President and Man-
aging Director Arvind Saxena said, Te start of Beat exports
underlines GMs commitment to India and demonstrates the
quality of the countrys growing supplier base. He further said,
Te exports will create more employment opportunities with-
in GM India and the supplier community while helping im-
prove capacity utilisation at the Talegaon Plant.
Its worth noting that the company has been struggling to
maintain its sales momentum in the domestic market due to a
slump in demand. In May 2014, the companys sales declined
by 42.76% to just 4,865 units (including 1,716 units of Beat) as
against 8,500 units in the same month last year.
SUGAR SUBSIDY
TURNAROUND HOPES
Good days are coming?
With the Centre recently extending the export incentive
scheme on raw sugar till September 2015, there is optimism
in the industry about a turnaround this fnancial year. Accord-
ing to the scheme, the government ofers Rs.3,300 subsidy for
every tonne of raw sugar exported. Although the intention of
these subsidies is to bail out the domestic sugar industry, its
already become a conentious issue at WTO, with Brazil and
Australia raising serious concerns on Indian subsidies.
Te subsidies are expected to help increase the sugar indus-
trys cash fow by Rs.13,200 crore during the entire 18 month
period ending September 2015. Of this, a sum of Rs.1,200 crore
is expected to go to farmers directly while the remaining will be
allocated for subsidy refund to sugar mills. According to ISMA,
Indias sugar industry will turnaround this year provided mills
are able to export the entire allocated quantity of 4 million
tonnes at a price higher than that prevailing in India.
PRECIOUS METALS: GOLD AND SILVER
TARIFF VALUE HIKE
All for the sake of reducing CAD?
Te Indian government has once again hiked import tarif on gold and
silver to $411/10 gram and $632/kg respectively in response to rising
global prices in the wake of escalating violence in Iraq.During the frst
fortnight of June, tarif value on imported gold stood at $408/10 gram
and silver at $617/kg. Te changes have been notifed by the Central
Board of Excise and Customs. Te import tarif value base price at
which customs duty is determined to prevent under-invoicing is re-
vised on a fortnightly basis, taking into account global prices. In the last
two weeks, global gold prices have increased due to rising violence in
Iraq that has spurred safe haven demand for precious metal.
Indias gold imports declined by over 74% in April (y-o-y) to $1.75
billion due to restrictions imposed by the government on inbound ship-
ments in an attempt to narrow the current account defcit (CAD).Gold
is Indias second largest import item afer petroleum. Due to several
curbs, Indias total gold and silver imports dropped by 40% to $33.46
billion in FY2014 as compared to $55.79 billion in FY2013.
Indias sugar & sugar confectionery exports
Sugar exports from India dance to the tunes of policymakers
2,500
2,000
1,500
1,000
500
0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Source: Ministry of Commerce; fgures in $ million
Indian government continues to curb gold imports
Chevrolet Beat
on display at an
auto show
News & Analysis
OILSEEDS IMPORT
WEAK MONSOON FEARS
Tryst with another drought?
Defcient monsoon could adversely impact Indias oilseeds
output this year resulting in more dependence on imports.
According to a paper released by ASSOCHAM, Indias oil-
seeds import bill is likely to shoot up to $14 billion in the
current fnancial year from $9.3 billion in FY2014 as produc-
tion of oilseeds is expected to be hit by as much as 8.3% due
to insufcient rainfall. As per initial indications, rainfall in the
edible oil growing states of Gujarat, Rajasthan, Madhya Pradesh,
Maharashtra, Karnataka, Tamil Nadu, West Bengal and
Andhra Pradesh would be defcient due to El Nino reducing
output, which in turn will result in higher import dependence.
ASSOCHAM Secretary General, D. S. Rawat recently pointed
out that demand for edible oil will continue to grow by 15% per
annum due to increasing income levels and fast changing eat-
ing habits in rural India. Te demand for edible oil is likely to
touch 203.54 lakh MT during FY2015, resulting in an import
bill of $14 billion.
Te ASSOCHAM paper titled Indias likely tryst with Ed-
ible Oil: Impact of El Nino factor reveals that the country
imported edible oils worth $9.3 billion in FY2014, a substan-
tial fall from $11.2 billion during FY2013. Despite increase in
production, close to half of Indias domestic demand is met by
imports. Te paper also points out that India faces drought
prospects every ffh year, the last one being in 2009, indicating
a possible drought in 2014.
FORD MOTOR COMPANY
EXPORT HUB INDIA
Fords next bet: India?
Ford Motor Company has decided to make India its
export hub. Revealing this information, Ford Motor
Company President and CEO Alan Mulally said, We
have decided that India will be an export hub for Ford.
We are exporting to over 50 countries from here and are
increasing it all the time. He further added that the de-
cision was taken keeping in view Indias position as one
of the fastest growing markets. It is because our oper-
ations are great, our quality is great and our efciency
is great. Its just that the location of India is great for
us, Mulally added. Ford India has two manufacturing
plants in India one in Gujarat and another at Mara-
imalai Nagar in Tamil Nadu.
Responding to a question on whether Ford India
has lived up to expectations, Mulally said, Remem-
ber Ford was in trouble in September eight years
ago. We had the worst report in 2006. I will remind
you that there was $17 billion loss to the company.
If you are in business, you are going to have brack-
ets around your numbers. We grew decisively. Not
only have we survived but are also prospering now.
Mulally pointed out that as soon as Ford attained prof-
itability, the company turned its attention to Asia Pa-
cifc. Our investments have been tremendous in India
and China. Tese are the fastest growing markets in the
world, he added.
Te Detroit giant is now focussing on delivering bet-
ter quality and fuel efcient vehicles and is operating as
one global company.
Indias oilseeds imports
India imported over $350 million worth of oilseeds in FY2014
400
350
300
250
200
150
100
50
0
Linseed oil
and fax
seeds. Indian
oilseeds
imports are
expected to
surge this
year
Alan Mulally, CEO of
Ford Motor Company,
at the North American
International Auto Show
2014 in Detroit, US
INDIA
TRADE
THIS MONTH
News & Analysis
LIQUEFIED NATURAL GAS
DUTY EXEMPTION
Get this gas off-duty. Now.
A high-level government panel, headed by former Planning
Commission Member Saumitra Chaudhuri, has proposed that
the government should exempt liquefed natural gas (LNG)
from the existing 5% import duty. Te panel has been institut-
ed to develop Indias Auto Fuel Vision.
According to a report released by the panel, for many years
now, import duty on crude petroleum has been nil, while pre-
viously it was 5% and before that 10%. However, the import
duty on LNG except when directly imported for power gen-
eration continues to be 5%. Tere is no logic for the separate
treatment to petroleum and LNG. Tey go towards similar uses
and LNG is in many ways a preferable substitute for liquid fu-
els, the report added.
Te panel also has proposed sharing the burden of stricter
green fuel norms with consumers by imposing a special fuel
up-gradation cess of 75 paise/liter of diesel and petrol. India
plans to introduce the stricter Bharat Stage V emission norms
by 2020 to curb growing air pollution. In addition, the commit-
tee has recommended closing the 75 paisa price gap between
TEXTILE EXPORTS
ZERO DUTY
Dressing up the world
Tirupur Exporters Association (TEA) has urged the Centre
to remove duty on man-made fbres and special machinery
used for the manufacturing of synthetic garments. In a mem-
orandum submitted to Commerce and Industry Minister
Nirmala Sitharaman and Textiles Minister Santhosh Kumar
Gangwar, TEA President A. Shaktivel said zero duty on man-
made fbres will not only increase its usage and production of
garments but also help exports of man-made fbre garments.
He said the import of special machinery on zero duty will
attract more investment in the manufacturing of synthetic
garments, a trend that is picking up globally. He also urged
the Centre to introduce Goods and Services Tax in the up-
coming Union Budget, which would enhance Indias com-
petitiveness in the global market.
Te memorandum also urged for an early signing of the
proposed Free Trade Agreement with the European Union
(EU) the main destination for Indian knitwear. Tis would
enable importing of value added fabrics under zero duty
basis and re-exporting to EU as garments.
Te association also requested the textile minister to
reduce customs duty on import of synthetic/blended and
specialty fabric of cotton. In order to protect the industry
from high interest rates, a separate chapter is required in the
monetary policy, Shaktivel added.
Stage III and IV fuel by imposing a high sulphur cess. Going
forward, the plan is to implement Bharat Stage VI standards by
2024, which will require automobile manufacturers to put in
place technological improvements.
While theres no duty on crude oil, LNG imports attract a 5% duty
India is increasingly
losing out to Bangla-
deshi textile exports
News & Analysis
ONION
MINIMUM EXPORT PRICE
Prevention is better than cure
In an endeavour to contain rising prices of onion, the Cen-
tre has set a minimum export price (MEP) of $300/MT. Te
introduction of MEP is expected to improve local supplies in
the coming months. According to ofcials, India has enough
stock to cope with domestic demand till September 2014, when
kharif crop enters the market. But the reason why the govern-
ment is introducing MEP is that it wants to ensure that only
high value exports take place and local supplies are not disrupt-
ed. Earlier in March, the government had removed MEP on
onion as prices had crashed to Rs.6-7 per kg. In December last
year, the Ministry of Commerce had brought down MEP from
$350/MT to $150/MT in order to scale up exports and eventu-
ally arrest drastic dip in domestic prices. Te government had
set MEP last year afer retail prices shot up to Rs.80-100 per
kg in major cities and towns. Its worth noting that India had
exported around 1.3 million MT of onion in FY2014, out of a
total production of 19.2 million MT.
MYSORE
EXPORT PUSH
More than just a helping hand
With an eye to facilitate exports from Mysore, Mandya and Chamarajanagar districts,
the Mysore Industries Association (MIA) is going to set up the Mysore Export Centre
in Hebbal Industrial Area. According to P. Vishwanath, President of MIA, the up-
coming Centre, when it becomes operational, will help more than 40,000 industries
in the area tap global markets. With 45% of the businesses in the area belonging to
small and medium enterprises (SMEs), the Centre is expected to become a game
changer. It will have all necessary facilities to organise seminars, workshops and will
also have provisions to showcase products on a permanent basis. Suresh Kumar Jain,
Secretary General of MIA, added that currently annual exports from the Mysore re-
gion is around Rs.7,000 crore and MIA is determined to achieve Rs.17,000 crore in
the next fve years.
IRON ORE
DUTY WITHDRAWAL
For greater effciency
Leading industry body, Federation of Indian Mineral Indus-
tries (FIMI) has urged the Union Government to completely
withdraw export duty on iron ore as it feels unless this is done,
achieving zero-waste mining is not possible.
FIMI members recently had a lengthy meeting with Union
Steel and Mines Minister Narendra Singh Tomar, during
which they told the minister that if India wants to fully utilise
its resources, without impacting the domestic steel industry, it
should make Indian exports competitive by withdrawing the
export duty completely. Currently, there is a 30% export duty
on iron ore in India.
A conveyor belt carrying iron ore from the warehouse to the
production facility
The Nandi bull on Chamundi Hill is a
notable statue that dates from 1659 and is
one of the main identities of Mysore city in
Karnataka
Imposition
of MEP on
onion export
will help in
stabilising
its prices in
the domestic
market
SPOTLIGHT USA
BIG DADDY, STILL
Over $17 trillion in debt and a gaping trade defcit running for decades is
something that no nation can afford. But then Uncle Sam has. And for years.
The only reason why the US hegemony continues is the dollars reserve
currency status. And it will, till the time the greenback is in vogue
$265.0
BN
EXPORTS FROM
TEXAS, US TOP
EXPORTING STATE
153
NUMBER OF
METROS WITH
OVER $1 BILLION
IN EXPORTS
32
NUMBER OF
METROS WITH
OVER 10 BILLION
IN EXPORTS
$110.3
BN
EXPORTS FROM
HOUSTON, US TOP
EXPORTING METRO
$426.4
BN
EXPORTS FROM SOUTH
CENTRAL, US TOP
EXPORTING REGION
THE UNITED
STATES HAS
SIGNED FREE
TRADE
AGREEMENTS
WITH 20 NATIONS
AROUND
THE WORLD
MOROCCO
AUSTRALIA
*CAFTA-DR INCLUDES SEVEN SIGNATORIES: USA, COSTA RICA, DOMINICAN
REPUBLIC, EL SALVADOR, GUATEMALA, HONDURAS AND NICARAGUA.
SOUTH KOREA
SINGAPORE
OMAN
BAHRAIN
CANADA
MEXICO
COLOMBIA
PERU
CHILE
PANAMA
JORDAN
ISRAEL
*CAFTA-DR
US major trading partners
While exports from India to USA have been rising steadily
for the last four years, imports have mostly remained fat
because of a weak rupee and a fragile domestic demand.
USAs main trading partners are those with whom it has
FTAs. China of course is not only its biggest exporter but
also a primary lender.
Indias main exports to USA are non-industrial diamonds,
pharmaceutical products, articles of jewellery, mucilages
and thickeners derived from locust beans and guargum.
Indias top imports categories from USA in 2013 were
Precious stones, Aircraft, Nuclear reactors, Boilers,
Electrical machinery, and Mineral fuels & oils.

A 70% share of consumer spending in GDP means that
USA has been running a trade defcit for over two decades
something possible only because of the dollars reserve
currency status.
A
B
C
D
Indo-American trade
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Exports (India) Imports (India)
Source: Commerce Ministry, GoI; $ million
Exports Imports
Source: US Department of Commerce; All fgures for CY2013 (in $ billion)
0 50 100 150 200 250 300 350 400 450
CANADA
MEXICO
CHINA
JAPAN
GERMANY
UK
BRAZIL
S. ARABIA
S. KOREA
FRANCE
Gems & Jewellery Pharmaceutical products
Lac, Gums, Resins Textile, Apparel & Clothing
Minerals fuels and Mineral oils Others
Natural and Cultured pearls Nuclear reactors, Boilers, Equipment
Electrical machinery & equipment Aircraft and Spacecraft
IN
DIAN

EXPO
RTS
TO

U
SA
(% SHARE OF
PRODUCT)
20.0% 8.8% 4.2%
42.7%
9.5%
12.2%
6.2%
57.2%
6.9%
8.0%
10.2%
14.1%
Source: Commerce Ministry; Breakup for FY2014
$39.2 BILLION
$22.3 BILLION
IN
DIAN

IM
PO
RTS
FRO
M
U
SA
(% SHARE OF
PRODUCT)
A
B
C
D
E
E
US trade in goods & services

Imports of goods and services

Exports of goods and services

Balance of trade in goods and services
3,000
2,500
2,000
1,500
1,000
500
0
-500
-1,000
90 92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Bureau of Economic Analysis (NIPAs); $ billion
US major trading partners
While exports from India to USA have been rising steadily
for the last four years, imports have mostly remained fat
because of a weak rupee and a fragile domestic demand.
USAs main trading partners are those with whom it has
FTAs. China of course is not only its biggest exporter but
also a primary lender.
Indias main exports to USA are non-industrial diamonds,
pharmaceutical products, articles of jewellery, mucilages
and thickeners derived from locust beans and guargum.
Indias top imports categories from USA in 2013 were
Precious stones, Aircraft, Nuclear reactors, Boilers,
Electrical machinery, and Mineral fuels & oils.

A 70% share of consumer spending in GDP means that
USA has been running a trade defcit for over two decades
something possible only because of the dollars reserve
currency status.
A
B
C
D
Indo-American trade
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Exports (India) Imports (India)
Source: Commerce Ministry, GoI; $ million
Exports Imports
Source: US Department of Commerce; All fgures for CY2013 (in $ billion)
0 50 100 150 200 250 300 350 400 450
CANADA
MEXICO
CHINA
JAPAN
GERMANY
UK
BRAZIL
S. ARABIA
S. KOREA
FRANCE
Gems & Jewellery Pharmaceutical products
Lac, Gums, Resins Textile, Apparel & Clothing
Natural and Cultured pearls Nuclear reactors, Boilers, Equipment
Electrical machinery & equipment Aircraft and Spacecraft
IN
DIAN

EXPO
RTS
TO

U
SA
(% SHARE OF
PRODUCT)
20.0% 8.8% 4.2%
42.7%
9.5%
12.2%
6.2%
57.2%
6.9%
8.0%
10.2%
14.1%
$39.2 BILLION
$22.3 BILLION
IN
DIAN

IM
PO
RTS
FRO
M
U
SA
(% SHARE OF
PRODUCT)
A
B
C
D
E
E
US trade in goods & services

Imports of goods and services

Exports of goods and services

Balance of trade in goods and services
3,000
2,500
2,000
1,500
1,000
500
0
-500
-1,000
90 92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Bureau of Economic Analysis (NIPAs); $ billion
CHINESE & US
AUTO MARKETS:
OPPORTUNITIES FOR
INDIAN EXPORTERS
India is fast growing into a global exports hub for automobiles and auto parts.
What are the prospects for Indian auto exporters in the two largest automobile
buying markets? And are there easier options?
ARTHUR C. WHEATON, DIRECTOR, WESTERN NY LABOUR & ENVIRONMENTAL PROGRAMME, CORNELL UNIVERSITY ILR SCHOOL
GLOBAL AUTO
SUPPLIERS HAVE
EXPANDED THEIR
OPERATIONS IN
INDIA. THERE ARE
OPPORTUNITIES AND
RISKS FOR INDIAN
MANUFACTURING
FOR US AND CHINA
W
hen I began teaching
about the global auto-
motive industry in the
1990s, it usually involved
long discussions about the Detroit Big
Tree: GM, Ford and Chrysler. Signif-
icant time was spent on the-then up-
and-coming Japanese companies Toy-
ota, Honda and Nissan, with their new
production systems. Te remaining in-
ternational content revolved around the
engineering and social progress made by
Western European brands: Volkswagen,
Mercedes-Benz, BMW, PSA Peugeot
Citroen, with casual reference to Renault
and Fiat. While there were many other
auto companies, those three geographic
regions comprised the majority of pro-
duction, sales and conversation. Tank-
fully today, the global auto industry has
moved away from US, Japan and West-
ern European domination.
INDIAS IMPRESSIVE
AUTO DOMESTIC MART...
Signifcantly, for exporters from low-
cost manufacturing nations like India,
situations changing across markets have
mattered too. Each destination, coun-
try or region developed their preferred
brands and vehicle preferences. Some
markets placed very high barriers for
new entrants to compete. Japan and Ko-
rea were incredibly difcult to establish
new international brands. China placed
restrictions on ownership of automotive
production demanding 50% ownership
by a Chinese JV partner.
China surpassed US to become the
largest market with new vehicle sales
over 20 million units in 2013, (including
buses and trucks). Korea has grown with
Hyundai and Kia. Recently, India has
made signifcant progress in this highly
competitive and expensive industry.
Tough comparing vehicle sales
across countries can be problematic with
varying defnitions and classifcations of
vehicles, one fact that is clear is that sales
are no longer classifed as US, Western
Europe and other.
Eighteen diferent countries reported
sales of at least one million vehicles be-
tween 2005 and 2013. According to data
from OICA, both Spain and Iran sold
over a million units in the past but fell
below that threshold in 2013. Argentina
and Turkey appear likely to join the club
in the near future with 2013 sales over
890,000.
According to the International Orga-
nization of Motor Vehicle Manufactur-
ers, India sold about 1.4 million vehicles
in 2005 and rapidly increased sales to
over 3 million units by 2010. More than
doubling its sales totals in less than 5
years established India as a major player.
India at 3.2 million in sales is currently
the sixth largest automotive market trail-
ing only China, US, Japan, Germany, and
Brazil for vehicle sales in 2013.
Tata Motors acquiring Land Rover and
Jaguar put the spotlight back on India.
Small cars have been manufactured in In-
dia for decades with the Maruti Alto sell-
ing more than 2.5 million units in India
and hundreds of thousands more export-
ed to other markets. Tese very success-
ful world class vehicles based on Suzuki
and Maruti technology raise awareness
of Indian automotive expertise and help
change the image of Ambassador taxi
cabs and antiquated technologies of
1950s-based British platforms.

...AND ITS CAPACITY AS
AN EXPORTER NATION
Automotive sales are not just a great
source of economic profts for the

ARTHUR C. WHEATON, CORNELL UNIVERSITY ILR SCHOOL
EXCLUSIVE
COLUMN
CHINESE & US
AUTO MARKETS:
OPPORTUNITIES FOR
INDIAN EXPORTERS
India is fast growing into a global exports hub for automobiles and auto parts.
What are the prospects for Indian auto exporters in the two largest automobile
buying markets? And are there easier options?
ARTHUR C. WHEATON, DIRECTOR, WESTERN NY LABOUR & ENVIRONMENTAL PROGRAMME, CORNELL UNIVERSITY ILR SCHOOL
GLOBAL AUTO
SUPPLIERS HAVE
EXPANDED THEIR
OPERATIONS IN
INDIA. THERE ARE
OPPORTUNITIES AND
RISKS FOR INDIAN
MANUFACTURING
FOR US AND CHINA
W
hen I began teaching
about the global auto-
motive industry in the
1990s, it usually involved
long discussions about the Detroit Big
Tree: GM, Ford and Chrysler. Signif-
icant time was spent on the-then up-
and-coming Japanese companies Toy-
ota, Honda and Nissan, with their new
production systems. Te remaining in-
ternational content revolved around the
engineering and social progress made by
Western European brands: Volkswagen,
Mercedes-Benz, BMW, PSA Peugeot
Citroen, with casual reference to Renault
and Fiat. While there were many other
auto companies, those three geographic
regions comprised the majority of pro-
duction, sales and conversation. Tank-
fully today, the global auto industry has
ern European domination.
INDIAS IMPRESSIVE
AUTO DOMESTIC MART...
Signifcantly, for exporters from low-
cost manufacturing nations like India,
situations changing across markets have
mattered too. Each destination, coun-
try or region developed their preferred
brands and vehicle preferences. Some
markets placed very high barriers for
new entrants to compete. Japan and Ko-
rea were incredibly difcult to establish
new international brands. China placed
restrictions on ownership of automotive
production demanding 50% ownership
by a Chinese JV partner.
China surpassed US to become the
largest market with new vehicle sales
over 20 million units in 2013, (including
buses and trucks). Korea has grown with
Hyundai and Kia. Recently, India has
made signifcant progress in this highly
competitive and expensive industry.
Tough comparing vehicle sales
across countries can be problematic with
varying defnitions and classifcations of
vehicles, one fact that is clear is that sales
are no longer classifed as US, Western
Europe and other.
Eighteen diferent countries reported
sales of at least one million vehicles be-
tween 2005 and 2013. According to data
from OICA, both Spain and Iran sold
over a million units in the past but fell
below that threshold in 2013. Argentina
and Turkey appear likely to join the club
in the near future with 2013 sales over
890,000.
According to the International Orga-
nization of Motor Vehicle Manufactur-
ers, India sold about 1.4 million vehicles
in 2005 and rapidly increased sales to
over 3 million units by 2010. More than
doubling its sales totals in less than 5
years established India as a major player.
India at 3.2 million in sales is currently
the sixth largest automotive market trail-
ing only China, US, Japan, Germany, and
Brazil for vehicle sales in 2013.
Tata Motors acquiring Land Rover and
Jaguar put the spotlight back on India.
Small cars have been manufactured in In-
dia for decades with the Maruti Alto sell-
ing more than 2.5 million units in India
and hundreds of thousands more export-
ed to other markets. Tese very success-
ful world class vehicles based on Suzuki
and Maruti technology raise awareness
of Indian automotive expertise and help
change the image of Ambassador taxi
cabs and antiquated technologies of
1950s-based British platforms.

...AND ITS CAPACITY AS
AN EXPORTER NATION
Automotive sales are not just a great
source of economic profts for the

EXCLUSIVE
COLUMN
Arthur C. Wheaton
Director, Western NY Labour and
Environmental Programs and
Expert Automotive, Healthcare &
Labour management, Cornell
University ILR School
manufacturer. Automotive assembly is
a signifcant multiplier industry. For ev-
ery assembly plant job in an auto plant
can create from 8-10 additional jobs in
automotive suppliers and related indus-
tries. While Original Equipment Man-
ufacturers and vehicle sales are clearly
important, their impact is magnifed
by the hundreds of automotive parts
manufacturers required to supply key
components.
World class auto suppliers currently
have expanded their operations in In-
dia with additional investments on the
way. According to the Automotive Com-
ponents Manufacturing Association in
India investment in India is increasing.
Japanese component manufacturers Ai-
sin Seiki, Denso, Yazaki, Toyoda Gosei
and many others have plants in India.
European companies include Faurecia,
Robert Bosch, ZF and Valeo. American
companies include Borg Warner, Delphi,
Eaton, Honeywell and Visteon. Tere are
certainly opportunities for manufactur-
ers in India to provide parts for both the
domestic and export markets.
OPPORTUNITIES AND
RISKS FOR AUTO MANU-
FACTURERS IN INDIA
While the automotive industry can lead
to many opportunities it can ofen be
cyclical. Tere are frequently dramatic
swings in supply and demand for auto-
mobiles leading to variable employment
security. [Te U.S. lost 43.1% of auto
manufacturing jobs from 2003-2009.
Te deterioration of profts by GM, Ford
and Chrysler and the Great Recession in
2008-2009 resulted in the loss of more
than half a million auto workers.] Main-
taining profts in the auto industry is not
easy. Tere are many failures and work-
ers end up losing a great deal when poor
decisions are made.
Tere are opportunities and risks for
Indian manufacturing for the US and
Chinese markets. According to Business-
in-Asia.com, India is the largest produc-
er of tractor and three-wheeled vehicles.
India is the second-largest producer
of two-wheel vehicles and fourth-larg-
est commercial vehicle producer. All of
those markets are relevant in both China
and the United States. Indian exporters
EXCLUSIVE
COLUMN
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14
Value ($ million; L-axis)
Volume (000 units; R-axis)

Source: Export Import Data Bank, DoC, GoI
Indias total exports of automobiles (2-wheeled & 2w+)
Exports of vehicles other than railway or tramway and parts have risen
Cab of car in welding assembly line in Samutprakarn, Thailand:
Thailands exports of auto and auto parts is 1.9 times that of Indias
Chryslers Jefferson North factory, Detroit: With over $133 billion in
exports in 2013, USA is the industrys third-largest exporter nation
of three wheelers could stand a chance
of grabbing some market share from
some new automotive companies in the
US market that are trying to establish
new or under-represented vehicles. For
instance, Elio Motors is building a new
three-wheel vehicle in an efort to create
or expand the market for alternatives to
the passenger car. [Tese three-wheeled
vehicles are being built in a former GM
auto plant.]
BLUE OCEAN FOR INDIAN
AUTO EXPORTERS
Indian auto and auto component ex-
porters may have a potential entry to the
US market given that three-wheeled ve-
hicles in the United States are not very
common and are governed by motorcy-
cle laws. Any vehicle with less than four
wheels in the United States is considered
a motorcycle and is exempt from many
of the highly regulated crash and emis-
sions standards for passenger cars. Ma-
hindra, Bajaj and Hero MotoCorp are
well-established brands in many parts of
the world but have limited name recog-
nition in the United States. Again, in this
respect, Elio Motors is a brand new com-
pany trying to establish a new market.
So there could be opportunities for new
auto brands emerging from India and or
may be even smaller suppliers from In-
dia waiting to tap potential of the three-
wheeled market in US.
Indian brands could also go the inor-
ganic way. Fiat established a signifcant
presence in the agricultural implement
(tractor) sector through mergers and
acquisitions of well-known brands Case
and New Holland. Tis path to success
is also underway for Mahindra as it
partners with Spanish automotive parts
company CIE and another Japanese
company. [Tough as a note of caution
it is important to state that global merg-
ers and joint-ventures have been tried
by many multinational companies with
varying degrees of success. Daimler-
Chrysler and Fiat-GM were failures. Fiat
Chrysler Automotive successfully saved
both companies.]
JVs could be a strategy too. Two of
the largest Indian automotive compa-
nies have opportunities through joint
ventures such as Mahindra CIE or Tata
Motors strategy of acquiring Jaguar and
Land Rover. Both Mahindra and Tata
make SUVs for one of the faster growing
segments in both China and US.
CHINA: TOUGH GAME
Hero MotoCorp and Bajaj have opportu-
nities in motorcycles and three-wheeled
markets in China and US as well. Te
opportunities for profts and growth are
easy to identify.
Te risks associated with those mar-
kets are also easy to identify. Establishing
new nameplates in China is no easy task.
Almost every large automotive manu-
facturer is drawn to the billion potential
drivers in China. Barriers for entry are
made difcult due to Chinas high tarifs
for imported vehicles and the require-
ment that automotive manufacturing for
sales in China must have 50% ownership
by a Chinese company.
GM and VW have made billions in in-
vestment in China and have battled for
market leadership for decades. An ex-
ception is Ford that is making signifcant
progress in China through its One Ford
Policy. [Te Ford Focus claims to be the
#1 selling vehicle in the world in the past
two years since its introduction to the
Chinese market.]
Risks in China are high. Toyota has
faced obstacles in China due to a terri-
torial dispute. Te multiplier efect of
EXCLUSIVE
COLUMN
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14
Value ($ million; L-axis)
Volume (000 units; R-axis)

Source: Export Import Data Bank, DoC, GoI
Indias total exports of automobiles (2-wheeled & 2w+)
Exports of vehicles other than railway or tramway and parts have risen
Cab of car in welding assembly line in Samutprakarn, Thailand:
Thailands exports of auto and auto parts is 1.9 times that of Indias
Chryslers Jefferson North factory, Detroit: With over $133 billion in
exports in 2013, USA is the industrys third-largest exporter nation
of three wheelers could stand a chance
of grabbing some market share from
some new automotive companies in the
US market that are trying to establish
new or under-represented vehicles. For
instance, Elio Motors is building a new
three-wheel vehicle in an efort to create
or expand the market for alternatives to
the passenger car. [Tese three-wheeled
vehicles are being built in a former GM
auto plant.]
BLUE OCEAN FOR INDIAN
AUTO EXPORTERS
Indian auto and auto component ex-
porters may have a potential entry to the
US market given that three-wheeled ve-
hicles in the United States are not very
common and are governed by motorcy-
cle laws. Any vehicle with less than four
wheels in the United States is considered
a motorcycle and is exempt from many
of the highly regulated crash and emis-
sions standards for passenger cars. Ma-
hindra, Bajaj and Hero MotoCorp are
well-established brands in many parts of
the world but have limited name recog-
nition in the United States. Again, in this
respect, Elio Motors is a brand new com-
pany trying to establish a new market.
So there could be opportunities for new
auto brands emerging from India and or
may be even smaller suppliers from In-
dia waiting to tap potential of the three-
wheeled market in US.
Indian brands could also go the inor-
ganic way. Fiat established a signifcant
presence in the agricultural implement
(tractor) sector through mergers and
acquisitions of well-known brands Case
and New Holland. Tis path to success
is also underway for Mahindra as it
partners with Spanish automotive parts
company CIE and another Japanese
company. [Tough as a note of caution
it is important to state that global merg-
ers and joint-ventures have been tried
by many multinational companies with
varying degrees of success. Daimler-
Chrysler and Fiat-GM were failures. Fiat
Chrysler Automotive successfully saved
both companies.]
JVs could be a strategy too. Two of
the largest Indian automotive compa-
nies have opportunities through joint
ventures such as Mahindra CIE or Tata
Motors strategy of acquiring Jaguar and
Land Rover. Both Mahindra and Tata
make SUVs for one of the faster growing
segments in both China and US.
CHINA: TOUGH GAME
Hero MotoCorp and Bajaj have opportu-
nities in motorcycles and three-wheeled
markets in China and US as well. Te
opportunities for profts and growth are
easy to identify.
Te risks associated with those mar-
kets are also easy to identify. Establishing
new nameplates in China is no easy task.
Almost every large automotive manu-
facturer is drawn to the billion potential
drivers in China. Barriers for entry are
made difcult due to Chinas high tarifs
for imported vehicles and the require-
ment that automotive manufacturing for
sales in China must have 50% ownership
by a Chinese company.
GM and VW have made billions in in-
vestment in China and have battled for
market leadership for decades. An ex-
ception is Ford that is making signifcant
progress in China through its One Ford
Policy. [Te Ford Focus claims to be the
#1 selling vehicle in the world in the past
two years since its introduction to the
Chinese market.]
Risks in China are high. Toyota has
faced obstacles in China due to a terri-
torial dispute. Te multiplier efect of
Beijings Central Business District, Oct 25, 2010: Sights of clogged roads like the one shown
makes China an attractive market. The nations protective policies play the repellent
Beijing,China, Apr.14, 2011: China is the
worlds largest consumer market for cars
and car parts. 20 million units of cars (and
buses & trucks) were sold in China in 2013
June 26, 2013, Chicago: USA is the worlds
largest importer of automobile and auto
parts. Its imports in 2013 were 161% more
than that of the #2 importer (Germany)
Pasadena Freeway into downtown
LA, California: Morning rush hour
traffc is a headache for commuters
and a joyful sight for exporters
across emerging markets like India
auto production encourages nearly every
country to somehow capture those mag-
ical jobs. India has made great strides in
the past decade and shows signs of be-
coming a major player. Tere are a great
many benefts to gain from a successful
launch in China. Tere are also a number
of companies that were unable to survive
in the brutally competitive market.
BEYOND CHINA: ASEAN...
Indian companies could seek to boost
exports into ASEAN countries and
smaller but expanding markets. Both
Ford and GM have announced in recent
weeks that they will utilise their Indian
based plants as a major export hub. GM
will export the Chevrolet Beat from the
Talegaon Plant. Ford will export the Eco-
Sport from the Maraimalainagar facility.
...AND WAGE ADVANTAGE
Te relative lower wage rates in India
helps to make Indian companies an in-
triguing business case. According to a
September 2012 UBS Prices and Earn-
ings report, India has lower wage rates
than China. UBS determined that Delhi
net hourly pay rates were $2.10 per hr,
Mumbai $2.30, Beijing $4.50, Shanghai
$5.40, Chicago $20.30 & NY $25.20.
Having the lowest international wage
rates are never a guarantee for success.
Wages go up and tend to increase at
diferent rates over time. According the
most recent AON Hewitt study, wages in
India increased 10% the lowest increase
in a decade with the automotive segment
lagging industry average at 9.5%.
What is impressive about the Indian
industry is its embrace of world-class
business and work practices. According
to ACMA India has 576 auto suppliers
that are ISO 9001 certifed. India also has
12 Deming Award (quality-related) win-
ners, the most outside of Japan. Global
OEMs do not like to take risks with qual-
ity. Te intense focus on quality in India
will place increasing pressure on suppli-
ers across other low-cost manufacturing
nations and establish India as a major ex-
port hub for automobiles and auto parts.
Tat the global auto industry has
About the author: Art Wheaton is a Work-
place and Industry Education Specialist for
the Institute for Industry Studies at Cornell
Univeristy ILR School. His expertise includes
industry education and workplace training,
high performance work systems, negotiations
and confict resolution, and auto & aerospace
industrial relations. Prior to joining the ILR fac-
ulty in 1999, Art was with MITs Labour Aero-
space Research Agenda. Art has also served
as executive board member for the American
Federation of State, County and Municipal
Employees, AFL-CIO in Michigan in the past.
ern European domination is good news
for Indian exporters. At the same time
however, both Indian auto and auto
component makers have to be careful to
choose the right markets to move into.
Tink beyond China and US if entry
barriers and saturation is a headache.
Talk about opportunities in markets like
Brazil and Russia is common today. Per-
haps Indian exporters could begin with
the ASEAN markets. Tis is particularly a
relatively safer bet for small-to-medium-
sized exporters in the auto industry.
W
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OVERSEAS TALK MARIE-JOSE CHARBONNEAU & ROSALINE KWAN, HIGH COMMISSION OF CANADA
(L) Rosaline Kwan
Senior Trade Commissioner,
Counsellor & Head Advocacy Programme,
TDB: In the four years leading to
FY2014, Canada accounted for under
0.7% of Indias merchandise exports
and imports. Te $3 billion mark has
never been breached in either exports
or imports. Where lies the concern?
Rosaline Kwan (RK): Lets focus on the
trend. Not absolute numbers. Since 2010,
trade between India and Canada has
been growing at a CAGR of 30%. Tats
promising. Even at a micro level, activity
is increasing. I am sure, trade numbers
will look much better in future.
TDB: But do you not agree that trade
between Canada and India is lower
than what it could potentially be?
Marie Josee Charbonneau (MJ): I dont
think so. Maybe I can start with the
Comprehensive Economic Partnership
Agreement (CEPA). We have completed
eight rounds of negotiations and there
are two or three chapters that are still
under negotiations. We need to build a
framework so that Canadian exporters
to India and Indian exporters to Canada
feel they have that safety net. So, I think
there are no real worries all we need is
work on to build that framework.
RK: Just to reinforce the point of having
a framework for bilateral trade, Canada
is very keen to work with the new gov-
ernment in India. And I am sure, trade
between the two countries will grow ex-
ponentially in the near term.
TDB: A study by the Canada-India
Business Council stated that CEPA will
give Canadian goods and services the
opportunity to have improved access
to Indias market and boost Canadian
economy. At the same time, for India,
the dividends will be high. How will
CEPA impact export communities at
both ends?
RK: Agreements and frameworks always
ofer something for both sides. 85-90%
of Canadas economy is driven by small
or medium-sized businesses. So, we
are perfectly in sync with the needs of
In recent years, bilateral trade between Canada and
India has not grown as expected. To make sense
of whats playing spoilsport and to understand
thoughts in the Canadian camp on the prevailing
issue, The Dollar Business sat down with two of
Canadas senior diplomats in India Marie Josee
Charbonneau and Rosaline Kwan. Excerpts:
BY NEHA DEWAN
TRADE CAN
PROSPER ONLY IF
YOU EMPOWER EVEN
THE SMALLEST OF
COMPANIES
(L) Rosaline Kwan
Senior Trade Commissioner,
Counsellor & Head Advocacy Programme,
TDB: In the four years leading to
FY2014, Canada accounted for under
0.7% of Indias merchandise exports
and imports. Te $3 billion mark has
never been breached in either exports
or imports. Where lies the concern?
Rosaline Kwan (RK): Lets focus on the
trend. Not absolute numbers. Since 2010,
trade between India and Canada has
been growing at a CAGR of 30%. Tats
promising. Even at a micro level, activity
is increasing. I am sure, trade numbers
will look much better in future.
TDB: But do you not agree that trade
between Canada and India is lower
than what it could potentially be?
Marie Josee Charbonneau (MJ): I dont
think so. Maybe I can start with the
Comprehensive Economic Partnership
Agreement (CEPA). We have completed
eight rounds of negotiations and there
are two or three chapters that are still
under negotiations. We need to build a
framework so that Canadian exporters
to India and Indian exporters to Canada
feel they have that safety net. So, I think
there are no real worries all we need is
work on to build that framework.
RK: Just to reinforce the point of having
a framework for bilateral trade, Canada
is very keen to work with the new gov-
ernment in India. And I am sure, trade
between the two countries will grow ex-
ponentially in the near term.
TDB: A study by the Canada-India
Business Council stated that CEPA will
give Canadian goods and services the
opportunity to have improved access
to Indias market and boost Canadian
economy. At the same time, for India,
the dividends will be high. How will
CEPA impact export communities at
both ends?
RK: Agreements and frameworks always
ofer something for both sides. 85-90%
of Canadas economy is driven by small
or medium-sized businesses. So, we
are perfectly in sync with the needs of
In recent years, bilateral trade between Canada and
India has not grown as expected. To make sense
of whats playing spoilsport and to understand
thoughts in the Canadian camp on the prevailing
issue, The Dollar Business sat down with two of
Canadas senior diplomats in India Marie Josee
Charbonneau and Rosaline Kwan. Excerpts:
BY NEHA DEWAN
TRADE CAN
PROSPER ONLY IF
YOU EMPOWER EVEN
THE SMALLEST OF
COMPANIES
IN 2013, VALUE OF
INDIAS EXPORTS
TO CANADA WAS
LESS THAN THOSE
TO COUNTRIES LIKE
NEPAL, EGYPT AND
TANZANIA
Indian exporters. We are consistently in
touch with CII and FIEO and trying to
incorporate as much of their inputs in
CEPA as possible. We are currently un-
dertaking a special programme called
the Canadian Technology Accelerator,
focusing on micro-sized startups with
good technology. I am sure it will add a
lot of value to our bilateral trade.
TDB: Canadas low investments in In-
dias industries like food processing,
energy and education are questioned.
What about Canadian investment in
India, particularly since the new Indi-
an government is pro-FDI and given
Canadas engagement with Gujarat in
the past?
MJ: In Canada, we have more than a
million Indo-Canadians. Tere are lots
of people-to-people links. Many In-
do-Canadians come from Gujarat. So, it
was natural to engage with Gujarat. Can-
ada has built really good relations with
the state and we are now looking to take
that relationship to the national level. In
terms of investments, the future is very
promising. Where we, as government
representatives can help, is build the
environment for Canadian investors to
come here and feel at home and have a
good sense of how the legal system works
and how investments will be protected.
RK: Some of our biggest companies have
invested heavily in manufacturing plants
in India. Companies like Bombardier
and McCain are already here in a big
way. When it comes to pension funds,
we are talking about a diferent level of
investment with Shapoorji Pallonji,
the partnership was worth $350 million,
with Piramal it was worth $500 million.
TDB: Which sectors will drive In-
dia-Canada trade going forward?
MJ: Canada has a lot to ofer when it
comes to education. Tere are a lot of
very good Canadian engineering frms
this makes infrastructure a focus area,
as well. Food security is one area where
we focus a lot. Canada accounts for 1/3
rd

of Indias peas, lentils and chickpeas mar-
ket. Tere is also a lot of scope for other
agricultural exports from Canada to India.
On the energy side, we produce lots of oil
from oil sands something that we are
now looking forward to export to India.
RK: Canada and India also have a sep-
arate framework for energy dialogue.
Indian Oil Corporation recently buying
a 10% stake in Petronas is a classic ex-
ample of how a relationship can move in
the energy sector. An Indian delegation
also visited the Global Petroleum show
in Canada recently. ONGC Videsh Lim-
ited (OVL) has an ofce in Calgary. So,
the energy sector has a lot to ofer.
TDB: Besides exports of articles of
iron and steel, organic chemicals, and
pharmaceutical products, which other
products in the manufacturing sector
hold maximum attractiveness in the
Canadian market for Indian exporters?
RK: Tere is a lot of interest in apparel
and precious stones sectors that are in-
herent to India. Where we think there is a
lot of potential, is IT. Tats an area where
I think trade can improve a lot, partic-
ularly in terms of back-end support for
Canadian fnancial services frms.
TDB: Are there exclusive products or
services that Canada can ofer?
RK: When you look at the numbers,
there is obviously a lot of interest in ma-
chinery and aerospace parts from Can-
ada. Ten you have solar technology
and lumber. I do believe more and more
builders will use wood in the future and I
am sure a lot of it will be Canadian.
TDB: Teres not a lot of talk around
Canadian tourism. Why doesnt Can-
ada promote itself much in that sense?
MJ: Te Canadian Tourism Commission
is represented here in New Delhi. We will
pass on your message that they should
expand their presence. We do want to
attract more Indian tourists to Canada
and, I think, the trend of Indians visiting
Canada is on the rise. My immigration
colleagues have their hands full and ev-
ery year we are issuing more and more
number of visas. Moreover, with a lot of
Indians having friends and relatives in
Canada, the numbers are only going to
rise going forward.
RK: A lot more can actually be done
when it comes to tourism. Last year, a
group of Canadian tourist operators
visited Jaipur and I am sure a lot of pro-
motional activities are being planned to
attract more tourists from India.
1.......................... Dried Leguminous Vegetables
2........................ Copper Ores and Concentrates
3............................................ Potassic Fertilisers
4................... Crude Oil and Other Petroleum Oil
5...........................................................Newsprint
6.................................................. Coal Briquettes
7................................................ Unwrought Gold
8.................................... Diamonds, not mounted
9............................................... Unwrought Silver
10....................................Aircraft and Spacecraft
Top imported Canadian
products to India...
In FY2014, India imported over $400
million worth of peas from Canada
800
700
600
500
400
300
200
100
0
1 2 3 4 5 6 7 8 9 10
1..................................................... Medicaments
2...................................................... Crustaceans
3.................................Precious Metals Jewellery
4.......................................................... Diamonds
5...................................Iron and Steel Structures
6............................................. Furnishing Articles
7.............................................................. T-Shirts
8.................................. Heterocyclic Compounds
9................................................................... Rice
10........................................................ Bed Linen
...and top Indian products
exported to Canada
Medicines were by far Indias biggest
exports to Canada in FY2014
160
140
120
100
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10
Source: Commerce Ministry; fgures for FY2014 ($ million)
A view of the container
terminal at Vancouver Port,
Canada during sunset.
Port Metro Vancouver is
Canadas largest and most
diversifed port
TDB: You seem more upbeat about
India as a service provider than a man-
ufacturer. Is that so?
RK: Although India has shown very
strong capabilities in the services area,
we understand that manufacturing is
critical, particularly when it comes to
creating jobs. Our perception is that
there will be an increased focus in India
to create jobs on the manufacturing side
going forward. And Canada should be a
participant in this respect.
TDB: In India, there is not a lot of trac-
tion when it comes to high-tech indus-
tries. Should India begin focussing on
high-tech manufacturing?
RK: We have been hearing a lot from the
government about framing policies that
will encourage electronics manufactur-
ing in India. My understanding and per-
ception is that its already taking place
and we have also been communicated
about it. In fact, we have communicated
this message back to Canadian compa-
nies so that while taking decisions they
dont ignore India.
MJ: I think such policies should also give
a clear signal to foreign investors. Te
message that should go out is that India
is ready for business. Once an investor
understands the kind of environment
he/she will be operating in, taking deci-
sions and putting in those big bucks be-
come easy.
neha@thedollarbusiness.com
Bilateral trade between India and Canada (by value)
India has continued to run a trade defcit with Canada for the last eight years
Source: Commerce Ministry; fgures in $ million
3,500
3,000
2,500
2,000
1,500
1,000
500
0

Indias exports to Canada

Indias imports from Canada
IN 2013, VALUE OF
INDIAS EXPORTS
TO CANADA WAS
LESS THAN THOSE
TO COUNTRIES LIKE
NEPAL, EGYPT AND
TANZANIA
Indian exporters. We are consistently in
touch with CII and FIEO and trying to
incorporate as much of their inputs in
CEPA as possible. We are currently un-
dertaking a special programme called
the Canadian Technology Accelerator,
focusing on micro-sized startups with
good technology. I am sure it will add a
lot of value to our bilateral trade.
TDB: Canadas low investments in In-
dias industries like food processing,
energy and education are questioned.
What about Canadian investment in
India, particularly since the new Indi-
an government is pro-FDI and given
Canadas engagement with Gujarat in
the past?
MJ: In Canada, we have more than a
million Indo-Canadians. Tere are lots
of people-to-people links. Many In-
do-Canadians come from Gujarat. So, it
was natural to engage with Gujarat. Can-
ada has built really good relations with
the state and we are now looking to take
that relationship to the national level. In
terms of investments, the future is very
promising. Where we, as government
representatives can help, is build the
environment for Canadian investors to
come here and feel at home and have a
good sense of how the legal system works
and how investments will be protected.
RK: Some of our biggest companies have
invested heavily in manufacturing plants
in India. Companies like Bombardier
and McCain are already here in a big
way. When it comes to pension funds,
we are talking about a diferent level of
investment with Shapoorji Pallonji,
the partnership was worth $350 million,
with Piramal it was worth $500 million.
TDB: Which sectors will drive In-
dia-Canada trade going forward?
MJ: Canada has a lot to ofer when it
comes to education. Tere are a lot of
very good Canadian engineering frms
this makes infrastructure a focus area,
as well. Food security is one area where
we focus a lot. Canada accounts for 1/3
rd

of Indias peas, lentils and chickpeas mar-
ket. Tere is also a lot of scope for other
agricultural exports from Canada to India.
On the energy side, we produce lots of oil
from oil sands something that we are
now looking forward to export to India.
RK: Canada and India also have a sep-
arate framework for energy dialogue.
Indian Oil Corporation recently buying
a 10% stake in Petronas is a classic ex-
ample of how a relationship can move in
the energy sector. An Indian delegation
also visited the Global Petroleum show
in Canada recently. ONGC Videsh Lim-
ited (OVL) has an ofce in Calgary. So,
the energy sector has a lot to ofer.
TDB: Besides exports of articles of
iron and steel, organic chemicals, and
pharmaceutical products, which other
products in the manufacturing sector
hold maximum attractiveness in the
Canadian market for Indian exporters?
RK: Tere is a lot of interest in apparel
and precious stones sectors that are in-
herent to India. Where we think there is a
lot of potential, is IT. Tats an area where
I think trade can improve a lot, partic-
ularly in terms of back-end support for
Canadian fnancial services frms.
TDB: Are there exclusive products or
services that Canada can ofer?
RK: When you look at the numbers,
there is obviously a lot of interest in ma-
chinery and aerospace parts from Can-
ada. Ten you have solar technology
and lumber. I do believe more and more
builders will use wood in the future and I
am sure a lot of it will be Canadian.
TDB: Teres not a lot of talk around
Canadian tourism. Why doesnt Can-
ada promote itself much in that sense?
MJ: Te Canadian Tourism Commission
is represented here in New Delhi. We will
pass on your message that they should
expand their presence. We do want to
attract more Indian tourists to Canada
and, I think, the trend of Indians visiting
Canada is on the rise. My immigration
colleagues have their hands full and ev-
ery year we are issuing more and more
number of visas. Moreover, with a lot of
Indians having friends and relatives in
Canada, the numbers are only going to
rise going forward.
RK: A lot more can actually be done
when it comes to tourism. Last year, a
group of Canadian tourist operators
visited Jaipur and I am sure a lot of pro-
motional activities are being planned to
attract more tourists from India.
1.......................... Dried Leguminous Vegetables
2........................ Copper Ores and Concentrates
3............................................ Potassic Fertilisers
4................... Crude Oil and Other Petroleum Oil
5...........................................................Newsprint
6.................................................. Coal Briquettes
7................................................ Unwrought Gold
8.................................... Diamonds, not mounted
9............................................... Unwrought Silver
10....................................Aircraft and Spacecraft
Top imported Canadian
products to India...
In FY2014, India imported over $400
million worth of peas from Canada
800
700
600
500
400
300
200
100
0
1 2 3 4 5 6 7 8 9 10
1..................................................... Medicaments
2...................................................... Crustaceans
3.................................Precious Metals Jewellery
4.......................................................... Diamonds
5...................................Iron and Steel Structures
6............................................. Furnishing Articles
7.............................................................. T-Shirts
8.................................. Heterocyclic Compounds
9................................................................... Rice
10........................................................ Bed Linen
...and top Indian products
exported to Canada
Medicines were by far Indias biggest
exports to Canada in FY2014
160
140
120
100
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10
Source: Commerce Ministry; fgures for FY2014 ($ million)
A view of the container
terminal at Vancouver Port,
Canada during sunset.
Port Metro Vancouver is
Canadas largest and most
diversifed port
TDB: You seem more upbeat about
India as a service provider than a man-
ufacturer. Is that so?
RK: Although India has shown very
strong capabilities in the services area,
we understand that manufacturing is
critical, particularly when it comes to
creating jobs. Our perception is that
there will be an increased focus in India
to create jobs on the manufacturing side
going forward. And Canada should be a
participant in this respect.
TDB: In India, there is not a lot of trac-
tion when it comes to high-tech indus-
tries. Should India begin focussing on
high-tech manufacturing?
RK: We have been hearing a lot from the
government about framing policies that
will encourage electronics manufactur-
ing in India. My understanding and per-
ception is that its already taking place
and we have also been communicated
about it. In fact, we have communicated
this message back to Canadian compa-
nies so that while taking decisions they
dont ignore India.
MJ: I think such policies should also give
a clear signal to foreign investors. Te
message that should go out is that India
is ready for business. Once an investor
understands the kind of environment
he/she will be operating in, taking deci-
sions and putting in those big bucks be-
come easy.
Bilateral trade between India and Canada (by value)
India has continued to run a trade defcit with Canada for the last eight years
Source: Commerce Ministry; fgures in $ million
3,500
3,000
2,500
2,000
1,500
1,000
500
0

Indias exports to Canada

Indias imports from Canada
INFOGRAPHICS WATCHES
IMPORTS
BY INDIA
SOURCE
MARKETS
(SHARE IN %)
SWISS
WATCH
EXPORT
MARKETS
(SHARE IN %)
Einstein once said: Time is that which clocks measure. Reality though is that
watches & clocks are just devices with steady cycles of operation, made to
measure something abstract as time. Whats wryly amusing is that mans desire
for fulflment of an abstract has become a multi-billion dollar indulgence
WHEN TIME IS SHORT
& STAKES ARE HIGH!
MAJOR EXPORTERS (BY VALUE)
35
30
25
20
15
10
5
0
CHINA HONG KONG SWITZERLAND GERMANY FRANCE
Source: The Federation of the Swiss Watch Industry FH; fgures for CY2013 ($ billion)
SWISS
WATCH
EXPORT
VOLUMES
(PRICE-WISE)
....UPTO 200
.........201-500
.... 501-3,000
............3,000+
HONG KONG
USA
CHINA
GERMANY
ITALY
FRANCE
JAPAN
SINGAPORE
UK
UAE
ROW
CHINA
HONG KONG
SWITZERLD
JAPAN
S. KOREA
ROW
Source: The
Federation of the
Swiss Watch
Industry FH;
prices in Swiss
franc in
Switzerland;
fgures
for CY2013
Source: Ministry
of Commerce &
Industry,
Government of
India; fgures
for FY2014
Source: The
Federation
of the Swiss
Watch Industry
FH; fgures for
CY2013
A B C
D
3.3%
0.5%
1.5%
1
9
.3
%

2
3
.
6
%

5
1
.
9
%
1
9
.0
%

1
0
.
0
%

7
.
0
%

6
.
0
%
6
. 0
%
5 . 0 % 5 . 0
%
4
. 0
%

4
.
0
%

4
.
0
%

2
8
.
0
%

6
5
.
0
%

1
7
.
0
%

1
2
.
0
%

6
.0%
Even for Swiss watches, price elasticity
of demand is worth taking a note of.
65% of the total watch volume exported
in 2013 were priced below 200 CHF
The top destination for Swiss watches
in 2013 was Hong Kong.
In value terms, Switzerland was the
biggest exporter of watches and
clocks to India in FY2014.
In 2013, exports of watches from
Switzerland was worth more than that
of the next four exporters combined.
MAJOR EXPORTERS (BY VOLUME)
MAJOR IMPORTERS (BY VALUE)
700
600
500
400
300
200
100
0
CHINA HONG KONG SWITZERLAND GERMANY USA
14
12
10
8
6
4
2
0
CHINA HONG KONG SWITZERLAND FRANCE USA
Source: The Federation of the Swiss Watch Industry FH; fgures for CY2013 (million units)
Source: The Federation of the Swiss Watch Industry FH; fgures for CY2013 ($ billion); includes components
Worlds top watchmakers (by value)
S
W
A
T
C
H
G
R
O
U
P
R
I
C
H
E
M
O
N
T
R
O
L
E
X
FOSSIL LVMH
10
08
06
04
02
0
Source: Company reports & The Dollar Business Intelligence Unit;
fgures for CY2013 ($ billion);
cross currency rates EUR/USD of 1.36 and CHF/USD of 1.1
E
F
A C
E
F
G
H
B
D
Indian watches & clock trade
350
300
250
200
150
100
50
0

Exports

Imports
Source: Ministry of Commerce; ($ million)
G
H
Hong Kong was the biggest importer
of Swiss watches in 2013.
Switzerland-based Swatch Group
had the highest sales (value) among
all watchmakers in 2013.
Indian watch imports has surged
six-fold over the last decade.
With an average price of just $3,
China exported over 634 million
timepieces in 2013.
INFOGRAPHICS WATCHES
IMPORTS
BY INDIA
SOURCE
MARKETS
(SHARE IN %)
SWISS
WATCH
EXPORT
MARKETS
(SHARE IN %)
Einstein once said: Time is that which clocks measure. Reality though is that
watches & clocks are just devices with steady cycles of operation, made to
measure something abstract as time. Whats wryly amusing is that mans desire
for fulflment of an abstract has become a multi-billion dollar indulgence
WHEN TIME IS SHORT
& STAKES ARE HIGH!
MAJOR EXPORTERS (BY VALUE)
35
30
25
20
15
10
5
0
CHINA HONG KONG SWITZERLAND GERMANY FRANCE
Source: The Federation of the Swiss Watch Industry FH; fgures for CY2013 ($ billion)
SWISS
WATCH
EXPORT
VOLUMES
(PRICE-WISE)
....UPTO 200
.........201-500
.... 501-3,000
............3,000+
HONG KONG
USA
CHINA
GERMANY
ITALY
FRANCE
JAPAN
SINGAPORE
UK
UAE
ROW
CHINA
HONG KONG
SWITZERLD
JAPAN
S. KOREA
ROW
Source: The
Federation of the
Swiss Watch
Industry FH;
prices in Swiss
franc in
Switzerland;
fgures
for CY2013
Source: Ministry
of Commerce &
Industry,
Government of
India; fgures
for FY2014
Source: The
Federation
of the Swiss
Watch Industry
FH; fgures for
CY2013
A B C
D
3.3%
0.5%
1.5%
1
9
.3
%

2
3
.
6
%

5
1
.
9
%
1
9
.0
%

1
0
.
0
%

7
.
0
%

6
.
0
%
6
. 0
%
5 . 0 % 5 . 0
%
4
. 0
%

4
.
0
%

4
.
0
%

2
8
.
0
%

6
5
.
0
%

1
7
.
0
%

1
2
.
0
%

6
.0%
Even for Swiss watches, price elasticity
of demand is worth taking a note of.
65% of the total watch volume exported
in 2013 were priced below 200 CHF
The top destination for Swiss watches
in 2013 was Hong Kong.
In value terms, Switzerland was the
biggest exporter of watches and
clocks to India in FY2014.
In 2013, exports of watches from
Switzerland was worth more than that
of the next four exporters combined.
MAJOR EXPORTERS (BY VOLUME)
MAJOR IMPORTERS (BY VALUE)
700
600
500
400
300
200
100
0
CHINA HONG KONG SWITZERLAND GERMANY USA
14
12
10
8
6
4
2
0
CHINA HONG KONG SWITZERLAND FRANCE USA
Source: The Federation of the Swiss Watch Industry FH; fgures for CY2013 (million units)
Source: The Federation of the Swiss Watch Industry FH; fgures for CY2013 ($ billion); includes components
Worlds top watchmakers (by value)
S
W
A
T
C
H
G
R
O
U
P
R
I
C
H
E
M
O
N
T
R
O
L
E
X
FOSSIL LVMH
10
08
06
04
02
0
Source: Company reports & The Dollar Business Intelligence Unit;
fgures for CY2013 ($ billion);
cross currency rates EUR/USD of 1.36 and CHF/USD of 1.1
E
F
A C
E
F
G
H
B
D
Indian watches & clock trade
350
300
250
200
150
100
50
0

Exports

Imports
Source: Ministry of Commerce; ($ million)
G
H
Hong Kong was the biggest importer
of Swiss watches in 2013.
Switzerland-based Swatch Group
had the highest sales (value) among
all watchmakers in 2013.
Indian watch imports has surged
six-fold over the last decade.
With an average price of just $3,
China exported over 634 million
timepieces in 2013.
GLOBETROTER STATE BANK OF INDIA
T
he year 2008 changed the way
the global banking industry
functioned. Massive deregula-
tion and a very loose interest
rate policy to tide over the twin crisis of
the dot-com bust and 9/11 attacks meant
that credit had been allowed to fow into
the broader economy at a rate never be-
fore seen in human history. Consumer
credit had soared, house prices skyrock-
eted and bankers had their hands full.
But with interest rates near-zero, it was
difcult for a bank to make a killing in
the traditional way. So, what had fol-
lowed was fnancial engineering of the
most bizarre kind and, as always, the epi-
center of this was US.
From mortgage-backed securities
(MBSs) to credit default swaps (CDSs);
from collateralised debt obligations
(CDOs) to collateralised bond obliga-
tions (CBOs) every penny lent was
packaged and repackaged and speculat-
ed on. To ensure a steady fow of such
products, multi-million dollar loans
were given to even those who had the
worst possible credit profle some of
these loans colloquially being called no
income, no job, no asset (NINJA) loans.
Rating agencies also saw this as an op-
portunity to make hay and gave AAA
ratings to even the most risky debt. As
long as the music played, the party con-
tinued. But when it stopped, banks had
nowhere to hide.
While the bursting of the credit bub-
ble mostly afected western banks, those
in India were not entirely immune. Any
kind of exposure to the US and Europe-
an housing market was looked at with
suspicion and the toughest of questions
asked. What helped Indian banks tide
over the storm unscathed though was
their limited exposure to the western
housing market, thanks to strict reg-
ulations of the Reserve Bank of India,
which was admired all over the world for
its role in curbing the animal instincts of
Indian bankers.
With this backdrop and barely fve
years since the credit crisis, it must be
surprising to many that Indian banks are
actually looking outward to fuel growth.
And the largest among them State
IN AN
EXPENSIVE
GLOBAL RACE
The respect and benefts that come with being a truly global bank are immense.
From making the brand a trustworthy household name, to catapulting the
executives to rockstar status, the lures of it are massive. But should the State Bank
of India pursue this drean at the cost of proftability
BY SHAKTI SHANKAR PATRA
AT THE END OF
FY2014, SBIS TOTAL
CONSOLIDATED
ASSETS WERE
ABOUT TWICE THE
GDP OF PAKISTAN
Headquartered in
Mumbai, State Bank
of India operates out
of 15,869 branches
T
he year 2008 changed the way
the global banking industry
functioned. Massive deregula-
tion and a very loose interest
rate policy to tide over the twin crisis of
the dot-com bust and 9/11 attacks meant
that credit had been allowed to fow into
the broader economy at a rate never be-
fore seen in human history. Consumer
credit had soared, house prices skyrock-
eted and bankers had their hands full.
But with interest rates near-zero, it was
difcult for a bank to make a killing in
the traditional way. So, what had fol-
lowed was fnancial engineering of the
most bizarre kind and, as always, the epi-
center of this was US.
From mortgage-backed securities
(MBSs) to credit default swaps (CDSs);
from collateralised debt obligations
(CDOs) to collateralised bond obliga-
tions (CBOs) every penny lent was
packaged and repackaged and speculat-
ed on. To ensure a steady fow of such
products, multi-million dollar loans
were given to even those who had the
worst possible credit profle some of
these loans colloquially being called no
income, no job, no asset (NINJA) loans.
Rating agencies also saw this as an op-
portunity to make hay and gave AAA
ratings to even the most risky debt. As
long as the music played, the party con-
tinued. But when it stopped, banks had
nowhere to hide.
While the bursting of the credit bub-
ble mostly afected western banks, those
in India were not entirely immune. Any
kind of exposure to the US and Europe-
an housing market was looked at with
suspicion and the toughest of questions
asked. What helped Indian banks tide
over the storm unscathed though was
their limited exposure to the western
housing market, thanks to strict reg-
ulations of the Reserve Bank of India,
which was admired all over the world for
its role in curbing the animal instincts of
Indian bankers.
With this backdrop and barely fve
years since the credit crisis, it must be
surprising to many that Indian banks are
actually looking outward to fuel growth.
And the largest among them State
IN AN
EXPENSIVE
GLOBAL RACE
The respect and benefts that come with being a truly global bank are immense.
From making the brand a trustworthy household name, to catapulting the
executives to rockstar status, the lures of it are massive. But should the State Bank
of India pursue this drean at the cost of proftability
AT THE END OF
FY2014, SBIS TOTAL
CONSOLIDATED
ASSETS WERE
ABOUT TWICE THE
GDP OF PAKISTAN
Headquartered in
Mumbai, State Bank
of India operates out
of 15,869 branches
80%
70%
60%
50%
40%
30%
20%
10%
0%
14
12
10
8
6
4
2
0
Source: 2012 fgures for worlds top 1,000 banks;
Average of FY12, FY13 and FY14 for SBI
Source: 2012 fgures for worlds top 1,000 banks; Average of
FY12, FY13 and FY14 for SBI
Growth in total assets (%)
SBIs assets are growing in double digits
Cost to income ratio
SBIs expenses are lower than global peers
Worlds top 1,000 banks
State Bank of India
Europe North America
State Bank of India
IN FY2014, WHILE
SBIS DOMESTIC NET
INTEREST MARGIN
WAS 3.49%, THAT
FOR ITS FOREIGN
OFFICES WAS 1.42%
Bank of India is at the forefront of this.
AS OLD AS THE HILLS
In its current avatar, the State Bank of
India is exactly 59 years old as it came
into being on July 1, 1955, afer the
State Bank of India Act was passed by
the Parliament. However, its origins can
be traced back to 1806. Tats right; SBI
is actually older than the country it is
based in! Four years afer the State Bank
of India Act was passed, the Parliament
passed the State Bank of India (Subsid-
iary Banks) Act in 1959, which made
eight other banks its subsidiaries.
SBI also has a long history of acquir-
ing other smaller banks mostly in bail-
outs. Te frst bank that SBI rescued and
acquired was the Bank of Behar in 1969,
followed by the National Bank of Lahore,
Krishnaram Baldeo Bank, Bank of Co-
chin, State Bank of Travancore and sev-
eral others. A Fortune 500 company, SBI
currently has consolidated assets worth
Rs.23.95 lakh crores, 15,869 branches,
190 foreign ofces, over 21.9 crore active
customers, 43,515 ATMs across India,
1.77 crore Internet banking users, 95
lakh mobile banking users, and of course
over 2.2 lakh employees.
AGAINST THE BEST
According a Capgemini report on the
global banking industry, total assets of
the worlds top 1,000 banks grew by 4.9%
in 2012 whereas a Te Dollar Business
Intelligence Unit analysis reveals that the
average of the same for SBI in FY2012,
FY2013 and FY2014 stood at 12.52% al-
most 8 percentage points higher. Similarly,
in terms of Cost to Income ratios, while the
same for North American and European
banks in 2012 were 67.8% and 64.2% re-
spectively, the three year average for SBI is
48.8% again 15 to 19 percentage points
lower. Tis basically means that not only
are global banks (particularly those in
Europe and North America) growing at
a much slower rate than SBI, but are also
incurring more for every penny worth of
income as compared to the Indian behe-
moth. If these numbers are not enough
to persuade the SBI management to stick
to India and dissuade them from ventur-
ing out (unless its for an ego boost), then
a look at the net interest margin for SBIs
own domestic and foreign operations
should seal the deal.
According to SBIs FY2014 Annual
Report, the bank had a domestic net in-
terest margin (NIM) of 3.49% while the
same for its foreign ofces was just 1.42%
more than 200 bps lower! So, why is
SBI trying to expand its global footprint
when domestic interest margins are
higher and cost of operations are lower?
Tats a billion dollar question.
LURE OF FOREIGN
SHORES
In the traditional sense, banking is a mo-
notonous business. A banker accepts de-
posits at X% and lends at Y%. Te only
way it makes a proft is in terms of the
diference between Y and X. And when
things go wrong, one bad loan can wipe
all the gains made by virtue of the dif-
ference between Y and X. About 60-70
Foreign banking subsidiaries of SBI (with stakes)
SBI has a presence in 36 countries and has 190 foreign branches
STATE BANK
OF INDIA
(CALIFORNIA)
STATE BANK
OF INDIA
(CANADA)
STATE BANK
OF INDIA
(MAURITIUS)
PT BANK
SBI
INDONESIA
NEPAL
SBI
BANK
COMMERCIAL
BANK OF INDIA LLC,
MOSCOW
100% 100%
60%
95%
76%
55%
AFTER A MINOR
EXPANSION IN
FY2013, SBIS ROA
DIPPED TO O.65 IN
FY2014 AS NET NPA
SURGED TO 2.57%
Number of foreign branches / ofces
SBIs global expansion has slowed in the last four years
Asset growth (made to base 1)
SBIs foreign ofces assets have more
than doubled in the last fve years
Source: SBI FY2014 annual report
years back, the global banking commu-
nity understood this. It just couldnt live
with the tiny profts it was making while
the businesses it was lending to, were
spinning out the big bucks. Hence, it
started venturing out into areas from
raising money for businesses to down-
right speculation which never made
sense to the purists. While in the short
run this meant great margins that made
shareholders happy, in the long run it
was a disaster waiting to happen. While
post several such booms and busts, reg-
ulations in the West have been tightened
and pure banks are not allowed to spec-
ulate with depositors money there are
always ways around such regulations
that are brazenly exploited in the West.
Is it this lure that is making Indias top
bank look elsewhere?
THE SECOND HOME
While explaining the concept of risk free
rate, a renowned professor once told his
class, Teres no investment that is risk
free; the closest you have in India is de-
posits with SBI. While the statement was
made in jest, it conveys the respect that
SBI is given in our country. And maybe
the obligation that comes with this kind
of respect has forced SBI to cater to the
Indian community abroad and also the
banking needs of the exporters and im-
porters community.
While SBI has a presence in 36 coun-
tries, a close look at the entire list makes
it clear that the focus has been on coun-
tries with a large expatriate Indian com-
munity, like Bahrain, Singapore, Mauri-
tius, Canada, South Africa, and of course
US. In fact, one of the main subsidiaries
of SBI in the US is State Bank of India
(California). Established in 1982, with
nine branches in California and one in
Washington D.C., SBIC primarily caters
to the huge Indian community in Silicon
Valley something that becomes very
clear by a single look at the banks web-
site what with Exchange Rates section
talking only about remittances to India!
One gets the same impression afer vis-
iting the website of State Bank of India,
United States of America. With a slogan
like Your Best Link to India, the bank
has made it very clear that it essentially
is for Indians in US or for those doing
business in India unlike the Citibanks
and Deutsches of the world, who are in
India, catering to Indians.
EPILOGUE
To be fair to SBI, the rate of growth of its
foreign ofces have slowed down in the
last two years. Afer a 54% jump in the
number of its foreign ofces in FY2010,
it has added just 17 new foreign ofces in
the last two years. So, maybe the realisa-
tion has sunk in. But a look at the balance
sheet, raises eyebrows yet again. In the
last fve years (since FY2009), growth in
the banks foreign ofces assets has clear-
ly outpaced that of its total assets. While
the diference is not massive and a lower
base in foreign ofces could be one of the
reasons for this, the question remains as
to why would a bank accumulate more
and more assets (which means more and
more liabilities) if the return on those as-
sets (RoA) is progressively lower?
As per the earlier mentioned Capgem-
ini report, the RoA of Latin American
banks, at 1.6%, was the highest in 2012,
while the same for banks in Asia-Pacifc
region was at 1.1%. As compared to this,
SBIs average RoA for FY2012, FY2013
and FY2014 has been just 0.83%. Tis
obviously means SBI is grossly under-
performing its peers in emerging mar-
kets, despite witnessing a strong growth
in total assets. While an anaemic domes-
tic economy and rising NPAs were the
main reasons for this, a calmer growth
in foreign ofces assets, would have re-
duced the overall asset size and improved
its RoA.
If one takes into account the fact that
RBI is now handing out new banking
licenses (since the penetration of banks
in India is very low), it makes even more
sense for SBI to stop looking elsewhere
and concentrate on the domestic econ-
omy. Of course, if alpha returns from
foreign lands in the years to come, youll
fnd us writing otherwise.
shakti@thedollarbusiness.com
200
180
160
140
120
100
80
60
40
20
0
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
2.5
2
1.5
1
0.5
0
FY09 FY10 FY11 FY12 FY13 FY14

Asset (Foreign Offces)
Total Asset
Source: SBI Annual Reports; Foreign offce fgures in $ billion;
Total fgures in Rs.crore
80%
70%
60%
50%
40%
30%
20%
10%
0%
14
12
10
8
6
4
2
0
Source: 2012 fgures for worlds top 1,000 banks;
Average of FY12, FY13 and FY14 for SBI
Source: 2012 fgures for worlds top 1,000 banks; Average of
FY12, FY13 and FY14 for SBI
Growth in total assets (%)
SBIs assets are growing in double digits
Cost to income ratio
SBIs expenses are lower than global peers
Worlds top 1,000 banks
State Bank of India
Europe North America
State Bank of India
IN FY2014, WHILE
SBIS DOMESTIC NET
INTEREST MARGIN
WAS 3.49%, THAT
FOR ITS FOREIGN
OFFICES WAS 1.42%
Bank of India is at the forefront of this.
AS OLD AS THE HILLS
In its current avatar, the State Bank of
India is exactly 59 years old as it came
into being on July 1, 1955, afer the
State Bank of India Act was passed by
the Parliament. However, its origins can
be traced back to 1806. Tats right; SBI
is actually older than the country it is
based in! Four years afer the State Bank
of India Act was passed, the Parliament
passed the State Bank of India (Subsid-
iary Banks) Act in 1959, which made
eight other banks its subsidiaries.
SBI also has a long history of acquir-
ing other smaller banks mostly in bail-
outs. Te frst bank that SBI rescued and
acquired was the Bank of Behar in 1969,
followed by the National Bank of Lahore,
Krishnaram Baldeo Bank, Bank of Co-
chin, State Bank of Travancore and sev-
eral others. A Fortune 500 company, SBI
currently has consolidated assets worth
Rs.23.95 lakh crores, 15,869 branches,
190 foreign ofces, over 21.9 crore active
customers, 43,515 ATMs across India,
1.77 crore Internet banking users, 95
lakh mobile banking users, and of course
over 2.2 lakh employees.
AGAINST THE BEST
According a Capgemini report on the
global banking industry, total assets of
the worlds top 1,000 banks grew by 4.9%
in 2012 whereas a Te Dollar Business
Intelligence Unit analysis reveals that the
average of the same for SBI in FY2012,
FY2013 and FY2014 stood at 12.52% al-
most 8 percentage points higher. Similarly,
in terms of Cost to Income ratios, while the
same for North American and European
banks in 2012 were 67.8% and 64.2% re-
spectively, the three year average for SBI is
48.8% again 15 to 19 percentage points
lower. Tis basically means that not only
are global banks (particularly those in
Europe and North America) growing at
a much slower rate than SBI, but are also
incurring more for every penny worth of
income as compared to the Indian behe-
moth. If these numbers are not enough
to persuade the SBI management to stick
to India and dissuade them from ventur-
ing out (unless its for an ego boost), then
a look at the net interest margin for SBIs
own domestic and foreign operations
should seal the deal.
According to SBIs FY2014 Annual
Report, the bank had a domestic net in-
terest margin (NIM) of 3.49% while the
same for its foreign ofces was just 1.42%
more than 200 bps lower! So, why is
SBI trying to expand its global footprint
when domestic interest margins are
higher and cost of operations are lower?
Tats a billion dollar question.
LURE OF FOREIGN
SHORES
In the traditional sense, banking is a mo-
notonous business. A banker accepts de-
posits at X% and lends at Y%. Te only
way it makes a proft is in terms of the
diference between Y and X. And when
things go wrong, one bad loan can wipe
all the gains made by virtue of the dif-
ference between Y and X. About 60-70
Foreign banking subsidiaries of SBI (with stakes)
SBI has a presence in 36 countries and has 190 foreign branches
STATE BANK
OF INDIA
(CALIFORNIA)
STATE BANK
OF INDIA
(CANADA)
STATE BANK
OF INDIA
(MAURITIUS)
PT BANK
SBI
INDONESIA
NEPAL
SBI
BANK
COMMERCIAL
BANK OF INDIA LLC,
MOSCOW
100% 100%
60%
95%
76%
55%
AFTER A MINOR
EXPANSION IN
FY2013, SBIS ROA
DIPPED TO O.65 IN
FY2014 AS NET NPA
SURGED TO 2.57%
Number of foreign branches / ofces
SBIs global expansion has slowed in the last four years
Asset growth (made to base 1)
SBIs foreign ofces assets have more
than doubled in the last fve years
Source: SBI FY2014 annual report
years back, the global banking commu-
nity understood this. It just couldnt live
with the tiny profts it was making while
the businesses it was lending to, were
spinning out the big bucks. Hence, it
started venturing out into areas from
raising money for businesses to down-
right speculation which never made
sense to the purists. While in the short
run this meant great margins that made
shareholders happy, in the long run it
was a disaster waiting to happen. While
post several such booms and busts, reg-
ulations in the West have been tightened
and pure banks are not allowed to spec-
ulate with depositors money there are
always ways around such regulations
that are brazenly exploited in the West.
Is it this lure that is making Indias top
bank look elsewhere?
THE SECOND HOME
While explaining the concept of risk free
rate, a renowned professor once told his
class, Teres no investment that is risk
free; the closest you have in India is de-
posits with SBI. While the statement was
made in jest, it conveys the respect that
SBI is given in our country. And maybe
the obligation that comes with this kind
of respect has forced SBI to cater to the
Indian community abroad and also the
banking needs of the exporters and im-
porters community.
While SBI has a presence in 36 coun-
tries, a close look at the entire list makes
it clear that the focus has been on coun-
tries with a large expatriate Indian com-
munity, like Bahrain, Singapore, Mauri-
tius, Canada, South Africa, and of course
US. In fact, one of the main subsidiaries
of SBI in the US is State Bank of India
(California). Established in 1982, with
nine branches in California and one in
Washington D.C., SBIC primarily caters
to the huge Indian community in Silicon
Valley something that becomes very
clear by a single look at the banks web-
site what with Exchange Rates section
talking only about remittances to India!
One gets the same impression afer vis-
iting the website of State Bank of India,
United States of America. With a slogan
like Your Best Link to India, the bank
has made it very clear that it essentially
is for Indians in US or for those doing
business in India unlike the Citibanks
and Deutsches of the world, who are in
India, catering to Indians.
EPILOGUE
To be fair to SBI, the rate of growth of its
foreign ofces have slowed down in the
last two years. Afer a 54% jump in the
number of its foreign ofces in FY2010,
it has added just 17 new foreign ofces in
the last two years. So, maybe the realisa-
tion has sunk in. But a look at the balance
sheet, raises eyebrows yet again. In the
last fve years (since FY2009), growth in
the banks foreign ofces assets has clear-
ly outpaced that of its total assets. While
the diference is not massive and a lower
base in foreign ofces could be one of the
reasons for this, the question remains as
to why would a bank accumulate more
and more assets (which means more and
more liabilities) if the return on those as-
sets (RoA) is progressively lower?
As per the earlier mentioned Capgem-
ini report, the RoA of Latin American
banks, at 1.6%, was the highest in 2012,
while the same for banks in Asia-Pacifc
region was at 1.1%. As compared to this,
SBIs average RoA for FY2012, FY2013
and FY2014 has been just 0.83%. Tis
obviously means SBI is grossly under-
performing its peers in emerging mar-
kets, despite witnessing a strong growth
in total assets. While an anaemic domes-
tic economy and rising NPAs were the
main reasons for this, a calmer growth
in foreign ofces assets, would have re-
duced the overall asset size and improved
its RoA.
If one takes into account the fact that
RBI is now handing out new banking
licenses (since the penetration of banks
in India is very low), it makes even more
sense for SBI to stop looking elsewhere
and concentrate on the domestic econ-
omy. Of course, if alpha returns from
foreign lands in the years to come, youll
fnd us writing otherwise.
200
180
160
140
120
100
80
60
40
20
0
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
2.5
2
1.5
1
0.5
0
FY09 FY10 FY11 FY12 FY13 FY14

Asset (Foreign Offces)
Total Asset
Source: SBI Annual Reports; Foreign offce fgures in $ billion;
Total fgures in Rs.crore
GLOBAL
MANAGER
DR. ALOK BHARADWAJ, EXEC. VICE-PRESIDENT, CANON INDIA
INTERVIEW BY STEVEN PHILIP WARNER, EDITOR-IN-CHIEF, THE DOLLAR BUSINESS
WE NEED A
NON-INDIA WITHIN
INDIA TO MAKE IT
A MANUFACTURING
AND EXPORTS HUB
With questions still being asked
whether India can ever become
a manufacturing hub, The Dollar
Business caught up with Dr. Alok
Bharadwaj, EVP, Canon India (and
Chairman of CIIs Offce Automation
and Imaging Division) to learn his
views on the subject. India cant fx its
manufacturing overnight, but it can fx
its manufacturing policy, believes
Dr. Bharadwaj. We couldnt agree more
TDB: You previously led the Indian
IT hardware industry body MAIT as
its President, and have been a part of
many-a-discussion on Indias manu-
facturing capabilities in the technolo-
gy sector. Where does India stand as a
manufacturing and exports hub in the
realm of IT hardware?
Dr. Alok Bharadwaj (DAB): I think
India has lost a lot of time. Tere is no
doubt that in time, manufacturing will
continue to get a fllip. Problem is, that
value creation has been eluding India.
And the last decade or so, the advantage
has gravitated towards China. And afer
Tailand, Malaysia and other South East
Asian economies some time in the past,
the advantage is now moving to Viet-
nam. All this while, there has been a lot
of discussion at the policymaker-level,
industry body-level and company-level
on the need and urgency to boost manu-
facturing in India. I think we have been
doing a bad service to the nation.
TDB: What surprises you most about
the fact that despite a pool of engineers,
India still lags in manufacturing?
DAB: Building a manufacturing base
is no rocket science. All the countries
I mentioned before have done it they
have found the economies of scale, the
cost advantage and all other advantages
required to create a global supply chain.
India has succeeded in making itself a
manufacturing hub in some businesses
like auto parts, but in electronics and
IT hardware, the whole discussion has
always revolved around policies that
are not encouraging manufacturing at
a global scale. Te ecosystem that is re-
quired for electronics manufacturing is
not easy to create. In this business, you
do not set up a manufacturing centre for
one company or two companies. Setting
up a facility for an ecosystem is a difer-
ent ballgame altogether. So the starting
point is government policies to make In-
dia to be a big electronic manufacturing
base and I think thats quite possible.
Te more consumption we create, the
more problems we will create in our im-
ports. Because that would mean that we
would need to import more electronic
goods to India. Its about the quality of
life today. Te latest number that our
Ministry of IT discussed was that, by
2020 almost $500 billion worth of IT and
electronic goods would be consumed by
India. Tat would be more than the fuel
bill. Meaning that India would be im-
porting more electronic hardware than
fuel. And if that is the case, given that
fuel is something that we cant manufac-
ture, if we do not think about manufac-
turing electronic items in India, it will be
a disservice to the nation.
TDB: Turning to Canon. At present,
this worlds largest maker of cameras
imports all its products sold in India.
Do we expect this supply-side strategy
to change in the near future?
DAB: Manufacturing is a diferent game
than selling. So many companies and
Canon is no exception to this rule have
their sales ofces in India, with R&D
being treated as a separate vertical. And
that list includes Canon. Decisions on
manufacturing are taken afer deciding
on which zone is most conducive. For
manufacturing, we look at supply chain,
costs of manufacturing and policy. Go-
ing by this, if India does become a manu-
facturing destination, then surely, Canon
will invest in setting up manufacturing
unit here. From a logistics angle, India
has a very long coastline and geograph-
ically, with Africa on one side and Asia
on the other, it is a prime location for to-
and-fro movement of goods.
TDB: Indias domestic market how
compelling is that for growth of both
small and big-sized manufacturers in
the IT hardware business today?
DAB: Te frst and prime aspect is Indias
domestic consumption. Unlike in other
smaller countries like Vietnam, where
manufacturing is only for global supply,
India consumes too. And if we continue
to have a GDP growth of 7% every year,
we will be able to create a reasonably
strong domestic consumption market.
Tat is one of the most compelling rea-
sons for foreign companies to invest in
India. If adopt an inside-out perspective,
we see equal opportunities for both do-
mestic and foreign, and small and large
players. Te large manufacturers can
take the higher end of the value chain,
while the smaller domestic players can
become an integral part of the ecosystem
by adding value at somewhat lower end
of the value chain to begin with. And
over time they can climb up the value
chain by adding diferential value.
TDB: What can the government do to
encourage innovation so that we begin
on a strong note to establish India as a
manufacturing and exports hub?
DAB: Firstly, I think our educational
system needs to be reconfgured. We
cannot feel that we can build a strong
R&D and innovation culture based on
just one dozen IITs and some science
institutes. We need a large number of in-
stitutes to make a big investment in the
education curriculum that is focussed on
creating research opportunities for Indi-
an students. Secondly, we have to look at
retaining talent in India to prevent brain
drainage. So the private sector comes in
Indias manufacturing sectors output growth vis-a-vis Chinas
With right, long-term policies, Indias manufacturing sector should shine brighter
20
15
10
5
0
-5
-10
20
18
16
14
12
10
8
FY10 FY11 FY12 FY13 FY14
Source: Indias data Central Statistical Organisation (CSO);
Chinas data National Bureau of Statistics of China, quantity in %

Indias Manufacturing Production (L-Axis)

Chinas Manufacturing Production (R-Axis)
GLOBAL
MANAGER
INTERVIEW BY STEVEN PHILIP WARNER, EDITOR-IN-CHIEF, THE DOLLAR BUSINESS
WE NEED A
NON-INDIA WITHIN
INDIA TO MAKE IT
A MANUFACTURING
AND EXPORTS HUB
With questions still being asked
whether India can ever become
a manufacturing hub, The Dollar
Business caught up with Dr. Alok
Bharadwaj, EVP, Canon India (and
Chairman of CIIs Offce Automation
and Imaging Division) to learn his
views on the subject. India cant fx its
manufacturing overnight, but it can fx
its manufacturing policy, believes
Dr. Bharadwaj. We couldnt agree more
TDB: You previously led the Indian
IT hardware industry body MAIT as
its President, and have been a part of
many-a-discussion on Indias manu-
facturing capabilities in the technolo-
gy sector. Where does India stand as a
manufacturing and exports hub in the
realm of IT hardware?
Dr. Alok Bharadwaj (DAB): I think
India has lost a lot of time. Tere is no
doubt that in time, manufacturing will
continue to get a fllip. Problem is, that
value creation has been eluding India.
And the last decade or so, the advantage
has gravitated towards China. And afer
Tailand, Malaysia and other South East
Asian economies some time in the past,
the advantage is now moving to Viet-
nam. All this while, there has been a lot
of discussion at the policymaker-level,
industry body-level and company-level
on the need and urgency to boost manu-
facturing in India. I think we have been
doing a bad service to the nation.
TDB: What surprises you most about
the fact that despite a pool of engineers,
India still lags in manufacturing?
DAB: Building a manufacturing base
is no rocket science. All the countries
I mentioned before have done it they
have found the economies of scale, the
cost advantage and all other advantages
required to create a global supply chain.
India has succeeded in making itself a
manufacturing hub in some businesses
like auto parts, but in electronics and
IT hardware, the whole discussion has
always revolved around policies that
are not encouraging manufacturing at
a global scale. Te ecosystem that is re-
quired for electronics manufacturing is
not easy to create. In this business, you
do not set up a manufacturing centre for
one company or two companies. Setting
up a facility for an ecosystem is a difer-
ent ballgame altogether. So the starting
point is government policies to make In-
dia to be a big electronic manufacturing
base and I think thats quite possible.
Te more consumption we create, the
more problems we will create in our im-
ports. Because that would mean that we
would need to import more electronic
goods to India. Its about the quality of
life today. Te latest number that our
Ministry of IT discussed was that, by
2020 almost $500 billion worth of IT and
electronic goods would be consumed by
India. Tat would be more than the fuel
bill. Meaning that India would be im-
porting more electronic hardware than
fuel. And if that is the case, given that
fuel is something that we cant manufac-
ture, if we do not think about manufac-
turing electronic items in India, it will be
a disservice to the nation.
TDB: Turning to Canon. At present,
this worlds largest maker of cameras
imports all its products sold in India.
Do we expect this supply-side strategy
to change in the near future?
DAB: Manufacturing is a diferent game
than selling. So many companies and
Canon is no exception to this rule have
their sales ofces in India, with R&D
being treated as a separate vertical. And
that list includes Canon. Decisions on
manufacturing are taken afer deciding
on which zone is most conducive. For
manufacturing, we look at supply chain,
costs of manufacturing and policy. Go-
ing by this, if India does become a manu-
facturing destination, then surely, Canon
will invest in setting up manufacturing
unit here. From a logistics angle, India
has a very long coastline and geograph-
ically, with Africa on one side and Asia
on the other, it is a prime location for to-
and-fro movement of goods.
TDB: Indias domestic market how
compelling is that for growth of both
small and big-sized manufacturers in
the IT hardware business today?
DAB: Te frst and prime aspect is Indias
domestic consumption. Unlike in other
smaller countries like Vietnam, where
manufacturing is only for global supply,
India consumes too. And if we continue
to have a GDP growth of 7% every year,
we will be able to create a reasonably
strong domestic consumption market.
Tat is one of the most compelling rea-
sons for foreign companies to invest in
India. If adopt an inside-out perspective,
we see equal opportunities for both do-
mestic and foreign, and small and large
players. Te large manufacturers can
take the higher end of the value chain,
while the smaller domestic players can
become an integral part of the ecosystem
by adding value at somewhat lower end
of the value chain to begin with. And
over time they can climb up the value
chain by adding diferential value.
TDB: What can the government do to
encourage innovation so that we begin
on a strong note to establish India as a
manufacturing and exports hub?
DAB: Firstly, I think our educational
system needs to be reconfgured. We
cannot feel that we can build a strong
R&D and innovation culture based on
just one dozen IITs and some science
institutes. We need a large number of in-
stitutes to make a big investment in the
education curriculum that is focussed on
creating research opportunities for Indi-
an students. Secondly, we have to look at
retaining talent in India to prevent brain
drainage. So the private sector comes in
Indias manufacturing sectors output growth vis-a-vis Chinas
With right, long-term policies, Indias manufacturing sector should shine brighter
20
15
10
5
0
-5
-10
20
18
16
14
12
10
8
FY10 FY11 FY12 FY13 FY14
Source: Indias data Central Statistical Organisation (CSO);
Chinas data National Bureau of Statistics of China, quantity in %

Indias Manufacturing Production (L-Axis)

Chinas Manufacturing Production (R-Axis)
GLOBAL
MANAGER
here. Government alone cannot help the
cause of making India an R&D-rich na-
tion. Tirdly, we are not giving high pri-
ority to patent-fling. India will have to
build very strong patent protection laws.
TDB: For players in the IT and elec-
tronics business, rupee devaluation has
been a big concern. You think so?
DAB: More the consumption, more the
vulnerability. And we are in a Catch 22
situation today. Te more India devel-
ops, more will be its dependence on IT
and electronic imports, therefore there
will be a greater exposure to movements
in the rupee value. Rupee exchange rate
is a very big concern for the IT industry
because of two reasons. One is that it is
very unpredictable and suddenly renders
a proftable business unproftable.
TDB: So has the rupee movement im-
pacted Canon in recent months as well?
DAB: Yes. It impacts all importers. Can-
on as a company, whenever we import,
we get supply credit. So a devaluing
currency syndrome brings in this basic
problem that we always have to pay more
than the cost of imported products. For
many companies, if we talk about long-
term government contracts, when the
rupee devalues, the contract transforms
into a death trap for many companies in
the IT industry. A volatile rupee is a big
pain for the industry.
TDB: What would you say about estab-
lishing IT and electronics manufactur-
ing zones as an efective way of dealing
with rupee volatility?
DAB: If we have to become a net ex-
porter of IT and electronics, one of the
elements is to establish an ecosystem for
manufacturing which is best done in an
SEZ or a manufacturing zone. Tat is the
way it is worldwide. Issue is how do we
make these zones almost like non-India?
So what is an Indian system? Te typi-
cal characteristic of an Indian system is
that there is no predictability. You are not
sure when you will have the goods deliv-
ered due to delays in transport or some
customs issue, etc. What is required is
near 100% predictability in supply chain
and processes to make India a real man-
ufacturing hub and a net exports market.
Anything short of that wont do. We need
to create a non-India within India. And
that will only be possible when the rules
of the land and infrastructure are made
diferent from what they currently are.
We have to invest in ports and highways.
TDB: So is that the complete solution?
DAB: No. Its only one part of the solu-
tion to make India a world-class man-
ufacturing centre and net exporter. Te
policies and tax laws should be abso-
lutely immune to change. We make laws
and change them in no time. Tis only
increases the factor of unpredictabili-
ty. Whenever a new state government
takes charge, it changes laws. We must
announce policies that are immune to
change. Even if we adopt a bad policy
and realise that afer ten years India has
lost because of that policy, we should re-
tain it. Long-term planning & stability
can as such come to pass.
Concrete formation of right
policies is important. And it
is critical that we delight our
big foreign investors. Stable policies will
add to India becoming a manufacturing
hub.
ESTABLISHING
SEZS AND
MANUFACTURING
ZONES IS JUST
ONE PART OF THE
SOLUTION. WE NEED
LONG-TERM LAWS
AND TAX RULES
GOOD OR BAD!
GLOBAL
MANAGER
here. Government alone cannot help the
cause of making India an R&D-rich na-
tion. Tirdly, we are not giving high pri-
ority to patent-fling. India will have to
build very strong patent protection laws.
TDB: For players in the IT and elec-
tronics business, rupee devaluation has
been a big concern. You think so?
DAB: More the consumption, more the
vulnerability. And we are in a Catch 22
situation today. Te more India devel-
ops, more will be its dependence on IT
and electronic imports, therefore there
will be a greater exposure to movements
in the rupee value. Rupee exchange rate
is a very big concern for the IT industry
because of two reasons. One is that it is
very unpredictable and suddenly renders
a proftable business unproftable.
TDB: So has the rupee movement im-
pacted Canon in recent months as well?
DAB: Yes. It impacts all importers. Can-
on as a company, whenever we import,
we get supply credit. So a devaluing
currency syndrome brings in this basic
problem that we always have to pay more
than the cost of imported products. For
many companies, if we talk about long-
term government contracts, when the
rupee devalues, the contract transforms
into a death trap for many companies in
the IT industry. A volatile rupee is a big
pain for the industry.
TDB: What would you say about estab-
lishing IT and electronics manufactur-
ing zones as an efective way of dealing
with rupee volatility?
DAB: If we have to become a net ex-
porter of IT and electronics, one of the
elements is to establish an ecosystem for
manufacturing which is best done in an
SEZ or a manufacturing zone. Tat is the
way it is worldwide. Issue is how do we
make these zones almost like non-India?
So what is an Indian system? Te typi-
cal characteristic of an Indian system is
that there is no predictability. You are not
sure when you will have the goods deliv-
ered due to delays in transport or some
customs issue, etc. What is required is
near 100% predictability in supply chain
and processes to make India a real man-
ufacturing hub and a net exports market.
Anything short of that wont do. We need
to create a non-India within India. And
that will only be possible when the rules
of the land and infrastructure are made
diferent from what they currently are.
We have to invest in ports and highways.
TDB: So is that the complete solution?
DAB: No. Its only one part of the solu-
tion to make India a world-class man-
ufacturing centre and net exporter. Te
policies and tax laws should be abso-
lutely immune to change. We make laws
and change them in no time. Tis only
increases the factor of unpredictabili-
ty. Whenever a new state government
takes charge, it changes laws. We must
announce policies that are immune to
change. Even if we adopt a bad policy
and realise that afer ten years India has
lost because of that policy, we should re-
tain it. Long-term planning & stability
can as such come to pass.
Concrete formation of right
policies is important. And it
is critical that we delight our
big foreign investors. Stable policies will
add to India becoming a manufacturing
hub.
ESTABLISHING
SEZS AND
MANUFACTURING
ZONES IS JUST
ONE PART OF THE
SOLUTION. WE NEED
LONG-TERM LAWS
AND TAX RULES
GOOD OR BAD!
SUBSCRIBE
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CHARTED TERRITORY HJF 2014
The 7
th
edition of the Hyderabad Jewellery Pearl and
Gem Fair (HJF) was a marvellous showcase of skills
that go into designing an aesthetic and splendorous
array of jewellery. The fabulous range of gems and
pearls on display were a feast for the eyes and
attracted the Whos Who of the business
BY JAYASHANKAR MENON
GEMS, GLITZ
AND GLITTER
T
he seventh edition of Hyder-
abad Jewellery, Pearl & Gem
Fair (HJF), held at the HITEX
exhibition centre between June
7 and June 9, 2014, was one of the biggest
exhibitions of its kind in India. Tis years
edition not only ensured participation
of over 120 manufacturers, wholesalers,
retailers, importers, exporters, suppliers
and representatives of various trade bod-
ies, but also felicitated those who have
been paying heed to the growth of the in-
dustry. Joji George, Managing Director,
UBM India, inaugurated the three-day
B2B event. Speaking to Te Dollar Busi-
ness, George said, UBM hosts in excess
of 20 large scale exhibitions and 40 con-
ferences across the country every year,
thereby enabling trade across multiple
industry verticals. And 2014 edition of
HJF has only taken things to the next level
of commitment ofering excellent business
opportunities to all stakeholders.
A gateway to the Indian jewellery
market, HJF 2014 provided an excellent
platform for buyers and suppliers to con-
nect, network, exchange ideas, discover
upcoming trends and generate business
opportunities. At the trade fair, exhibi-
tors presented a wide spectrum of mer-
chandise including diamonds, pearls,
gemstones, exquisite gold jewellery and
the latest machinery and equipment
used in the manufacturing process.
Te exhibition, since its debut in 2008,
has created right business opportunities
for the industry and has been attracting
exhibitors and buyers from both domes-
tic and international markets. And this
year wasnt diferent. Many prominent
players in the jewellery business includ-
ing Emrals from Coimbatore; Krizz from
Chennai; Peeyar Manufacturers, Sanghi
Jewellers and P. Mangatram from Hyder-
abad; and Hari Krishna Exports, Mukti
Gold and Shanti Gold from Mumbai
among others, showcased their designs.
Despite having a global footprint, the
Indian gems & jewellery industry has so
far been a laggard when it comes to the
use of technology, a participant told Te
Dollar Business. Well, it is discrepancies
like this that trade fairs like HJF should
now start addressing. Its time we take
that next big leap. he added.
jay@thedollarbusiness.com
Glimpses of seventh edition of Hyder-
abad Jewellery, Pearl and Gem Fair (HJF)
held at HITEX exhibition centre between
June 7 and June 9, 2014
TDB: What promotional activities are you conducting in South India?
GVS: Our primary goal is to bring the entire industry on one platform to
maintain unity and integrity. Te second objective is to educate jewellers,
crafsmen, designers and help them move to the next level. We want to
ensure that jewellery is sold as a product and not a commodity. Now that
the new government is in power, we have a lot of expectations from it. In
fact, now things are starting to look up. As far as southern region is con-
cerned, its witnessing a boom. Right from Kerala to Tamil Nadu, from
Andhra to Karnataka, the demand for gems and jewellery is increasing
like never before. Now that awareness about compliance is spreading, it
is good for the industry. GJF is confdent that India is going to be the
number one in the world in production of jewellery, given the proactive
approach of the new government.
TDB: Have you made any recommendations to the government?
GVS: Yes. We have requested the government to withdraw the 80:20 rule
and cut customs duty from 10% to 2%. Apart from this, we are also sup-
porting the government on every issue. We are with the government to
solve all outstanding issues.
TDB: You were talking about making Hyderabad a hub for manufac-
turing jewellery. Can you elaborate?
GVS: Basically, Hyderabad specialises in ruby, fat diamond and Chakri
diamond jewellery. Tis has been restricted only to the South India. It has
not really made inroads into the North. Trough these kind of events, we
are trying to increase awareness. Footfalls are certainly increasing year
afer year. Tis is a serious business meet, where buyer-seller interactions
also happen.
TDB: What about training local jewellers?
GVS: GJF is trying to educate the entire industry, especially jewellers
from the hinterlands to observe compliance. If that happens, the entire
jewellery industry will become transparent. And once it becomes trans-
parent, we will go to the next level. Now we have the hallmarking system,
which is a value added service. Tis gives lot of confdence to jewellers.
TDB: Could you shed more light on skill counselling?
GVS: We have various training modules. A few years ago, a worker used
to work under extreme conditions in a highly disorganised way. Today
things have changed. Now proper infrastructure, convenience, clean en-
vironment and more are provided. So, even youngsters are opting for jobs
in this industry. In fact, it is more like a laboratory and they are treated
like metallurgists unlike a menial in the past.
Cut duty from 10% to 2%
G. V. Sridhar, Regional Director (South), All India
Gems & Jewellery Federation (GJF), has huge expec-
tations from the new government. On the sidelines of
HJF-2014, he spoke to Te Dollar Business on a whole
host of issues concerning the gems and jewellery in-
dustry in India. Excerpts:
CHARTED TERRITORY HJF 2014
The 7
th
edition of the Hyderabad Jewellery Pearl and
Gem Fair (HJF) was a marvellous showcase of skills
that go into designing an aesthetic and splendorous
array of jewellery. The fabulous range of gems and
pearls on display were a feast for the eyes and
attracted the Whos Who of the business
GEMS, GLITZ
AND GLITTER
T
he seventh edition of Hyder-
abad Jewellery, Pearl & Gem
Fair (HJF), held at the HITEX
exhibition centre between June
7 and June 9, 2014, was one of the biggest
exhibitions of its kind in India. Tis years
edition not only ensured participation
of over 120 manufacturers, wholesalers,
retailers, importers, exporters, suppliers
and representatives of various trade bod-
ies, but also felicitated those who have
been paying heed to the growth of the in-
dustry. Joji George, Managing Director,
UBM India, inaugurated the three-day
B2B event. Speaking to Te Dollar Busi-
ness, George said, UBM hosts in excess
of 20 large scale exhibitions and 40 con-
ferences across the country every year,
thereby enabling trade across multiple
industry verticals. And 2014 edition of
HJF has only taken things to the next level
of commitment ofering excellent business
opportunities to all stakeholders.
A gateway to the Indian jewellery
market, HJF 2014 provided an excellent
platform for buyers and suppliers to con-
nect, network, exchange ideas, discover
upcoming trends and generate business
opportunities. At the trade fair, exhibi-
tors presented a wide spectrum of mer-
chandise including diamonds, pearls,
gemstones, exquisite gold jewellery and
the latest machinery and equipment
used in the manufacturing process.
Te exhibition, since its debut in 2008,
has created right business opportunities
for the industry and has been attracting
exhibitors and buyers from both domes-
tic and international markets. And this
year wasnt diferent. Many prominent
players in the jewellery business includ-
ing Emrals from Coimbatore; Krizz from
Chennai; Peeyar Manufacturers, Sanghi
Jewellers and P. Mangatram from Hyder-
abad; and Hari Krishna Exports, Mukti
Gold and Shanti Gold from Mumbai
among others, showcased their designs.
Despite having a global footprint, the
Indian gems & jewellery industry has so
far been a laggard when it comes to the
use of technology, a participant told Te
Dollar Business. Well, it is discrepancies
like this that trade fairs like HJF should
now start addressing. Its time we take
that next big leap. he added.
Glimpses of seventh edition of Hyder-
abad Jewellery, Pearl and Gem Fair (HJF)
held at HITEX exhibition centre between
June 7 and June 9, 2014
TDB: What promotional activities are you conducting in South India?
GVS: Our primary goal is to bring the entire industry on one platform to
maintain unity and integrity. Te second objective is to educate jewellers,
crafsmen, designers and help them move to the next level. We want to
ensure that jewellery is sold as a product and not a commodity. Now that
the new government is in power, we have a lot of expectations from it. In
fact, now things are starting to look up. As far as southern region is con-
cerned, its witnessing a boom. Right from Kerala to Tamil Nadu, from
Andhra to Karnataka, the demand for gems and jewellery is increasing
like never before. Now that awareness about compliance is spreading, it
is good for the industry. GJF is confdent that India is going to be the
number one in the world in production of jewellery, given the proactive
approach of the new government.
TDB: Have you made any recommendations to the government?
GVS: Yes. We have requested the government to withdraw the 80:20 rule
and cut customs duty from 10% to 2%. Apart from this, we are also sup-
porting the government on every issue. We are with the government to
solve all outstanding issues.
TDB: You were talking about making Hyderabad a hub for manufac-
turing jewellery. Can you elaborate?
GVS: Basically, Hyderabad specialises in ruby, fat diamond and Chakri
diamond jewellery. Tis has been restricted only to the South India. It has
not really made inroads into the North. Trough these kind of events, we
are trying to increase awareness. Footfalls are certainly increasing year
afer year. Tis is a serious business meet, where buyer-seller interactions
also happen.
TDB: What about training local jewellers?
GVS: GJF is trying to educate the entire industry, especially jewellers
from the hinterlands to observe compliance. If that happens, the entire
jewellery industry will become transparent. And once it becomes trans-
parent, we will go to the next level. Now we have the hallmarking system,
which is a value added service. Tis gives lot of confdence to jewellers.
TDB: Could you shed more light on skill counselling?
GVS: We have various training modules. A few years ago, a worker used
to work under extreme conditions in a highly disorganised way. Today
things have changed. Now proper infrastructure, convenience, clean en-
vironment and more are provided. So, even youngsters are opting for jobs
in this industry. In fact, it is more like a laboratory and they are treated
like metallurgists unlike a menial in the past.
Cut duty from 10% to 2%
G. V. Sridhar, Regional Director (South), All India
Gems & Jewellery Federation (GJF), has huge expec-
tations from the new government. On the sidelines of
HJF-2014, he spoke to Te Dollar Business on a whole
host of issues concerning the gems and jewellery in-
dustry in India. Excerpts:
36 THE DOLLAR BUSINESS II JULY2014
THE SECRET INGREDIENT TURMERIC
FOR INDIAN BRIDES
& FOREIGN BUYERS
As wisdom dawns upon the globe about the amazing array of Indias herbal
resources, the international science and medical fraternities (besides just
culinary connoisseurs) are waking up to the potential of a product native to
India turmeric. Whats better is the fact that with 80% of the worlds total
turmeric being produced in India, this spice has the potential to work wonders for
exporters. Actually, were talking about Rs.650 crore in exports-a-year already!
BY SACHIN MANAWARIA
Cost of Turmeric (INR/MT) * 1,20,000.00
Cost of Turmeric (USD/MT) ** 2,000.00
Freight & Insurance (USD/MT) *** 680.00
General and Administrative Costs (USD) 125.00
Final Cost (USD/MT) 2,805.00
Price in USA (USD/MT) # 3,630.00
Proft (USD/MT) 825.00
Proft Margin 29.41%
Note: Turmeric attracts no import duties in USA
*Wholesale Price of Alleppey Finger in Cochin
** Assuming USD/INR of 60
*** Shipping and Insurance Cost for 1 MT Turmeric from
Cochin to New York
# Spices Board of India and The Dollar Business Intelligence Unit
F
or over 5,000 years, turmeric
has been used throughout India,
China and Indonesia as a spice
and medicinal agent. But only
recently has it started capturing imag-
inations around the world as a pana-
cea and a palliative for a wide range of
ailments. So much so that it has been
granted Generally Recognised as Safe
(GRAS) status by the USFDA.
Te worlds love afair with this co-
lourful agent is also evident from the
extensive research being carried out on
its medicinal values and extracts. For in-
stance, curcumin, an ingredient found in
it, has long been used to prevent many
chronic diseases including obesity, type
II diabetes and liver diseases. Recent
studies show that this dietary supple-
ment possesses potent anti-oxidant, an-
ti-carcinogenic, anti-infammatory and
hypoglycemic properties. In India, tur-
meric is an omnipresent ingredient in a
majority of delicacies. A dash of turmer-
ic is enough to spice up the favour and
play a gastronomic delight. Plus, there is
also a curative within.
Although exports are just above the
$100 million mark not signifcantly
high considering its potential the focus
of international attention is slowly shif-
ing to turmeric and its extracts. Going
by the growing interest, turmeric trade
is all poised for a quantum leap in terms
of number of international takers in the
near future. And being the only bulk
producer of turmeric (India accounts for
about 80% of world turmeric produc-
tion), India holds a near monopoly over
its exports.
If you step back in time, you will re-
alise that turmeric has been an import-
ant ingredient of Indian tradition and
wisdom since the Vedic era. Owing to
its therapeutic characteristics, it is wide-
ly used in Ayurvedic as well as Unani
systems of medicine. Spiritually, it rep-
resents a gesture of good omen and is
widely associated with fertility in India.
No religious/spiritual occasion is com-
plete without turmeric in over 80% of
Indian homes such is the importance
of this humble yellow spice.
In fact, these medicinal characteris-
tics of turmeric are now gradually being
acknowledged across the globe too. Tis
is evident by a 13.4% CAGR reported by
Proft estimate for turmeric exports
Zero customs duty for Turmeric in USA makes exports to
that country extremely lucrative
Source: Ministry of Commerce; Quantity in metric tonne; value in $ million
Indias turmeric exports by value and volume
Average export price has increased from Rs.35.39/ kg in FY05 to Rs.83.26/kg in FY14
120,000
100,000
80,000
60,000
40,000
20,000
0
200
180
160
140
120
100
80
60
40
20
0
Exports (Quantity; L-axis)

Export (Value; R-axis)
Dry turmeric curcuma
root at a wholesale spice
shop at APMC Market in
Mumbai. Indian turmeric
exports are dominated
by dry turmeric, which
accounted for over 43% of
total exports in FY2014
Turmeric curcuma root
and powder: Curcum-
in, an ingredient found
in turmeric, has long
been used to prevent
many chronic diseas-
es including obesity,
type II diabetes and
liver diseases
Cost of Turmeric (INR/MT) * 1,20,000.00
Cost of Turmeric (USD/MT) ** 2,000.00
Freight & Insurance (USD/MT) *** 680.00
General and Administrative Costs (USD) 125.00
Final Cost (USD/MT) 2,805.00
Price in USA (USD/MT) # 3,630.00
Proft (USD/MT) 825.00
Proft Margin 29.41%
Note: Turmeric attracts no import duties in USA
*Wholesale Price of Alleppey Finger in Cochin
** Assuming USD/INR of 60
*** Shipping and Insurance Cost for 1 MT Turmeric from
Cochin to New York
# Spices Board of India and The Dollar Business Intelligence Unit
F
or over 5,000 years, turmeric
has been used throughout India,
China and Indonesia as a spice
and medicinal agent. But only
recently has it started capturing imag-
inations around the world as a pana-
cea and a palliative for a wide range of
ailments. So much so that it has been
granted Generally Recognised as Safe
(GRAS) status by the USFDA.
Te worlds love afair with this co-
lourful agent is also evident from the
extensive research being carried out on
its medicinal values and extracts. For in-
stance, curcumin, an ingredient found in
it, has long been used to prevent many
chronic diseases including obesity, type
II diabetes and liver diseases. Recent
studies show that this dietary supple-
ment possesses potent anti-oxidant, an-
ti-carcinogenic, anti-infammatory and
hypoglycemic properties. In India, tur-
meric is an omnipresent ingredient in a
majority of delicacies. A dash of turmer-
ic is enough to spice up the favour and
play a gastronomic delight. Plus, there is
also a curative within.
Although exports are just above the
$100 million mark not signifcantly
high considering its potential the focus
of international attention is slowly shif-
ing to turmeric and its extracts. Going
by the growing interest, turmeric trade
is all poised for a quantum leap in terms
of number of international takers in the
near future. And being the only bulk
producer of turmeric (India accounts for
about 80% of world turmeric produc-
tion), India holds a near monopoly over
its exports.
If you step back in time, you will re-
alise that turmeric has been an import-
ant ingredient of Indian tradition and
wisdom since the Vedic era. Owing to
its therapeutic characteristics, it is wide-
ly used in Ayurvedic as well as Unani
systems of medicine. Spiritually, it rep-
resents a gesture of good omen and is
widely associated with fertility in India.
No religious/spiritual occasion is com-
plete without turmeric in over 80% of
Indian homes such is the importance
of this humble yellow spice.
In fact, these medicinal characteris-
tics of turmeric are now gradually being
acknowledged across the globe too. Tis
is evident by a 13.4% CAGR reported by
Proft estimate for turmeric exports
Zero customs duty for Turmeric in USA makes exports to
that country extremely lucrative
Source: Ministry of Commerce; Quantity in metric tonne; value in $ million
Indias turmeric exports by value and volume
Average export price has increased from Rs.35.39/ kg in FY05 to Rs.83.26/kg in FY14
120,000
100,000
80,000
60,000
40,000
20,000
0
200
180
160
140
120
100
80
60
40
20
0
Exports (Quantity; L-axis)

Export (Value; R-axis)
Dry turmeric curcuma
root at a wholesale spice
shop at APMC Market in
Mumbai. Indian turmeric
exports are dominated
by dry turmeric, which
accounted for over 43% of
total exports in FY2014
Turmeric curcuma root
and powder: Curcum-
in, an ingredient found
in turmeric, has long
been used to prevent
many chronic diseas-
es including obesity,
type II diabetes and
liver diseases
A farmer harvesting turmeric. Exports of fresh turmeric has nosedived over the last decade
exports of turmeric from India in the last
fve years. Since India is the only major
producer, consumer and exporter of tur-
meric still, future prospects of this Indi-
an spice appear, well... quite spicy.
AS DIVERSE AS INDIA
Turmeric is widely grown in the south-
ern peninsular region of India. Andhra
Pradesh and Tamil Nadu are the two ma-
jor turmeric producing states contrib-
uting nearly 70% to the total produce,
followed by Odisha, West Bengal, Maha-
rashtra, Karnataka and Kerala.
India produces a wide variety of tur-
meric, each unique in itself for its innate
properties and values. Te Alleppey Tur-
meric grown in Kerala is popular for its
rich content of curcumin around 6 to
6.5%. It usually varies from deep yellow
to orange yellow in colour. Tis type of
turmeric fnger is usually the preferred
variety of turmeric exported to USA in
an unpolished form.
On the other hand, Madras Turmeric
is widely grown in districts like Salem,
Erode, Coimbatore, Dharampuri areas
of Tamil Nadu. Tis variety is usually
traded in the Erode market, which is one
of the biggest trading centers of turmeric
in India. Tese mustard yellow coloured
rhizomes underground root of thick
mass comprise nearly 3-3.5% of cur-
cumin. Madras Turmeric is generally
preferred in Europe and UK and is ex-
ported in polished and raw form.
Similarly, Andhra Pradesh, the big-
gest turmeric producing state in India, is
known for Nizamabad Turmeric grown
in Nizamabad, Guntur, Karimnagar and
Kadapa districts of the state. Tis type of
turmeric is pale yellow and the curcum-
in level is not more than 2%. Te Middle
East is one of the major markets for this
variety of turmeric.
Another variety Rajapuri Turmeric
is largely grown in Maharashtra and is
marketed through Sangli and Mumbai
trading centers. It is slightly superior to
the Madras variety with curcumin con-
tent of 3.5-4.0%. Tis type of turmeric is
mostly exported to the Japanese market
in polished form. Some of the other well
know varieties are Duggirala Turmer-
ic grown in Guntur district of Andhra
Pradesh, Dehradun local, Daghi and
Lakadong produced in the North East
region with high curcumin content, and
a few other commercially grown variet-
ies like Krishna, Suroma, Rasmi, Suvar-
na, IISR Prabha and IISR Pratibha.
Surprisingly, the productivity of tur-
meric in India has been on a decline over
the last few years due to a couple of fac-
tors. According to estimates of the Spices
Board of India, the total area under tur-
meric cultivation went down to 1,92,916
hectares in FY2013 with an output of
9,73,098 tonnes from 2,37,720 hect-
ares under cultivation with an output of
12,46,220 tonnes in FY2012. Two major
cyclones, coupled with unseasonal rains
in Andhra Pradesh and surrounding
coastal areas during last couple of years,
have lowered the yield of turmeric in
these belts. But then experts believe it to
be a temporary factor afecting business.
THE INDIA ADVANTAGE
India is by far the largest producer, con-
sumer as well as exporter of turmeric (to
all major destinations across the globe).
Although it is grown in few pockets of
China, Pakistan, Bangladesh and Myan-
Top export destinations for
Indian turmeric
Over 13% of Indias total turmeric
exports in FY2014 was to Iran
Leading turmeric producing
states in India
Andhra Pradesh accounts for over 35%
of the total turmeric produced in India
Iran
Japan
Malaysia
UAE
USA
UK
Andhra Pradesh
Tamil Nadu
Odisha
Karnataka
Maharashtra
Others
Sri Lanka
Saudi Arabia
South Africa
Spain
ROW
Source: Ministry of Commerce; All values for FY2014 Source: Spices Board of India; Provisional Figures for FY2011
4%
4%
4%
3%
35
39%
37%
22%
16%
7%
5%
13%
8%
7%
9%
5%
14%
mar, India accounts for 70-80% of glob-
al turmeric trade. It consumes nearly
80-85% of its own produce and exports
less than 10%. In terms of competition,
theres nothing that comes close to In-
dian turmeric given its high curcumin
content, bright colour and aroma.
SPICING UP THE WORLD
Over the past few years, Indian turmer-
ic exports has shown an encouraging
trend. In dollar terms, Indian exports
have grown at a CAGR of 10% between
FY2009 and 2013, while volume-wise it
has surged at a CAGR of 13.5% during
the same period. Going by past trends,
UAE, Iran, USA, Malaysia and Japan
happen to be the top markets for high
quality Indian turmeric. Apart from
these, UK, France and Germany too are
now emerging as new markets.
Turmeric is usually exported in four
diferent forms. Amongst these forms,
fresh turmeric is losing sheen as an ex-
port commodity. Exports of this variety
has fallen by 76% in the past decade.
Oleoresins from turmeric are in high
demand globally in the present times.
Tis highly processed liquid of turmeric
is of brownish dark-yellow appearance
and fnds usage in pharmaceutical and
food industry all over the world. Tis is
the reason for turmeric oleoresins ex-
ports witnessing a CAGR of 24% in the
last fve years. Categories of dry turmeric
and powder turmeric exports have also
grown at a CAGR of 11% and 16% re-
spectively in the past fve. Te reason for
such increase can be attributed to factors
like rise in use of turmeric in curry pow-
der and spice mixes globally (due to its
therapeutic properties), and a shif away
from synthetic colour.
During the ten-year period leading to
FY2014, the share of fresh turmeric in
overall turmeric exports has come down
from over 38.5% to just 2.7%, while that
of dry turmeric has increased from a lit-
tle over 26.1% to 43.6%. Similarly, shares
of powder and other varieties of turmer-
ic have also increased from 31.06% and
4.25% to 42.02% and 11.5% respectively.
GOLD DUST. LITERALLY!
Prices of the best grades of turmeric
fngers such as Duggirala, Kadapa and
Salem are currently hovering between
Rs.60-70/kg and are being sold in the
Middle East at Rs.90-120/kg. Similarly,
premium grades of Alleppey Fingers
with high curcumin content of 5-6%
are currently trading in the Rs.110-120/
kg price range in India but is being sold
at about $1.65/lb (~Rs.218.25/kg) in
USA. Since there are no duties on tur-
meric imports in USA, proft margins of
25-30% are easily available to Indian ex-
porters post shipping and other admin-
istrative costs (see table).
While large parts of the globe are yet
to wake up to turmeric and its thera-
peutic values, things are headed in the
right direction for exporters of this crop.
Further, a large expatriate Indian com-
munity is only helping raise awareness
about this wonder spice globally. With
not much existing or expected compe-
tition and a gentle cap on production
volumes, even a marginal rise in demand
will send prices soaring. And rejoice will
the hordes of Indian exporters.
Tis product, as it appears, has a co-
lourful personality, yet is just...turmeric!
Now, did you imagine its business worth
the last time you saw it on the kitchen
shelf? Seriously, it deserves attention!
Breakup of Indias turmeric
exports (FY2005)
10 years ago, exports from India was
dominated by fresh turmeric...
exports (FY2014)
...currently, dry and powder turmeric
lead Indias exports
Fresh
Dry
Fresh
Dry
Powder
Other Turmeric
Powder
Other Turmeric
Source: Ministry of Commerce Source: Ministry of Commerce
INDIA ACCOUNTED
FOR OVER 76%
OF THE GLOBAL
TURMERIC EXPORTS
IN 2013, FOLLOWED
BY MYANMAR
India accounts for about 80% of the worlds total turmeric production
42%
43%
12%
39%
26%
31%
4% 4%
mar, India accounts for 70-80% of glob-
al turmeric trade. It consumes nearly
80-85% of its own produce and exports
less than 10%. In terms of competition,
theres nothing that comes close to In-
dian turmeric given its high curcumin
content, bright colour and aroma.
SPICING UP THE WORLD
Over the past few years, Indian turmer-
ic exports has shown an encouraging
trend. In dollar terms, Indian exports
have grown at a CAGR of 10% between
FY2009 and 2013, while volume-wise it
has surged at a CAGR of 13.5% during
the same period. Going by past trends,
UAE, Iran, USA, Malaysia and Japan
happen to be the top markets for high
quality Indian turmeric. Apart from
these, UK, France and Germany too are
now emerging as new markets.
Turmeric is usually exported in four
diferent forms. Amongst these forms,
fresh turmeric is losing sheen as an ex-
port commodity. Exports of this variety
has fallen by 76% in the past decade.
Oleoresins from turmeric are in high
demand globally in the present times.
Tis highly processed liquid of turmeric
is of brownish dark-yellow appearance
and fnds usage in pharmaceutical and
food industry all over the world. Tis is
the reason for turmeric oleoresins ex-
ports witnessing a CAGR of 24% in the
last fve years. Categories of dry turmeric
and powder turmeric exports have also
grown at a CAGR of 11% and 16% re-
spectively in the past fve. Te reason for
such increase can be attributed to factors
like rise in use of turmeric in curry pow-
der and spice mixes globally (due to its
therapeutic properties), and a shif away
from synthetic colour.
During the ten-year period leading to
FY2014, the share of fresh turmeric in
overall turmeric exports has come down
from over 38.5% to just 2.7%, while that
of dry turmeric has increased from a lit-
tle over 26.1% to 43.6%. Similarly, shares
of powder and other varieties of turmer-
ic have also increased from 31.06% and
4.25% to 42.02% and 11.5% respectively.
GOLD DUST. LITERALLY!
Prices of the best grades of turmeric
fngers such as Duggirala, Kadapa and
Salem are currently hovering between
Rs.60-70/kg and are being sold in the
Middle East at Rs.90-120/kg. Similarly,
premium grades of Alleppey Fingers
with high curcumin content of 5-6%
are currently trading in the Rs.110-120/
kg price range in India but is being sold
at about $1.65/lb (~Rs.218.25/kg) in
USA. Since there are no duties on tur-
meric imports in USA, proft margins of
25-30% are easily available to Indian ex-
porters post shipping and other admin-
istrative costs (see table).
While large parts of the globe are yet
to wake up to turmeric and its thera-
peutic values, things are headed in the
right direction for exporters of this crop.
Further, a large expatriate Indian com-
munity is only helping raise awareness
about this wonder spice globally. With
not much existing or expected compe-
tition and a gentle cap on production
volumes, even a marginal rise in demand
will send prices soaring. And rejoice will
the hordes of Indian exporters.
Tis product, as it appears, has a co-
lourful personality, yet is just...turmeric!
Now, did you imagine its business worth
the last time you saw it on the kitchen
shelf? Seriously, it deserves attention!
exports (FY2005)
10 years ago, exports from India was
dominated by fresh turmeric...
exports (FY2014)
...currently, dry and powder turmeric
lead Indias exports
Fresh
Dry
Fresh
Dry
Powder
Other Turmeric
Powder
Other Turmeric
Source: Ministry of Commerce Source: Ministry of Commerce
INDIA ACCOUNTED
FOR OVER 76%
OF THE GLOBAL
TURMERIC EXPORTS
IN 2013, FOLLOWED
BY MYANMAR
India accounts for about 80% of the worlds total turmeric production
42%
43%
12%
39%
26%
31%
4% 4%
TDB: Apart from Andhra Pradesh [the
largest producer of turmeric], which
are the other key trading and process-
ing centers to procure good quality tur-
meric in India?
SS: Te key varieties come from Erode in
Tamil Nadu and Kadapa, Dugirala and
Nizamabad in Andhra Pradesh. How-
ever, all such volumes of turmeric go to
Sangli in Maharashtra as it is one of the
biggest centers for processing and pol-
ishing turmeric in India. Although good
quality turmeric is grown in Sangli, it is
more famous for processing and that has
been in vogue for generations. In fact,
Sangli accounts for almost 40-50% of In-
dias total turmeric processing.
TDB: India is already the biggest ex-
porter of turmeric in the world. But
are Indias exporters really realising the
crops full potential? Isnt there a scope
for further improvement?
SS: Turmeric export from India is pret-
ty less as compared to other spices like
coriander and chilly because of low
global awareness. But it will surely catch
up in years to come as more and more
people across the world are becoming
health-conscious. I expect it to, slowly
but steadily, become an essential com-
modity even in other parts of the world.
TDB: Which are the key markets for
Indian turmeric?
SS: We mainly export to USA and Ger-
many. Te tanning industry in Iran is
also maturing and hence, use of turmer-
ic in that industry is on an upswing. So,
exports to Iran are also on a rise. In fact,
Iran is one market that all turmeric ex-
porters should watch out for in the near
term. Other places where turmeric is tra-
ditionally exported from India are Saudi
Arabia, Malaysia, Japan, Indonesia and
the whole of Europe.
TDB: What about competition? Is
EXCLUSIVE
INTERVIEW
BHASKAR SHAH, MANAGING DIRECTOR, JABS INTERNATIONAL
IRAN COULD
BE THE NEXT
BIG MARKET
FOR INDIAN
TURMERIC
Going by the attention turmeric is enjoying in
recent times, the future looks promising for this
wonder spice. The challenge, however, is to
expand awareness about its usage and medicinal
values. In an exclusive interaction with The Dollar
Business, Bhaskar Shah, Managing Director, JABS
International, gives a 360-degree view of Indias
turmeric trade
there any, considering that India is the
biggest producer of turmeric globally?
SS: Worldwide, there are very few coun-
tries that cultivate turmeric. Even among
them, very few can match the quality of
Indian turmeric. Hence, we dont even
consider them as competition. Te chal-
lenge for us is to expand the awareness
about turmeric.
TDB: Te price of turmeric has been
continuously rising over the last few
months? At what level do you see it sta-
bilising in near future?
SS: Prices are now stable and I expect
them to remain stable going forward.
Te entry of speculators in the turmeric
business should be a very positive thing
for Indian farmers. In fact, the forward
market commission (FMC) has played
a very crucial role as far as all spices are
concerned. Earlier, the market was solely
driven by demand and supply. But now,
the market is driven by three factors
demand, supply and the speculators. Due
to this speculative element, Indian farm-
ers have gained a lot during the last fve
years. In the case of most spices, prices
have at least doubled and in some cases,
they have risen threefold.
sachin@thedollarbusiness.com
INTERVIEW BY SACHIN MANAWARIA
TDB: Apart from Andhra Pradesh [the
largest producer of turmeric], which
are the other key trading and process-
ing centers to procure good quality tur-
meric in India?
SS: Te key varieties come from Erode in
Tamil Nadu and Kadapa, Dugirala and
Nizamabad in Andhra Pradesh. How-
ever, all such volumes of turmeric go to
Sangli in Maharashtra as it is one of the
biggest centers for processing and pol-
ishing turmeric in India. Although good
quality turmeric is grown in Sangli, it is
more famous for processing and that has
been in vogue for generations. In fact,
Sangli accounts for almost 40-50% of In-
dias total turmeric processing.
TDB: India is already the biggest ex-
porter of turmeric in the world. But
are Indias exporters really realising the
crops full potential? Isnt there a scope
for further improvement?
SS: Turmeric export from India is pret-
ty less as compared to other spices like
coriander and chilly because of low
global awareness. But it will surely catch
up in years to come as more and more
people across the world are becoming
health-conscious. I expect it to, slowly
but steadily, become an essential com-
modity even in other parts of the world.
TDB: Which are the key markets for
Indian turmeric?
SS: We mainly export to USA and Ger-
many. Te tanning industry in Iran is
also maturing and hence, use of turmer-
ic in that industry is on an upswing. So,
exports to Iran are also on a rise. In fact,
Iran is one market that all turmeric ex-
porters should watch out for in the near
term. Other places where turmeric is tra-
ditionally exported from India are Saudi
Arabia, Malaysia, Japan, Indonesia and
the whole of Europe.
TDB: What about competition? Is
EXCLUSIVE
INTERVIEW
BHASKAR SHAH, MANAGING DIRECTOR, JABS INTERNATIONAL
IRAN COULD
BE THE NEXT
BIG MARKET
FOR INDIAN
TURMERIC
Going by the attention turmeric is enjoying in
recent times, the future looks promising for this
wonder spice. The challenge, however, is to
expand awareness about its usage and medicinal
values. In an exclusive interaction with The Dollar
Business, Bhaskar Shah, Managing Director, JABS
International, gives a 360-degree view of Indias
turmeric trade
there any, considering that India is the
biggest producer of turmeric globally?
SS: Worldwide, there are very few coun-
tries that cultivate turmeric. Even among
them, very few can match the quality of
Indian turmeric. Hence, we dont even
consider them as competition. Te chal-
lenge for us is to expand the awareness
about turmeric.
TDB: Te price of turmeric has been
continuously rising over the last few
months? At what level do you see it sta-
bilising in near future?
SS: Prices are now stable and I expect
them to remain stable going forward.
Te entry of speculators in the turmeric
business should be a very positive thing
for Indian farmers. In fact, the forward
market commission (FMC) has played
a very crucial role as far as all spices are
concerned. Earlier, the market was solely
driven by demand and supply. But now,
the market is driven by three factors
demand, supply and the speculators. Due
to this speculative element, Indian farm-
ers have gained a lot during the last fve
years. In the case of most spices, prices
have at least doubled and in some cases,
they have risen threefold.
sachin@thedollarbusiness.com
INTERVIEW BY SACHIN MANAWARIA
About us
The vision behind The Dollar Business is to become the
most desired destination of information on foreign trade in
the country!
Description
The journey of The Dollar Business has wonderfully begun. It belongs to the house of Vimbri
Media Pvt. Ltd., a media company headquartered in Hyderabad.
The Dollar Business is an India-based magazine for India-based exporters and importers and
the so-called, multinational giants that believe in the magic of trade beyond borders. There
are many business magazines in the country that claim to be essential reads. They have
many-a-claim to fame usually without much reason or proof, like being number one in India
across many dimensions. How uninteresting. The Dollar Business doesnt claim to be number
one. Its the only one in India. And it doesnt know many dimensions. Just one global trade!
From an industry that records a turnover of close to 10 times of Indias GDP each year, there
is much to be learnt. Actually, there much to earn too! The Dollar Business has a focused
reach. We dont cater to the everyday Toms who want to fip pages to catch a glimpse of Marilyn
Monroe or read what a novice has heard through the grapevine about some business going
bust. Our content isnt priceless in that respect. Our readers desire serious information that
either supports their case or gives them an understanding that can be priced. Our readers are
either stakeholders in the business of export-import, or have a keen interest in what this indus-
try has to offer. Like we say, we just know one dimension global trade, and most defnitely, all
our readers have a serious interest in both our articles and the advertisers.
To cater to such a focused reader group, we dont just do with everyday content creators
and feld reporters who know little about the vast subject of foreign trade. We have content
specialists on board who have dealt with foreign trade as a platform for decades. This expert
editorial panel functions pan-India from the fnancial capital of India (Mumbai) to the political
capital (Delhi), from the Silicon Valley of India (Hyderabad) to the former capital of British India
(Kolkata). In fact, the next time you sit sipping Darjeeling tea, there is a chance that we actu-
ally would have a fat-glassed analyst roaming the sloped hills where tender apical tea shoots
are being plucked. His task to make our reader something more than just a tea-sipper. How
abouta tea exporter with a turnover of a few crore rupees? Excited?
THE MIDAS TOUCH CYCLES
With rising green awareness, health consciousness, and soaring fuel prices,
the global bicycle industry is witnessing a boom. Although Indias share in
global bicycle exports is less than 1%, Africa seems to have taken a special
liking to our cycles. Last year alone, India exported $31.5 million worth of
bicycles to Africa, about 18.3% of the continents total imports of the product.
And if trade analysts are to be believed, this number will only rise going
forward. Its time Indian bicycle exporters pedal their way faster to Africa
BY NEHA DEWAN
In CY2013, China exported
over $3 billion worth of
bicycles more than a third
of total global cycle exports
PEDAL YOUR WAY
TO HEALTH
AND FORTUNE
I
n the latest Hero Cycles TVC,
people are seen pedaling their way
around rocky terrains in Indian
and foreign locales and breeze past
rough weather. And, almost everyone
women, children and corporate execu-
tives alike shown in the commercial is
a beaming owner of the humble bicycle.
But in reality, are cycles usually
dubbed as the poor mans vehicle in
India fnding universal acceptance?
And has India really got the potential to
emerge as a leading exporter of cycles to
international markets?
PART OF US
A study by industry body Assocham on
the Future of Indian Bicycle Industry
pegs India as the worlds second largest
bicycle producer afer China, account-
ing for about 10% of global bicycle pro-
duction. With an estimated market size
worth $1.5 billion, the Indian bicycle
industry produces about 15 million fn-
ished cycles annually.
According to All India Cycle Manu-
facturers Association (AICMA), most
bicycle components and bicycle spare
parts in India, except for free wheels, are
manufactured by small scale industries
(SSIs), while large scale units manufac-
ture bicycle frames, chains and rims for
captive consumption. Te organised
sector, on the other hand, dominates the
Indian cycles: top destinations
Africa is the top market for Indian cycles
Mozambique Nepal UK
Zambia Malawi Bangladesh
Nigeria Congo Germany
Uganda Other
Proft estimate for bicycle exports
Bicycle exports to Africa are mostly done at par;
the proft is made thanks to duty drawbacks
Cost of Cycle (INR/Unit) * 2,500.00
Cost of Cycle (USD/unit)** 41.67
Transportation cost from Ludhiana to 1.35
Mumbai (USD/Unit) ***
Freight & Insurance (USD/Unit) # 10
Final Cost (USD/unit) 53.02
Price in Mozambique (USD/unit) *** 52.00
Proft ## (-3.02)
Proft Margin (%) ## 11.00
* Price of Hero Jet in India
** At a USD/INR rate of 60
*** The Dollar Business Intelligence Unit
# Cost of Shipping from Nhava Sheva in Mumbai to Beirat in Mozambique
## Indian cycle exporters essentially owe their profts to export incentives of 16.7%
(11.7% duty drawback and up to 5% under FPS) provided by the government
19%
16%
9%
7%
6%
5%
5%
5%
5%
3%
21%
With rising green awareness, health consciousness, and soaring fuel prices,
the global bicycle industry is witnessing a boom. Although Indias share in
global bicycle exports is less than 1%, Africa seems to have taken a special
liking to our cycles. Last year alone, India exported $31.5 million worth of
bicycles to Africa, about 18.3% of the continents total imports of the product.
And if trade analysts are to be believed, this number will only rise going
forward. Its time Indian bicycle exporters pedal their way faster to Africa
BY NEHA DEWAN
In CY2013, China exported
over $3 billion worth of
bicycles more than a third
of total global cycle exports
PEDAL YOUR WAY
TO HEALTH
AND FORTUNE
I
n the latest Hero Cycles TVC,
people are seen pedaling their way
around rocky terrains in Indian
and foreign locales and breeze past
rough weather. And, almost everyone
women, children and corporate execu-
tives alike shown in the commercial is
a beaming owner of the humble bicycle.
But in reality, are cycles usually
dubbed as the poor mans vehicle in
India fnding universal acceptance?
And has India really got the potential to
emerge as a leading exporter of cycles to
international markets?
PART OF US
A study by industry body Assocham on
the Future of Indian Bicycle Industry
pegs India as the worlds second largest
bicycle producer afer China, account-
ing for about 10% of global bicycle pro-
duction. With an estimated market size
worth $1.5 billion, the Indian bicycle
industry produces about 15 million fn-
ished cycles annually.
According to All India Cycle Manu-
facturers Association (AICMA), most
bicycle components and bicycle spare
parts in India, except for free wheels, are
manufactured by small scale industries
(SSIs), while large scale units manufac-
ture bicycle frames, chains and rims for
captive consumption. Te organised
sector, on the other hand, dominates the
Indian cycles: top destinations
Africa is the top market for Indian cycles
Mozambique Nepal UK
Zambia Malawi Bangladesh
Nigeria Congo Germany
Uganda Other
Proft estimate for bicycle exports
Bicycle exports to Africa are mostly done at par;
the proft is made thanks to duty drawbacks
Cost of Cycle (INR/Unit) * 2,500.00
Cost of Cycle (USD/unit)** 41.67
Transportation cost from Ludhiana to 1.35
Mumbai (USD/Unit) ***
Freight & Insurance (USD/Unit) # 10
Final Cost (USD/unit) 53.02
Price in Mozambique (USD/unit) *** 52.00
Proft ## (-3.02)
Proft Margin (%) ## 11.00
* Price of Hero Jet in India
** At a USD/INR rate of 60
*** The Dollar Business Intelligence Unit
# Cost of Shipping from Nhava Sheva in Mumbai to Beirat in Mozambique
## Indian cycle exporters essentially owe their profts to export incentives of 16.7%
(11.7% duty drawback and up to 5% under FPS) provided by the government
19%
16%
9%
7%
6%
5%
5%
5%
5%
3%
21%
manufacturing of complete bicycles.
Te bicycle industry is currently in the
middle of endeavours to enhance bicycle
exports since the potential for Indian
bicycles in the international market is
signifcant. In FY2014, India exported
close to 1.3 million bicycles, a majority
of them to African countries. In compar-
ison, China is estimated to have export-
ed over 50 million bicycles in CY2013.
In India, companies like Hero Cycles, TI
Cycles, Avon Cycles and Atlas Cycles ac-
count for a majority of total bicycle sales.
Hero Cycles is by far the leading player
in the segment with almost 35% market
share. Among export destinations, India
cycles are gaining traction on African
roads, along with other destinations like
Bangladesh and UK.
SHOW ME THE MONEY
Indias cycle exports business has unique
nuances of its own. While high value
cycles exported to developed markets
like UK ofer handsome margins, the
entry level ones exported to Africa ofer
margins in term of duty drawback. For
example, for every rupee worth of cycle
exports, the government provides 11.7
paise as Duty Drawback (Refer Customs
Notifcation No.98/2013; dated 14th
September, 2013) and 5 paise under Fo-
cus Product Scheme (Chapter 3 of FTP
2009-14; Appendix 37D of HoP Vol. I).
Tis obviously means that even if one
sells bicycles abroad at a breakeven price,
a 16.7% proft is guaranteed something
that not many products can boast of!
Although overall numbers look prof-
itable for Indias bicycle exports, which
is growing at a CAGR of 17%, there are
serious concerns, with cost disadvantage
acting as a primary deterrent for export-
ers. We are outpriced by 20-30% by our
Chinese peers, G. D. Kapoor, President
Sales & Marketing at Hero Cycles, tells
Te Dollar Business. In a nutshell, this
explains one of the biggest hurdles that
Indian bicycle companies looking at ex-
ports have to contend with. On an aver-
age Chinese cycle prices are at least 15%
lower than Indian ones, if not more.
THE HUB
Several manufacturing units in Lud-
hiana, which is the epicenter of bicycle
manufacturing in India and accounts for
90% of Indias bicycle and bicycle parts
production, have shut down in the last
3,500
3,000
2,500
2,000
1,500
1,000
5,00
0
1,600
1,400
1,200
1,000
800
600
400
200
0
Source: International Trade Centre;
fgures for CY2013 ($ million)
Source: International Trade Centre;
fgures for CY2013 ($ million)
Top bicycle exporters
China towers over every other exporter
Top bicycle importers
US is the biggest importer of bicycles
China Chinese Taipei
Netherlands Germany
Cambodia
USA Japan
Germany UK
Netherlands
New bicycles kept outside a
factory before being shipped
away. In FY2014, India
exported close to 1.3 million
bicycles, a majority of them
to African nations
To get a real sense of Indias bicycle market and how our ex-
ports are doing, Te Dollar Business caught up G. D. Kapoor,
Executive Director Sales & Marketing, Hero Cycles. He not
only spoke at length about issues pertaining to the industry,
but also explained the need for a higher duty drawback
Proft margins on bicycle
exports can range anywhere
between 10-12%
G. D. Kapoor
Executive Director,
Sales & Marketing, Hero Cycles
INDIANS HAVE BEEN
DOING BUSINESS
WITH AFRICANS FOR
OVER 150 YEARS
NOW AND THERE IS
AN ATMOSPHERE OF
TRUST FOR US
TDB: Hero Cycles is the countrys lead-
ing manufacturer of cycles. What ex-
actly is your market share?
GDK: Te overall size of the bicycle in-
dustry in India is approximately 15.5
million units per annum. Hero Cycles
commands a 35% market share.
TDB: What are the main diferences
between the Indian and the interna-
tional cycle market?
GDK: Te diferences are wide ranging
in the two markets. As is known, mar-
kets in the West are far more engaging
and mature. For example, people do not
mind cycling to work a trend nowhere
to be seen in India. Even in terms of
organising sporting events, the West is
defnitely far ahead of us.
TDB: As a leading exporter of bicycles,
what are your expectations from the
new government?
GDK: Tere is a defnite need for setting
up world-class design & testing centers.
At present, our exports are serious-
ly hampered due to non-availability of
these facilities. An Indian cycle manu-
facturer depends heavily on China and
Taiwan for design and testing facilities,
which I think is really hampering our
business. Te price diference in raw
materials is also enormous. Steel, which
accounts for roughly 65% of the cost of
a bicycle, has become dearer in India by
approximately Rs.7,000-8,000/MT. Tis,
along with other cost diferences and
incentives, makes a Chinese exporter
signifcantly competitive. As far as du-
ties are concerned, there needs to be a
higher duty drawback and transport
subsidies should also be made available
for factories upcountry.
TDB: Which are Hero Cycles major
export destinations? On an average,
how many units do you export annual-
ly and what is the growth rate?
GDK: Mozambique, Nigeria, Bangla-
desh, United Kingdom, Poland and Fiji
are the major markets for our cycles. We
exported about 1,00,000 units in FY2014
and have set an ambitious target of
5,00,000 units for this fscal.
TDB: Which are the new markets that
you have set your eyes on?
GDK: Europe and USA. With a45 mil-
lion unit per annum market, these two
are the largest, both in terms of value
and volume. However, they also pose the
ultimate challenge to a bicycle manufac-
turer, in terms of the use of high technol-
ogy and quality.
TDB: What kind of proft margins are
available to Indian bicycle exporters?
GDK: Proft margins can range any-
where between 10-12%. While export-
ing to developed countries the tangible
benefts may appear to be less,but other
factors such as exposure to latest tech-
nology, designs and systems act as a great
value adds.
TDB: You have entered the luxury
market with Urban Trail. You have also
recently launched the Disney range of
cycles. What has been the response to
these two oferings?
GDK: Te premium market is growing
at almost 40% within India. Urban Trail
has been accepted very well in the mar-
ket. Urban Trail currently ofers prod-
ucts for kids in Rs.4,000-8,000 range and
for adults in Rs.10,000-35,000 range. We
will soon also be launching cycles priced
at Rs.1 lakh and even higher, giving stif
competition to all international brands.
TDB: What are the main challenges
when it comes to exporting to your big-
gest market, Africa?
GDK: Presently, most African econo-
mies are where India was 25-30 years
ago. Tey are going through the build-
ing processes which we have already
experienced. Tey are convinced that
Indian products and technology are best
suited for their development. Africa is a
continent of opportunities where Indi-
ans have been doing business for over
150 years now. Tishas certainly helped
in building an atmosphere of mutual
trust and reliability.
few years due to rising imports of cheap
cycle parts from China. In addition to
this, a 2% central excise duty on cycles
and high cost of steel which rough-
ly accounts for 65% of the total cost of
production of a cycle act as a double
whammy. Agrees Nalin Sinha, Found-
er of Delhi Cycling Club, when he tells
Te Dollar Business, Te entire frame
of a cycle is made of steel. However, ris-
ing steel prices are causing a big dent in
the pockets of cycle manufacturers. Be-
sides this, the cost of bicycles need to be
brought down, especially good quality
high-end bicycles...
Prices of branded cycles in India start
from about Rs.2,000 and go up to as high
as Rs.15,000 for the high-end varieties,
while the top-end varieties can put one
back by a few lakhs. To appeal to a wider
set, brands are innovating across catego-
ries and trying to capture a larger share
of the international and domestic mar-
kets via premium customised oferings.
ITS TIME FOR AFRICA
Data from the Commerce Ministry also
validates this trend. In FY2014, Mo-
zambique was the top destination for
Indian bicycles, accounting for close to
20% of total exports. Nepal was the sec-
ond in line at about 16%. Even in terms
of growth, while Mozambique saw a
27.71% growth (in terms of volume) in
FY2014 as compared to the previous
year, number of cycles exported to Nepal
actually saw a small de-growth. A distant
third was UK, again followed by the Af-
rican duo of Zambia and Malawi.
Experts believe that appropriate mea-
sures can facilitate trade better and boost
exports for the industry. More tax in-
centives need to be doled out by the gov-
ernment to give a push to the industry.
Tere is also a need for specifc fnancial
schemes and insurance schemes on bi-
cycles. A comprehensive analysis and
promotion by the government can help
facilitate exports to lucrative destina-
tions, adds Sinha of the Delhi Cycling
Club. Newer opportunity areas such as
cycle sharing systems in advanced econ-
omies, which mainly serve as a platform
for short-term bicycle rental systems,
also need to be tapped. Across the world,
this is a popular practice, with the system
also making a recent entry to India.

THE ROAD AHEAD
Kumar Manish, co-founder of Centre for
Green Mobility, an organisation promot-
ing walking, cycling and public transpor-
tation facilities in India says that there is
a huge potential for Indian bike manu-
facturers to cater to this demand. Cycle
sharing systems act as a perfect mode of
transport for last mile connectivity and
are a well-accepted practice in developed
countries. Tey ofer a healthy alterna-
tive to motorised modes of transport.
Bicycle manufacturers in India need to
reach out to this segment more aggres-
sively by promoting their range of bulk
oferings for such platforms, he tells Te
Dollar Business.
Although the road ahead may yet
seem a bumpy track, small steps can
help in creating bigger volumes for the
industry. Reimbursing inland freight to
reduce the cost burden for exporters is
another suggestion that has been foat-
ed by industry bigwigs. Needless to say,
besides government support, upgrading
bike technology by manufacturers and
positioning Indian cycles as superior in
quality for use in international markets
can spur growth of exports to varying
degrees. Together, it can all add up to
beating the odds and positioning the
Indian cycle brand prominently on the
global terrain. Are you game?
Indias bicycle exports
In volume terms, Indian bicycle exports have barely grown in the last decade
1.4
1.2
1
0.8
0.6
0.4
0.2
0
60
50
40
30
20
10
0
Source: Commerce Ministry; value in $ million; quantity in million units
Export volume

Export value
A group of cyclists at Tour de France.
Cycling equipment has improved tremen-
dously over the last few years. Indian man-
ufacturers need to keep pace to remain
globally competitive
THE AVERAGE PRICE
OF A BICYCLE THAT
INDIA EXPORTED
IN FY14 WAS JUST
RS.2,432 WHILE THE
SAME FOR IMPORTS
WAS RS.3,544
V
o
l
u
m
e
V
a
l
u
e
Our Vision
We intend to become the foremost authority on foreign trade in the country by giving its readers
an unbeatable package of knowledge and business edge in the feld of foreign trade. Our aim
is not just to educate readers the way commoners do, but to empower them to evolve. Thats
why we were born. And thats why we breathe.
The 4Es that defne our 5th E Existence are:
EXPERTISE:
Who creates content at The Dollar Business We have veterans in the realm of foreign trade to
do that. We have experts who analyse the outcome of a choice of product or place for export
or import or the impact of a certain policy change. Each member of our editorial team has been
carefully handpicked so that we create what can be priced as a product that is respected by all
and one who understands or wants to understand the business of export-import.
EDUCATION:
We are not in love with Friedman, but we completely admire his idea of a fat world. Globalisa-
tion of capitalism is there a bigger need to educate India on why beyond borders is the next
playfeld to discuss and explore? From pinpointing constraints in cross-border opportunities
to identifying market and product-specifc tactical gambitswhy leave it all to just plain luck?
EMPOWERMENT:
To think and not to act, is sin. Precisely why we believe in empowering while educating. The
minefeld of treasures that The Dollar Business is, will not only change the way oracles in the
world of foreign trade think, but also how they act, while importing, while exporting.
EVOLUTION:
We communicate. We empower. We change lives for businesses, entrepreneurs and the mil-
lions of hopefuls who make claims of good news beyond borders. With The Dollar Business,
evolution will occur. Not only how information in the world of foreign trade is shared, but why it
is sought and how it is exploited.
few years due to rising imports of cheap
cycle parts from China. In addition to
this, a 2% central excise duty on cycles
and high cost of steel which rough-
ly accounts for 65% of the total cost of
production of a cycle act as a double
whammy. Agrees Nalin Sinha, Found-
er of Delhi Cycling Club, when he tells
Te Dollar Business, Te entire frame
of a cycle is made of steel. However, ris-
ing steel prices are causing a big dent in
the pockets of cycle manufacturers. Be-
sides this, the cost of bicycles need to be
brought down, especially good quality
high-end bicycles...
Prices of branded cycles in India start
from about Rs.2,000 and go up to as high
as Rs.15,000 for the high-end varieties,
while the top-end varieties can put one
back by a few lakhs. To appeal to a wider
set, brands are innovating across catego-
ries and trying to capture a larger share
of the international and domestic mar-
kets via premium customised oferings.
ITS TIME FOR AFRICA
Data from the Commerce Ministry also
validates this trend. In FY2014, Mo-
zambique was the top destination for
Indian bicycles, accounting for close to
20% of total exports. Nepal was the sec-
ond in line at about 16%. Even in terms
of growth, while Mozambique saw a
27.71% growth (in terms of volume) in
FY2014 as compared to the previous
year, number of cycles exported to Nepal
actually saw a small de-growth. A distant
third was UK, again followed by the Af-
rican duo of Zambia and Malawi.
Experts believe that appropriate mea-
sures can facilitate trade better and boost
exports for the industry. More tax in-
centives need to be doled out by the gov-
ernment to give a push to the industry.
Tere is also a need for specifc fnancial
schemes and insurance schemes on bi-
cycles. A comprehensive analysis and
promotion by the government can help
facilitate exports to lucrative destina-
tions, adds Sinha of the Delhi Cycling
Club. Newer opportunity areas such as
cycle sharing systems in advanced econ-
omies, which mainly serve as a platform
for short-term bicycle rental systems,
also need to be tapped. Across the world,
this is a popular practice, with the system
also making a recent entry to India.

THE ROAD AHEAD
Kumar Manish, co-founder of Centre for
Green Mobility, an organisation promot-
ing walking, cycling and public transpor-
tation facilities in India says that there is
a huge potential for Indian bike manu-
facturers to cater to this demand. Cycle
sharing systems act as a perfect mode of
transport for last mile connectivity and
are a well-accepted practice in developed
countries. Tey ofer a healthy alterna-
tive to motorised modes of transport.
Bicycle manufacturers in India need to
reach out to this segment more aggres-
sively by promoting their range of bulk
oferings for such platforms, he tells Te
Dollar Business.
Although the road ahead may yet
seem a bumpy track, small steps can
help in creating bigger volumes for the
industry. Reimbursing inland freight to
reduce the cost burden for exporters is
another suggestion that has been foat-
ed by industry bigwigs. Needless to say,
besides government support, upgrading
bike technology by manufacturers and
positioning Indian cycles as superior in
quality for use in international markets
can spur growth of exports to varying
degrees. Together, it can all add up to
beating the odds and positioning the
Indian cycle brand prominently on the
global terrain. Are you game?
Indias bicycle exports
In volume terms, Indian bicycle exports have barely grown in the last decade
1.4
1.2
1
0.8
0.6
0.4
0.2
0
60
50
40
30
20
10
0
Source: Commerce Ministry; value in $ million; quantity in million units
Export volume

Export value
A group of cyclists at Tour de France.
Cycling equipment has improved tremen-
dously over the last few years. Indian man-
ufacturers need to keep pace to remain
globally competitive
THE AVERAGE PRICE
OF A BICYCLE THAT
INDIA EXPORTED
IN FY14 WAS JUST
RS.2,432 WHILE THE
SAME FOR IMPORTS
WAS RS.3,544
V
o
l
u
m
e
V
a
l
u
e
Our Vision
We intend to become the foremost authority on foreign trade in the country by giving its readers
an unbeatable package of knowledge and business edge in the feld of foreign trade. Our aim
is not just to educate readers the way commoners do, but to empower them to evolve. Thats
why we were born. And thats why we breathe.
The 4Es that defne our 5th E Existence are:
EXPERTISE:
Who creates content at The Dollar Business We have veterans in the realm of foreign trade to
do that. We have experts who analyse the outcome of a choice of product or place for export
or import or the impact of a certain policy change. Each member of our editorial team has been
carefully handpicked so that we create what can be priced as a product that is respected by all
and one who understands or wants to understand the business of export-import.
EDUCATION:
We are not in love with Friedman, but we completely admire his idea of a fat world. Globalisa-
tion of capitalism is there a bigger need to educate India on why beyond borders is the next
playfeld to discuss and explore? From pinpointing constraints in cross-border opportunities
to identifying market and product-specifc tactical gambitswhy leave it all to just plain luck?
EMPOWERMENT:
To think and not to act, is sin. Precisely why we believe in empowering while educating. The
minefeld of treasures that The Dollar Business is, will not only change the way oracles in the
world of foreign trade think, but also how they act, while importing, while exporting.
EVOLUTION:
We communicate. We empower. We change lives for businesses, entrepreneurs and the mil-
lions of hopefuls who make claims of good news beyond borders. With The Dollar Business,
evolution will occur. Not only how information in the world of foreign trade is shared, but why it
is sought and how it is exploited.
IMPORTONOMICS PECTIN
PECTIN HAVE YOU
HEARD ABOUT IT?
Its an integral part of the processed food industry and while you might be
consuming it on a daily basis, odds are that you would have never heard about
Pectin. While very little domestic production have seen Indias pectin imports
rising, lack of awareness ensures that it offers lucrative margins to an importer
W
hat is that unique ingre-
dient that helps jams &
jellies, marshmallows,
marmalades and a host of
other delicacies gel? Which is that prod-
uct that is most sought afer by FMCG
majors like Hindustan Unilever, Nestle,
GlaxoSmithKline, Kelloggs and innu-
merable food processing companies?
And which is that product that perhaps
has no substitute? Chances are that you
wouldnt have heard about it.
Well, if you are still wondering, lets
make your task easier. Tis magical
ingredient is called Pectin. Its a natu-
ral compound extracted from difer-
ent sources of vegetative origin. It is
produced from lime, orange peels and
apple. While the level of pectin in an
apple is only 1-1.5%, in citrus peel its
around 30%. Te key raw materials for
pectin production are dried citrus peels
and apple pomace, both by-products of
juice production. Pectin is a gelling and
thickening agent and is also a stabiliser
in food. Pectin gives the jelly-like con-
sistency to jams and marmalades, which
would otherwise be just sweet juices.
Pectin is also being increasingly used to
stabilise acidic protein drinks including
drinking yogurt, besides being a fat sub-
stitute in baked food products.
According to Switzerland based Inter-
national Pectin Producers Association
(IPPA), pectin is one of the most versa-
tile stabilisers available. Its gelling, thick-
Strawberry and strawberry
jam bottles on display. Jam
manufacturers are amongst the
biggest consumers of pectin
ening and stabilising attributes make it
an essential additive in the production of
many food products. Traditionally, pec-
tin was primarily used in the production
of jams and fruit jellies industrially as
well as at home and in products with
high sugar content. Reason: Pectin se-
cures the desired texture, limits the cre-
ation of water/juice on top of the surface,
and ensures an even distribution of fruit
in the product.
With changes in lifestyles, pectin is
now being primarily sold for industri-
al use. In some European markets, it is
still sold to consumers as an integrated
component in gelling sugar. Pectin is
generally regarded as an extremely safe
food additive and its composition and
use is regulated under various food ad-
ditive laws. It is also recognised under
the International Codex Alimentarius,
recognised by FAO and WHO. Te Unit-
ed States Food and Drug Administra-
tion (USFDA) too recognises pectin as
a GRAS (Generally Recognised as Safe)
for the use in all non-standardised foods.
As far as the business viability of the
product is concerned, the IPPA is of the
view that at present, good quality organ-
ically produced pectin raw materials are
not available in large quantities and the
situation is not likely to change within
the next fve years. Good news for those
who want to enter the business with seri-
ous long-term commitment.
THE PROTAGONISTS
Germany with exports valued at $186.70
million, Mexico with $69.13 million,
Brazil with $46.70 million, Czech Re-
public with $42.60 million and China
with $27.40 million were the top export-
ers of pectin during CY2013. On the
other hand, USA with imports valued
at $89.60 million, Germany with $74.80
million, Japan with $45.1 million, France
with $29.10 million and Russia with
$27.20 million were the major import-
ers of pectin during FY2013. According
to information contained in Chemical
& Engineering News, a magazine pub-
lished by the American Chemical Soci-
ety, around $850 million worth of pectin
is sold annually across the world.
Import of pectin to India is on the
rise for the last few years. According to
the Ministry of Commerce (GoI), In-
dias pectin imports almost doubled
from $4.84 million in FY2012 to $8.15
million in FY2013. Tis trend contin-
ued in FY2014 with imports valued at
$10.14 million. Multinational players
such as Hindustan Unilever, Nestle,
GlaxoSmithKline, Kelloggs and many
others import pectin from various global
markets. All major food product makers
and diary product producers also use
imported pectin.
When it comes to Indian food prod-
uct manufacturers they rely on China
and Brazil as these countries ofer pec-
PECTIN: MANUFACTURING PROCESS
THERE ARE FOUR MAIN STAGES IN PECTIN
PRODUCTION: HYDROLYSIS, PURIFICATION,
SEPARATION, AND STANDARDIZATION
USFDA HAS GIVEN
THE GENERALLY
RECOGNISED AS
SAFE STATUS TO
PECTIN FOR USE IN
NON-STANDARDISED
FOODS
Apple pomace or
citrus peel
Hydrolysis of protopectin
with acid in hot conditions
Separation
Filtration
Concentration
Precipitation in alcohol
Washing
Drying / Milling
Batch control
Demethylation
Controls
on the fnal products
Pre-shipping
controls
Shipping
Washing
Batch control
Blending for standardization
purposes
purposes
HM Pectins LM Pectins
Depectinized
dry residues
(pomace/peels)
Alcohol
recovery
and distillation
Raw materials
Extraction
Separation
Coagulation
Ground pectins
Final
product
Shipping
ening and stabilising attributes make it
an essential additive in the production of
many food products. Traditionally, pec-
tin was primarily used in the production
of jams and fruit jellies industrially as
well as at home and in products with
high sugar content. Reason: Pectin se-
cures the desired texture, limits the cre-
ation of water/juice on top of the surface,
and ensures an even distribution of fruit
in the product.
With changes in lifestyles, pectin is
now being primarily sold for industri-
al use. In some European markets, it is
still sold to consumers as an integrated
component in gelling sugar. Pectin is
generally regarded as an extremely safe
food additive and its composition and
use is regulated under various food ad-
ditive laws. It is also recognised under
the International Codex Alimentarius,
recognised by FAO and WHO. Te Unit-
ed States Food and Drug Administra-
tion (USFDA) too recognises pectin as
a GRAS (Generally Recognised as Safe)
for the use in all non-standardised foods.
As far as the business viability of the
product is concerned, the IPPA is of the
view that at present, good quality organ-
ically produced pectin raw materials are
not available in large quantities and the
situation is not likely to change within
the next fve years. Good news for those
who want to enter the business with seri-
ous long-term commitment.
THE PROTAGONISTS
Germany with exports valued at $186.70
million, Mexico with $69.13 million,
Brazil with $46.70 million, Czech Re-
public with $42.60 million and China
with $27.40 million were the top export-
ers of pectin during CY2013. On the
other hand, USA with imports valued
at $89.60 million, Germany with $74.80
million, Japan with $45.1 million, France
with $29.10 million and Russia with
$27.20 million were the major import-
ers of pectin during FY2013. According
to information contained in Chemical
& Engineering News, a magazine pub-
lished by the American Chemical Soci-
ety, around $850 million worth of pectin
is sold annually across the world.
Import of pectin to India is on the
rise for the last few years. According to
the Ministry of Commerce (GoI), In-
dias pectin imports almost doubled
from $4.84 million in FY2012 to $8.15
million in FY2013. Tis trend contin-
ued in FY2014 with imports valued at
$10.14 million. Multinational players
such as Hindustan Unilever, Nestle,
GlaxoSmithKline, Kelloggs and many
others import pectin from various global
markets. All major food product makers
and diary product producers also use
imported pectin.
When it comes to Indian food prod-
uct manufacturers they rely on China
and Brazil as these countries ofer pec-
PECTIN: MANUFACTURING PROCESS
THERE ARE FOUR MAIN STAGES IN PECTIN
PRODUCTION: HYDROLYSIS, PURIFICATION,
SEPARATION, AND STANDARDIZATION
USFDA HAS GIVEN
THE GENERALLY
RECOGNISED AS
SAFE STATUS TO
PECTIN FOR USE IN
NON-STANDARDISED
FOODS
Apple pomace or
citrus peel
Hydrolysis of protopectin
with acid in hot conditions
Separation
Filtration
Concentration
Precipitation in alcohol
Washing
Drying / Milling
Batch control
Demethylation
Controls
on the fnal products
Pre-shipping
controls
Shipping
Washing
Batch control
purposes
purposes
HM Pectins LM Pectins
Depectinized
dry residues
(pomace/peels)
Alcohol
recovery
and distillation
Raw materials
Extraction
Separation
Coagulation
Ground pectins
Final
product
Shipping
IMPORTONOMICS PECTIN
500
450
400
350
300
250
200
150
100
50
0
100
90
80
70
60
50
40
30
20
10
0
GERMANY MEXICO BRAZIL CZECH REPUBLIC CHINA USA GERMANY JAPAN FRANCE RUSSIA
Source: International Trade Centre; fgures for CY2013 ($ million) Source: International Trade Centre; fgures for CY2013 ($ million)
Top pectin exporters
In 2013, Germany exported over $430 million worth of pectin
Top pectin importers
USA was the biggest pectin importer in the world in 2013
tin at around $10 per kilogram, whereas
pectin produced by Germany, the Czech
Republic, and Denmark are a tad expen-
sive. Prices of pectin vary a lot, as the
bulk of imports go through intermediar-
ies, who usually ofer pectin in the range
of $6-$13/kg. Depending on the type
and brand, inferior varieties of pectin are
available even at $0.5- $2/kg.
AND MORE
Te total duty on pectin imports in In-
dia work out to 20.068%, which includes
15% efective customs duty, 4% addition-
al customs duty (ACD) and a 0.45% cess.
But the 4% ACD is refundable only to
food processors and other end users who
use imported pectin for value addition to
their products, instead of selling it out in
its original state.
When it comes to India, pectin ex-
tracted from apple and citrus fruits are in
great demand. While high density pectin
is used by the confectionery industry,
medium and low density pectin is in
great demand for the production of yo-
gurt and fruit juice. Despite abundance
of raw materials, domestic production
of pectin in India is still too low to meet
the burgeoning demand. And thats the
reason why most food processors in In-
dia either import pectin directly or buy it
from importers.
Since pectin is an indigestible soluble
fber therefore its content in most pro-
cessed foods is restricted between 0.5%
and 1.0%. In medicine, pectin increases
viscosity and volume of stool. It is used
against both constipation and diarrhoea,
besides being used in throat lozenges as
a demulcent. Apart from that pectin is
used in cosmetic products, where it acts
as a stabiliser. It is also used in wound
healing preparations and specialty med-
icine adhesives like colostomy devices.
While the level of pectin in an apple is just
1-1.5%, in citrus peel its about 30%. Inter-
estingly, research is on to extract pectin
from mango. Mango peel, which consti-
tutes 2025% of the mango processing
waste, has been found to be a good source
for the extraction of good quality pectin,
suitable for the preparation of jam and jelly
Source of Indias pectin
imports
More than 50% of Indias pectin imports
come from Brazil
Brazil Germany
China Denmark
Czech Republic Other
Source: Ministry of Commerce, GoI; Breakup for FY2014
51%
20%
8%
6%
5%
11%
ALL THE SAME
Mapro Foods, the Mahabaleshwar-based
manufacturer of jams and other food
products, is a major importer of citrus
pectin. Speaking to Te Dollar Business,
Mayur Vora, Managing Director of Ma-
pro Foods, says, Indias imports during
FY2014 was around 1,000-1,200 tonnes
valued at $10.14 million. About 70-80%
of the imported pectin is consumed by
the food industry.
When enquired about the qualitative
diference between Brazilian and Chi-
nese pectin, Vora said there is hardly any
diference. And he is right. Price wise,
China used to be much more competi-
tive. But with the renminbi appreciating
and the real depreciating over the last
two years, theres hardly any diference in
prices for an importer. Its all the same.
However, shipping time from China is
much less. While we import citrus pectin
from Brazil, we source apple pectin from
China. In fact, our company accounts
for about 15-20% of Indias total pectin
imports, he tells the magazine.
Despite the presence of domestic sup-
pliers, major manufacturers like Mapro
seem to entirely rely on imports. Asked
about the reason for this reliance on im-
ports, Vora explained that the total do-
mestic supply is just about 5-10% of the
total demand. So, if we want large quan-
tities, there are no suppliers in the do-
mestic market. Te only alternative is to
import from China and Brazil, he adds.
GOOD TO LAST
Despite abundant resources, India
doesnt produce sufcient pectin to ca-
ter to the domestic demand. World over,
industrial waste of both apple and citrus
processing industries is used as an input
for pectin. However, India doesnt have
large apple or citrus processing indus-
tries. Most of the citrus fruit consump-
tion in India happen at homes. Collect-
ing the waste can ofen turn out to be
costlier than the product itself. Tis ob-
viously means great news for importers.
At current prices, proft margins of over
25% are there for the taking for those
importing top quality pectin from Bra-
zil. With demand expected to move only
northwards, margins are bound to ex-
pand. Sounds lucrative, doesnt it?
THE RENMINBIS
RECENT STRENGTH
HAS PUSHED THE
PRICE OF CHINESE
PECTIN TO ALMOST
AT PAR WITH THE
BRAZILIAN VARIETY
Indias pectin imports
Indias pectin imports have grown over fve-fold in the last 10 years
Proft estimate for
pectin imports
Reduction in customs duty for pectin to
15% in 2012 has expanded margins
1,200
1,000
800
600
400
200
0
12
10
8
6
4
2
0
Source: Ministry of Commerce, GoI; Value in $ million; Volume in metric tonnes
Import Volume (L-axis)

Import Value (R-axis)
Cost of Pectin (USD/MT) * 9,800.00
Freight & Insurance (USD/MT) ** 210.00
CIF 10,010.00
Landing Charge LC (1%) 100.10
CIF + LC 10,110.10
Import Duty ID (15%) 1,516.52
CIF + LC +ID 11,626.62
Cess (0.45%) 68.24
CIF + LC + ID + Cess 11,694.86
ACD (4%) 467.79
Final Cost 12,162.65
Final Cost (INR) *** 7,29,759.15
Retail Price in India # 9,25,000.00
Proft 1,95,240.85
Proft Margin (%) 26.75
* Genu Pectin in Brazil
** Freight and Insurance cost for shipping from Santos in
Brazil to Mumbai
*** Assuming exchange rate of USDINR 60
# The Dollar Business Intelligence Unit
Pectin Factoids
Pectin occurs in terrestrial plants
and is abundant in most vegetables
and fruits.
Pectin was frst isolated in the 1820s
but production started on an industrial
basis only in the 20
th
century.
Prior to the introduction of commer-
cial pectin, home-made jam was gelled
by natural pectin in the fruit.
The frst commercial production of
a liquid pectin extract was recorded
in 1908 in Germany, and the process
spread rapidly to US, where a classic
patent was obtained by a person named
Douglas (US Pat. 1.082,682, 1913).
Pectin was frst sold as a liquid
extract, but is now most often used as
dried powder, which is easier to store
and handle than liquid.
Pectin for use in food is defned as a
polymer containing at least 65% galac-
turonic acid units.
Drugs are encapsulated with a pectin
flm to protect the gastric mucosa and
to allow sustained release of the active
substance into the blood circulation.
In the cosmetics industry, pectin is
used as a natural texture provider on
plant basis for pastes, ointments, oils
and creams.
In deodorants and tooth pastes,
pectin coats special favour substances,
but it is also used as a thickener and
stabilizer in hair tonics, body lotions and
shampoos.
BESTSELLER WINE
BY NEHA DEWAN
T
hey say that wine is poetry in
a bottle. Te dry, sweet notes
ranging from plum, tea leaf,
black cherry, raspberry, et al,
emanating from classy-glassy futes
mesmerise you with the beauty that sur-
rounds such futy poetry! And, if you are
a wine afcionado, your wine cellar prob-
ably tells more about you than even your
library.
Statistics on imported wine in In-
dia narrate the story quite vividly.
As per a report by consulting frm
Technopak Advisors, imported
wine accounts for 30% of the
total wine market in India and
is growing at a steady rate of
25-30% y-o-y. In addition to
leading hospitality chains,
several swish and fne dining
restaurants have sprung up
across the country serving
the choicest wines sourced
from across the world.
An
intriguing
sense
of respect
overpowers you
when a connoisseur
torpedoes you with a
battery of rare wine variety
proper nouns. A sparkle in the
eye escorts the vocal demonstration;
a sign that the beverage is a close-to-
the-heavens sign of celebration. And what
pairs well with a ritual glass of this beverage
(for any importer) is the fact that its already
a multi-million dollar industry in India with
potential margins that call for a refll
Market estimates peg the current size
of the wine market in India at 1.2 mil-
lion cases. According to projections, the
market will scale up to 10 million cases
by 2017, of which imported wines will
account for 2 million cases. Te im-
ported wine category branches itself
out into the Old World and the New
World. Countries like France and Italy
make up the former. Te other group
consists of South Africa, Australia and
New Zealand.
DEVELOPING THE TASTE
According to a study by Vinexpo, an ex-
hibition portal created by the Bordeaux
Chamber of Commerce and Industry
(for international operators in the wine
and spirits sector), wine consumption
in India grew by 16.3% in CY2013, up
from 11.8% in CY2012. Te study also
revealed that a quarter of the beverage
consumed in India is from the import-
ed stable, with Australia leading the list.
[Australia has increased its exports (by
value) of wine to India by over 170% over
the last fve years. However, value-wise
France is still by far the biggest exporter
of wine to India.] Research fndings also
indicate a greater propensity among In-
dians towards red wine than white, with
over 61% of the wine consumed in India
being red.
According to Sukhbir Singh, Food &
Beverage Service Manager at Hilton Gar-
den Inns multi-cuisine restaurant India
Grill, demand is on an enthusiastic up-
swing. For wine importers, the business
dynamics convert to good proftability,
with margins at least in the range of 20-
30%. Although the wine market in India
is being mainly fuelled by the strong
growth in domestic wine production,
imported wine plays a crucial role in cre-
ating awareness and increasing demand,
he tells Te Dollar Business.
About 80% of India Grills clients are
expatriates, and to cater to them it stocks
both classic and new world wines from
countries like France, Italy, Chile, Argen-
tina, South Africa and Australia.
ON A HIGH
Indias Commerce Ministry data sub-
stantiates the rising demand for fne
wine sourced from some of the top wine
producers in the world. Not surprising-
ly, France was no. 1 in terms of quantum
of sparkling wine imported in FY2014,
followed by UK and Germany. For Port
FOR WINE
IMPORTERS IN
INDIA, DESPITE
A TOUGH TARRIF
STRUCTURE,
MARGINS RANGE
BETWEEN 20-30%
France is by far the
biggest exporter of
wine in the world,
having exported
over $10.4 billion
worth of the bever-
age in CY2013
Cost of Wine (USD/case)* 53.80
Freight & Insurance (USD/case)** 2.50
Landed Value (CIF; USD) 56.30
Landing Charge (1% of CIF; USD) 0.56
Assessable value (CIF + LC; USD) 56.86
Import Duty ID (150%; USD) 85.29
Additional Duty (USD)*** 40.00
Final Cost (USD) 182.16
Final Cost (INR)**** 10,929.45
Retail Price in India (INR)# 13,476.00
Proft (INR) 2,546.55
Proft Margin (%) 23.30
Note: * Lindemans Shiraz Bin 50 in Australia
** Freight and insurance cost of one case of
wine from Darwin to Chennai
*** As per CBEC notifcation no. 32/2003
**** Assuming USD/INR rate of 60
# The Dollar Business Intelligence Unit
Proft estimate: Wine imports
Despite a draconian duty structure,
wine imports ofer lucrative margins
BESTSELLER WINE
wine and other red wines too, France led
the way in FY2014 (in terms of value),
recording a growth of nearly 24% over
FY2013, followed by Italy and Australia.
Interestingly, Australian wine Jacobs
Creek has been steadily climbing up
the popularity charts in India. Nicola
Watkinson, Senior Trade & Investment
Commissioner (South Asia), Australian
Trade Commission, explained the rea-
sons for this trend to Te Dollar Business.
We have a very diferent way of market-
ing our wines. We like to tell everything
about the wine, including what kind of a
grape it is, which region it comes from,
as well as other details that keep the con-
sumer well informed. Besides this, we
also use a lot of new wine-making tech-
niques, blends and approaches that can
work better for an international palate,
she told the magazine.
In fact, the growing potential of inter-
national wine brands in India has led to
importers like Brindco, Pernod Ricard,
Aspri and Moet & Hennessy, aspiring for
a larger share of the pie. Others are fol-
lowing suit. Fratelli Wines, an Indo-Ital-
ian joint venture, which positions itself
as the second most distributed domestic
wine brand with 18 diferent labels, will
now be expanding its portfolio to in-
clude imported cases as well. Te com-
pany recently tied up with leading wine
merchant Hallgarten Druitt, part of the
worldwide German WIV Group, for im-
porting an array of fne wines.
We have started with 2,000 cases and
our target is to reach about 4,000 cases in
FY2015. We currently have six diferent
varieties of wine, which we have sourced.
Delhi, Mumbai, Goa and Bangalore will
be our main target markets. We are opti-
mistic about this venture, Kapil Sekhri,
Director, Fratelli Wines tells Te Dollar
Business. Although Sekhri terms the lo-
gistics of wine importing a tough mar-
ket, he labels it as diverse in its varied
oferings and opportunities.
KNOW THY WINE
Besides just the business dynamics, di-
versity is also an inherent characteristic
of the wine business. Essentially, there
are four types of wines Table wine,
which harmonises well with food pri-
marily red, white and rose wines; spar-
kling wine, which implies Champagne
and other bubblies; fruits & plants make
up the aromatic wine type. Ten there
are the fortifed wines, which include an
added distilled beverage usually bran-
dy in them. Tey are frequently used
even in cooking. Table wines tend to be
the most preferred, due to their favour
complementing meals quite well. Tey
also go a tad easy on the pocket and tend
to be the wine of choice for most social
occasions.
However, wine experts insist that ap-
propriate food is extremely necessary to
suit the taste of the wine. Te problem
with teaming a wine with curry is the
The wine section of a shop in Strasbourg, Alsace in France. Alsace is one of the biggest & most important wine producing regions in France
Source: Ministry of Commerce
Indias wine imports (by value)
Indias wine imports have surged by almost 400% over the last decade
6,000
5,000
4,000
3,000
2,000
1,000
0
30
25
20
15
10
5
0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14*
Import (Volume; 000 units; L-axis)

Import (Value; $ million; R-axis)
acidic favour of vinegar and yogurt
common ingredients in such a cuisine.
Acidic ingredients dont mix well with
wine. Moreover, highly tannic wines
taste bitter when confronted with chillies
and seasonings as the curries strip the
fruit favours from the wine, leaving it
too astringent, adds Singh.
Popular wisdom suggests that while
white wine is served best with white
meat and fsh, red wine pairs better with
red meat. Cheese is a good companion
for Port & red wine. And exotic dishes
prepared with wine taste best with that
specifc wine.
UNCORKING AINT EASY
Although wine importing is an extreme-
ly lucrative business, it has its own set of
challenges that act as a stumbling block
for importers. At one of the fne dining
restaurants in the capital, Amour Te
Patio Restaurant Caf & Bar, interna-
tional wine labels command a signifcant
share of the product portfolio, approxi-
mately 60% in value terms. Te restau-
rants Indian clientele mostly tend to
favour the New World wines, as these
are easy on the palate. Its international
clients, however, tend to be a bit more
experimental with other grape varieties
and usually prefer Old World wines.
Further, there are a lot of other factors
that play spoilsport, even though they
are not directly involved in the process of
importing themselves, and have a bear-
ing on their overall sales.
Heavy taxation and tedious process-
es due to which wine cases are locked
up in ports for months before they are
cleared by authorities, result in inconsis-
tent supply and much higher prices. Tis
impacts us as it hits our ability to sell a
specifc wine consistently. Also, high tax-
es result in high costs for us which erode
our margins as the consumer does not
want to pay more than a certain amount
for a glass or bottle of wine, Ran-
deep Bajaj, Promoter, Amour Te
Patio Restaurant Cafe & Bar, tells
Te Dollar Business.
Bajajs woes are not unfounded. At
present, customs duty is a whopping
150% on wine, with additional duty
sometimes as high as 75%. Other add-
ons such as insurance and freight cost,
storage cost, State taxes, unsystematic
logistics, and needless to mention, mar-
keting expenses, push up the price of a
bottle of wine to the sky.
Despite challenges, the market for
fne wine continues to grow at a robust
30% y-o-y. With more Indians preferring
wine over other spirits for consumption
during social occasions, the future for
this segment looks brighter, proftable
and more sparkling.
Wine is proftably special if you are an
importer. But even this beverage you
cant drink and drive.
VIGNETTES
ON WINE
The earliest remnants of wine were
discovered in Iran, dating back to the
Neolithic period (8,500 4,000 B.C.).
The oldest evidence of cultivated
vineyards were found in Georgia, dat-
ing from 7,000 5,000 B.C.
The Chinese drank their way to a re-
cord 155 million 9-litre cases of red
wine in 2013, thereby surpassing
the French whose consumption de-
creased by 18% to 150 million cases.
The increasing popularity of red wine
in China is largely due to the fact that
red is considered to be a lucky colour.
Which country drinks the most wine
per capita? Answer: The Vatican. Vol-
ume? 74 liters per capita in 2013.
One of the worlds most famous
Champagnes Dom Prignon was
named after a monk. Dom Pierre Pri-
gnon (1638 1715), an early advocate
of organic wine-making, experiment-
ed with new methods and successful-
ly improved the winemaking process.
Interestingly, his practices and tech-
niques are still used today.
Worlds top wine importers (by value)
In 2013, USA & UK imported over $10 billion worth of wines
Worlds top wine exporters (by value)
Frances dominance in global wine exports continued in 2013
Source: International Trade Centre; fgures for 2013 ($ billion)
U.S.A
FRANCE
U.K
ITALY
4.96
6.70
3.37
3.42
2.02
1.89
1.58
1.78
5.49
1
0.44
GERMANY
SPAIN
CANADA
CHILE
JAPAN
A
USTRALIA
Wine exporters to India (by value)
France is by far the single-largest wine exporter to India
REST
USA
UK
ITALY
AUSTRALIA
FRANCE
Source: Commerce Ministry; FY2014
42%
23%
6%
7%
12%
10%
BESTSELLER WINE
wine and other red wines too, France led
the way in FY2014 (in terms of value),
recording a growth of nearly 24% over
FY2013, followed by Italy and Australia.
Interestingly, Australian wine Jacobs
Creek has been steadily climbing up
the popularity charts in India. Nicola
Watkinson, Senior Trade & Investment
Commissioner (South Asia), Australian
Trade Commission, explained the rea-
sons for this trend to Te Dollar Business.
We have a very diferent way of market-
ing our wines. We like to tell everything
about the wine, including what kind of a
grape it is, which region it comes from,
as well as other details that keep the con-
sumer well informed. Besides this, we
also use a lot of new wine-making tech-
niques, blends and approaches that can
work better for an international palate,
she told the magazine.
In fact, the growing potential of inter-
national wine brands in India has led to
importers like Brindco, Pernod Ricard,
Aspri and Moet & Hennessy, aspiring for
a larger share of the pie. Others are fol-
lowing suit. Fratelli Wines, an Indo-Ital-
ian joint venture, which positions itself
as the second most distributed domestic
wine brand with 18 diferent labels, will
now be expanding its portfolio to in-
clude imported cases as well. Te com-
pany recently tied up with leading wine
merchant Hallgarten Druitt, part of the
worldwide German WIV Group, for im-
porting an array of fne wines.
We have started with 2,000 cases and
our target is to reach about 4,000 cases in
FY2015. We currently have six diferent
varieties of wine, which we have sourced.
Delhi, Mumbai, Goa and Bangalore will
be our main target markets. We are opti-
mistic about this venture, Kapil Sekhri,
Director, Fratelli Wines tells Te Dollar
Business. Although Sekhri terms the lo-
gistics of wine importing a tough mar-
ket, he labels it as diverse in its varied
oferings and opportunities.
KNOW THY WINE
Besides just the business dynamics, di-
versity is also an inherent characteristic
of the wine business. Essentially, there
are four types of wines Table wine,
which harmonises well with food pri-
marily red, white and rose wines; spar-
kling wine, which implies Champagne
and other bubblies; fruits & plants make
up the aromatic wine type. Ten there
are the fortifed wines, which include an
added distilled beverage usually bran-
dy in them. Tey are frequently used
even in cooking. Table wines tend to be
the most preferred, due to their favour
complementing meals quite well. Tey
also go a tad easy on the pocket and tend
to be the wine of choice for most social
occasions.
However, wine experts insist that ap-
propriate food is extremely necessary to
suit the taste of the wine. Te problem
with teaming a wine with curry is the
The wine section of a shop in Strasbourg, Alsace in France. Alsace is one of the biggest & most important wine producing regions in France
Source: Ministry of Commerce
Indias wine imports (by value)
Indias wine imports have surged by almost 400% over the last decade
6,000
5,000
4,000
3,000
2,000
1,000
0
30
25
20
15
10
5
0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14*
Import (Volume; 000 units; L-axis)

Import (Value; $ million; R-axis)
acidic favour of vinegar and yogurt
common ingredients in such a cuisine.
Acidic ingredients dont mix well with
wine. Moreover, highly tannic wines
taste bitter when confronted with chillies
and seasonings as the curries strip the
fruit favours from the wine, leaving it
too astringent, adds Singh.
Popular wisdom suggests that while
white wine is served best with white
meat and fsh, red wine pairs better with
red meat. Cheese is a good companion
for Port & red wine. And exotic dishes
prepared with wine taste best with that
specifc wine.
UNCORKING AINT EASY
Although wine importing is an extreme-
ly lucrative business, it has its own set of
challenges that act as a stumbling block
for importers. At one of the fne dining
restaurants in the capital, Amour Te
Patio Restaurant Caf & Bar, interna-
tional wine labels command a signifcant
share of the product portfolio, approxi-
mately 60% in value terms. Te restau-
rants Indian clientele mostly tend to
favour the New World wines, as these
are easy on the palate. Its international
clients, however, tend to be a bit more
experimental with other grape varieties
and usually prefer Old World wines.
Further, there are a lot of other factors
that play spoilsport, even though they
are not directly involved in the process of
importing themselves, and have a bear-
ing on their overall sales.
Heavy taxation and tedious process-
es due to which wine cases are locked
up in ports for months before they are
cleared by authorities, result in inconsis-
tent supply and much higher prices. Tis
impacts us as it hits our ability to sell a
specifc wine consistently. Also, high tax-
es result in high costs for us which erode
our margins as the consumer does not
want to pay more than a certain amount
for a glass or bottle of wine, Ran-
deep Bajaj, Promoter, Amour Te
Patio Restaurant Cafe & Bar, tells
Te Dollar Business.
Bajajs woes are not unfounded. At
present, customs duty is a whopping
150% on wine, with additional duty
sometimes as high as 75%. Other add-
ons such as insurance and freight cost,
storage cost, State taxes, unsystematic
logistics, and needless to mention, mar-
keting expenses, push up the price of a
bottle of wine to the sky.
Despite challenges, the market for
fne wine continues to grow at a robust
30% y-o-y. With more Indians preferring
wine over other spirits for consumption
during social occasions, the future for
this segment looks brighter, proftable
and more sparkling.
Wine is proftably special if you are an
importer. But even this beverage you
cant drink and drive.
VIGNETTES
ON WINE
The earliest remnants of wine were
discovered in Iran, dating back to the
Neolithic period (8,500 4,000 B.C.).
The oldest evidence of cultivated
vineyards were found in Georgia, dat-
ing from 7,000 5,000 B.C.
The Chinese drank their way to a re-
cord 155 million 9-litre cases of red
wine in 2013, thereby surpassing
the French whose consumption de-
creased by 18% to 150 million cases.
The increasing popularity of red wine
in China is largely due to the fact that
red is considered to be a lucky colour.
Which country drinks the most wine
per capita? Answer: The Vatican. Vol-
ume? 74 liters per capita in 2013.
One of the worlds most famous
Champagnes Dom Prignon was
named after a monk. Dom Pierre Pri-
gnon (1638 1715), an early advocate
of organic wine-making, experiment-
ed with new methods and successful-
ly improved the winemaking process.
Interestingly, his practices and tech-
niques are still used today.
Worlds top wine importers (by value)
In 2013, USA & UK imported over $10 billion worth of wines
Worlds top wine exporters (by value)
Frances dominance in global wine exports continued in 2013
U.S.A
FRANCE
U.K
ITALY
4.96
6.70
3.37
3.42
2.02
1.89
1.58
1.78
5.49
1
0.44
GERMANY
SPAIN
CANADA
CHILE
JAPAN
A
USTRALIA
Wine exporters to India (by value)
France is by far the single-largest wine exporter to India
REST
USA
UK
ITALY
AUSTRALIA
FRANCE
Source: Commerce Ministry; FY2014
42%
23%
6%
7%
12%
10%
COVER FEATURE BRAZIL
BOOMING BRIC,
BLESSED BRAZIL?
The fact that Brazil has the lowest import-to-GDP ratio among the worlds top 35
economies is reason enough to believe that this Latin American nation, famed
for being the worlds largest exporter of footballers, is also a prime destination for
the wonderboys of Indias exporting community. Translation: Brazil is a lucrative
BRIC wall, but one that could take some serious breaking. Are you game?
BY DR. A. K. SENGUPTA, CHIEF CONSULTING EDITOR, THE DOLLAR BUSINESS
Tourists enjoying the sunset
on the Corcovado hill in
Rio de Janeiro, Brazil. It is
known worldwide for the 125
feet statue of Jesus atop its
peak, entitled Cristo Reden-
tor or Christ the Redeemer
T
he land of soccer and samba
is sizzling and how. Currently
hosting the biggest sporting
spectacle in the world the
FIFA World Cup 2014 and all set to
host the Summer Olympics in 2016, Bra-
zil is making all the right noises about its
arrival as a sporting and economic su-
perpower. Not that it had to ever prove
anything to anyone. Home to over 200
million people (which makes it the 5
th

most populated country in the world)
and spread over 8.5 million square ki-
lometers (which makes it the 5
th
biggest
nation), its a $2.5 trillion GDP the 7
th

largest economy in the world. Brazil has
long been a modern, vibrant and cos-
mopolitan republic. But unprecedented
growth in the 2000s, thanks to a global
commodity boom, all of a sudden, has
catapulted it to rock star status.
RECALLING MEMORIES
Following more than three centuries of
Portuguese rule, Brazil gained its inde-
pendence in 1822. Te country main-
tained a monarchical system of govern-
ment until the abolition of slavery in
1888 and the subsequent proclamation
of a republic by the military in 1889. Bra-
zilian cofee exporters politically dom-
inated the country until populist leader
Getlio Vargas rose to power in 1930.
By far the largest and most populous
country in South America, Brazil under-
went more than half-a-century of popu-
list and military governments until 1985,
when the military regime peacefully
ceded power to civilian rulers, which
continues without hiccups. Exploiting its
vast natural resources and a large labour
pool, Brazil today continues to pursue
industrial and agricultural growth and is
not only a regional powerhouse, but also
a global leader.
A NEIGHBOURS ENVY
With abundant natural and human re-
sources, Brazil is today one of the most
promising emerging markets in the
world. It is the seventh-largest economy
both in terms of nominal GDP and pur-
chasing power parity. Characterised by
moderately free markets, the Brazilian
economy grew at a brisk pace during the
frst decade of the current century but
has been plagued by a bit of a slowdown
since 2010. However, it has steadily out-
paced many other countries in terms of
GDP growth and might soon be ranked
the ffh largest economy in the world.
Te Brazilian labour force is estimat-
ed at 100.77 million, 16% of which is
involved in agriculture, 13% in industry
and 71% in the services sector. Tis pres-
ents a far more balanced picture than In-
dia where agriculture contributes about
13-14% to the GDP, while its share in
employment is almost 50%.
SPLIT AND DOUBLE
Te only time a country hosted a soc-
cer World Cup and Summer Olympics
back to back earlier, like Brazil is doing
now, was USA in 1994 and 1996. But
those were the roaring 90s. Ten, the
US economy was on a roll, it had neces-
sary infrastructure already in place, and
hence, the cost of hosting the two events
was just $30 million and $1.8 billion for
the World Cup and the Summer Olym-
pics respectively. As compared to that,
Brazil has already spent $11 billion on
just the FIFA World Cup, with multiple
cost overruns that are likely to continue.
While the twin events will do their bit for
the Brazilian GDP, with tourism getting a
boost, they are likely to be a major drain
on an economy that is nowhere close to
its glory days yet.
Brazil bid for the 2014 FIFA World
Cup in 2007 a time when the econo-
my was growing at a rate of knots. Ten
the global fnancial crisis struck and Bra-
zils economy went into a tailspin. While
there was an immediate rebound in
2010 and Brazils GDP (at current pric-
es) crossed the $2 trillion mark for the
frst time, it has been a laboured progress
since then, with several quarters of neg-
ative growth.
But since then, matters have worsened
so much that the Brazilian real (its cur-
rency) has lost half its value in the last
three years and Standard & Poors has
cut Brazils sovereign rating to BBB mi-
nus the lowest investment grade. In
this kind of an environment, the lavish
spending on the World Cup has not gone
Traffc on Avenida Paulista, one of the
most important avenues in So Paulo,
Brazil. The 2.8 kilometre thoroughfare is
known for headquartering a large number
of fnancial and cultural institutions
People walking on Santa Efgenia Viaduct in So Paulo, Brazil. The downtown area offers a
valuable history lesson of the city
Panorama of the Copan Building in So Paulo. Copan is one of the largest buildings in Brazil
and has the largest foor area of any residential building in the world
A) Mineral Fuels, Oils, Waxes; B) Organic Chemicals; C) Miscellaneous Chemicals; D) Man Made Filaments;
E) Auto & Auto Ancillary; F) Nuclear Reactors, Boilers & Machinery; G) Pharmaceutical Products;
H) Apparel & Clothing (not knitted); I) Electrical Machinery & Equipment; J) Plastic & Plastic Articles;
K) Tanning or Dyeing Extracts; L) Rubber & Rubber Articles; M) Articles of Iron or Steel; N) Iron & Steel;
O) Cotton; P) Article, Photographic Instrument; Q) Aluminium & Aluminium Articles; R) Man Made Staple Fibres;
S) Apparel & Clothing (knitted); T) Glass & Glassware
down well with the masses (and media).
Tere have been widespread protests
against the event something unthink-
able in the football-hungry nation. But as
the World Cup progresses, football mag-
ic is in the air again, and not in Brazil but
all across the globe.
THE NUMBERS
Brazilian merchandise trade has grown
more than three-fold over the last 10
years. Although it has maintained a trade
surplus right through this period, fat to
negative exports growth coupled with
continuously rising imports in the last
four years mean that a surplus of close
to $34 billion in 2004 has now been re-
duced to just $3 billion.
Being the two pillars of the BRIC,
India and Brazil have engaged increas-
ingly in bilateral trade. Te numbers
FY2013 FY2014
400
350
300
250
200
150
100
50
0
A* B C D E F G H I J K L M N O P Q R S T
* Imports of $3.3 billion in FY2013 vs. $2.7 billion in FY2014; Other fgures in $ million; Source: Ministry of Commerce
Top imports by Brazil from India
Diesel is by far Brazils biggest import from India
People walking on Santa Efgenia Viaduct in So Paulo, Brazil. The downtown area offers a
valuable history lesson of the city
Panorama of the Copan Building in So Paulo. Copan is one of the largest buildings in Brazil
and has the largest foor area of any residential building in the world
A) Mineral Fuels, Oils, Waxes; B) Organic Chemicals; C) Miscellaneous Chemicals; D) Man Made Filaments;
E) Auto & Auto Ancillary; F) Nuclear Reactors, Boilers & Machinery; G) Pharmaceutical Products;
H) Apparel & Clothing (not knitted); I) Electrical Machinery & Equipment; J) Plastic & Plastic Articles;
K) Tanning or Dyeing Extracts; L) Rubber & Rubber Articles; M) Articles of Iron or Steel; N) Iron & Steel;
O) Cotton; P) Article, Photographic Instrument; Q) Aluminium & Aluminium Articles; R) Man Made Staple Fibres;
S) Apparel & Clothing (knitted); T) Glass & Glassware
down well with the masses (and media).
Tere have been widespread protests
against the event something unthink-
able in the football-hungry nation. But as
the World Cup progresses, football mag-
ic is in the air again, and not in Brazil but
all across the globe.
THE NUMBERS
Brazilian merchandise trade has grown
more than three-fold over the last 10
years. Although it has maintained a trade
surplus right through this period, fat to
negative exports growth coupled with
continuously rising imports in the last
four years mean that a surplus of close
to $34 billion in 2004 has now been re-
duced to just $3 billion.
Being the two pillars of the BRIC,
India and Brazil have engaged increas-
ingly in bilateral trade. Te numbers
FY2013 FY2014
400
350
300
250
200
150
100
50
0
A* B C D E F G H I J K L M N O P Q R S T
* Imports of $3.3 billion in FY2013 vs. $2.7 billion in FY2014; Other fgures in $ million; Source: Ministry of Commerce
Top imports by Brazil from India
Diesel is by far Brazils biggest import from India
AVERAGE DISTANCE
OF COUNTRIES
EXPORTING TO
BRAZIL IS DOUBLE
THE WORLD
AVERAGE
have grown exponentially over the last
decade. Less than $1.5 billion worth of
merchandise trade in FY2005, had sky-
rocketed to over $10 billion by FY2013,
before mildly dropping in FY2014. India
almost always has had a trade surplus
with Brazil, except for FY2010, when a
three-fold surge in imports (because of
a 24x surge in import of mineral fuels),
temporarily turned the tables against In-
dia. At the same time, India has managed
to end FY2014 with an all-time high
trade surplus of over $1.7 billion with
Brazil.
While the Indo-Brazil trade has grown
manifold over the last decade, it remains
abysmally low in absolute terms. For
example, trade between Brazil and Chi-
na was worth over $83 billion in 2013
800% more than that between Brazil and
India. Similarly, of the 20 top items that
Brazil imports, Indias name (as the ori-
gin of the import) is virtually non-exis-
tent in half of the items on the list.
A case in point is cars. Brazil import-
ed over $9 billion worth of cars in 2013,
most of them from Argentina, Mexico
and Germany. But India didnt cater to
even 0.01% of this demand.
While Indian automakers have been
talking about tapping the Brazilian mar-
ket for a long time, not much has ma-
terialised yet. Te scenario is not much
diferent when it comes to some of the
other top Brazilian imports as well, be
it electronics & electrical equipment or
medicaments. In fact, the only major
Brazilian import, which India caters to
in a signifcant way is mineral fuels like
diesel oil; all thanks to a company popu-
larly known as Reliance Industries.
THE NEXT BEST THING
Brazil is the most important member of
MERCOSUR South Americas leading
trading bloc formed by Brazil, Argenti-
na, Paraguay, Uruguay and Venezuela,
with Bolivia recently becoming an ac-
ceding member. While it has never got
the kind of attention it deserves, partic-
ularly in India, MERCOSUR currently is
the third largest such bloc, afer the EU
and NAFTA. As a result of a plethora
of safeguards, common tarifs and in-
centives provided under the pact, Brazil
traditionally has had very strong trade
relationships with other member states
of the bloc, particularly Argentina.
While there is still no Free Trade Agree-
ment (FTA) between India and MER-
COSUR, in 2003, a framework agreement
was signed between the two at Asuncion
350
300
250
200
150
100
50
0
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Exports

Imports

Exports

Imports
Source: International Trade Centre; fgures in $ billion Source: Commerce Ministry, Govt. of India; fgures in $ million
Nelore cattle being herd through a feld in a farm in Magda county of So Paulo. Nelore cat-
tle originated from Ongole cattle brought to Brazil from Nellore in Andhra Pradesh, India
Itaip hydroelectric power plant
located on the Brazil-Paraguay border
Brazilian global trade
Brazils trade surplus is slowly shrinking due to rising imports
Indo-Brazilian trade
India has mostly managed a trade surplus with Brazil
Brazilian fans during the 2014 FIFA World Cup opening ceremony at So Paulo. According to
E&Y, the event may result in an increase of 79% in the tourist infow to Brazil in 2014
in Paraguay. Te aim of this framework
agreement was to create conditions and
mechanisms for negotiations by grant-
ing reciprocal tarif preferences and ne-
gotiate a free trade area between the two
parties in conformity with the rules of the
WTO. As a follow up to the agreement,
a Preferential Trade Agreement (PTA)
was signed in New Delhi on January 25,
2004. Te aim of this PTA is to expand
and strengthen existing relations between
MERCOSUR and India and promote the
expansion of trade by granting reciprocal
fxed tarif preferences.
Te PTA consists of a list of 452 Indian
products, which get tarif concessions in
MERCOSUR (a list of 450 MERCOSUR
products get tarif concession in India;
the PTA comprises rules, safeguards and
dispute settlement procedures). Te ma-
jor products covered in the Indian ofer
list are meat and meat products, organic
& inorganic chemicals, dyes & pigments,
raw hides & skins, leather articles, wool,
Demand-supply gap analysis: Indian exports Brazilian imports
Broad summary of Brazils top 20 imports show that Indian exports are non-existent in 12 of them
HS Code Product Total Imports Potential Potential
Imports From India for Indian (%) Enhancement
exports Factor #
2710 Petroleum Oils (not Crude) 17,756,951 3,364,061 14,392,890 81.05 4.28
2709 Crude Petroleum Oils 16,319,993 0 16,319,993 100.00 NA
8703 Cars (including station wagons) 9,081,176 119 9,081,057 100.00 76311.40
8708 Parts & Access. of Motor Vehicles 8,296,706 179,816 8,116,890 97.83 45.14
2711 Petroleum Gases 7,997,946 0 7,997,946 100.00 NA
8517 Electric App. for Line Telephony 5,036,185 13,554 5,022,631 99.73 370.56
8542 Electronic Integrated Circuits 4,748,725 990 4,747,735 99.98 4795.69
3004 Medicament Mixtures (put in dosage) 3,734,309 126,648 3,607,661 96.61 28.49
8529 Parts suitable for use in televisions 3,565,667 199 3,565,468 99.99 17916.92
3104 Mineral or Chemical Fertilizers 3,356,145 0 3,356,145 100.00 NA
8704 Motor Vehicles (for transport of goods) 3,340,644 188 3,340,456 99.99 17768.38
3002 Human & Animal Blood, Toxins 3,187,046 17,740 3,169,306 99.44 178.65
3808 Insecticides, Fungicides, Herbicides 2,999,751 171,447 2,828,304 94.28 16.50
3105 Nitrogen, Phosphorous Fertilizers 2,628,785 1 2,628,784 100.00 2628784.00
2701 Coal; Briquettes, Ovoids 2,453,571 0 2,453,571 100.00 NA
1001 Wheat and Meslin 2,414,821 0 2,414,821 100.00 NA
8411 Turbo-jets, Turbo-propellers 2,323,109 17 2,323,092 100.00 136652.47
3102 Mineral or Chemical Fertilizers 2,242,837 1 2,242,836 100.00 2242836.00
2933 Heterocyclic Compounds 2,240,626 159,409 2,081,217 92.89 13.06
8473 Parts & Accessories of computers 2,203,783 2,897 2,200,886 99.87 759.71
Source: International Trade Centre; all fgures in $ thousands (for CY2013)
# Enhancement factor is the number of times Indian export value has to be raised, in the absence of policy restrictions and latent demand, from the current levels to meet total demand
of the destination market (Brazil)
cotton yarn, glass and glassware, arti-
cles of iron and steel, machinery items,
electrical machinery & equipment and
optical, photographic & cinematograph-
ic apparatus. Te major product groups
covered in the ofer list of MERCOSUR
are food preparations, organic chemi-
cals, pharmaceuticals, and electrical ma-
chinery & equipment. Te India-MER-
COSUR PTA came into efect in 2009
and has just completed fve years.
While the India-MERCOSUR PTA is,
no doubt, a great initiative to boost trade
ties between India and Brazil, if one takes
a closer look at the list of items in which
Indian products get a margin of prefer-
ence in MERCOSUR member countries,
one cant help but feel disappointed.
For instance, two items included in
the ofer list of MERCOSUR are instru-
ment panels (HS Code: 87082995) and
steering boxes (HS Code: 87089493).
Terefore, when an Indian manufac-
turer exports either of these two items
to Brazil, it gets a 10% margin of pref-
erence. So far so good. Te trouble
starts when one tries to fnd out what
value of these two items were exported
from India in the recent past. For, not
only has India never ever exported a
single penny worth of these two prod-
ucts to Brazil, it has never ever export-
ed a penny worth of these two products
to any other country either! Tis means
Brazil essentially gives preferential
treatment in terms of duties to an item
produced in India, which has never
been exported by India!
Whats worse is the fact that this is not
limited to just the two products men-
tioned above, but a host of other prod-
ucts mentioned in MERCOSURs ofer
list to India.
LOW HANGING FRUITS
While Indian exports may be negligible
in half of Brazils top 20 imports, Te
Dollar Business Intelligence Unit analysis
shows there are 14 items, where at least a
billion dollar worth of exports are there
for the taking for Indian exporters. To
arrive at this list, we analysed all items
(broken down to 4-digit HS codes) with
three necessary prerequisites: (i) Items
that Brazil imported in excess of $1
BRAZIL IMPORTS
AND INDIA
EXPORTS LARGE
QUANTITIES OF
AUTO PARTS, WHEAT
AND MEDICINES.
BUT NOT MUCH
BILATERALLY
50
45
40
35
30
25
20
15
10
5
0
China USA Argentina Germany Netherlands India
Exports Imports
Source: International Trade Centre; fgures for CY2013 ($ billion)
Containers and cranes at the Port of
Montevideo, Uruguay. It is one of the
largest ports of South America and
an important transit area for goods of
MERCOSUR members
Brazils major trade partners
Brazil is one of the rare examples of a country having a trade surplus with China
TDB: Indo-Brazilian trade is today
about 10 times of what it was a decade
ago. Are you satisfed?
CY: Trade between Brazil and India has
grown tremendously in the last few years
from $828 million in 2001 to $9.48 bil-
lion in 2013. India already is one of the
main trade partners of Brazil, but there
is still plenty of room for bilateral trade
to grow. One of the issues of our bilateral
trade, however, is that it is highly concen-
trated on oil and its derivatives. In 2013,
around 50.69% of Brazilian exports to
India consisted of crude oil and 52.60%
of Brazilian imports from India were of
diesel. Any change in the oil market will
signifcantly afect our bilateral trade.
TDB: Indo-Brazilian trade is lesser in
value than that of even Indo-Venezue-
lan trade. What do you think is the pri-
mary reason for such state of afairs?
CY: India is a country with signifcant
energy demands, resulting in consider-
able imports of oil. Venezuela is a major
oil exporter. It is therefore natural that an
increase in Indian demand for oil would
impact the amount of trade between the
two countries. As mentioned before, al-
though Brazil-India trade has enjoyed
strong growth in the last decade, there
is still room for both quantitative and
qualitative expansion. Tis means we
can have more trade in the traditional
products, as well as diversify.
A recent study concluded by APEX
(the Brazilian Trade & Investment Pro-
motion Agency) gives a detailed profle
of economic, political and commercial
landscape of India, as well as a set of
business opportunities for Brazilian ex-
porters in the Indian market. Tese are:
1) Food, Beverage & Agribusiness; 2)
Home & Construction; 3) Machinery &
Equipment; 4) Fashion & Personal Care;
and 5) Multi-Sector & Other. Opportu-
nities in agribusiness seem particularly
attractive, due to rising population and
incomes in India, all within limited ex-
pansion of local production.
Among mechanisms established to
boost bilateral trade, it is worth noting
three: the Bilateral Trade Monitoring
Mechanism, the CEO Forum, and the
India-MERCOSUR Preferential Trade
Agreement, whose scope gives margin
for further expansion.
TDB: Do you think Brazil not having
a large Indian community has afected
trade between the two countries?
CY: Te fact that there is only a small
Indian community in Brazil might have
contributed to the perspective that Bra-
zil is too far or too diferent. However,
during the last few years, as developing
countries gained greater political and
economic space, a diferent concept has
developed. As large developing coun-
tries, Brazil and India are more similar
in political, economic and social aspects
than frst looks may reveal.
TDB: What has been Brazils strategy
to attract Indian football fans for the
ongoing FIFA World Cup?
CY: Te Brazilian government is com-
mitted to promoting tourism in Brazil,
especially through Embratur a gov-
ernment agency entirely devoted to the
promotion of tourist destinations in the
country. Every year, Brazil reaches new
record numbers of foreign visitors, all
searching for great experiences from
beaches to business. In this sense, the
2014 FIFA World Cup as well as the
Olympic and Paralympic Games in 2016
in Rio de Janeiro, will be milestones for
Brazilian tourism. For this years World
Cup, visa requests from Indians have
been almost double the usual number.
Tis speaks for itself in terms of the in-
terest Brazil is generating in this country.
TDB: Does Brazilian government have
any plans to issue visa-on-arrival to In-
dia tourists?
CY: Brazil is being promoted as a great
destination among Indian travel agen-
cies and tour operators together with
workshops to train Indian operators on
Brazilian sights and features. Moreover,
Brazil has signed a bilateral Air Service
Agreement with India, with a strategy
to establish direct fights between the
two countries. As far as visa-on-arrival
is concerned, Brazil does not have such
arrangements with any country. Exist-
ing procedures, however, are clear and
straightforward.
TDB: Brazils exports to India are
mostly raw materials. Do you have any
strategy to increase the export of fn-
ished goods and hi-tech products?
CY: Brazilian raw materials are very
competitive in international trade and,
as a result, play a large role in its exports.
Te bilateral trade between India and
Brazil is still concentrated on few prod-
ucts, mainly oil, whose price variations
signifcantly impact numbers. Diversi-
fcation is therefore a major challenge
which is being tackled through mea-
sures such as profling opportunities for
Brazilian exporters in the Indian market.
In an exclusive interaction with Te Dollar Business, Chloe
Rocha Young, Secretary, Economic & Commercial Section, at
the Embassy of Brazil in India, talks at length about India-
Brazil trade relations and explains why there is enough room
for both quantitative and qualitative expansion. Excerpts:
Brazil is neither too far, nor
too diferent from India
HS Product Brazils imports Indias exports Indias exports Opportunity
Code from the world to the world to Brazil
1001 Wheat & Meslin 2,414.8 1,260.3 0.0 2,414.8
2710 Petroleum Oils (not Crude) 17,756.9 67,075.2 3,364.0 14,392.9
2933 Heterocyclic Compounds 2,240.6 1,575.2 159.4 2,081.2
3004 Medicament Mixtures (put in dosage) 3,734.3 10,313.9 126.6 3,607.7
3808 Insecticides, Fungicides, Herbicides 2,999.7 2,133.2 171.4 2,828.3
4011 Pneumatic Tires of Rubber 1,641.6 1,778.6 52.2 1,589.4
7403 Refned Copper & Copper Alloys 1,823.8 2,354.2 2.5 1,821.3
8481 Tap, Cock, Valve for Pipe, Tank 1,468.8 1,213.1 14.4 1,454.4
8504 Electrical Transformer, Static Converter 1,111.0 1,006.3 9.0 1,102.0
8517 Electrical Apparatus for Line Telephony 5,036.2 3,444.6 13.5 5,022.7
8703 Cars (including Station Wagons) 9,081.2 5,556.5 0.1 9,081.1
8708 Parts & Accessories of Motor Vehicles 8,296.7 3,912.8 179.8 8,116.9
8802 Aircraft & Spacecraft 1,525.4 2,590.3 0.1 1,525.3
8803 Aircraft Parts 1,333.2 1,527.0 0.0 1,333.2
Low hanging fruits
Items imported by Brazil in large numbers, exported by India in large numbers but still ofering billion dollar opportunities
Source: International Trade Centre; fgures for 2013 ($ million)
# Criteria: Brazilian imports of more than $1 billion, Indian exports of more than $1 billion, opportunity of more than $1 billion
TDB: India still seems to be ignoring
Brazil as a market. Whats Brazils true
potential as an export destination?
AS: Brazil is one of the most important
markets in Latin America. Unfortunate-
ly, the past year wasnt good for Indian
exports to Brazil, due to the sofening of
commodity and metal prices. Many other
countries like Venezuela and Argentina
also put restrictions on both current and
capital goods transfers. Some of them
also introduced automatic licensing to
restrict imports. Hence, 2013 wasnt
great for Indian exports to Latin Amer-
ica. But barring last year, I think Latin
America has been one of the biggest
success stories of Indian exports. In fact,
we have been able to double our share
of exports to Latin America in the last
ten years.
TDB: Te Ministry of Commerce re-
cently re-extended the FOCUS LAC
Programme. Is that any proof that the
Brazil has a lot to ofer for
Indias Services exporters
Indian government is serious about the
Brazilian market?
AS: Te Programme one that was
launched in 1997 has been re-extended
until March 2019. Most of the countries
mentioned therein are a part of the Fo-
cus Market and Special Focus Market
Schemes, which shows that the govern-
ment of India realises the potential of
these countries. And Brazil is a part of
the BRICS, a country with whom we are
even considering developing a common
currency for trade. Once that happens,
transaction costs will reduce substantial-
ly and trade between the two countries
will get a major boost.
TDB: Which are the thrust products as
far as market penetration and growth
in Brazil are concerned?
AS: Te Ministry of Commerce through
its study of increasing Indias econom-
ic engagement with Latin America, has
identifed auto components, pharmaceu-
ticals and chemicals, textile and precious
& semi-precious gems and jewellery as
thrust products in the Latin American
market, particularly in Brazil. Te Gov-
ernment of India is also keen to have
some concessional or free trade agree-
ment with Brazil.
TDB: How about exporting Services
from India?
AS: When it comes to Services, many
Indian companies who are/were looking
to tap the North American market, have
already set up their bases in Brazil. In
terms of proximity to US and visa policy,
Brazil is better than most other countries
in the region. Other than IT, medical and
health tourism, fnancial services, en-
vironmental services, architecture and
consulting are some areas where we
can look to increase our market share
in Brazil, which anyways is one of the
biggest importer of Services and runs a
huge trade defcit in it.
Ajay Sahai,
Director General
& CEO, FIEO
Port of
Rio de Janeiro
in Brazil a
major cargo
destination for
freight from
overseas
Dr. A. K. Sengupta
Chief Consulting Editor, The Dollar Business;
Former Dean of The Indian Institute of Foreign
Trade (IIFT), New Delhi
billion in 2013; (ii) Items that India ex-
ported in excess of $1 billion in the same
year, and (iii) Items that presented an
opportunity of over $1 billion for Indian
exporters.
At the top of this list is petroleum oils
(HS code 2710), $17.75 billion of which
was imported by Brazil and $67.07 bil-
lion of which was exported by India in
2013. But Indias exports to Brazil were
just $3.36 billion, thereby presenting a
potential of $14.39 for Indian export-
ers. At the second spot in this list is cars
(HS code 8703) $9.08 billion worth of
imports by Brazil in 2013, $5.55 billion
worth of exports by India in 2013, but
virtually no exports from India to Brazil.
Other such billion-dollar ideas in-
clude wheat and meslin, medicament
mixtures, insecticides (including fungi-
cides & herbicides), pneumatic rubber
tyres, refned copper & related alloys,
taps (including cocks, valves for pipes,
and tanks), electrical transformers, stat-
ic converters, electrical apparatuses for
line telephony, auto parts, and aircrafs
and spacecrafs (and related parts). Add
potential export opportunities for In-
dian exporters in just these 14 product
categories and you end up with a fgure
in excess of $56 billion nearly 20%
of Indias total exports to the world in
FY2014! To imagine that serving a single
overseas market can be so lucrative an
exercise and in just about a dozen-odd
product categories is eye-opening. Its
a pop sound you cant miss if you have
your eyes and attention on the business
of foreign trade.
Bottomline dont take your eyes
of Brazil even afer the FIFA jamboree
gets silent. [Weve lef the soccer balls
for Pakistan to export anyway.] Tere is
a massive market to tap and weve only
scratched the surface. Teres a Sum-
mer Olympics scheduled for 2016. And
things are just warming up. If youre an
exporter, make Brazil count. Its a $2 tril-
lion economy, mind you! And one with
the hallowed BRICS tag.
DOCKYARD KANDLA PORT
IS INDIAS
DARLING PORT
LOSING
ITS SHEEN?
Born out of necessity to replace Karachi Port, which went to Pakistan at the
time of partition, and ease the load on Mumbai Port, Kandla went on to become
Indias No.1 port really fast. And it well deserved the honour. From a safe
geographical location to the proximity to a commercially vibrant region, from
Priority status to a state-of-the-art infrastructure, it has all what it requires to
stay on top. Despite all this, critics claim that alls not well at Kandla. Its biggest
competition lies just 60 km south west Mundra Port, which has recently
overtaken it as Indias biggest commercial port. Can Kandla reclaim its lost glory?
BY SISIR KUMAR PRADHAN
A view of Kandla
Ports entry gates:
Despite recent
problems, Kandla
is still Indias No.1
major port in terms
of cargo-handling
KPT CATERS TO A
VAST HINTERLAND
OF 11 STATES,
SPREAD ACROSS 1
MILLION SQ. KM.
G
andhidham, a small town lo-
cated in the Kutch district of
Gujarat, about 810 km from
the countrys fnancial cap-
ital Mumbai was created soon afer the
partition of India to accommodate refu-
gees from Sindh, Pakistan. Te extreme
climatic conditions of the region can be
gauged from the fact that its population
density is just 46 per sq km as compared
to 416 per sq km for India as a whole.
However, the region is commercially very
vibrant and is one of the top investment
destinations in Gujarat. With Kandla
Port one of the countrys biggest cargo
ports next door, the city has become a
testimony to the kind of impact a port
can have on a region. No wonder, most
major businesses in the town are related
to the shipping trade.
ITS IN THE GENES
Another major strength of the town is
its large Sindhi population. Founder
and owner of Rishi Shipping, a shipping
company with an annual turnover of
Rs.300 crore, B. K. Mansukhani is one
proud member of this enterprising com-
munity. Speaking to Te Dollar Business
this 70-year old shipping industry vet-
eran says, I was three years old when
my family migrated to Ajmer from Pa-
kistan. I came here to earn a living and
took up my frst job as a teacher at a
salary of Rs.100 per month. In 1976 his
life took a turn for the better when one
of his students father, who was Trafc
Manager at Kandla Port, advised him to
trade lefover scrap of cargo ships. One
day, he casually approached the captain
of a ship and bought some metal drums.
I earned a proft of Rs.21,000 close to
20 years salary afer selling them to a
scrap dealer, he chuckles.
In fact, like Mansukhani, there are
several frst generation entrepreneurs in
the region who have scripted their own
A state-of-the-art 103 tonne
capacity crane commissioned
via PPP at Kandla Port. PPP
projects have not been as
successful in Kandla as they
have been elsewhere
SINCE KANDLA
DOESNT HAVE A
DEEPER DRAFT ITS
NOT ABLE TO BRING
IN BIGGER VESSELS
success stories in port-related trades.
PARTITION PANG
Te history of Kandla Port goes back
to the pre-independence era. Te ruler
of the princely state of Kutch, Maharao
Khengarji III, in 1930, initiated the con-
struction of a deep draf port for his king-
dom and the port was commissioned in
1931. However, Kandla Ports real glory
days started post independence. Follow-
ing partition, Karachi Port that used to
serve the vast hinterlands of North and
West India, went to Pakistan. Hence, the
Indian government constituted the West
Coast Major Port Development Com-
mittee, on February 17, 1948, to scout
for locations to construct a deep sea
port, which could act as a replacement to
the Karachi Port. As a result of the com-
mittees recommendations, the Kandla
Port was developed and inaugurated in
1964. Te Port is situated in the Kandla
creek, 90 km from the mouth of the Gulf
of Kutch. Tis makes it one of the safest
during cyclones and tidal disturbances.
NEVER DETERRED
Te Kandla Port Trust (KPT) caters to
a vast hinterland of 11 states, spread
across 1 million square kilometre. Te
region attracts people from all over the
country, giving it a cosmopolitan look
the primary reason why there has never
been a major labour unrest at the port.
However, the deadly earthquake of 2001
disrupted its smooth journey. Post the
quake, the Centre announced the In-
centive Scheme 2001 to attract new
industries and large investments to the
district. Recalling the devastating quake,
Ranuj Yadav, who owns a small saloon
in Gandhidham, tells Te Dollar Busi-
ness, Tere was little lef in the region.
Most buildings which had more than
two foors collapsed. Adds Nandu Bhai,
a tour operator, as he tells the magazine,
We sufered a lot due to the quake. But
with the government declaring a tax hol-
iday to help the rebuilding exercise, mas-
sive investment poured in.
Kutch is also home to Asias frst Spe-
cial Economic Zone (SEZ). Established
in 1965, the Te Port of Kandla SEZ is
the biggest multiple-product SEZ in the
country and was beneftted in a massive
way when the new SEZ scheme was in-
troduced in the Export & Import Policy
2000. Stressing on the importance of the
Port on the socio-economic growth of
the region, Te Gandhidham Chamber
of Commerce and Industry Joint Sec-
retary Aashish S. Joshi tells Te Dollar
Business, All economic activities in the
region are directly or indirectly associat-
ed with Kandla Port. Apart from giving a
boost to heavy and small industries, the
Port has also spearheaded export orient-
ed businesses in the region. It has helped
the local salt, mineral, timber, hotel and
fertiliser industry fourish.
In fact, Kandla is the epicentre of In-
dias timber trade. Kandla Timber Asso-
ciation Vice-President Sameer Garg rea-
sons this. Te timber business requires
a lot of storage space. In the late 70s,
timber importers in India tried ports like
Kolkata and Mumbai. But Kandla Port
turned out to be the most cost efective
and also convenient because of the avail-
ability of a lot of vacant land, Garg tells
Te Dollar Business. He proudly adds
that about 70% of Indias total timber im-
ports are handled by Kandla.
Moreover, the 4,000 MW ultra-mega
imported coal and super-critical tech-
nology based power plant by Coastal
Gujarat Power Ltd. also uses the port to
import coal. Indian Farmers Fertiliser
Cooperative Ltd. too uses Kandla as a
gateway port. However, the main rea-
son why Kandla continues to be Indias
preferred port is the Priority Port status
that has been accorded to it for LNG,
coal, petroleum and fertiliser imports.
ROADBLOCKS
Despite necessary ecosystem being in
place, all is not well at KPT. Its biggest
competition lies just 60 km south west.
Adani group-controlled Mundra Port
has now overtaken KPT and has be-
come Indias largest port in terms of car-
go handling. Te fagship port of Adani
Ports and SEZ (APSEZL), Mundra be-
Containers being loaded on Bulk Monaco, a 39,737 gross tonnage ship registered in Panama,
at Kandla Port. KPT has foated a tender and invited bids to operate the container terminal
700
600
500
400
300
200
100
0
FY2012 FY2013 FY2014
Source: Ministry of Shipping; fgures in lakh tonnes
Trafc handled by Kandla
Cargo trafc registered a de-growth of
7.1% in FY2014 over FY2013
Traffc handled (imports) Traffc handled (exports)
SINCE KANDLA
DOESNT HAVE A
DEEPER DRAFT ITS
NOT ABLE TO BRING
IN BIGGER VESSELS
success stories in port-related trades.
PARTITION PANG
Te history of Kandla Port goes back
to the pre-independence era. Te ruler
of the princely state of Kutch, Maharao
Khengarji III, in 1930, initiated the con-
struction of a deep draf port for his king-
dom and the port was commissioned in
1931. However, Kandla Ports real glory
days started post independence. Follow-
ing partition, Karachi Port that used to
serve the vast hinterlands of North and
West India, went to Pakistan. Hence, the
Indian government constituted the West
Coast Major Port Development Com-
mittee, on February 17, 1948, to scout
for locations to construct a deep sea
port, which could act as a replacement to
the Karachi Port. As a result of the com-
mittees recommendations, the Kandla
Port was developed and inaugurated in
1964. Te Port is situated in the Kandla
creek, 90 km from the mouth of the Gulf
of Kutch. Tis makes it one of the safest
during cyclones and tidal disturbances.
NEVER DETERRED
Te Kandla Port Trust (KPT) caters to
a vast hinterland of 11 states, spread
across 1 million square kilometre. Te
region attracts people from all over the
country, giving it a cosmopolitan look
the primary reason why there has never
been a major labour unrest at the port.
However, the deadly earthquake of 2001
disrupted its smooth journey. Post the
quake, the Centre announced the In-
centive Scheme 2001 to attract new
industries and large investments to the
district. Recalling the devastating quake,
Ranuj Yadav, who owns a small saloon
in Gandhidham, tells Te Dollar Busi-
ness, Tere was little lef in the region.
Most buildings which had more than
two foors collapsed. Adds Nandu Bhai,
a tour operator, as he tells the magazine,
We sufered a lot due to the quake. But
with the government declaring a tax hol-
iday to help the rebuilding exercise, mas-
sive investment poured in.
Kutch is also home to Asias frst Spe-
cial Economic Zone (SEZ). Established
in 1965, the Te Port of Kandla SEZ is
the biggest multiple-product SEZ in the
country and was beneftted in a massive
way when the new SEZ scheme was in-
troduced in the Export & Import Policy
2000. Stressing on the importance of the
Port on the socio-economic growth of
the region, Te Gandhidham Chamber
of Commerce and Industry Joint Sec-
retary Aashish S. Joshi tells Te Dollar
Business, All economic activities in the
region are directly or indirectly associat-
ed with Kandla Port. Apart from giving a
boost to heavy and small industries, the
Port has also spearheaded export orient-
ed businesses in the region. It has helped
the local salt, mineral, timber, hotel and
fertiliser industry fourish.
In fact, Kandla is the epicentre of In-
dias timber trade. Kandla Timber Asso-
ciation Vice-President Sameer Garg rea-
sons this. Te timber business requires
a lot of storage space. In the late 70s,
timber importers in India tried ports like
Kolkata and Mumbai. But Kandla Port
turned out to be the most cost efective
and also convenient because of the avail-
ability of a lot of vacant land, Garg tells
Te Dollar Business. He proudly adds
that about 70% of Indias total timber im-
ports are handled by Kandla.
Moreover, the 4,000 MW ultra-mega
imported coal and super-critical tech-
nology based power plant by Coastal
Gujarat Power Ltd. also uses the port to
import coal. Indian Farmers Fertiliser
Cooperative Ltd. too uses Kandla as a
gateway port. However, the main rea-
son why Kandla continues to be Indias
preferred port is the Priority Port status
that has been accorded to it for LNG,
coal, petroleum and fertiliser imports.
ROADBLOCKS
Despite necessary ecosystem being in
place, all is not well at KPT. Its biggest
competition lies just 60 km south west.
Adani group-controlled Mundra Port
has now overtaken KPT and has be-
come Indias largest port in terms of car-
go handling. Te fagship port of Adani
Ports and SEZ (APSEZL), Mundra be-
Containers being loaded on Bulk Monaco, a 39,737 gross tonnage ship registered in Panama,
at Kandla Port. KPT has foated a tender and invited bids to operate the container terminal
700
600
500
400
300
200
100
0
FY2012 FY2013 FY2014
Trafc handled by Kandla
Cargo trafc registered a de-growth of
7.1% in FY2014 over FY2013
Traffc handled (imports) Traffc handled (exports)
Wheat being loaded onto a vessel with the help of ELL wharf cranes at Kandla Port.
Kandla has been accorded the status of Priority Port when it comes to grain exports
came the frst Indian port to handle 100
million metric tonnes (MMT) in a year
afer it crossed the mark in FY2014. As
compared to this, KPT handled about
87 MMT during the period. At the same
time, of the 87 MMT that KPT claims
to have handled, a signifcant share was
accounted for by KPTs satellite port Va-
dinar. Its worth mentioning that Vadinar
handles liquid petroleum products and is
managed by Essar Ports.
According to a Ministry of Shipping
report, Kandla not only missed its tar-
get of 95 MMT but also recorded a fall
of 7.1% in cargo handled in FY2014.
Te reason why KPT ofcials and other
stakeholders should be very worried is
the mushrooming of minor and inter-
mediate ports all over Gujarats coast,
which are growing at a frantic pace. For
instance, in FY1999, while KPT handled
40.6 MMT cargo, all intermediate and
minor ports in Gujarat, put together,
IN FY2014, MINOR
AND INTERMEDIATE
PORTS IN GUJARAT
HANDLED CLOSE TO
FOUR TIMES OF WHAT
KANDLA HANDLED
DURING THE YEAR
handled just 25.1 MMT. Tis ratio has
turned upside down in the last 15 years.
Interestingly, in FY2014, minor and in-
termediate ports in Gujarat handled
close to four times of what Kandla han-
dled during the year!
Limited draf is another obstacle to
the Ports growth. KPT is a tidal port and
ship movement is possible only during
high tide. Te Port has a draf of about
12.5 meter, which limits the entry of big-
ger vessels. On the other hand, Mundra,
being a deep sea port, has no such issues.
Mansukhani blames slow decision mak-
ing, lack of pro-activeness, and faulty
PPP (public-private-partnership) and
BOT (buildoperatetransfer) models
for the Ports recent poor show.
Another Kandla stakeholder Gyan
Singhvi, Director of Singhvi Tradelink,
a company that uses Kandla Port for
exporting its products tells Te Dollar
Business, Te major problem with KPT
is that its Chairman is rarely available
since he also heads the Mumbai Port.
Tis delays decision-making. [In fact,
the day our team reached the KPTs
administrative ofce, most cabins were
vacant. Piles of fles scattered all over,
made a mockery of the governments
claim of making transactions in public
sector organisations paperless.] Te
Port has become an orphan. Neither the
trustees, nor the government is bothered
about the Ports development. Out of 15
berths, six remain idle most of the time,
laments Singhvi.
NEWBIES HAVE ARRIVED
Gujarat Maritime Board (GMB), which
was created in 1982 to manage non-ma-
jor ports in the state, currently manages
41 minor ports along Gujarats 1,600 km
long coastline and is doing an excellent
job. Tis has resulted in competition for
Kandla and is only growing fast. While
private ports like Mundra have a faster
project conceptualisation and realisation
process, KPT ofcials have to get approv-
als from the trustees and the Centre for
even basic administrative issues.
Despite all such issues, KPT, due to
its strategic location, vast hinterland
and Priority Port status, has managed
to retain its No.1 rank among all major
ports in India. Congestion at Mumbai
Port and JNPT has also contributed to
the diversion of trafc to Kandla. How-
ever, KPT shouldnt take this for granted
and needs to develop infrastructure at
a much faster rate if it wants to hold on
to its No.1 major port rank. Tere are
some people with vested interests who
dont want the Port to grow. Te Ports
dependence on the Centre to make deci-
sions has also afected its performance,
says Mansukhani of Rishi Shipping. Its
worth noting that in 2007, a report by
the then KPT Chief Vigilance Ofcer to
Breakup of cargo handled
Petroleum, oil and lubricants account
for 60% of the total cargo at Kandla
POL Iron ore Finished fertiliser
Fertiliser raw materials Coking coal
Thermal coal Container Other
Source: Ministry of Shipping; Breakup for H1, FY2014
A wide-angle view of
state-of-the-art heavy
duty ELL wharf cranes
commissioned at
Kandla Port
58.0%
25.0%
9.0%
1.2%
4.0%
1.0%
1.0%
0.8%
Wheat being loaded onto a vessel with the help of ELL wharf cranes at Kandla Port.
Kandla has been accorded the status of Priority Port when it comes to grain exports
came the frst Indian port to handle 100
million metric tonnes (MMT) in a year
afer it crossed the mark in FY2014. As
compared to this, KPT handled about
87 MMT during the period. At the same
time, of the 87 MMT that KPT claims
to have handled, a signifcant share was
accounted for by KPTs satellite port Va-
dinar. Its worth mentioning that Vadinar
handles liquid petroleum products and is
managed by Essar Ports.
According to a Ministry of Shipping
report, Kandla not only missed its tar-
get of 95 MMT but also recorded a fall
of 7.1% in cargo handled in FY2014.
Te reason why KPT ofcials and other
stakeholders should be very worried is
the mushrooming of minor and inter-
mediate ports all over Gujarats coast,
which are growing at a frantic pace. For
instance, in FY1999, while KPT handled
40.6 MMT cargo, all intermediate and
minor ports in Gujarat, put together,
IN FY2014, MINOR
AND INTERMEDIATE
PORTS IN GUJARAT
HANDLED CLOSE TO
FOUR TIMES OF WHAT
KANDLA HANDLED
DURING THE YEAR
handled just 25.1 MMT. Tis ratio has
turned upside down in the last 15 years.
Interestingly, in FY2014, minor and in-
termediate ports in Gujarat handled
close to four times of what Kandla han-
dled during the year!
Limited draf is another obstacle to
the Ports growth. KPT is a tidal port and
ship movement is possible only during
high tide. Te Port has a draf of about
12.5 meter, which limits the entry of big-
ger vessels. On the other hand, Mundra,
being a deep sea port, has no such issues.
Mansukhani blames slow decision mak-
ing, lack of pro-activeness, and faulty
PPP (public-private-partnership) and
BOT (buildoperatetransfer) models
for the Ports recent poor show.
Another Kandla stakeholder Gyan
Singhvi, Director of Singhvi Tradelink,
a company that uses Kandla Port for
exporting its products tells Te Dollar
Business, Te major problem with KPT
is that its Chairman is rarely available
since he also heads the Mumbai Port.
Tis delays decision-making. [In fact,
the day our team reached the KPTs
administrative ofce, most cabins were
vacant. Piles of fles scattered all over,
made a mockery of the governments
claim of making transactions in public
sector organisations paperless.] Te
Port has become an orphan. Neither the
trustees, nor the government is bothered
about the Ports development. Out of 15
berths, six remain idle most of the time,
laments Singhvi.
NEWBIES HAVE ARRIVED
Gujarat Maritime Board (GMB), which
was created in 1982 to manage non-ma-
jor ports in the state, currently manages
41 minor ports along Gujarats 1,600 km
long coastline and is doing an excellent
job. Tis has resulted in competition for
Kandla and is only growing fast. While
private ports like Mundra have a faster
project conceptualisation and realisation
process, KPT ofcials have to get approv-
als from the trustees and the Centre for
even basic administrative issues.
Despite all such issues, KPT, due to
its strategic location, vast hinterland
and Priority Port status, has managed
to retain its No.1 rank among all major
ports in India. Congestion at Mumbai
Port and JNPT has also contributed to
the diversion of trafc to Kandla. How-
ever, KPT shouldnt take this for granted
and needs to develop infrastructure at
a much faster rate if it wants to hold on
to its No.1 major port rank. Tere are
some people with vested interests who
dont want the Port to grow. Te Ports
dependence on the Centre to make deci-
sions has also afected its performance,
says Mansukhani of Rishi Shipping. Its
worth noting that in 2007, a report by
the then KPT Chief Vigilance Ofcer to
Breakup of cargo handled
Petroleum, oil and lubricants account
for 60% of the total cargo at Kandla
POL Iron ore Finished fertiliser
Fertiliser raw materials Coking coal
Thermal coal Container Other
Source: Ministry of Shipping; Breakup for H1, FY2014
A wide-angle view of
state-of-the-art heavy
duty ELL wharf cranes
commissioned at
Kandla Port
58.0%
25.0%
9.0%
1.2%
4.0%
1.0%
1.0%
0.8%
People queuing up to take a look at INS Gomati, a frigate of Indian Navy, docked at Kandla
A mechanised container loading berth at Kandla Port
Coal being loaded onto trucks using a mechanised coal handler at Kandla Port
of failing to handle minimum guaran-
teed volumes of container, while ABG
accused KPT of failing to meet its obli-
gation to provide adequate draf, night
navigation and rail connectivity.
Finally, in 2013, KPT took over the as-
sets of ABG in exchange for Rs.110 crore.
In its FY2013 annual report, ABG Infral-
ogistics mentioned, ABG Kandla Con-
tainer Terminal Limited used to operate
the container terminal at Kandla Port on
BOT basis. It has terminated its contract
with Kandla Port Trust vide its letter dat-
ed November 9, 2012 due to the failure of
Kandla Port Trust in meeting its obliga-
tions as per the license agreement.
When Te Dollar Business asked
KPT Chief Mechanical Engineer K. C.
Kuncheria to give KPTs side of the sto-
ry, he says, AGB had some management
issues, hence the agreement was termi-
nated. On questioning why KPT did
not conduct enough background check
before allocating the project to ABG,
Kuncheria was evasive. I took over
charge just two months back and hence
I am not aware about the technicalities
of the MoU. However, KPT has foated a
fresh tender and has invited new private
players to operate a container terminal of
0.6 MTU capacity, he defends.
A GLASS HALF-FULL
Despite huge challenges, alls not lost
for KPT. Te mismanagement of KPT
has thrown up great opportunities for
private stevedoring and cargo-handling
companies, who have come up with in-
novative solutions. For example, the issue
of Kandla having a shallow draf is now
being bypassed with the use of foating
cranes to load and of-load cargo from
bigger vessels in the mid-sea. Speaking
to Te Dollar Business about such ini-
tiatives, KPT Deputy Trafc Manager P.
Suresh Babu says, We are working on
improving infrastructure and the inner
channels will be dredged to achieve the
required draf.
Te PPP model has its own issues
though. Yogendrasinh Rana, Senior Ex-
ecutive, RAS Infraport, which partnered
with KPT to develop berth number 13
on BOT basis, feels port authorities
need to be more liberal when it comes
to revenue sharing. Due to the existing
the Ministry of Shipping had confrmed
allegations that 16,000 acres of KPTs
land had been leased away to salt manu-
facturers at throwaway prices.
BACK AND FORTH
In year 2000, KPT foated a global ten-
der and invited bids from private players
to develop a container terminal on BOT
basis. Post the bidding, Australian com-
pany P&O Ports got the letter of intent
(LoI) since it quoted the highest bid of
Rs.300 crore. However, KPT trustees
rejected the ofer giving a vague reason
that the companys ofer was detrimental
to the interests of the port. Tree years
later, P&O Ports acquired 100% stake in
Mundra International Container Termi-
nal, which is now the second largest con-
tainer terminal in India. Hilarious!
In 2006, KPT once again ventured out
on the container terminal mission and
selected Mumbai-based ABG Infralogis-
tics to build and operate it on BOT basis
for a period of 30 years. ABG Infralogis-
tics subsidiary ABG Kandla Container
Terminal Limited signed a MoU with
KPT on an annual revenue sharing mod-
el. However, this deal too turned sour as
KPT ofcials accused ABG Infralogistics
revenue sharing model, our berth has
become 5 times more expensive than
KPT-managed berths. If KPT ofcials
want the Ports growth, they have to pro-
vide much more support than what they
do now, Rana tells Te Dollar Business.
V. G. Sivadas, Assistant Manager of
shipping agency ULA, feels congestion is
the biggest issue for KPT. Port authori-
ties need to upgrade trafc handling ca-
pacities if they want to stop trafc mov-
ing to other ports, he says.
THE WAY FORWARD
Pained by the poor state of afairs at
Kandla Port and disappointed that new
private ports are thriving at its cost, solu-
tions and advices for KPT are plenty.
Singhvi of Singhvi Tradelink reasons why
it is foolish to write of Kandla. Tere is
a nexus between customs house agents,
shipping agencies and container freight
stations (CFS) at Mundra Port. Shipping
agencies force customers to of-load car-
go at a specifc CFS. If the importer of-
loads the cargo at his/her preferred CFS,
he/she is forced to pay a rent for the used
CFS and also the CFS chosen by the ship
liner. Tis is not the case at KPT. Tats
why a lot of users prefer it. He adds if
KPT can get its act together, glory days
would be back again.
Te Bhuj-Kutch region has around
72 large scale and public sector units,
of which 12 are located in and around
Gandhidham. Tese units act as cargo
feeders to Kandla Port. Tere is anoth-
er reason that makes Kandla the choice
of exporters and importers. Mundra
Port is 60 km from our depots in Gand-
hidham. Tis increases transportation
cost by Rs.100-150/cubic metre, reasons
Garg of Kandla Timber Association.
A full-time Chairman on deck should
be the right start to mending Kand-
las wrongs that have resulted in rising
popularity of competitor-port Mundra
amongst the trader community.
Having spent a few days in Gand-
hidham, despite criticisms, one cannot
escape the feeling of love and respect that
its residents have for Kandla. It made
Gandhidham. [Know what we mean?]
You can almost hear their silent prayers.
If only the right gods were listening.
sisir@thedollarbusiness.com
A view of Kandlas harbour
tug. A tug is a boat that
maneuvers big vessels by
pushing or towing them
in a crowded harbour or a
narrow canal
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
60
50
40
30
20
10
0
-10
-20
-30
-40
Kolkata Paradip Vizag Chennai Tuticorin Cochin Mangalore Mormugao Mumbai JNPT Ennore Kandla
Cargo handled by Indias major ports
Paradip and Ennore were the only two ports that recorded double-digit growth rates in FY2014
FY2013 FY2014

Growth (%)
P
h
o
t
o

C
o
u
r
t
e
s
y
:

M
o
h
a
n

N
a
i
k
INSIDE OUT SERVED FROM INDIA SCHEME (SFIS)
E
ver since China became the fac-
tory of the world and Chinese
goods started fooding global
markets, Made in China has
become one of the most powerful brands
around. From the Upper East Side of
Manhattan to Burrabazar in Kolkata;
from Chatuchak Weekend Market in
Bangkok to Chandni Chowk in New
Delhi, there is just no escaping Chinese
goods. All across the globe, Made in
Known all over the world as
a civilization that takes much
pride in serving mankind,
India has not quite lived
up to its potential as a
world-class service provider.
And while the government is
doing its bit with a scheme
like Served From India
Scheme (SFIS), there
seems to be a lack of intent
in helping Indian service
providers become a global
force to reckon
Did you know?
The philosophy behind
the Indian gesture of
greeting another
person with folded hands
(namah + te = namaste) is
I bow to you!
HOW
SERVED
FROM INDIA
SCHEME
ALMOST
BECAME
FAMOUS
China has become a symbol of cheap
but efective manufactured products. In
fact, Made in China has become such a
dominant brand that it is believed to be
one of the main reasons for Sinophobia.
At the other end of the spectrum is
Swiss Made. A symbol of superior and
reliable quality, the brand has helped
revive Switzerlands manufacturing sec-
tor, particularly watches and clocks and
helped them reclaim their status as the
best in the world. Wouldnt it have been
great if India had something like these
two to boast about?
BABY STEPS
Realising that Manufacturing was not
Indias forte and the only sector where
India had a chance to create a global-
ly recognisable brand was Services, the
government, in the Foreign Trade Poli-
cy (FTP) 2004-2009, had introduced the
Served From India Scheme (SFIS). Te
objective of the scheme was to accelerate
growth in the export of services to create
a powerful and unique brand, instantly
recognised and respected all over the
world. As per the scheme, any service
provider, with at least Rs.10 lakh worth
of foreign earnings in a fnancial year,
was eligible for duty credit scrip of 10%
of total forex earnings that can be used
in the following year(s). While in case
of Star hotels, the duty credit was 5%
of forex earnings, in case of standalone
restaurants it was 20%. Te duty credit
was allowed to be used while importing
any capital goods including spares, ofce
equipment, professional equipment, of-
fce furniture & consumables and even
food items & alcoholic beverages.
Later, via a notifcation dated Janu-
ary 18, 2011, the eligibility was brought
down to just Rs.5 lakh for individual
service providers.
FALLING AT THE
FIRST HURDLE
In 2013, when SFIS was still in its infancy
and the basic objectives for foating it had
barely been achieved, the government
dropped a bomb while announcing the
annual supplement to the FTP by chang-
ing the rules for calculating duty credit
scrip entitlement. Post the supplement, a
service provider is now entitled for 10%
duty credit only on net forex earnings
and not gross forex earnings, as was the
case earlier. For example, if a service pro-
vider earned Rs.10 lakh worth of forex in
FY2014 and in order to earn it, it ended
up spending Rs.5 lakh worth of forex,
then, he/she is entitled to just Rs.50,000
as duty credit instead of Rs.1 lakh, as was
the case earlier.
Tis came as a rude shock and end-
ed up making SFIS just a forex earning
scheme instead of a brand building ex-
ercise for the Indian Services sector. For,
if the idea is to build a unique, power-
ful, recognisable and globally respect-
ed brand, as was envisaged in the FTP
2004-2009, just how many dollars one
contributes to the economy can never be
the criteria for incentivising service pro-
viders. And unfortunately, the ones who
got hit the hardest were small providers
as their ratio of forex spent and forex
earned was much higher than that of the
bigger players.
Agrees Gurgaon-based Pratik Jain,
Tax Partner at KPMG, as he tells Te
Dollar Business, Te rationalisation will
have a much bigger impact on small-
er service providers because the large
players dont have a huge expenditure as
compared to their earnings.
BAFFLING
Another long standing demand of Indi-
an services exporters is to make the duty
credit transferable something that the
government has been adamantly reject-
ing for years. While fscal mathematics
might have something to do with this, it
once again exposes the lack of sincerity
to build the Served From India brand.
For, non-transferable duty credit doesnt
LAST YEAR, THE
GOVT RATIONALISED
DUTY CREDIT SCRIP
OFFERED UNDER
SFIS IN THE ANNUAL
SUPPLEMENT TO
THE FTP
Indias services trade
India has almost always maintained a healthy surplus in services trade
Source: International Trade Centre; fgures in $ billion
180
160
140
120
100
80
60
40
20
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: International Trade Centre
Breakup for CY2013; fgures in $ billion
Travel
Other business
Transportation
Financial
Royalties
IT
Insurance
Communication
Construction
Govt. services
Personal, Cultural
Global services trade
Travel & tourism and transportation
account for almost half of services trade
27%
24% 20%
7%
7%
7%
1%
2%
2%
2%
1%
E
ver since China became the fac-
tory of the world and Chinese
goods started fooding global
markets, Made in China has
become one of the most powerful brands
around. From the Upper East Side of
Manhattan to Burrabazar in Kolkata;
from Chatuchak Weekend Market in
Bangkok to Chandni Chowk in New
Delhi, there is just no escaping Chinese
goods. All across the globe, Made in
Known all over the world as
a civilization that takes much
pride in serving mankind,
India has not quite lived
up to its potential as a
world-class service provider.
And while the government is
doing its bit with a scheme
like Served From India
Scheme (SFIS), there
seems to be a lack of intent
in helping Indian service
providers become a global
force to reckon
Did you know?
The philosophy behind
the Indian gesture of
greeting another
person with folded hands
(namah + te = namaste) is
I bow to you!
HOW
SERVED
FROM INDIA
SCHEME
ALMOST
BECAME
FAMOUS
China has become a symbol of cheap
but efective manufactured products. In
fact, Made in China has become such a
dominant brand that it is believed to be
one of the main reasons for Sinophobia.
At the other end of the spectrum is
Swiss Made. A symbol of superior and
reliable quality, the brand has helped
revive Switzerlands manufacturing sec-
tor, particularly watches and clocks and
helped them reclaim their status as the
best in the world. Wouldnt it have been
great if India had something like these
two to boast about?
BABY STEPS
Realising that Manufacturing was not
Indias forte and the only sector where
India had a chance to create a global-
ly recognisable brand was Services, the
government, in the Foreign Trade Poli-
cy (FTP) 2004-2009, had introduced the
Served From India Scheme (SFIS). Te
objective of the scheme was to accelerate
growth in the export of services to create
a powerful and unique brand, instantly
recognised and respected all over the
world. As per the scheme, any service
provider, with at least Rs.10 lakh worth
of foreign earnings in a fnancial year,
was eligible for duty credit scrip of 10%
of total forex earnings that can be used
in the following year(s). While in case
of Star hotels, the duty credit was 5%
of forex earnings, in case of standalone
restaurants it was 20%. Te duty credit
was allowed to be used while importing
any capital goods including spares, ofce
equipment, professional equipment, of-
fce furniture & consumables and even
food items & alcoholic beverages.
Later, via a notifcation dated Janu-
ary 18, 2011, the eligibility was brought
down to just Rs.5 lakh for individual
service providers.
FALLING AT THE
FIRST HURDLE
In 2013, when SFIS was still in its infancy
and the basic objectives for foating it had
barely been achieved, the government
dropped a bomb while announcing the
annual supplement to the FTP by chang-
ing the rules for calculating duty credit
scrip entitlement. Post the supplement, a
service provider is now entitled for 10%
duty credit only on net forex earnings
and not gross forex earnings, as was the
case earlier. For example, if a service pro-
vider earned Rs.10 lakh worth of forex in
FY2014 and in order to earn it, it ended
up spending Rs.5 lakh worth of forex,
then, he/she is entitled to just Rs.50,000
as duty credit instead of Rs.1 lakh, as was
the case earlier.
Tis came as a rude shock and end-
ed up making SFIS just a forex earning
scheme instead of a brand building ex-
ercise for the Indian Services sector. For,
if the idea is to build a unique, power-
ful, recognisable and globally respect-
ed brand, as was envisaged in the FTP
2004-2009, just how many dollars one
contributes to the economy can never be
the criteria for incentivising service pro-
viders. And unfortunately, the ones who
got hit the hardest were small providers
as their ratio of forex spent and forex
earned was much higher than that of the
bigger players.
Agrees Gurgaon-based Pratik Jain,
Tax Partner at KPMG, as he tells Te
Dollar Business, Te rationalisation will
have a much bigger impact on small-
er service providers because the large
players dont have a huge expenditure as
compared to their earnings.
BAFFLING
Another long standing demand of Indi-
an services exporters is to make the duty
credit transferable something that the
government has been adamantly reject-
ing for years. While fscal mathematics
might have something to do with this, it
once again exposes the lack of sincerity
to build the Served From India brand.
For, non-transferable duty credit doesnt
LAST YEAR, THE
GOVT RATIONALISED
DUTY CREDIT SCRIP
OFFERED UNDER
SFIS IN THE ANNUAL
SUPPLEMENT TO
THE FTP
Indias services trade
India has almost always maintained a healthy surplus in services trade
180
160
140
120
100
80
60
40
20
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: International Trade Centre
Breakup for CY2013; fgures in $ billion
Travel
Other business
Transportation
Financial
Royalties
IT
Insurance
Communication
Construction
Govt. services
Personal, Cultural
Global services trade
Travel & tourism and transportation
account for almost half of services trade
27%
24% 20%
7%
7%
7%
1%
2%
2%
2%
1%
AT OVER $25.2
BILLION, INDIA HAD
THE 9
TH
BIGGEST
TRADE SURPLUS
GLOBALLY IN
SERVICES TRADE
IN CY2013
give a level playing feld to all service
providers and defnitely not help build
the Served From India brand.
Lets take hypothetical examples of
two service providers a discotheque
and an authentic Marathi food restaurant
in South Mumbai. Lets also assume that
both the places are frequented by for-
eign tourists, who mostly use their credit
cards to pay the bills. So, in FY2014, if
foreign tourists used their credit cards to
pay Rs.1 crore equivalent at each of the
two places, then both of them are enti-
tled to duty credit scrips of Rs.10 lakh
each. But while the discotheque can use
its duty credit while importing foreign
liquor the following year, the restau-
rant is lef high and dry since it sources
everything domestically. Isnt it only fair
therefore to allow the restaurant to sell
its duty credit to a willing buyer in cash
or kind?
According to Jain, SFIS is a post ex-
port scheme. A company frst exports
and only then gets the duty scrip, which
is then used for the future imports. Trad-
able duty scrip will beneft a number of
service providers since it does not make
any sense for them to hold on to their
duty scrip for several years if they do not
have any requirement for imports in the
near future. He goes on to add, At the
end of the day, the aim is to promote the
services sector. Te government has to
be liberal and provide tangible benefts
to exporters.
SERVING LOVE FOR A
MILLION YEARS
Indian history is full of stories about the
importance that the country has given
to serving others. So, while the Indian
government is trying to use this virtue to
build a strong Indian brand which will
not only increase Indias equity around
the world but also bring in the big bucks
it shouldnt act miserly while incentiv-
ising its service providers.
As Made in Japan, Swiss Made and
Made in China have, if Served From
India manages to win admirers around
the world, the gains will far outweigh all
concessions that the Indian government
is giving in the name of SFIS.
Ten years ago, when it was launched,
SFIS almost became famous overnight.
Chances are, it actually will. How soon?
Depends on how soon our policymakers
amp up the namaste gesture.
800
700
600
500
400
300
200
100
0
Exports Imports
Top services exporters & importers in the world
US was the biggest exporter & importer of services in 2013
U
S
A
C
h
i
n
a
F
r
a
n
c
e
G
e
r
m
a
n
y
U
K
I
n
d
i
a
R
u
s
s
i
a
S
p
a
i
n
J
a
p
a
n
S
i
n
g
a
p
o
r
e
Indian services imports
At over $127 billion, transportation
accounted for half of Indias imports
Indian services exports
As expected, information technology
dominates Indias services exports
Source: International Trade Centre; Breakup for CY2013
IT
Other business
Travel
Transportation
Other business
Travel
Transportation
Financial
Rest
Insurance
Financial
Rest
48%
24%
10%
9%
4%
5%
34%
33%
12%
11%
7%
3%
TDB: Te last foreign trade policy did
not have much on ofer for the ser-
vices sector. For instance, an incen-
tive scheme such as the Focus Market
Scheme had the services sector exclud-
ed in toto. Are we really incentivising
the services sector?
SG: No, we are not incentivising the ser-
vices sector! And this is not a personal
issue for me or FIEO. It is an issue for
the 300 million people living below the
poverty line. Until now, our foreign trade
policy was being dictated by lobbyists.
What was happening was that Indian
goods were being discouraged and for-
eign goods were being encouraged. We
did not have a nationalist foreign trade
policy and it only served vested interests.
Our policies have been encouraging peo-
ple to become importers instead of man-
ufacturers and exporters.
TDB: Te government has been try-
ing to promote Served From India
(Scheme) both as a brand and a pol-
icy. Do you think enough is being
done in this regard, especially with the
SFIS Duty Credit Scrip being made
non-transferable?
SG: Let me answer this with an example.
Let us talk about physical exporters of
items such as gems and jewellery, carpets
and garments. We are the largest export-
ers of these items. I will start with gems
and jewellery. To export $1,000 worth of
gems and jewellery, we import $900 or
$950 worth of gold and precious stones
from abroad. So, the value addition for
the country is anywhere between $10
and $100. But the service tax exemption
based on the foreign earnings is on that
$1,000. Similarly, for every $1,000 worth
carpets that we export, nearly 50% of the
wool is imported from New Zealand and
Australia. Tis means that the value ad-
dition to the country is only 30% to 40%
but the carpet exporter also gets service
exemption on $1,000 foreign earnings.
Same is the case is with garments. But
in tourism, out of $1,000 that is earned,
$999 is spent in India. Te rest 1% is
the expenditure that an industry player
has to make. But tourism is not given
exemption from service tax. So with all
services sector schemes, including SFIS,
the government is only giving lip service
to the services sector. If they really want
services sector to compete then they
should exempt us from service tax.
TDB: What incentives do you think the
government should ofer the services
sector then?
SG: My only suggestion is dont kill the
goose that lays golden eggs. Dont tax the
services sector. Give them a tax holiday
for up to fve years. And if the govern-
ment needs to tax them, then service
providers should be charged a tax of 4%
to 5% only.
TDB: Across which markets can Indias
services exports be promoted?
SG: Our main markets are USA, UK,
Germany and Sri Lanka. But I believe,
we should also focus on the Middle East
and China too. Today, if we build on
China alone, then we can get huge
business from the market. Tourists
from China are keen to visit India, but
lack of Chinese-speaking guides is
a deterrent.
purba@thedollarbusiness.com
In an exclusive interaction with Te Dollar Business, Subhash
Goyal, Chairman (Services), FIEO, and President, Indian
Association of Tour Operators (IATO), reveals whats wrong
with Indias Services exports. Excerpts:
Dont kill the goose
that lays golden eggs!
Subhash Goyal
Chairman (Services), FIEO;
President, Indian Association
of Tour Operators (IATO)
AT OVER $25.2
BILLION, INDIA HAD
THE 9
TH
BIGGEST
TRADE SURPLUS
GLOBALLY IN
SERVICES TRADE
IN CY2013
give a level playing feld to all service
providers and defnitely not help build
the Served From India brand.
Lets take hypothetical examples of
two service providers a discotheque
and an authentic Marathi food restaurant
in South Mumbai. Lets also assume that
both the places are frequented by for-
eign tourists, who mostly use their credit
cards to pay the bills. So, in FY2014, if
foreign tourists used their credit cards to
pay Rs.1 crore equivalent at each of the
two places, then both of them are enti-
tled to duty credit scrips of Rs.10 lakh
each. But while the discotheque can use
its duty credit while importing foreign
liquor the following year, the restau-
rant is lef high and dry since it sources
everything domestically. Isnt it only fair
therefore to allow the restaurant to sell
its duty credit to a willing buyer in cash
or kind?
According to Jain, SFIS is a post ex-
port scheme. A company frst exports
and only then gets the duty scrip, which
is then used for the future imports. Trad-
able duty scrip will beneft a number of
service providers since it does not make
any sense for them to hold on to their
duty scrip for several years if they do not
have any requirement for imports in the
near future. He goes on to add, At the
end of the day, the aim is to promote the
services sector. Te government has to
be liberal and provide tangible benefts
to exporters.
SERVING LOVE FOR A
MILLION YEARS
Indian history is full of stories about the
importance that the country has given
to serving others. So, while the Indian
government is trying to use this virtue to
build a strong Indian brand which will
not only increase Indias equity around
the world but also bring in the big bucks
it shouldnt act miserly while incentiv-
ising its service providers.
As Made in Japan, Swiss Made and
Made in China have, if Served From
India manages to win admirers around
the world, the gains will far outweigh all
concessions that the Indian government
is giving in the name of SFIS.
Ten years ago, when it was launched,
SFIS almost became famous overnight.
Chances are, it actually will. How soon?
Depends on how soon our policymakers
amp up the namaste gesture.
800
700
600
500
400
300
200
100
0
Exports Imports
Top services exporters & importers in the world
US was the biggest exporter & importer of services in 2013
U
S
A
C
h
i
n
a
F
r
a
n
c
e
G
e
r
m
a
n
y
U
K
I
n
d
i
a
R
u
s
s
i
a
S
p
a
i
n
J
a
p
a
n
S
i
n
g
a
p
o
r
e
Indian services imports
At over $127 billion, transportation
accounted for half of Indias imports
Indian services exports
As expected, information technology
dominates Indias services exports
Source: International Trade Centre; Breakup for CY2013
IT
Other business
Travel
Transportation
Other business
Travel
Transportation
Financial
Rest
Insurance
Financial
Rest
48%
24%
10%
9%
4%
5%
34%
33%
12%
11%
7%
3%
TDB: Te last foreign trade policy did
not have much on ofer for the ser-
vices sector. For instance, an incen-
tive scheme such as the Focus Market
Scheme had the services sector exclud-
ed in toto. Are we really incentivising
the services sector?
SG: No, we are not incentivising the ser-
vices sector! And this is not a personal
issue for me or FIEO. It is an issue for
the 300 million people living below the
poverty line. Until now, our foreign trade
policy was being dictated by lobbyists.
What was happening was that Indian
goods were being discouraged and for-
eign goods were being encouraged. We
did not have a nationalist foreign trade
policy and it only served vested interests.
Our policies have been encouraging peo-
ple to become importers instead of man-
ufacturers and exporters.
TDB: Te government has been try-
ing to promote Served From India
(Scheme) both as a brand and a pol-
icy. Do you think enough is being
done in this regard, especially with the
SFIS Duty Credit Scrip being made
non-transferable?
SG: Let me answer this with an example.
Let us talk about physical exporters of
items such as gems and jewellery, carpets
and garments. We are the largest export-
ers of these items. I will start with gems
and jewellery. To export $1,000 worth of
gems and jewellery, we import $900 or
$950 worth of gold and precious stones
from abroad. So, the value addition for
the country is anywhere between $10
and $100. But the service tax exemption
based on the foreign earnings is on that
$1,000. Similarly, for every $1,000 worth
carpets that we export, nearly 50% of the
wool is imported from New Zealand and
Australia. Tis means that the value ad-
dition to the country is only 30% to 40%
but the carpet exporter also gets service
exemption on $1,000 foreign earnings.
Same is the case is with garments. But
in tourism, out of $1,000 that is earned,
$999 is spent in India. Te rest 1% is
the expenditure that an industry player
has to make. But tourism is not given
exemption from service tax. So with all
services sector schemes, including SFIS,
the government is only giving lip service
to the services sector. If they really want
services sector to compete then they
should exempt us from service tax.
TDB: What incentives do you think the
government should ofer the services
sector then?
SG: My only suggestion is dont kill the
goose that lays golden eggs. Dont tax the
services sector. Give them a tax holiday
for up to fve years. And if the govern-
ment needs to tax them, then service
providers should be charged a tax of 4%
to 5% only.
TDB: Across which markets can Indias
services exports be promoted?
SG: Our main markets are USA, UK,
Germany and Sri Lanka. But I believe,
we should also focus on the Middle East
and China too. Today, if we build on
China alone, then we can get huge
business from the market. Tourists
from China are keen to visit India, but
lack of Chinese-speaking guides is
a deterrent.
In an exclusive interaction with Te Dollar Business, Subhash
Goyal, Chairman (Services), FIEO, and President, Indian
Association of Tour Operators (IATO), reveals whats wrong
with Indias Services exports. Excerpts:
Dont kill the goose
that lays golden eggs!
Subhash Goyal
Chairman (Services), FIEO;
President, Indian Association
of Tour Operators (IATO)
POLICY FOCUS POWER EXPORTS
POWER
DIPLOMACY
GONE
HAYWIRE!
If you are being tormented by frequent power cuts
this summer, add our governments generosity to
Bangladesh to your curse list. For a country, with
more people without power than the entire population
of the US, does it really make sense to export
power? And that too at subsidised rates?
BY SATYAPAL MENON
C
all it serendipitous, but its def-
nitely not a coincidence! Even
while writing this piece on
power exports, there are series
of agonising power cuts. Well, believe it
or not, power defcit India is also a power
exporter. Call it misplaced or displaced
priorities, or attempts to position India
as a regional powerhouse, our policy-
makers have, what in their view is dip-
lomatic altruism, opened up power lines
to Bangladesh. Diplomacy and helping
ones neighbour is unquestionable, but
shouldnt one put ones house in order
frst? Sharing what one has in surplus is
always welcome, but what is incompre-
hensible is the rationale behind export-
ing power, when India itself is countering
chronic crisis and consistently rationing
its power resources.
SOUR DEAL
Power fow to Bangladesh, through the
125-km Baharampur-Bheramara trans-
mission link between the grids of the two
countries, became operational last Octo-
ber. According to the arrangement, 250
megawatt (MW) of power from Indian
central governments unallocated quota
and 250 MW more from a private frm
will be supplied to Bangladesh. Apart
from this commitment, there are also
plans to augment the power supply to
1,500 MW within the next few years.
Te big question here is, can India
aford these exports? Scarcity and short-
ages of power have impacted the Indian
economy and dealt debilitating blows to
both the industrial and agriculture sec-
tors. If the initial decision exposed a lack
of insight, the proposal to increase the
quantum refects policy fallacy .
HUNGRY NUMBERS
India is the worlds 5
th
largest producer
and consumer of power, accounting for
3.4% of global energy production. It is
also a country with shockingly low per
capita power consumption per cap-
ita power consumption in India, at 684
units, is about 95% lower than that of
USA. About 25% of our populace, i.e.,
about 300 million people do not have
access to power. According to a report
titled Shackling Indias Growth Story
by Federation of Indian Chambers of
Commerce and Industry (FICCI), power
demand in India has been growing at an
annual rate of 3.5% for the last three de-
cades and is expected to grow at a much
High voltage transmission towers like these
carry power across the border to Bangladesh
from Indian central governments unallocated
quota. Bangladesh started drawing power
from Indian grid on October 1, 2013 through a
125-kilometre high-voltage transmission line
between Baharampur in West Bengal (India)
and Bheramara in Kushtia (Bangladesh)
POWER
DIPLOMACY
GONE
HAYWIRE!
If you are being tormented by frequent power cuts
this summer, add our governments generosity to
Bangladesh to your curse list. For a country, with
more people without power than the entire population
of the US, does it really make sense to export
power? And that too at subsidised rates?
BY SATYAPAL MENON
C
all it serendipitous, but its def-
nitely not a coincidence! Even
while writing this piece on
power exports, there are series
of agonising power cuts. Well, believe it
or not, power defcit India is also a power
exporter. Call it misplaced or displaced
priorities, or attempts to position India
as a regional powerhouse, our policy-
makers have, what in their view is dip-
lomatic altruism, opened up power lines
to Bangladesh. Diplomacy and helping
ones neighbour is unquestionable, but
shouldnt one put ones house in order
frst? Sharing what one has in surplus is
always welcome, but what is incompre-
hensible is the rationale behind export-
ing power, when India itself is countering
chronic crisis and consistently rationing
its power resources.
SOUR DEAL
Power fow to Bangladesh, through the
125-km Baharampur-Bheramara trans-
mission link between the grids of the two
countries, became operational last Octo-
ber. According to the arrangement, 250
megawatt (MW) of power from Indian
central governments unallocated quota
and 250 MW more from a private frm
will be supplied to Bangladesh. Apart
from this commitment, there are also
plans to augment the power supply to
1,500 MW within the next few years.
Te big question here is, can India
aford these exports? Scarcity and short-
ages of power have impacted the Indian
economy and dealt debilitating blows to
both the industrial and agriculture sec-
tors. If the initial decision exposed a lack
of insight, the proposal to increase the
quantum refects policy fallacy .
HUNGRY NUMBERS
India is the worlds 5
th
largest producer
and consumer of power, accounting for
3.4% of global energy production. It is
also a country with shockingly low per
capita power consumption per cap-
ita power consumption in India, at 684
units, is about 95% lower than that of
USA. About 25% of our populace, i.e.,
about 300 million people do not have
access to power. According to a report
titled Shackling Indias Growth Story
by Federation of Indian Chambers of
Commerce and Industry (FICCI), power
demand in India has been growing at an
annual rate of 3.5% for the last three de-
cades and is expected to grow at a much
High voltage transmission towers like these
carry power across the border to Bangladesh
from Indian central governments unallocated
quota. Bangladesh started drawing power
from Indian grid on October 1, 2013 through a
125-kilometre high-voltage transmission line
between Baharampur in West Bengal (India)
and Bheramara in Kushtia (Bangladesh)
Breakup of all India
installed capacity
Power production in India is still
dominated by government agencies
faster pace over the coming decades.
During FY2014, the demand for pow-
er was 10,02,257 million units (MUs)
against a supply of 9,59,829 MUs a
shortage of 42,428 MUs. While the peak
demand was 1,35,918 MW, the availabili-
ty was 1,29,815 MW a shortage of 6,103
MW. According to Load Generation Bal-
ancing Report (LGBR), India is expected
to experience a peak shortage of 2% and
energy shortage of 5.1% during FY2015.
Against requirements of 1,048,672 MUs,
the availability would be 9,95,157 MUs,
resulting in a shortage of 53,515 MUs.
Te peak availability would be 1,44,788
MW against a demand of 1,47,815 MW,
resulting in a shortage of 3,027 MW.
In fact, this perpetual story of shortage
continues despite a 10% annual growth
in installed capacity in recent years. Te
all-India installed capacity as of Febru-
ary 2014 was 1,63,304.99 MW of ther-
mal, 4,780.00 MW of nuclear, 40,195.40
MW of hydro and 29,462.55 MW of re-
newable power.
NON SPARED
According to a FICCI commissioned
survey conducted by Bureau of Research
on Industry & Economic Fundamen-
tals (BRIEF) on the impact of intermit-
tent power cuts and shortages in supply
on the industrial sector, 39% of Indian
companies were found to be requir-
ing 10,001-50,000 KWH, 29% needing
50,001-1,00,000 KWH, 26% requiring
1,00,001-5,00,000 KWH and 6% requir-
ing more than 5,00,000 KWH power
every month to maximise output and
production. To avoid shortfall in pro-
duction, companies use power backup
units, which ultimately increase their
cost of production/operations. Te study
reveals that 61% of the companies are
burdened by over 10% cost escalation
due to power cuts. Te highest cost esca-
lation was observed in Andhra Pradesh,
Tamil Nadu and Odisha, where cost es-
calation extended beyond 30% for a few
frms.
Te study further adds that if the frms
do not rely on power backup units to en-
sure continuous production, 61% of the
frms would experience over 10% short-
fall in production. According to the re-
port, 21% of the surveyed companies ex-
perience more than 30 hours, 16% from
6 to 10 hours and 15% from 1 to 5 hours
of power outage every week. In fact, In-
dia loses $68 billion in terms of GDP
due to electricity shortage. For instance,
the Rs.13,000 crore knitwear industry at
Tirupur in Tamil Nadu is witnessing an
uptick in enquiries and orders, but it is
unable to accept all orders. Reason: un-
precedented power cuts lasting 8 to 10
hours a day.
Power shortage and defciencies have
also adversely impacted the agriculture
sector, which has been deprived of even
minimal needs. A majority of rural ar-
eas across the country are subjected to
chronic shortages, afecting the produce
Electrical substations like
the one shown here are
used to ration power to
Indian households and com-
mercial establishments
IN FY2014, INDIA
HAD A SHORTFALL
OF 42,428 MUs OF
POWER, WHICH IS
EXPECTED TO RISE
TO 53,515 MUs IN
FY2015
Central State Private
29%
38%
33%
Source: Ministry of Power; breakup for FY2014
and productivity.
WHOS COMMITMENT?
Currently, India is exporting power to
Bangladesh at 7 taka or Rs.5.4/unit. Te
consideration appears neither viable nor
proftable. If one looks at power tarifs
in India avg. price of Rs.9.85/unit in
Maharashtra, Rs.8.15/unit in Andhra
Pradesh, Rs.8/unit in West Bengal,
Rs.6.95/unit in Kerala one cant help
but get the feeling that supplying power
to Bangladesh is nothing but extending
subsidies across the border.
Perhaps, in the long term, if and when
India becomes a power surplus country,
we can aford such largesse. National
Termal Power Corporation (NTPC),
one of Indias largest power producers,
which has been asked to meet the pres-
ent commitment to Bangladesh, has al-
ready expressed its strong reservations
about augmenting supplies at the nego-
tiated prices.
THE OTHER ONE
Tere is an alternative and a more feasi-
ble plan on the anvil though a takeof
from the success of Bhutans hydro-elec-
tric projects. Te success of the Bhutan
model is a classic case in point under
which India had constructed two 2,600
MW capacity hydro-electric projects in
Bhutan, which are being used for redi-
recting or exporting 4,800 BUs to India
afer meeting local demand.
India has been consistently upgrading
and augmenting its generating capacity.
In fact, the installed capacity registered
a growth rate of 10% during FY2014. Al-
though India is well endowed with coal
resources, the countrys coal based plants
are not generating power in accordance
with the installed capacities. Te plant
load factor or the actual generation has
been consistently between 70-73% of
the total thermal installed capacity. Par-
adoxically, coal-based plants are being
operated with imported coal since coal
produced in India does not meet the
standards required for power genera-
tion. Apart from these factors, India also
has had to import natural gas to operate
its gas-based plants. Te performance of
hydro-electric plants are also subjected
to the vagaries of monsoon and avail-
ability of water.
Tis is where our neighbours can chip
in. India can use its thermal power in-
frastructure to its full capacity by im-
porting natural gas and the right quality
of coal from its neighbours. It can also
contribute its expertise in constructing
infrastructure for power generation,
both thermal projects and hydro-elec-
tric projects like in the case of Bhutan.
According to a Ministry of Power report,
because of low electricity per capita
consumption in India, the country is
going to achieve surplus electricity gen-
eration during the 12
th
plan period pro-
vided its coal production and transport
infrastructure is developed adequate-
ly. Surplus electricity can be exported
to neighbouring countries in return
for natural gas supplies from Pakistan,
Bangladesh and Myanmar. Bangladesh,
Myanmar and Pakistan respectively have
proven natural gas reserves of 184 billion
cubic meters (BCM), 283 BCM and 754
BCM. Tere is ample opportunity for
mutually benefcial trading in energy re-
sources with these countries. India can
supply its surplus electricity to Pakistan
and Bangladesh in return of natural gas
imports by gas pipelines. Similarly, India
can explore scope to develop, on BOOT
(buildownoperatetransfer) basis, hy-
dro power projects in Nepal, Myanmar
and Bhutan.
Long-term power purchase agree-
ments with China for developing the
hydro power potential in Brahmaputra
basin of Tibet region could prove to be
another viable initiative. Tere is ample
trading synergy for India with its neigh-
bours in securing its energy require-
ments but they have to be explored with
proper planning not in the way Bangla-
desh is being provided subsidised power
by keeping India in darkness.
satyapal@thedollarbusiness.com
THERMAL HYDRO NUCLEAR TOTAL THERMAL HYDRO NUCLEAR
Target Achieved Target Achieved
Targets & achievements: Apr-Feb FY2014
Robust thermal power production helped achieve the target
12
th
Plan targets & achievements
India plans to produce 90,000 MW power in the 12
th
Plan
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Source: Ministry of Power; fgures in megawatt (MW)
ACCORDING TO A
FICCI REPORT, INDIA
LOSES ABOUT
$68 BILLION WORTH
OF GDP EVERY YEAR
DUE TO POWER
SHORTAGE
Breakup of all India
installed capacity
Power production in India is still
dominated by government agencies
faster pace over the coming decades.
During FY2014, the demand for pow-
er was 10,02,257 million units (MUs)
against a supply of 9,59,829 MUs a
shortage of 42,428 MUs. While the peak
demand was 1,35,918 MW, the availabili-
ty was 1,29,815 MW a shortage of 6,103
MW. According to Load Generation Bal-
ancing Report (LGBR), India is expected
to experience a peak shortage of 2% and
energy shortage of 5.1% during FY2015.
Against requirements of 1,048,672 MUs,
the availability would be 9,95,157 MUs,
resulting in a shortage of 53,515 MUs.
Te peak availability would be 1,44,788
MW against a demand of 1,47,815 MW,
resulting in a shortage of 3,027 MW.
In fact, this perpetual story of shortage
continues despite a 10% annual growth
in installed capacity in recent years. Te
all-India installed capacity as of Febru-
ary 2014 was 1,63,304.99 MW of ther-
mal, 4,780.00 MW of nuclear, 40,195.40
MW of hydro and 29,462.55 MW of re-
newable power.
NON SPARED
According to a FICCI commissioned
survey conducted by Bureau of Research
on Industry & Economic Fundamen-
tals (BRIEF) on the impact of intermit-
tent power cuts and shortages in supply
on the industrial sector, 39% of Indian
companies were found to be requir-
ing 10,001-50,000 KWH, 29% needing
50,001-1,00,000 KWH, 26% requiring
1,00,001-5,00,000 KWH and 6% requir-
ing more than 5,00,000 KWH power
every month to maximise output and
production. To avoid shortfall in pro-
duction, companies use power backup
units, which ultimately increase their
cost of production/operations. Te study
reveals that 61% of the companies are
burdened by over 10% cost escalation
due to power cuts. Te highest cost esca-
lation was observed in Andhra Pradesh,
Tamil Nadu and Odisha, where cost es-
calation extended beyond 30% for a few
frms.
Te study further adds that if the frms
do not rely on power backup units to en-
sure continuous production, 61% of the
frms would experience over 10% short-
fall in production. According to the re-
port, 21% of the surveyed companies ex-
perience more than 30 hours, 16% from
6 to 10 hours and 15% from 1 to 5 hours
of power outage every week. In fact, In-
dia loses $68 billion in terms of GDP
due to electricity shortage. For instance,
the Rs.13,000 crore knitwear industry at
Tirupur in Tamil Nadu is witnessing an
uptick in enquiries and orders, but it is
unable to accept all orders. Reason: un-
precedented power cuts lasting 8 to 10
hours a day.
Power shortage and defciencies have
also adversely impacted the agriculture
sector, which has been deprived of even
minimal needs. A majority of rural ar-
eas across the country are subjected to
chronic shortages, afecting the produce
Electrical substations like
the one shown here are
used to ration power to
Indian households and com-
mercial establishments
IN FY2014, INDIA
HAD A SHORTFALL
OF 42,428 MUs OF
POWER, WHICH IS
EXPECTED TO RISE
TO 53,515 MUs IN
FY2015
Central State Private
29%
38%
33%
Source: Ministry of Power; breakup for FY2014
and productivity.
WHOS COMMITMENT?
Currently, India is exporting power to
Bangladesh at 7 taka or Rs.5.4/unit. Te
consideration appears neither viable nor
proftable. If one looks at power tarifs
in India avg. price of Rs.9.85/unit in
Maharashtra, Rs.8.15/unit in Andhra
Pradesh, Rs.8/unit in West Bengal,
Rs.6.95/unit in Kerala one cant help
but get the feeling that supplying power
to Bangladesh is nothing but extending
subsidies across the border.
Perhaps, in the long term, if and when
India becomes a power surplus country,
we can aford such largesse. National
Termal Power Corporation (NTPC),
one of Indias largest power producers,
which has been asked to meet the pres-
ent commitment to Bangladesh, has al-
ready expressed its strong reservations
about augmenting supplies at the nego-
tiated prices.
THE OTHER ONE
Tere is an alternative and a more feasi-
ble plan on the anvil though a takeof
from the success of Bhutans hydro-elec-
tric projects. Te success of the Bhutan
model is a classic case in point under
which India had constructed two 2,600
MW capacity hydro-electric projects in
Bhutan, which are being used for redi-
recting or exporting 4,800 BUs to India
afer meeting local demand.
India has been consistently upgrading
and augmenting its generating capacity.
In fact, the installed capacity registered
a growth rate of 10% during FY2014. Al-
though India is well endowed with coal
resources, the countrys coal based plants
are not generating power in accordance
with the installed capacities. Te plant
load factor or the actual generation has
been consistently between 70-73% of
the total thermal installed capacity. Par-
adoxically, coal-based plants are being
operated with imported coal since coal
produced in India does not meet the
standards required for power genera-
tion. Apart from these factors, India also
has had to import natural gas to operate
its gas-based plants. Te performance of
hydro-electric plants are also subjected
to the vagaries of monsoon and avail-
ability of water.
Tis is where our neighbours can chip
in. India can use its thermal power in-
frastructure to its full capacity by im-
porting natural gas and the right quality
of coal from its neighbours. It can also
contribute its expertise in constructing
infrastructure for power generation,
both thermal projects and hydro-elec-
tric projects like in the case of Bhutan.
According to a Ministry of Power report,
because of low electricity per capita
consumption in India, the country is
going to achieve surplus electricity gen-
eration during the 12
th
plan period pro-
vided its coal production and transport
infrastructure is developed adequate-
ly. Surplus electricity can be exported
to neighbouring countries in return
for natural gas supplies from Pakistan,
Bangladesh and Myanmar. Bangladesh,
Myanmar and Pakistan respectively have
proven natural gas reserves of 184 billion
cubic meters (BCM), 283 BCM and 754
BCM. Tere is ample opportunity for
mutually benefcial trading in energy re-
sources with these countries. India can
supply its surplus electricity to Pakistan
and Bangladesh in return of natural gas
imports by gas pipelines. Similarly, India
can explore scope to develop, on BOOT
(buildownoperatetransfer) basis, hy-
dro power projects in Nepal, Myanmar
and Bhutan.
Long-term power purchase agree-
ments with China for developing the
hydro power potential in Brahmaputra
basin of Tibet region could prove to be
another viable initiative. Tere is ample
trading synergy for India with its neigh-
bours in securing its energy require-
ments but they have to be explored with
proper planning not in the way Bangla-
desh is being provided subsidised power
by keeping India in darkness.
satyapal@thedollarbusiness.com
THERMAL HYDRO NUCLEAR TOTAL THERMAL HYDRO NUCLEAR
Target Achieved Target Achieved
Targets & achievements: Apr-Feb FY2014
Robust thermal power production helped achieve the target
12
th
Plan targets & achievements
India plans to produce 90,000 MW power in the 12
th
Plan
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Source: Ministry of Power; fgures in megawatt (MW)
ACCORDING TO A
FICCI REPORT, INDIA
LOSES ABOUT
$68 BILLION WORTH
OF GDP EVERY YEAR
DUE TO POWER
SHORTAGE
POLICY
MONITOR
R. RAMESH KUMAR, EXECUTIVE DIRECTOR, COUNCIL FOR LEATHER EXPORTS
EXTENSION OF
EXCISE DUTY
EXEMPTION
WILL SURELY
BOOST
LEATHER
EXPORTS
Coveting popular attention isnt always about a vanity play. Not in the business
of leather exports. Despite a slowdown in the global economy, leather exports
from India have surged in recent times. And at the forefront of this revolution is
R. Ramesh Kumar, Executive Director, Council for Leather Exports (CLE). In
conversation with The Dollar Business, Ramesh Kumar dwells in depth about
factors that enabled the leather industry to weather storms in the last fve years
INTERVIEW BY JAYASHANKAR MENON
TDB: How would you summarise
Indias exports of leather in the last
fscal? Which product categories gave
an impetus to exports?
RK: Te industry achieved an all-
time high export value of $6 billion in
FY2014 a growth of about 17.6% as
compared to the previous year. Tis has
been achieved despite several challeng-
es, particularly high cost of essential
raw materials and intense competition
in the global market. In fact, all prod-
uct segments, except leather garments,
achieved an export growth rate of more
than 13% in FY2014. In case of leather
garments, the growth was comparatively
lower at 5.37%, which can be attributed
to competition from the emergence of al-
ternate synthetic and PU (Polyurethane)
garments. However, the leather garment
segment has now adopted combination
garments, i.e., garments made of leath-
er in combination with synthetic/textile
items. Tis is in tune with market re-
quirements and we are hopeful that ex-
ports will get a boost in FY2015.
TDB: Growth of leather exports from
India, in volume terms, has been errat-
ic over the last fve years. What do you
think has been the reason?
RK: As far as exports growth in quan-
tity terms is concerned, one has to look
into the adverse impact caused by the
global economic recession of 2008-09,
which signifcantly reduced the demand
for leather products and footwear. Tis
might be one reason for uneven growth
rates in quantity terms.
TDB: What kind of margins are avail-
able to those who export leather skins
and hides as compared to those who
export leather goods?
RK: Its difcult to fgure out the margins
WE ARE NOW
EXPLORING NEW
MARKETS IN THE
ASIA-OCEANIA
REGION FOR
ENHANCING OUR
EXPORTS
for exporters of hides, skins and leather
as well as those for value-added products
as they depend on many factors. In the
case of hides, skins and leather, we have
to look into the type of hides or skins, i.e.,
whether they are raw, semi-processed
or fnished. Similarly, the price will dif-
fer depending on the origin of the skin/
hide. In case of value-added products,
margins depend on whether the product
is in the lower range, middle range or is
supplied to the higher end of the market.
TDB: Hong Kong is the top destination
for Indian leather but it doesnt fgure
anywhere when it comes to leather
goods. Is it a function of demand or are
we losing out to competition?
RK: Competition is a major factor.
Hence, we are also looking at other po-
tential markets in the Asia-Oceania re-
gion including Japan, Australia and New
Zealand for enhancing our exports. In-
dian exporters are regularly participat-
ing in leather exhibitions (Asia Pacifc
Leather Fair) organised in Hong Kong.
Besides, we had recently organised the
visit of one delegation to Australia and
New Zealand to tap into those markets.
We are also planning to send delegations
to countries like Vietnam and South Ko-
rea to discover new possibilities.
TDB: Indian leather goods are most-
ly exported to Europe and USA. Who,
according to you, are our main com-
petitors and what is Indias share in the
total imports by these two markets?
RK: About 75% of Indias export of
leather and leather products is directed
to Europe and USA. Our main competi-
tors in these two major markets are Chi-
na, Vietnam, Pakistan (particularly for
leather garments), Bangladesh (when it
comes to footwear), Tailand, and Cam-
bodia. While our market share in Europe
is about 4.5%, in USA it is about 1.4%.
Hence, there is a lot of scope for further
increasing our market share even in
these traditional markets.
TDB: What kind of incentives do you
think are being provided by govern-
ments of such competing nations that
are exporting to USA and Europe?
RK: Te governments of competing
countries must be providing export in-
centives. Bangladesh, for example, ben-
efts from the status of Least Developed
Country because of which it enjoys
zero import duty or higher concessional
duties. Similarly, it is learnt that the Eu-
ropean Union has ofered Generalised
Scheme of Preferences (GSP) and other
benefts to Pakistan, on account of which
it might be having an edge.
TDB: Asian countries still dont fgure
among the top destinations for Indian
leather and leather goods. Is it an un-
tapped market or is demand in these
countries generally low?
RK: We are looking at countries like
Japan, South Korea as well as the Middle
East as future markets for Indian leather
products and footwear. We hope that the
Indian leather industry is able to consid-
erably increase its market share in these
countries in the coming years.
TDB: Excise duty on machinery and
equipment that the leather industry
uses was cut in the last Budget. How
has it helped the margins of leather
goods manufacturers? Do you expect
these measures to be extended further
in this years Budget?
RK: Te extension of the excise duty re-
duction will defnitely help modernisa-
tion of the leather industry and in turn
boost exports. We hope the government
extends it.
TDB: What kind of a growth can we ex-
pect if the government gives its nod to
your other demands like enhancement
of duty credit and implementation of
3% interest rate subvention scheme?
RK: Te industry is targeting 20% export
growth this year. If the government gives
a go-ahead to our demands, exports will
defnitely get a further boost.
Destination for
Indian leather goods
Germany is the biggest
market for Indian leather
Breakup of Indian
leather goods exports
Indian exports are dominated
by jackets & jerseys
Indias leather & leather goods exports
Leather exports has been growing at a CAGR of about 8.54%*
2,500
2,000
1,500
1,000
500
0
Raw Hides, Skin and Leather Leather Goods
Source: Ministry of Commerce; breakup for FY2014 Source: Ministry of Commerce; $ million (*Last fve years)
France Germany
Spain USA
UK ROW
Ladies handbags Wallets & Purses
Jackets & Jerseys Other handbags
Industrial gloves Other
36%
7%
16%
21%
9%
11%
17%
12%
7%
17%
7%
40%
POLICY
MONITOR
R. RAMESH KUMAR, EXECUTIVE DIRECTOR, COUNCIL FOR LEATHER EXPORTS
EXTENSION OF
EXCISE DUTY
EXEMPTION
WILL SURELY
BOOST
LEATHER
EXPORTS
Coveting popular attention isnt always about a vanity play. Not in the business
of leather exports. Despite a slowdown in the global economy, leather exports
from India have surged in recent times. And at the forefront of this revolution is
R. Ramesh Kumar, Executive Director, Council for Leather Exports (CLE). In
conversation with The Dollar Business, Ramesh Kumar dwells in depth about
factors that enabled the leather industry to weather storms in the last fve years
TDB: How would you summarise
Indias exports of leather in the last
fscal? Which product categories gave
an impetus to exports?
RK: Te industry achieved an all-
time high export value of $6 billion in
FY2014 a growth of about 17.6% as
compared to the previous year. Tis has
been achieved despite several challeng-
es, particularly high cost of essential
raw materials and intense competition
in the global market. In fact, all prod-
uct segments, except leather garments,
achieved an export growth rate of more
than 13% in FY2014. In case of leather
garments, the growth was comparatively
lower at 5.37%, which can be attributed
to competition from the emergence of al-
ternate synthetic and PU (Polyurethane)
garments. However, the leather garment
segment has now adopted combination
garments, i.e., garments made of leath-
er in combination with synthetic/textile
items. Tis is in tune with market re-
quirements and we are hopeful that ex-
ports will get a boost in FY2015.
TDB: Growth of leather exports from
India, in volume terms, has been errat-
ic over the last fve years. What do you
think has been the reason?
RK: As far as exports growth in quan-
tity terms is concerned, one has to look
into the adverse impact caused by the
global economic recession of 2008-09,
which signifcantly reduced the demand
for leather products and footwear. Tis
might be one reason for uneven growth
rates in quantity terms.
TDB: What kind of margins are avail-
able to those who export leather skins
and hides as compared to those who
export leather goods?
RK: Its difcult to fgure out the margins
WE ARE NOW
EXPLORING NEW
MARKETS IN THE
ASIA-OCEANIA
REGION FOR
ENHANCING OUR
EXPORTS
for exporters of hides, skins and leather
as well as those for value-added products
as they depend on many factors. In the
case of hides, skins and leather, we have
to look into the type of hides or skins, i.e.,
whether they are raw, semi-processed
or fnished. Similarly, the price will dif-
fer depending on the origin of the skin/
hide. In case of value-added products,
margins depend on whether the product
is in the lower range, middle range or is
supplied to the higher end of the market.
TDB: Hong Kong is the top destination
for Indian leather but it doesnt fgure
anywhere when it comes to leather
goods. Is it a function of demand or are
we losing out to competition?
RK: Competition is a major factor.
Hence, we are also looking at other po-
tential markets in the Asia-Oceania re-
gion including Japan, Australia and New
Zealand for enhancing our exports. In-
dian exporters are regularly participat-
ing in leather exhibitions (Asia Pacifc
Leather Fair) organised in Hong Kong.
Besides, we had recently organised the
visit of one delegation to Australia and
New Zealand to tap into those markets.
We are also planning to send delegations
to countries like Vietnam and South Ko-
rea to discover new possibilities.
TDB: Indian leather goods are most-
ly exported to Europe and USA. Who,
according to you, are our main com-
petitors and what is Indias share in the
total imports by these two markets?
RK: About 75% of Indias export of
leather and leather products is directed
to Europe and USA. Our main competi-
tors in these two major markets are Chi-
na, Vietnam, Pakistan (particularly for
leather garments), Bangladesh (when it
comes to footwear), Tailand, and Cam-
bodia. While our market share in Europe
is about 4.5%, in USA it is about 1.4%.
Hence, there is a lot of scope for further
increasing our market share even in
these traditional markets.
TDB: What kind of incentives do you
think are being provided by govern-
ments of such competing nations that
are exporting to USA and Europe?
RK: Te governments of competing
countries must be providing export in-
centives. Bangladesh, for example, ben-
efts from the status of Least Developed
Country because of which it enjoys
zero import duty or higher concessional
duties. Similarly, it is learnt that the Eu-
ropean Union has ofered Generalised
Scheme of Preferences (GSP) and other
benefts to Pakistan, on account of which
it might be having an edge.
TDB: Asian countries still dont fgure
among the top destinations for Indian
leather and leather goods. Is it an un-
tapped market or is demand in these
countries generally low?
RK: We are looking at countries like
Japan, South Korea as well as the Middle
East as future markets for Indian leather
products and footwear. We hope that the
Indian leather industry is able to consid-
erably increase its market share in these
countries in the coming years.
TDB: Excise duty on machinery and
equipment that the leather industry
uses was cut in the last Budget. How
has it helped the margins of leather
goods manufacturers? Do you expect
these measures to be extended further
in this years Budget?
RK: Te extension of the excise duty re-
duction will defnitely help modernisa-
tion of the leather industry and in turn
boost exports. We hope the government
extends it.
TDB: What kind of a growth can we ex-
pect if the government gives its nod to
your other demands like enhancement
of duty credit and implementation of
3% interest rate subvention scheme?
RK: Te industry is targeting 20% export
growth this year. If the government gives
a go-ahead to our demands, exports will
defnitely get a further boost.
Destination for
Indian leather goods
Germany is the biggest
market for Indian leather
Breakup of Indian
leather goods exports
Indian exports are dominated
by jackets & jerseys
Indias leather & leather goods exports
Leather exports has been growing at a CAGR of about 8.54%*
2,500
2,000
1,500
1,000
500
0
Raw Hides, Skin and Leather Leather Goods
Source: Ministry of Commerce; breakup for FY2014 Source: Ministry of Commerce; $ million (*Last fve years)
France Germany
Spain USA
UK ROW
Ladies handbags Wallets & Purses
Jackets & Jerseys Other handbags
Industrial gloves Other
36%
7%
16%
21%
9%
11%
17%
12%
7%
17%
7%
40%
PRIME FOCUS TRIPS
SECURING
INSECURITIES
Innovation is at the heart of trade and commerce.
And protecting innovations is Trade-Related Aspects
of Intellectual Property Rights (TRIPS). While there
are contentious issues that need to be sorted out,
there is no denying that protecting intellectual
property is the only way to encourage innovations
BY SISIR PRADHAN
T
en years ago, Dinesh Gupta,
was running from pillar to post
to meet the mounting medical
bills of his mother who was
sufering from chronic myeloid leuke-
mia (CML), a cancer of the blood that
leads to unregulated production of white
blood cells (WBC) in the bone marrow.
As days passed, paying for existing drugs
was turning out to be an almost impos-
sible task. One morning, his mothers
oncologist broke the good news that a
better drug Imatinib Mesylate that
had the potential to completely cure her
was available in the market. Te bad
news: its price was way beyond Guptas
reach. Gupta felt the kind of empty help-
lessness that a typical breadwinner in a
middle-class family in the developing
world. with a cancer patient experiences.
He surrendered everything to fate.
Days later, a miracle occurred. Gup-
ta recalls that day still. A family mem-
ber informed him that a substitute drug
from Natco Pharmaceuticals (a generic
drug maker) had become available in the
market. And that it was the solution.
Te year was 2003. Ten, Novartis,
the Swiss pharma giant, had just won
the exclusive marketing right (EMR)
for Imatinib in India under the brand
name Gleevec and had priced it at about
Rs.1,20,000/month (for a standard dose
of 400 mg) way beyond Guptas budget.
But then, overnight, Natco started selling
a generic version of Imatinib, under the
brand name Veenat, at 1/10
th
the price
and Guptas mother got a new lease of
life. Tanks to Natco, my mother is alive
today, Gupta tells Te Dollar Business.
ITS MONEY, HONEY
Guptas mother is one of the few thou-
sands who have managed to live longer
because companies like Natco manu-
facture generic versions of anti-cancer
drugs and sell them at a fraction of the
original drugs price. But such emotions
do not persuade companies to wash their
hands of a potential treasure formula.
Novartis is a case in point. Afer all,
the millions of dollars invested in the
research of Imatinib cannot be written
of with a smile, no matter how human-
itarian it might sound. Generic versions
are a pureplay nightmare for companies
Medicine tablets being
manufactured at Salu-
tas Pharma GmbH, the
largest production plant
of drugmaker Sandoz. The
comany produces more
than 27 million tablets and
capsules every day at its
manufacturing plant in
Saxony-Anhalt, Germany
like it. [Its worth noting that in Novartis
product portfolio Gleevec is one of the
biggest revenue earners, with a contri-
bution of $4.69 billion to its total global
sales of $57.90 billion in CY2013.] Los-
ing patent rights in a country with over
1.2 billion people is in any case bad news
for a patent-lover. [Te Supreme Court
of India ruled in favour of Natco in its
war against Novartis through a 2013 rul-
ing.]
In international trade, a patent holder
has the sole right to manufacture a prod-
uct and export it to regions where its pat-
ents are efective. It also has the power to
prevent the import of cheaper versions
of its products from outside. Its worth
noting that the Indian pharma industry
exported around $11 billion worth of
medicines in FY2013. More signifcantly,
emerging markets like Africa, home to
the most number of HIV/AIDS afected
people, imported $2.7 billion worth of
medicines from India in FY2013 about
17% of the regions imports of $15.4 bil-
lion. [Novartis, in its 2013 Annual Re-
port, has forecasted that in 2014, it will
lose $3 billion to generic erosions as
compared to $2.2 billion in 2013.]
According to Toronto-based intel-
WHILE DEVELOPED
COUNTRIES WERE
GIVEN ONE YEAR
TO ADHERE TO
TRIPS, DEVELOPING
COUNTRIES WERE
GIVEN FIVE YEARS
lectual property (IP) experts Anthony
F. Baldanza and Charles Todd, IP laws
guarantee an absolute right to the cre-
ator and owner of a work. Tey also
prevent the commercial exploitation
of someones innovation and research.
However, this legal monopoly sometime
leads to absolute market dominance and
monopoly as defned under competi-
tion laws. And when this advantage or
dominant position is abused by some-
one, it creates a confict between IPR and
competition law.
THE INDIAN VERSION
Te Indian Parliament passed the Pat-
ents Act in 1970, which restricted prod-
uct patents and also reduced the time
involved in getting process patents ap-
proved. Before the Patents Act, medi-
cines in India were among the costliest
in the world. But even though India had
a proper patent law, Indian companies
were not very proactive in protecting
their business interest before it signed
the WTO agreement in 1995. While
joining WTO, India asked for time to
amend its patent law in order to comply
with the TRIPS (Trade Related Aspects
of Intellectual Property Rights) agree-
ment in a phased manner.
In 1999, India allowed transitional fl-
ing of product patent applications, with
retrospective efect from 1995. Full prod-
uct and process patent protection was
re-introduced beginning 2005, when all
transitional regulations ended.
Big pharma has ofen criticised Indian
patent laws, which it claims dont protect
its IPRs. It is a fact that many domestic
pharma companies did brazenly produce
generic equivalents of expensive drugs
until 2005, when India amended its pat-
ent law. Te new law (that exists today),
amending Indias Patent Act, ratifes in-
novations in all spheres from machin-
ery to sofware and medicines. However,
it allows making and selling of all generic
drugs, which had been approved in India
before 2005, provided the seller pays li-
censing fees to the patent holder.
THE GLOBAL PICTURE
Te scope of protection and enforce-
ment of IPRs vary from country to
country. Te primary goal of TRIPS is to
narrow the gaps in the way these rights
are protected around the world and to
bring them under common internation-
al rules. It establishes minimum levels of
protection that each government has to
give to the intellectual property of fel-
low WTO members. Te WTO has also
made provisions to resolve disputes un-
der the Dispute Settlement Body. When
the WTO agreement came into efect
on January 1 1995, developed countries
were given one year to ensure that their
laws and practices conformed to the
TRIPS agreement. Developing countries
and (under certain conditions) transi-
tion economies were given fve years un-
til 2000. Least-developed countries, on
the other hand, had 11 years until 2006,
which was extended to 2013 in general
and to 2016 for pharmaceutical patents
and undisclosed information.
ARE WE THERE YET?
In a bid to comply with the WTO agree-
Assembly line
production has
signifcantly improved
the speed and cost of
making medicines
Top applicants under Patent
Cooperation Treaty (PCT)
In 2013, most patent applications came
from US and Japan
Applications under Patent
Electrical machinery and apparatus
applications were the highest in 2013
Source: WIPO; Breakup for CY2013 Source: WIPO; Breakup for CY2013
Electrical machinery
Computer technology
Digital communication
USA
Japan
China
Medical technology
Measurement
Germany
South Korea
Rest
29%
23%
23%
22%
19%
13%
21%
10%
9%
6%
25%
PRIME FOCUS TRIPS
SECURING
INSECURITIES
Innovation is at the heart of trade and commerce.
And protecting innovations is Trade-Related Aspects
of Intellectual Property Rights (TRIPS). While there
are contentious issues that need to be sorted out,
there is no denying that protecting intellectual
property is the only way to encourage innovations
BY SISIR PRADHAN
T
en years ago, Dinesh Gupta,
was running from pillar to post
to meet the mounting medical
bills of his mother who was
sufering from chronic myeloid leuke-
mia (CML), a cancer of the blood that
leads to unregulated production of white
blood cells (WBC) in the bone marrow.
As days passed, paying for existing drugs
was turning out to be an almost impos-
sible task. One morning, his mothers
oncologist broke the good news that a
better drug Imatinib Mesylate that
had the potential to completely cure her
was available in the market. Te bad
news: its price was way beyond Guptas
reach. Gupta felt the kind of empty help-
lessness that a typical breadwinner in a
middle-class family in the developing
world. with a cancer patient experiences.
He surrendered everything to fate.
Days later, a miracle occurred. Gup-
ta recalls that day still. A family mem-
ber informed him that a substitute drug
from Natco Pharmaceuticals (a generic
drug maker) had become available in the
market. And that it was the solution.
Te year was 2003. Ten, Novartis,
the Swiss pharma giant, had just won
the exclusive marketing right (EMR)
for Imatinib in India under the brand
name Gleevec and had priced it at about
Rs.1,20,000/month (for a standard dose
of 400 mg) way beyond Guptas budget.
But then, overnight, Natco started selling
a generic version of Imatinib, under the
brand name Veenat, at 1/10
th
the price
and Guptas mother got a new lease of
life. Tanks to Natco, my mother is alive
today, Gupta tells Te Dollar Business.
ITS MONEY, HONEY
Guptas mother is one of the few thou-
sands who have managed to live longer
because companies like Natco manu-
facture generic versions of anti-cancer
drugs and sell them at a fraction of the
original drugs price. But such emotions
do not persuade companies to wash their
hands of a potential treasure formula.
Novartis is a case in point. Afer all,
the millions of dollars invested in the
research of Imatinib cannot be written
of with a smile, no matter how human-
itarian it might sound. Generic versions
are a pureplay nightmare for companies
Medicine tablets being
manufactured at Salu-
tas Pharma GmbH, the
largest production plant
of drugmaker Sandoz. The
comany produces more
than 27 million tablets and
capsules every day at its
manufacturing plant in
Saxony-Anhalt, Germany
like it. [Its worth noting that in Novartis
product portfolio Gleevec is one of the
biggest revenue earners, with a contri-
bution of $4.69 billion to its total global
sales of $57.90 billion in CY2013.] Los-
ing patent rights in a country with over
1.2 billion people is in any case bad news
for a patent-lover. [Te Supreme Court
of India ruled in favour of Natco in its
war against Novartis through a 2013 rul-
ing.]
In international trade, a patent holder
has the sole right to manufacture a prod-
uct and export it to regions where its pat-
ents are efective. It also has the power to
prevent the import of cheaper versions
of its products from outside. Its worth
noting that the Indian pharma industry
exported around $11 billion worth of
medicines in FY2013. More signifcantly,
emerging markets like Africa, home to
the most number of HIV/AIDS afected
people, imported $2.7 billion worth of
medicines from India in FY2013 about
17% of the regions imports of $15.4 bil-
lion. [Novartis, in its 2013 Annual Re-
port, has forecasted that in 2014, it will
lose $3 billion to generic erosions as
compared to $2.2 billion in 2013.]
According to Toronto-based intel-
WHILE DEVELOPED
COUNTRIES WERE
GIVEN ONE YEAR
TO ADHERE TO
TRIPS, DEVELOPING
COUNTRIES WERE
GIVEN FIVE YEARS
lectual property (IP) experts Anthony
F. Baldanza and Charles Todd, IP laws
guarantee an absolute right to the cre-
ator and owner of a work. Tey also
prevent the commercial exploitation
of someones innovation and research.
However, this legal monopoly sometime
leads to absolute market dominance and
monopoly as defned under competi-
tion laws. And when this advantage or
dominant position is abused by some-
one, it creates a confict between IPR and
competition law.
THE INDIAN VERSION
Te Indian Parliament passed the Pat-
ents Act in 1970, which restricted prod-
uct patents and also reduced the time
involved in getting process patents ap-
proved. Before the Patents Act, medi-
cines in India were among the costliest
in the world. But even though India had
a proper patent law, Indian companies
were not very proactive in protecting
their business interest before it signed
the WTO agreement in 1995. While
joining WTO, India asked for time to
amend its patent law in order to comply
with the TRIPS (Trade Related Aspects
of Intellectual Property Rights) agree-
ment in a phased manner.
In 1999, India allowed transitional fl-
ing of product patent applications, with
retrospective efect from 1995. Full prod-
uct and process patent protection was
re-introduced beginning 2005, when all
transitional regulations ended.
Big pharma has ofen criticised Indian
patent laws, which it claims dont protect
its IPRs. It is a fact that many domestic
pharma companies did brazenly produce
generic equivalents of expensive drugs
until 2005, when India amended its pat-
ent law. Te new law (that exists today),
amending Indias Patent Act, ratifes in-
novations in all spheres from machin-
ery to sofware and medicines. However,
it allows making and selling of all generic
drugs, which had been approved in India
before 2005, provided the seller pays li-
censing fees to the patent holder.
THE GLOBAL PICTURE
Te scope of protection and enforce-
ment of IPRs vary from country to
country. Te primary goal of TRIPS is to
narrow the gaps in the way these rights
are protected around the world and to
bring them under common internation-
al rules. It establishes minimum levels of
protection that each government has to
give to the intellectual property of fel-
low WTO members. Te WTO has also
made provisions to resolve disputes un-
der the Dispute Settlement Body. When
the WTO agreement came into efect
on January 1 1995, developed countries
were given one year to ensure that their
laws and practices conformed to the
TRIPS agreement. Developing countries
and (under certain conditions) transi-
tion economies were given fve years un-
til 2000. Least-developed countries, on
the other hand, had 11 years until 2006,
which was extended to 2013 in general
and to 2016 for pharmaceutical patents
and undisclosed information.
ARE WE THERE YET?
In a bid to comply with the WTO agree-
Assembly line
production has
signifcantly improved
the speed and cost of
making medicines
Top applicants under Patent
In 2013, most patent applications came
from US and Japan
Applications under Patent
Electrical machinery and apparatus
applications were the highest in 2013
Source: WIPO; Breakup for CY2013 Source: WIPO; Breakup for CY2013
Electrical machinery
Computer technology
Digital communication
USA
Japan
China
Medical technology
Measurement
Germany
South Korea
Rest
29%
23%
23%
22%
19%
13%
21%
10%
9%
6%
25%
PRIME FOCUS TRIPS
ment on TRIPS, the then Congress gov-
ernment managed to pass the amended
patent bill in 2005 despite strong opposi-
tion from the main opposition NDA and
other international bodies. Following
the amendment, India faced criticism
both at home and abroad. International
non-government organisations like Ox-
fam International and Doctors Without
Borders said the new law will put an end
to the development of generic drugs, the
impact of which will be felt globally. Fol-
lowing mass opposition to the new law,
the then Commerce & Industry Minister
Kamal Nath, in a clarifcation, had said,
I have ensured that all fexibilities that
are permissible are taken advantage of. If
any upsurge in prices come to notice, the
government will deal with it. Besides,
Indias traditional knowledge will be
protected as plants cannot come under
patents, he added.
Following reports of patents being
fled for traditional Indian products
and plants with medicinal values, In-
dia launched a Traditional Knowledge
Digital Library (TKDL) to electronical-
ly document its exhaustive list of tradi-
tional knowledge such as Ayurveda. Te
database has 34 million pages of infor-
mation in fve international languages in
searchable formats and has been shared
with patent examiners all over the world.
GENERALLY GENERIC
Te Indian pharma industry has earned
a name for itself all over the world for
its expertise in reverse-engineering
new processes for manufacturing drugs
at low costs. However, over a period of
time, companies like Dr. Reddys, Ran-
baxy, Aurobindo Pharma, Sun Pharma
and Natco have worked towards drug
innovations as well.
Te Hyderabad-based Dr. Reddys
was the frst Indian company to fle Para-
graph IV Drug Product Application with
the US Food & Drug Administration
(USFDA). Under the Drug Price Com-
petition & Patent Term Restoration Act
(the Hatch-Waxman Act), a company
can seek USFDAs approval to market a
generic drug before the expiration of a
patent relating to a branded drug. Te
frst company to submit an Abbreviated
New Drug Application (ANDA) with the
USFDA, gets the exclusive rights to mar-
ket the generic drug for 180 days.
Dr. Reddys also became the frst In-
dian company to receive a 180-day mar-
keting exclusivity in US for Fluoxetine
capsules (an antidepressant) on August
2, 2001. 180 days is a good enough time
for a generic drug manufacturer to earn a
handsome proft in US. As per insurance
agreements in US, doctors are bound to
prescribe the cheapest available drug in
the market, thereby helping the cause of
Indian companies, Dr. V. C. Vivekanan-
dan, Intellectual Property Chair Profes-
sor at Hyderabad based NALSAR Uni-
versity of Law, tells Te Dollar Business.
The production line of a pharmaceutical company. Drug patents have been at the heart of several controversies
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Source: WIPO
Year-wise IP fllings from India
Applications from India have grown 300% in the last decade
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 A fully automatic flling and sealing machine at the
manufacturing plant of a pharmaceutical company
OTHERS ARE WAKING UP
Other sectors in India are also, slowly
but surely, realising the importance of
investing in R&D and protecting their
IPRs. MNCs like TCS that gets a major
share of its revenue from international
markets, understand the importance of
securing their IPRs. For instance, TCS,
in 2011, received ISO 27001 certifca-
tion, the highest internationally accept-
ed standard for Information Security
Management Systems (ISMS). TCS was
one among just 300 companies to have
earned this certifcation then. In its
FY2014 annual report, TCS has men-
tioned that it has fled 1,746 patent appli-
cations, of which, 114 have been granted.
BHEL, which exported goods worth
Rs.438.68 crore and gained export in-
centives of Rs.24.26 crore for foreign
exchange earnings of Rs.12,357 crore
in FY2013, has also started investing in
protecting its IPRs. Te public sector
unit invested Rs.1,252 crore on R&D in
FY2013 and fled for 385 patents and
copyrights during the year.
Te Tea Board of India and the Dar-
jeeling Planters Association have also
been fghting hard to prevent misuse of
the word Darjeeling for other types of
tea. For this, the Tea Board has, since
1998, hired the services of CompuMark,
a global trademark research and brand
protection solutions provider.
NOT THE FINAL WORD
Indias IP laws are still at an evolving
stage and we are also learning from ex-
perience, says Dr. Vivekanandan.
Similarly, commenting on the post-
TRIPs scenario, Pharmexcil Regional
Director K. Subbi Reddy tells Te Dol-
lar Business, If a product is an essential
commodity then volumes will grow and
subsequently if companies dont cut their
prices down, competitors will fnd ways
to make the product available at a low-
er price. Te original inventor should
always obtain a patent to safeguard the
business interest, however no govern-
ment will allow the patent holder to gain
from creating a monopoly, particularly
when peoples lives are at stake.
IP has facets to it. In the developed
world, it is used as a medium to gain
competitive advantage, generate reve-
nue from licensing fee and royalty, swap
patents like a trade and/or prevent
competition. In the developing world,
the jury is still out. But, as competition
intensifes, TRIPS will have an ever
bigger role to protect interests and
provide a level-playing feld to all
stakeholders.
Panasonic
ZTE
Huawei
CSIR
IITs
Cadilla Healthcare
Lupin
Research Foundation
Robert Bosch
Toyota
Ericsson
Ranbaxy
Tejas Networks
TCS
Ineda Systems
Dr. Reddys
Qualcomm
Intel
Sharp
Philips
3,500
3,000
2,500
2,000
1,500
1,000
500
0
80
70
60
50
40
30
20
10
0
Source: WIPO; fgures for CY2013
Top applicants under PCT (company)
Panasonic fled 2,881 patent applications in 2013
Top Indian applicants under PCT
Te IITs are at the forefront of fling patent applications
A woman worker
picking tea leaves
at an estate in
Darjeeling. India
spends crores of
rupees every year to
prevent misuse of
the Darjeeling brand
PRIME FOCUS TRIPS
ment on TRIPS, the then Congress gov-
ernment managed to pass the amended
patent bill in 2005 despite strong opposi-
tion from the main opposition NDA and
other international bodies. Following
the amendment, India faced criticism
both at home and abroad. International
non-government organisations like Ox-
fam International and Doctors Without
Borders said the new law will put an end
to the development of generic drugs, the
impact of which will be felt globally. Fol-
lowing mass opposition to the new law,
the then Commerce & Industry Minister
Kamal Nath, in a clarifcation, had said,
I have ensured that all fexibilities that
are permissible are taken advantage of. If
any upsurge in prices come to notice, the
government will deal with it. Besides,
Indias traditional knowledge will be
protected as plants cannot come under
patents, he added.
Following reports of patents being
fled for traditional Indian products
and plants with medicinal values, In-
dia launched a Traditional Knowledge
Digital Library (TKDL) to electronical-
ly document its exhaustive list of tradi-
tional knowledge such as Ayurveda. Te
database has 34 million pages of infor-
mation in fve international languages in
searchable formats and has been shared
with patent examiners all over the world.
GENERALLY GENERIC
Te Indian pharma industry has earned
a name for itself all over the world for
its expertise in reverse-engineering
new processes for manufacturing drugs
at low costs. However, over a period of
time, companies like Dr. Reddys, Ran-
baxy, Aurobindo Pharma, Sun Pharma
and Natco have worked towards drug
innovations as well.
Te Hyderabad-based Dr. Reddys
was the frst Indian company to fle Para-
graph IV Drug Product Application with
the US Food & Drug Administration
(USFDA). Under the Drug Price Com-
petition & Patent Term Restoration Act
(the Hatch-Waxman Act), a company
can seek USFDAs approval to market a
generic drug before the expiration of a
patent relating to a branded drug. Te
frst company to submit an Abbreviated
New Drug Application (ANDA) with the
USFDA, gets the exclusive rights to mar-
ket the generic drug for 180 days.
Dr. Reddys also became the frst In-
dian company to receive a 180-day mar-
keting exclusivity in US for Fluoxetine
capsules (an antidepressant) on August
2, 2001. 180 days is a good enough time
for a generic drug manufacturer to earn a
handsome proft in US. As per insurance
agreements in US, doctors are bound to
prescribe the cheapest available drug in
the market, thereby helping the cause of
Indian companies, Dr. V. C. Vivekanan-
dan, Intellectual Property Chair Profes-
sor at Hyderabad based NALSAR Uni-
versity of Law, tells Te Dollar Business.
The production line of a pharmaceutical company. Drug patents have been at the heart of several controversies
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Source: WIPO
Year-wise IP fllings from India
Applications from India have grown 300% in the last decade
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 A fully automatic flling and sealing machine at the
manufacturing plant of a pharmaceutical company
OTHERS ARE WAKING UP
Other sectors in India are also, slowly
but surely, realising the importance of
investing in R&D and protecting their
IPRs. MNCs like TCS that gets a major
share of its revenue from international
markets, understand the importance of
securing their IPRs. For instance, TCS,
in 2011, received ISO 27001 certifca-
tion, the highest internationally accept-
ed standard for Information Security
Management Systems (ISMS). TCS was
one among just 300 companies to have
earned this certifcation then. In its
FY2014 annual report, TCS has men-
tioned that it has fled 1,746 patent appli-
cations, of which, 114 have been granted.
BHEL, which exported goods worth
Rs.438.68 crore and gained export in-
centives of Rs.24.26 crore for foreign
exchange earnings of Rs.12,357 crore
in FY2013, has also started investing in
protecting its IPRs. Te public sector
unit invested Rs.1,252 crore on R&D in
FY2013 and fled for 385 patents and
copyrights during the year.
Te Tea Board of India and the Dar-
jeeling Planters Association have also
been fghting hard to prevent misuse of
the word Darjeeling for other types of
tea. For this, the Tea Board has, since
1998, hired the services of CompuMark,
a global trademark research and brand
protection solutions provider.
NOT THE FINAL WORD
Indias IP laws are still at an evolving
stage and we are also learning from ex-
perience, says Dr. Vivekanandan.
Similarly, commenting on the post-
TRIPs scenario, Pharmexcil Regional
Director K. Subbi Reddy tells Te Dol-
lar Business, If a product is an essential
commodity then volumes will grow and
subsequently if companies dont cut their
prices down, competitors will fnd ways
to make the product available at a low-
er price. Te original inventor should
always obtain a patent to safeguard the
business interest, however no govern-
ment will allow the patent holder to gain
from creating a monopoly, particularly
when peoples lives are at stake.
IP has facets to it. In the developed
world, it is used as a medium to gain
competitive advantage, generate reve-
nue from licensing fee and royalty, swap
patents like a trade and/or prevent
competition. In the developing world,
the jury is still out. But, as competition
intensifes, TRIPS will have an ever
bigger role to protect interests and
provide a level-playing feld to all
stakeholders.
Panasonic
ZTE
Huawei
CSIR
IITs
Cadilla Healthcare
Lupin
Research Foundation
Robert Bosch
Toyota
Ericsson
Ranbaxy
Tejas Networks
TCS
Ineda Systems
Dr. Reddys
Qualcomm
Intel
Sharp
Philips
3,500
3,000
2,500
2,000
1,500
1,000
500
0
80
70
60
50
40
30
20
10
0
Top applicants under PCT (company)
Panasonic fled 2,881 patent applications in 2013
Top Indian applicants under PCT
Te IITs are at the forefront of fling patent applications
A woman worker
picking tea leaves
at an estate in
Darjeeling. India
spends crores of
rupees every year to
prevent misuse of
the Darjeeling brand
Have a product to showcase? Or want to learn what
your rivals are up to? Heres a list of Indian and foreign
trade fairs you shouldnt miss in July and August 2014
dia 2014. Last year, the show had seen
participation from over 70 exhibitors, 150
delegates and over 4,000 industry pro-
fessionals
AGRI INTEX 2014
July 18 21
Coimbatore
www.agriintex.codissia.com
South Asias largest international agricul-
ture expo, Agri Intex had last year seen
participation jump to 1,23,159 people. A
unique opportunity to listen to eminent
scientists and industry professionals, the
event also provides a common platform
to retailers, wholesalers, distributors and
farmers from the whole of South India.
AMTEX 2014
July 25 28
New Delhi
www.amtex2014.com
After a one year hiatus, AMTEX is back
to offer a unique platform for all stake-
holders in the machine tools industry. In
2012, the fair was inaugurated by the
then Corporate Affairs Minister Dr. Veer-
appa Moily and had seen participation
from over 40,000 business visitors from 14
countries like China, South Korea, USA,
Singapore, Israel, Malaysia and Japan.
AUTOMATION ASIA-2014
July 25 28
New Delhi
www.automationasia2014.com
The exhibition promises to showcase the
latest and the best in industrial automa-
tion solutions covering all the aspects of
factory, industrial building and produc-
tion & process automation for industrial
manufacturing as well as engineering
& maintenance services from individu-
al components to complete automation
solutions
MEDIA EXPO DELHI2014
Aug 1 3
New Delhi
www.themediaexpo.com
A trade exhibition dedicated to indoor
and outdoor advertising and signage
solutions. The event provides network-
ing opportunity between exhibitors and
visitors from all over Asia and other parts
of the world
GIFTS WORLD EXPO
DELHI - 2014
Aug 1 3
New Delhi
www.giftsworldexpo.com
The Rs.1,000 crore Indian gift industry
is highly complex and varied. This niche
market is gradually shifting towards a
more year round business which is col-
laborating corporates, business profes-
sionals and retailers. Gifts World Expo is
a one-stop solution for gifts, souvenirs,
premiums, novelties, mementos and
keepsake
MEDICALL 2014
Aug 1 3
Chennai
www.medicall.in
Medicall is Indias premier hospital needs
and equipment exposition and the big-
gest of its kind in India and was started
with the idea of promoting entrepreneur-
ship amongst the medical fraternity. The
event brings the latest, appropriate and
affordable technologies, for the beneft of
all hospitals including smaller hospitals,
clinics, nursing homes and physicians
setting up group practice
INDIAN STAINLESS STEEL
HOUSEWARE 2014
Aug 14 17
Mumbai
www.inoxhousewareshow.com
The frst of its kind show, Indian Stain-
[India]
INDIA WAREHOUSING
SHOW 2014
July 8 10,
New Delhi
www.indiatransportlogistics.com
An annual opportunity for warehousing,
material handling, storage, AIDC, in-
tra-logistics, supply chain and transport
& logistics industry professionals to meet
visitors from various end-user industries,
last year, the show had hosted over 160
companies including participants from
India and represented companies from
China, Italy, Germany, Japan, Middle
East, Taiwan and US, together with 8937
trade visitors from all over the world.
OSH INDIA
July 17 18
Chennai
www.ubmindia.in/osh_india/home
Discover the latest technologies, inno-
vations, trends and developments in the
Indian fre and safety industry at OSH In-
An Eicher truck on display at IITLS 2013, which
is held concurrently to IWS
less Steel Houseware is dedicated to
the domestic stainless steel housewares
industry and has turned out to be a re-
sounding success, with over 5,000 par-
ticipants at the last event
[Global]
LUXURY CHINA
July 4 6
Beijing, China
www.luxurychina.com
Every year, Luxury China attracts over
300 international high-end brands from
over 20 countries, including Italy, Swit-
zerland, France, the US, Germany, and
Spain. The event is slowly emerging as
the mecca for sports car, private yacht,
jewellery, watches, and luxury furniture,
art, and wine enthusiasts from all over
the world
16TH CHINA
INTERNATIONAL BUILDING
DECORATION FAIR
July 8 11
Guangzhou, China
www.fair.cbd-china.com
Asias leading trade fair for building deco-
ration is expected to attract around 2,600
exhibitors, who will showcase various
products related to interior design, deco-
ration and household commodities. The
organisers are expecting 1.3 lakh visitors
during the four-day event this year

INNOPROM 2014
July 9 12
Ekaterinburg, Russia
www.innoprom.com
Innoprom is a large-scale internation-
al industrial exhibition annually held in
Ekaterinburg, Russia. The event is dedi-
cated to intelligent technologies, materi-
als and solutions. It provides a platform
to demonstrate solutions for production
modernisation and technologies that
increase effciency, and improve per-
Log on to
for more events and details.
formance of manufacturing processes.
Representatives from about 30 coun-
tries, including commercial enterprises
and governmental institutions are ex-
pected to attend the expo this year
ASEANMACH
July 16 19
Kuala Lumpur, Malaysia
www.oneinternational.com.my
Malaysias frst and only heavy machin-
ery and equipment exhibition dedicated
to construction, mining and infrastructure
sector is expected to attract industry ex-
perts, investors, manufacturers, distribu-
tors and buyers from around the world
WWD MAGIC
August 18 20
Las Vegas, USA
www.magiconline.com/wwd-magic
Founded in 1933, the event is one of
the largest fair on apparel and accesso-
ry trade in the US. The event provides
a platform to connect with international
buyers and sellers of mens, womens,
and childrens apparel and accesso-
ries. Every year, thousands of retailers
spanning single store boutiques to mass
market domestic and international
chains come to the fair to access more
than 4,000 manufacturers showcasing
over 5,000 brands and private label
resources
FARM PROGRESS
SHOW - 2014
August 26 28
Boone, United States
www.farmprogressshow.com
This exhibition on outdoor farm equip-
ment aims to provide an interactive ven-
ue for North American and international
farmers, agribusiness offcials and agri-
culture companies to network, gain infor-
mation, and conduct business. The show
hosts around 600 exhibitors and over
1,00,000 attendees during the three-day
event. Attendees can obtain information
to make well-informed purchasing deci-
sions, and explore the latest agriculture
products and technologies
A visitor checking out products at last years
Stainless Steel Housware Show
A visitor standing next to a sportbike at Luxury China - 2013, which is slowly emerging as the go to
destination for luxury goods enthusiasts all over the world
A conference in progress at lNNOPROM - 2013
in Russia
Have a product to showcase? Or want to learn what
your rivals are up to? Heres a list of Indian and foreign
trade fairs you shouldnt miss in July and August 2014
dia 2014. Last year, the show had seen
participation from over 70 exhibitors, 150
delegates and over 4,000 industry pro-
fessionals
AGRI INTEX 2014
July 18 21
Coimbatore
www.agriintex.codissia.com
South Asias largest international agricul-
ture expo, Agri Intex had last year seen
participation jump to 1,23,159 people. A
unique opportunity to listen to eminent
scientists and industry professionals, the
event also provides a common platform
to retailers, wholesalers, distributors and
farmers from the whole of South India.
AMTEX 2014
July 25 28
New Delhi
www.amtex2014.com
After a one year hiatus, AMTEX is back
to offer a unique platform for all stake-
holders in the machine tools industry. In
2012, the fair was inaugurated by the
then Corporate Affairs Minister Dr. Veer-
appa Moily and had seen participation
from over 40,000 business visitors from 14
countries like China, South Korea, USA,
Singapore, Israel, Malaysia and Japan.
AUTOMATION ASIA-2014
July 25 28
New Delhi
www.automationasia2014.com
The exhibition promises to showcase the
latest and the best in industrial automa-
tion solutions covering all the aspects of
factory, industrial building and produc-
tion & process automation for industrial
manufacturing as well as engineering
& maintenance services from individu-
al components to complete automation
solutions
MEDIA EXPO DELHI2014
Aug 1 3
New Delhi
www.themediaexpo.com
A trade exhibition dedicated to indoor
and outdoor advertising and signage
solutions. The event provides network-
ing opportunity between exhibitors and
visitors from all over Asia and other parts
of the world
GIFTS WORLD EXPO
DELHI - 2014
Aug 1 3
New Delhi
www.giftsworldexpo.com
The Rs.1,000 crore Indian gift industry
is highly complex and varied. This niche
market is gradually shifting towards a
more year round business which is col-
laborating corporates, business profes-
sionals and retailers. Gifts World Expo is
a one-stop solution for gifts, souvenirs,
premiums, novelties, mementos and
keepsake
MEDICALL 2014
Aug 1 3
Chennai
www.medicall.in
Medicall is Indias premier hospital needs
and equipment exposition and the big-
gest of its kind in India and was started
with the idea of promoting entrepreneur-
ship amongst the medical fraternity. The
event brings the latest, appropriate and
affordable technologies, for the beneft of
all hospitals including smaller hospitals,
clinics, nursing homes and physicians
setting up group practice
INDIAN STAINLESS STEEL
HOUSEWARE 2014
Aug 14 17
Mumbai
www.inoxhousewareshow.com
The frst of its kind show, Indian Stain-
[India]
INDIA WAREHOUSING
SHOW 2014
July 8 10,
New Delhi
www.indiatransportlogistics.com
An annual opportunity for warehousing,
material handling, storage, AIDC, in-
tra-logistics, supply chain and transport
& logistics industry professionals to meet
visitors from various end-user industries,
last year, the show had hosted over 160
companies including participants from
India and represented companies from
China, Italy, Germany, Japan, Middle
East, Taiwan and US, together with 8937
trade visitors from all over the world.
OSH INDIA
July 17 18
Chennai
www.ubmindia.in/osh_india/home
Discover the latest technologies, inno-
vations, trends and developments in the
Indian fre and safety industry at OSH In-
An Eicher truck on display at IITLS 2013, which
is held concurrently to IWS
less Steel Houseware is dedicated to
the domestic stainless steel housewares
industry and has turned out to be a re-
sounding success, with over 5,000 par-
ticipants at the last event
[Global]
LUXURY CHINA
July 4 6
Beijing, China
www.luxurychina.com
Every year, Luxury China attracts over
300 international high-end brands from
over 20 countries, including Italy, Swit-
zerland, France, the US, Germany, and
Spain. The event is slowly emerging as
the mecca for sports car, private yacht,
jewellery, watches, and luxury furniture,
art, and wine enthusiasts from all over
the world
16TH CHINA
INTERNATIONAL BUILDING
DECORATION FAIR
July 8 11
Guangzhou, China
www.fair.cbd-china.com
Asias leading trade fair for building deco-
ration is expected to attract around 2,600
exhibitors, who will showcase various
products related to interior design, deco-
ration and household commodities. The
organisers are expecting 1.3 lakh visitors
during the four-day event this year

INNOPROM 2014
July 9 12
Ekaterinburg, Russia
www.innoprom.com
Innoprom is a large-scale internation-
al industrial exhibition annually held in
Ekaterinburg, Russia. The event is dedi-
cated to intelligent technologies, materi-
als and solutions. It provides a platform
to demonstrate solutions for production
modernisation and technologies that
increase effciency, and improve per-
Log on to
for more events and details.
formance of manufacturing processes.
Representatives from about 30 coun-
tries, including commercial enterprises
and governmental institutions are ex-
pected to attend the expo this year
ASEANMACH
July 16 19
Kuala Lumpur, Malaysia
www.oneinternational.com.my
Malaysias frst and only heavy machin-
ery and equipment exhibition dedicated
to construction, mining and infrastructure
sector is expected to attract industry ex-
perts, investors, manufacturers, distribu-
tors and buyers from around the world
WWD MAGIC
August 18 20
Las Vegas, USA
www.magiconline.com/wwd-magic
Founded in 1933, the event is one of
the largest fair on apparel and accesso-
ry trade in the US. The event provides
a platform to connect with international
buyers and sellers of mens, womens,
and childrens apparel and accesso-
ries. Every year, thousands of retailers
spanning single store boutiques to mass
market domestic and international
chains come to the fair to access more
than 4,000 manufacturers showcasing
over 5,000 brands and private label
resources
FARM PROGRESS
SHOW - 2014
August 26 28
Boone, United States
www.farmprogressshow.com
This exhibition on outdoor farm equip-
ment aims to provide an interactive ven-
ue for North American and international
farmers, agribusiness offcials and agri-
culture companies to network, gain infor-
mation, and conduct business. The show
hosts around 600 exhibitors and over
1,00,000 attendees during the three-day
event. Attendees can obtain information
to make well-informed purchasing deci-
sions, and explore the latest agriculture
products and technologies
A visitor checking out products at last years
Stainless Steel Housware Show
A visitor standing next to a sportbike at Luxury China - 2013, which is slowly emerging as the go to
destination for luxury goods enthusiasts all over the world
A conference in progress at lNNOPROM - 2013
in Russia
RENDEZVOUS

YADUVENDRA MATHUR, CMD, EXIM BANK
BORROWING LIMIT
HIKE WILL HELP US
FUND LARGE VALUE
PROJECTS OVERSEAS
Commencing operations as a purveyor of export credit, like any other export
credit agencies in the world, Export-Import Bank of India (Exim Bank) has
come a long way since its inception in 1982. It has not only been a catalyst in
the promotion of cross-border trade and investment, but has also managed
to integrate the countrys foreign trade with the overall economic growth. In a
freewheeling interview with The Dollar Business, Yaduvendra Mathur, Chairman
& Managing Director of Exim Bank, talks about how the institution can far better
and effectively serve the interests of large Indian projects spanning railways,
roads and power sectors in neighbouring nations and Africa
TDB: Exim Bank has the mandate to support and take for-
ward Indias foreign trade. How, according to you, has been
the progress so far, and what is your vision for the institu-
tions role in Indias global leadership?
YM: Exim Bank as an institution is well-geared towards ac-
commodating the needs of the changing times. Te institution
has been in business as Indias premier export credit agency for
more than three decades and has been conscious in its endeav-
our towards promoting development assistance. However, we
have realised that current norms restrict Exim Banks funding
to a single project to up to Rs.1,200 crore because of which it
cannot lend to large-value projects, especially those related to
railways, roads and power sectors. Such Indian projects are in
demand in many neighbouring countries as well as some de-
veloping countries in Africa. Exim Bank therefore has asked
the government for a 50% increase in the borrowing limit to
15 times of its net owned fund. Besides this, we have also asked
for a $10-billion line of credit from forex reserves to support
high value project exports from India. We hope that with these
changes we will be able to better our mandate.
TDB: In FY2013, the Exim Banks loan book grew by 20%
but net non-performing asset (NPA) was at 0.47%. Last fs-
cal, your loan book grew by 16% and net NPA dipped to
0.43%. At the current level of stress in the global economy,
what kind of a loan book growth do you think will not im-
pact asset quality?
YM: Exim Banks net NPA as percentage of total advances was
0.29% as on March 31, 2012, which increased to 0.47% as on
March 31, 2013. Tese fgures are amongst the best in the in-
dustry. Also, Exim Bank has 80% provision coverage, which is
EXIM BANK HAS ASKED FOR A
$10-BILLION LINE OF CREDIT
FROM FOREX RESERVES
TO SUPPORT HIGH VALUE
PROJECT EXPORTS FROM INDIA
RENDEZVOUS

YADUVENDRA MATHUR, CMD, EXIM BANK
also one of the best in the industry. Asset quality is a refection
of the problems faced by the industry due to a sharp slowdown
in GDP growth and industrial production caused by a host of
domestic and international factors, which are well known to all
of us. Exim Banks clients are externally oriented. Prolonged re-
cessionary trend in some of the advanced countries and unrest
in the Middle East region, coupled with volatility in forex, had
an adverse impact on some of the banks exporting customers.
Added to this, the banks NPA problem has also been aggra-
vated due to legal impediments and time consuming nature of
asset disposal process.
TDB: Which were the main sectors to which Exim Bank dis-
bursed loans in FY2014? Are you planning to tap some new
sectors this fscal?
YM: Te top three sectors and their exposure as on March
31, 2014 were: Rs. 6,706.12 crore to ferrous metals and met-
al processing an exposure of 10.94%; Rs. 5,673.69 crore to
EPC services (project exports) an exposure of 9.25%; and Rs.
4,640.09 crore to textiles and garments an exposure of 7.57%.
Overall, exposures of Exim Bank are fairly well diversifed since
it fnances a wide variety of industries. Notwithstanding this, it
has always been Exim Banks endeavour to fnance emerging
enterprises and sectors. Tus, for instance, we were on the van-
guard of fnancing sofware companies during the 1980s when
the Indian sofware industry was at its infancy. Similarly, we
were among the frst to fnance the flm industry when it was
granted industry status. So, tapping new and emerging sectors
is an ongoing process for us.
TDB: What is your strategy to address issues like high cur-
rent account defcit, sustaining infation and a weak rupee
that have been tormenting the Indian economy?
YM: I dont think that all these factors had a serious and sig-
nifcant bearing on Exim Bank. Rupee volatility has obviously
been of concern, impacting both borrowing and lending oper-
ations of the bank. Exporters, at the same time, were not able to
hedge to that extent during the 2013 volatility cycle, which was
triggered by the Feds announcement to taper its stimulative
quantitative easing policy. As far as the current account defcit
is concerned, it has shrunk from 4.8% to 2.3% of GDP because
of administrative measures to curb gold imports as well as ro-
bust export growth.
TDB: Exim Bank is planning to set up a project development
company with the African Development Bank. Can you give
us details of the plan?
YM: Exim Bank is almost at the fnal phase of setting up the
Project Development Company (PDC) in Africa, in associa-
tion with State Bank of India (SBI), IL&FS and African Devel-
opment Bank. Te new company will essentially look to bring
infrastructure projects in Africa to a bankable stage and facil-
itate exports from India to Africa. Tis is the frst time Exim
Bank is looking to set up a PDC. Te PDC will look at large
projects that will be built across two-three countries in Africa.
TDB: Apart from Africa, which new locations and business
lines do you fnd attractive?
YM: Exim Banks Africa focus is largely because there exists
opportunities for growth and there are less number of insti-
tutions which are ready to participate in this opportunity. Te
bank is also in the process of designing a new business strategy
over a 5-10 year horizon. Trough our new strategy, we may
consider looking into newer activities in sync with the govern-
ments policies and vision, including diversifying export mar-
kets and destinations.
TDB: What are your targets for FY2015 and how do you
plan to achieve them?
YM: Exim Bank plans to achieve a 15% growth in its loan busi-
ness during FY2015. Tis would be facilitated through infusion
of additional capital from the Government of India (a provi-
sion of Rs.1,300 crore has been made towards the banks recap-
italisation in the Union Budget). Tis will enable the bank to
enhance its headroom for borrowings and a suitable relaxation
in the borrowing limit by RBI.
TDB: What according to you should be the 10-point agenda
of the new government to provide the much-needed impe-
tus to the Indian economy?
YM: Te new government has been provided a historic op-
portunity and I am confdent that it will live up to the peoples
mandate. If I have to suggest a 10-point agenda, it will be as fol-
lows: 1) Taking immediate measures to boost the manufactur-
ing sector in India; 2) Initiating steps to bring infation under
control to give monetary policy the room to support growth;
3) Resolving taxation issues and bringing clarity around tax
laws; 4) Taking up implementation of the GST; 5) Giving much
needed acceleration to all infrastructure projects; 6) Emphasis-
ing on green energy and bringing it under priority sector lend-
ing; 7) Focusing on regulatory reforms that will improve the
ease of doing business, reduce transaction costs and expedite
approval timelines; 8) Leveraging on Information Technology
to make administrative governance in India transparent and
stakeholders accountable; 9) India has not built a good city
since independence. It is time that greater prospects are created
in Tier-II and Tier-III cities so that the existing metros are not
burdened; and 10) Initiating administrative reforms, particu-
larly in police, judiciary, land acquisition and labour laws.
EXIM BANK PLANS TO ACHIEVE
A 15% GROWTH IN ITS LOAN
BUSINESS DURING FY2015.
THIS WOULD BE FACILITATED
THROUGH INFUSION OF
ADDITIONAL CAPITAL FROM GOI
FOR ADVERTISING
+91-40-6677 0765/66
ads@thedollarbusiness.com
UNLOCKING CASH MARKET DEVELOPMENT ASSISTANCE
FOR THAT
HOME RUN
Well known marketer Seth Godin has been famously
quoted as saying, Marketing is a contest for peoples
attention. But garnering peoples attention comes
with a price, which at times is beyond the means
of an entrepreneur who has just started. Trying to
help Indian sports goods manufacturers overcome
this hurdle is the Sports Goods Export Promotion
Council. And how? By making best use of the Market
Development Assistance (MDA) scheme
BY PURBA DAS
FROM BEING A
NET EXPORTER
A DECADE BACK,
INDIA IS NOW
RUNNING A $200
MILLION DEFICIT
WHEN IT COMES TO
SPORTS GOODS
the same cant be said about our sports
goods manufacturing and exports.
WEAK HANDS
Sports goods manufacturing in India is
essentially dominated by small players
many of them in the unorganised sector
based in tier II towns like Jalandhar and
Meerut. So, when the seriousness with
which Indians looked at sports started
rising sharply, the need for high quali-
ty sports goods also rose exponentially.
And Indian sports goods manufacturers
were found wanting to cater to this rising
demand for top quality sports goods. Te
result? Massive rise in imports. So, from
being a net exporter of sports goods un-
til a decade back, India now runs a huge
trade defcit over $200 million for each
of the last three fnancial years.
Although Sports Goods Export Pro-
motion Council (SGEPC) was found-
ed way back in 1958, the need for it to
pull up its socks was felt only recently,
thanks to the rising defcit. And on its
part, SGEPC has been trying to do its
bit to support the sports goods man-
ufacturing industry in India, at least
in terms of them getting the attention
they deserve.
ALL ABOUT MARKETING
In this endeavour, SGEPC has been try-
I
ndians have traditionally been
known as people, who respect brain
more than brawn. Tey take great
pride is saying that theirs is a cul-
ture of knowledge seekers something
that can be seen even in 3
rd
and 4
th
gener-
ation People of Indian Origin. Lets take
the case of Indian-Americans. A thriving
community, it has produced some of the
best doctors, lawyers and scientists for
US. Te dominance of Indian-Amer-
icans in the spelling bee competitions
in US is a part of folklore. However, the
picture is completely diferent when it
comes to American sports like ice hock-
ey, basketball, etc which are very physical
in nature. But with satellite TV becom-
ing an integral part of modern life and
liberalisation ensuring money fowing
into sports, the mindset is changing. And
changing fast. Unfortunately though,
ing in right earnest to push the Market-
ing Development Assistance (MDA)
scheme of the Ministry of Commerce,
which it feels will be of great help to Indi-
an sports goods manufacturers. Te aim
of the scheme is to:
(i) Assist exporters for export promo-
tion activities abroad.
(ii) Assist Export Promotion Councils
(EPCs) to undertake export promotion
activities.
(iii) Assist approved organisations in
undertaking exclusive non-recurring in-
novative activities.
(iv) Assist focus export promotion
programmes in specifc regions like Fo-
cus (LAC), Focus (Africa), Focus (CIS)
UNLOCKING CASH MARKET DEVELOPMENT ASSISTANCE
FOR THAT
HOME RUN
Well known marketer Seth Godin has been famously
quoted as saying, Marketing is a contest for peoples
attention. But garnering peoples attention comes
with a price, which at times is beyond the means
of an entrepreneur who has just started. Trying to
help Indian sports goods manufacturers overcome
this hurdle is the Sports Goods Export Promotion
Council. And how? By making best use of the Market
Development Assistance (MDA) scheme
BY PURBA DAS
FROM BEING A
NET EXPORTER
A DECADE BACK,
INDIA IS NOW
RUNNING A $200
MILLION DEFICIT
WHEN IT COMES TO
SPORTS GOODS
the same cant be said about our sports
goods manufacturing and exports.
WEAK HANDS
Sports goods manufacturing in India is
essentially dominated by small players
many of them in the unorganised sector
based in tier II towns like Jalandhar and
Meerut. So, when the seriousness with
which Indians looked at sports started
rising sharply, the need for high quali-
ty sports goods also rose exponentially.
And Indian sports goods manufacturers
were found wanting to cater to this rising
demand for top quality sports goods. Te
result? Massive rise in imports. So, from
being a net exporter of sports goods un-
til a decade back, India now runs a huge
trade defcit over $200 million for each
of the last three fnancial years.
Although Sports Goods Export Pro-
motion Council (SGEPC) was found-
ed way back in 1958, the need for it to
pull up its socks was felt only recently,
thanks to the rising defcit. And on its
part, SGEPC has been trying to do its
bit to support the sports goods man-
ufacturing industry in India, at least
in terms of them getting the attention
they deserve.
ALL ABOUT MARKETING
In this endeavour, SGEPC has been try-
I
ndians have traditionally been
known as people, who respect brain
more than brawn. Tey take great
pride is saying that theirs is a cul-
ture of knowledge seekers something
that can be seen even in 3
rd
and 4
th
gener-
ation People of Indian Origin. Lets take
the case of Indian-Americans. A thriving
community, it has produced some of the
best doctors, lawyers and scientists for
US. Te dominance of Indian-Amer-
icans in the spelling bee competitions
in US is a part of folklore. However, the
picture is completely diferent when it
comes to American sports like ice hock-
ey, basketball, etc which are very physical
in nature. But with satellite TV becom-
ing an integral part of modern life and
liberalisation ensuring money fowing
into sports, the mindset is changing. And
changing fast. Unfortunately though,
ing in right earnest to push the Market-
ing Development Assistance (MDA)
scheme of the Ministry of Commerce,
which it feels will be of great help to Indi-
an sports goods manufacturers. Te aim
of the scheme is to:
(i) Assist exporters for export promo-
tion activities abroad.
(ii) Assist Export Promotion Councils
(EPCs) to undertake export promotion
activities.
(iii) Assist approved organisations in
undertaking exclusive non-recurring in-
novative activities.
(iv) Assist focus export promotion
programmes in specifc regions like Fo-
cus (LAC), Focus (Africa), Focus (CIS)
A sports goods manufacturing unit in Meerut, Uttar Pradesh. Jalandhar and Meerut account for 80% of Indias total production of sports goods
Indias sports goods trade
Te gap has been widening over the last few years
600
500
400
300
200
100
0

Exports Imports
and Focus (ASEAN + 2) programmes.
(v) Residual essential activities con-
nected with marketing promotion eforts
abroad.
As per the scheme, exporting com-
panies with an FOB value of exports
of up to Rs.30 crore in the preceding
year are eligible for MDA assistance for
participation in buyer seller meetings/
fairs/exhibitions abroad to explore new
markets for export of their specifc pro-
duct(s) and commodities from India in
the initial phase. Tis will be subject to
the condition that the exporter has com-
pleted 12 months membership with the
concerned EPC and has fled whatever
documents its supposed to fle, regularly.
COACH VS. PLAYER
India is not a country which is anywhere
close to being a sporting powerhouse. So,
its but natural that even though compa-
nies like the Meerut-based Bhalla Inter-
national, which owns the Vinex brand;
Sanspareils Greenlands, the popular
cricket equipment manufacturer; and
the Jalandhar-based Soccer Internation-
al, a leading football equipment manu-
facturer, are now manufacturing world
class sports goods, the fact that they are
based out of India weighs against them.
And trying to to reverse or remove this
handicap is SGEPC.
Its because of such grant provided un-
der the MDA, large delegations of Indian
sports goods manufacturers managed to
attend three international sports goods
exhibitions in FY2013 two in Hong
Kong and one in New York. Similarly,
using MDA grant, a delegation of 12
Indian sports goods manufacturers are
scheduled to attend buyer-seller meets in
Brazil and Chile, later this year.
Tanks to participation in such fairs,
Indian sports goods exports increased by
20% in FY2014. And while imports still
far outweigh exports, one hopes with
SGEPC as a coach, players in the sports
goods industry have set their sights on
the goal. Will they be able to score?
BORDERLINE EDITORS COLUMN
...STILL FAR FROM
THE FINISH LINE
Manish K. Pandey
Editor,
Te Dollar Business
I
t was the year 2004 when European Union (EU) and
India frst realised the need of taking their ties to the
next level. Idea was to forge a strategic partnership
that would ensure mutual cooperation on a range of
issues from enhancing trade to free movement of
professionals in the region, from government procurement
to market access, and to even cultural exchanges. Not to
mention, the foundation of this friendship was (and is still)
purely economic.
To strengthen the harmony, both sides even went on to
initiate dialogues towards an ambitious free trade agree-
ment (FTA), ofcially known as the Broad-based Trade and
Investment Agreement (BTIA). Te year was 2007 and the
Great Recession had just begun. While for Brussels this
was part of its strategy to expedite multilateral trade liber-
alization, for India it was more about development. In other
words, New Delhi was looking at it (and has always been)
as an accord that would help it achieve its developmental
objectives through free trade and investments.
It has more been than six years and ffeen rounds of talks
since then, but the proposed FTA is still far from the fnish
line. Free movement of professionals, relaxing FDI limits,
agricultural trade, protection of intellectual property rights
and data security have been some real bones of contention,
at times even signaling a collapse. However, both India and
EU have failed to bridge the gaps on these critical issues.
While EU has been demanding substantial duty cuts and
tax reductions on several products (particularly automo-
bile, spirits and dairy products) apart from a stronger in-
tellectual property regime, India is asking EU to grant it the
Data Secure Nation status that will have a bearing on IT
companies wanting market access.
With its combination of rapid growth, complementary
trade baskets and growing bilateral trade, India is an obvi-
ous partner for an FTA for EU. In fact, the 28-nations bloc
has been one of Indias leading trade partners, accounting
for over 15% of its total trade in goods and services. Its not
only an important market for Indias exports of IT, textiles,
pharmaceuticals, gems and jewellery, but also the biggest
source of FDI fows into India, nearly 25% of the total. Te
value of EU-India trade has doubled in the last 10 years,
from 28.6 billion in 2003 to 72.7 billion in 2013.
Te opportunities are alike for EU. India can ofer a lot
to European companies when it comes to multi-brand retail
and insurance, and currently closed sectors like accountan-
cy and legal services. If concluded, BTIA has the potential
to increase the services (which has already quadrupled in
the past decade, from 5.2 billion in 2002 to 22.5 billion in
2013) trade between the two manifolds.
A trade agreement is always about give and take. And
there is a constant arm wrestle. But then negotiations cant
go on forever. Tere has to be some re-balancing that the
two do in order to arrive at an agreement. Indecisiveness
would mean a big opportunity loss, for both India and
EU, and that too at a time when trade agreements such as
the Trans-Pacifc Partnership (TPP) and the Transatlantic
Trade and Investment Partnership (TTIP) are moving glob-
al trade away from MFN routes toward regional routes.
Once concluded, EU-India BTIA will be the biggest free
trade accord involving India, surpassing its FTA with the
ASEAN countries. Tis certainly calls for taking a long-
term view of trade policy options while negotiating the
trade pact, and of course the requisite political will. And
well, thats true for both sides!
With its combination of rapid
growth, complementary trade
baskets and growing bilateral
trade, India is an obvious partner
for an FTA for European Union
@MK_Pandey www.thedollarbusiness/blogs/manish
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Airline
Brand
Enjoy food. Fine dine. World-class
service. Feel pampered. Youre worth
every second you spend with us.
Be our guest.
www.your_airline_brand.com
No more going to a
cash machine. Now
you dont have to pay
those extra bucks at
an expensive bureau
de change. No more
waiting or standing in
a queue. Its the end of
cash! Power up your
life with Your Bank
card. Its freedom, its
safety... its power in
your hands. Go cash-
less. Go places.
YOUR BANK mWALLET
GO CASHLESS WITH...
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brand
Tere is no fun without safety.
Not in this lifetime.
Enjoy the most
secure banking
Te banker to evry Indian makes a prom-
ise it doesnt break. Te people depicted
in this advertisement are Your Banks
genuine customers. You may be next.
www.your_bank_brand.in
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.
.
LETTING YOU ON THE SECRET BEHIND
THE WAUGHS, THE CHAPPELS AND THE
WOODIES
A blissful marriage of health and taste
Hit that Wimble-
don winning back-
hand winner three
seconds before
noon on a rainy
Sunday
Coz you want to etch those moments forever
DECODING
FOREIGN
TRADE!
RNI: APENG/2014/54643

The Dollar Business Magazine-July 2014

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