TARGET SECTORS

Under the Indo-British Partnership (IBP) programme, the UK government  has identified the  following  sectors of Indian economy as target sectors and currently giving special emphasis:

UK government has made a comprehensive list of 20 target sectors for India:

  • Aerospace 
  • Agriculture
  • Automotive
  • Biotechnology & Pharmaceuticals
  • Building, Construction & Property Services
  • Chemicals
  • Creative
  • Education
  • Energy
  • Engineering (Mining Equipment, Machineries)
  • Environment
  • Fire, Police, Security
  • Food and Drink
  • Healthcare
  • Household
  • Infrastructure
  • IT and Electronics
  • Metals and Minerals
  • Oil & Gas
  • Ports

AGRICULTURE

Indian agriculture sector accounts for  26 percent of country's  GDP, provides 64 percent employment and 18 percent of country's exports. The immense scope for Indian food processing industry to expand  could be gauged by the fact that about 25-30 percent of fresh vegetables and processed foods are lost in India due to lack of adequate and scientific storage facilities as well as improper handling of the produce. Besides being a huge domestic market (1.02 billion population as per 2001 Census), Indian agro sector can emerge as a major source of third country exports.  UK has identified Indian agribusiness industry as a priority sector. It aims to emerge as a leading source for providing technology, equipment and consultancy services in agribusiness.

India is the second largest vegetables producer in the world and  ranks among the top few in fruits production. The potential of food processing sector and the prospect of foreign investment/collaboration in this sector could be gauged by the fact that  in some certain categories of fruit like mango India is the largest producer. The average annual output  of major products under horticulture is: mango 10 million tonne, coconut 13 million nuts, banana 11 million tonne, cashew nuts 400,000 tonne, cardamom 11,000 tonne, coriander 240,000 tonne, garlic 475,000 tonne, pepper 60,000 tonne, turmeric 425,000 tonne, ginger 180,000 tonne, chili 860 tonne and tea 816 million kilogramme.

Foreign investment in fisheries is about one-third of total investment in the sector. In processed and value-added fish products there is scope for foreign technology collaboration. Indian fish has very good export markets, particularly Japan, USA and the European Union.

UK's focus areas are :

  • Post harvest technology

  • Bulk storage (incl. silos and temperature-controlled warehouses)

  • Bulk handling transportation (incl. packaging) and logistics

  • Cold chain facilities

  • Port handling equipment (loading and unloading)

  • Liquid storage facilities for food grains

  • Improved seeds for agricultural and horticultural produce

  • Research and Development through use of agricultural biotechnology

  • Cold store, cold chain management of agriculture, horticultural and fish products

HEALTHCARE

Healthcare is another target sector UK is focusing on. Indian federal as well as state governments are putting greater emphasis on  healthcare system. The existing healthcare facilities are within the reach of 50-55 percent of  country's population which has crossed 1-billion-mark as per 2001 Census. The industry size is about 10.4 billion. Of this, pharmaceuticals' share is 1.7bn. A growing affluent and middle class people are more and more  availing of better and improved healthcare facilities.  There are subsidized healthcare facilities being provided by the government-run hospitals and various charitable organization. Along with this, there are number of nursing homes,  privately-run hospitals, clinics and specialized treatment centres in the country. Based on  industry's observation, the UK government expects  Indian healthcare industry to grow by 13 percent per annum till 2005.

In turnkey healthcare  projects like hospitals, specialist centres-- both government and private, India offers vast scope for UK investors. Hospital management consultancy could also be an area of interest to UK. According to latest available statistics with the Organisation of Pharmaceutical Producers of India (OPPI), there are 15097 hospitals, 22291 primary health centres and 136818 health subcentres in the country. Besides, there are 42 medical colleges.

UK's focus areas are :

  • Electronic medical equipment and instrumentation

  • Diagnostics

  • Single use disposable products (UK accounts for about 25 percent share in the world)

  • Non-clinical consultancy which includes consultancy provided to the government on healthcare matters, education and training on improved healthcare relating to diseases like AIDS.

  • With the opening up of insurance sector, India offers a vast scope for the British private health insurance companies.


AUTOMOTIVE

Indian automotive market offers vast potential for vehicle manufacturers but due to several constraints like inadequate infrastructure problems like good roads or adequate roadable connections there  may not be any immediate gains but in long term perspective India is going to emerge as one major vehicles manufacturing base in the world. Besides, the massive investments Indian federal government has undertaken to improve and expand the National Highways connecting all regions of the country are expected to  spur investments in country's automotive sector as well.

The latest trend in vehicle production and sales in India shows a positive growth. According to statistics compiled by the Society of Indian Automobile Manufacturers (SIAM), automotive production in fiscal 2001-02 was up 13.19 percent at 5.37 million units and sales increased by a significant 12.77 percent at 5.23 million units. In the export front, the industry registered 9.5 percent growth in the last fiscal (2001-02). Automotive exports in 2001-02 stood at 1.84 lakh units compared with 1.68 lakh units. Segmentwise analysis reveals that both motorcycles (36.64 percent) and four-wheelers (59.45 percent) have registered significant growth in exports whereas commercial vehicle (CV), multi-utility vehicle (MUV), two-wheeler and three-wheeler sectors have suffered setback. Commercial vehicles exports declined markedly by 17 percent.

During the first four months of the current fiscal year (2002-03) Indian automobile industry registered an impressive 22 percent growth.

  • India's prospect as a potential vehicle manufacturing base is reflected in the fact that a number of world's auto major have made large investments in the Indian auto sector. The list includes General Motors, Daimler Chrysler, Daewoo, Ford, Honda, Mitsubishi, Toyota, Fiat, Hyundai. They have either formed joint ventures or have technological collaborations.

  • While investing in auto sector, the world majors are also eyeing India as a global source base and are gradually strengthening the vendor base in India for supply of component not only to their Indian arm but also to other manufacturing bases outside India. With this end in view,  world leaders in auto parts manufacturing also gone in for JVs in Indian companies.

  • The foreign partners in JVs include Bosch, Leave, Mahler, Dona, Lucas, Gabriel, ZF, Nippon Denso, Valeo, Daikin and  Asahi Glass, Delphi and Federal Mogul.

  • Major auto players currently in Indian market include Maruti Udyog, TELCO, Bajaj Auto, General Motors, Hyundai, Mahindra, TVS Suzuki, Ford, Hindustan Motors, LML,  Daewoo Motors, Hero Honda, Ind. Auto, Swaraj Mazda, Eicher Motors, Kinetic Engineering, Hero Motors, Royal Enfield and  Volvo.

  • The UK automotive industry spotted India as one of the high priority countries along with China, South Korea, and Brazil. India is a priority market for auto component as well. In Indian auto sector UK  technical and engineering  expertise has vast scope. Auto giants in US, Japan, Italy, Germany and France extensively depend on the British technical and engineering expertise.

BIOTECHNOLOGY

In the field of biotechnology India is fast changing from traditional biotech to modern biotechnology. Not only the federal government, but different state governments also are putting greater emphasis on biotech and taken up various projects. The most notable project is five-year Indian Genome Inititaive (IGI) project being funded by the US government. The progress in this sector is mainly spearheaded by the federal department of Biotechnology under the Ministry of Science and Technology. Major players in Indian biotech sector include Dr. Reddy's Laboratories, Advanced Biochemical Ltd, Shantha Biotechnics Pvt. Ltd, Bharat Biotech International, DSQ Biotech, Reliance Industries, GVK Group, Chembiotic International, Technology Development Board.

In biotech products, India is likely to emerge as a major consumption market. BY 2005, consumption market for healthcare products  are expected to have a market share of about 40 percent, biotech in agriculture would be nearly 33 percent, industrial and other products would be about 25 percent.

Indian biotech sector offers attractive scope for investment in following areas:

  • Vaccines, diagnostics, molecular medicines, separation of blood components in healthcare products.

  • Developing hybrids, varieties and genetically modified seeds, bio-fertilisers, bio-pesticides and plant growth stimulants in agriculture.

  • Industrial enzymes, organic acids including amino acids, speciality materials including biodegradable plastics etc.

PHARMACEUTICALS

India accounts for about 1.5 percent of total global pharmaceuticals business. Of its total business, formulations take the largest chunk with around 82 percent share and the balance 18 percent or so goes to the bulk drug segment. Multinational pharmaceutical companies share in Indian domestic market is anywhere between 35-40 percent. India's pharmaceuticals imports range between 450 million to 500 mn and exports hover around 1 bn.

There are 250 large pharmaceuticals units including five state-run units. Besides, there are about 8000 small scale units (SSIs). Major Indian players in the pharmaceuticals industry include Ranbaxy, Dr. Reddy's Laboratories, Cipla, Nicholoas Piramal, Wockhard, Hindustan Antibiotics, IDPL. Indigenous manufacturing units meet about 70 percent of domestic demand for bulk drug, intermediaries, formulations, chemicals, tablets, capsules and injectibles. The industry's output in 2001 stood at US$ 4.3 billion. Focus areas are:

  • Foreign Direct Investment permitted up to 100 percent through automatic route

  • No restriction to introduce top end products in Indian market

  • Tie-up with local players for franchise manufacturing and marketing of MNC products.

  • Upgradation of manufacturing facilities of existing units to get their products approved by UK MCA and USFDA as without such approvals Indian medicines can't enter the European and US markets.

  • Manufacturing collaboration with Indian companies to cater to fast expanding generics markets.

  • UK MCA approval for patent

  • Marketing tie-ups with Indian cos

  • Collaboration to develop off-patent products

  • Developing manufacturing base in India for third country exports either through tie-ups with local units or creating own production base which would meet investing companies own requirements as well.

EDUCATION

UK has identified India as a priority export market  for education and training. Compared with its vast population (over 1 billion according to 2001 Census) the educational facilities in India are still not adequate. However, for specialised education and related training, India's demand is primarily for post-graduated courses. UK's share in total number of Indian students studying abroad is around 16 percent compared with USA's 60 percent. Britain is the gateway to European Uion hence  education in Britain would help Indian students get greater international exposure. The number of students from India to the UK has gone up to 12,000 now (2003) from 4000 five years back. The rate at which the demand of Indian students to get education in the UK has become so fast that the UK government target for this sector set for 2005 has already been achieved. Top quality education being ensured all the institutions in the UK seems to be prompting more and more Indian students seeking education from UK. About 40 percent of all the Indian students are studying management. The UK governmenr  offers as many as 700 scholarships in different fields of education.

ENVIRONMENT

With Indian federal and state governments' increasing emphasis and growing awareness of Indian people about environment, the need for state-of-the art technology and equipment combating pollution is fast increasing. Focus areas where UK companies venture into are:

Air Pollution Control equipment

  • Energy management

  • Environmental Consultancy Services

  • Environment control in coal and gas sectors

  • Marine pollution control, Waste management --nuclear and non-nuclear

  • Water and waste water treatment

  • Cleaner production technology and processes

FINANCIAL SERVICES

With Indian financial market's gradual unfolding, the scope for offering services relating to financial activities is also expanding and UK market leaders in this sector can find Indian market an attractive  one. Today UK has the world's largest share in : metals market (95 percent); Eurobond trade (70 percent); Foreign Equity market  (58 percent); Derivative market (36 percent) Insurance (22 percent).

Identified focus areas are :

  • Banking

  • Insurance

  • Pensions Reform

  • Fund/Asset Management

  • Public Private Partnership

  • Securities

At micro level, Indian  market offers scope for foreign investment/collaboration in the following segments:

  • Capital Markets

  • Concession Financing

  • Corporate Banking

  • Corporate Finance

  • Derivatives

  • Foreign Exchange Trading

  • Fund Management

  • Insurance Broking

  • Insurance Underwriting

  • Management Consultancy

  • Pension Management and Consultancy

  • Privatisation

  • Retail Financial Services

  • Securities Trading

  • Wholesale Banking

  • Venture Capital

IT

India's Information Technology (IT) industry which is witnessing almost an explosive growth, expects to generate US$ 87 billion including US$ 50 bn from exports by 2008. In hardware segment, assembled PC accounts for about 60 percent whereas Indian brands account for about 17-18 percent. The business segment accounts for largest (76 percent)  chunk of the domestic market. India has the advantage of providing a highly-skilled, English speaking workforce at a comparatively low wage cost. More than 70,000 software professionals enter the Indian market every year.  Indian IT has been identified by UK as a  priority sector. The UK IT and Electronics industry is the 5th largest in the world. Many a multinational companies are using UK as their manufacturing base. Besides its major export markets like USA, Germany, France , Benelux, Switzerland and Eire. However, UK is widening its focus  to include  India, China and Israel. For outsourcing works from India, the UK government's stand, as stated by the former British Ambassador, Sir Rob Young, is that if a firm stands to gain and remains competitive, it should outsource.  The focus areas are :

  • Leading source of software tools and solutions

  • E-business solutions, applications and research

  • Technology collaboration or joint ventures with Indian IT companies on IT-enabled and IT-related services.

Potential areas of  cooperation:

  • Cables and wiring accessories

  • Cabling Services

  • Card technologies and automatic ID

  • Computer Hardware

  • Electronic instrumentation and control equipment

  • Electronic optical instrumentation

  • IT Consultancy service

  • IT disaster recovery services

  • Leisure Software

  • Networking

NASSCOM-LSE co-operation

Indian IT industry's national platform, National Association of Software and Services Companies (NASSCOM) and the London Stock Exchange has  signed a Memorandum of Co-operation on November 22, 2002 committing the two organisations to work together for the benefit of the Indian IT industry. "This agreement reinforces the Exchange’s commitment to Indian IT companies. The IT industry in India is expanding at an impressive rate and, for this to continue, companies will need access to further capital. London is home to more international capital than any other financial centre in the world but, more importantly in the current environment, it offers world-leading standards of corporate governance and market regulation. These advantages mean that London is increasingly becoming the first choice for Indian IT companies that want to fund their future growth,” so feels Clara Furse, chief executive of the London Stock Exchange.

"UK is the second largest market for Indian IT Services companies accounting for about 12% of the total Indian IT Services exports. The need today is for Indian companies to consolidate and expand their presence in UK and Europe and to engage with this important financial market to raise capital", maintains  Kiran Karnik, president of NASSCOM. “The MoU with LSE envisages the fulfillment of both these objectives to enable Indian IT companies to explore new horizons with UK and Europe in the technology sector”, he points out.

The chairman of NASSCOM Mr. Arun  Kumar is of the view India's presence in the global IT Services market is today more focused to custom application development and application outsourcing, which forms only 10 percent of the global IT services market. Significant potential also exists in service lines such as Network infrastructure management; IS outsourcing; IT Training and Education; Hardware support and Installation; and Network consulting and integration where Indian vendors have negligible presence currently. "With Off shoring becoming more mainstream, Indian IT companies are expected to penetrate new service lines such as Systems integration (accounting for 22% of global IT services market); Packaged Software Support and Installation (13%) and IT Outsourcing (18%).", he points out. Nasscom president, Mr. Kiran Karnik, observes that "increased customer willingness to disaggregate service lines in order to maximize offshore leverage and also Indian vendors building onshore skills, augur well for India's foray into these service lines. Many leading vendors already have a strong presence in package software installation and support market and upto 40-50% of the activities involved can be offshored."

Current and Potential share of India's IT Services exports worldwide
by Service Lines

SERVICE LINES Current Share (2002) Potential Share (2008)
Custom Application Development 14-15 percent 30-35 percent
Application Outsourcing 14-15 percent 30-35 percent
Packaged Software Installation & Support 1.5 percent 4-5 percent
Systems Integration 0.5 percent 2-3 percent
IS Outsourcing 0.5 percent 2-3 percent
IT Training and Education 0.5 percent 2-3 percent
Network Infrastructure Management 0.5 percent 2-3 percent
IT Consulting 0.2 percent 1 percent
Network Consulting & Integration 0.3 percent 1 percent
Hardware Installation and Support 0.3 percent 1 percent
SOURCE: NASSCOM

Current and estimated share of IT Service lines in India's total exports

SERVICE LINES 2001-02 2002-03 (estimated)
Software and Services 64.7 percent 60.2 percent
IT Consulting 0.65 percent 1.02 percent
Systems Integration 1.96 percent 3.05 percent
Custom Application Development and Maintenance 34.64 percent 30.50 percent
Network Consulting and Integration - -
IT Training and Education - -
Hardware Support and Integration - -
Packaged Software Support and Installation 3.92 percent 4.58 percent
Processing Services - -
IS Outsourcing - -
Application outsourcing 22.8 19.3
Network Infrastructure Management 0.65 0.71
IT Enabled Services 19.4 percent 22.6 percent
R&D Services 15.9 percent 16.2 percent
SOURCE: NASSCOM

Current and Potential for ITES-BPO Exports by Service Lines

SERVICE LINES 2002-03 (Estimated)
(In US$ million)
2008
(In US$ billion)
HR 35 3-4
Customer Care 700 8.85
Payment Services   190 3-3.5
Content Development 650z 2.5-3
Administration 350 1.5-2
Finance 450 2.5-3
Total 2375 21-24
SOURCE:NASSCOM


LEISURE & TOURISM

Leisure and Tourism is yet another sector where there is immense scope for Indo-UK cooperation. Being world's 5th largest tourism destination, over the decades UK has acquired considerable experience in the management of heritage, museums and tourism. Many of the UK tourism and hospitality companies have substantial stakes in overseas projects. In leisure goods also India offers immense  scope to UK companies. UK enjoys substantial market shares in sports goods market of Germany, USA, Italy, France and the Netherlands, particularly in sports equipment  like cricket bats, golf equipment and hockey sticks.


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