BEST PROSPECTS SECTORS

The US government has identified 13 best prospects sectors for exports to India and four sectors which offer investment opportunities in India. Best prospect sectors for US exports include computer software and services; computers and peripherals; education services; telecommunication equipment; environmental technology; telecommunication equipment; power transmission and distribution; biotechnology ; medical equipment; process control equipment; airport and ground support equipment systems; textile machinery; air conditioning and refrigeration equipment; and franchising ; Sectors offering investment opportunities include oil & gas machinery; insurance; drugs and pharmaceuticals; and healthcare services.

• COMPUTER SOFTWARE & SERVICES
  Indian software & services industry has  registered 26 percent growth in 2002. It's share in global exports stands at 1.9 percent at the end of 2002 against 1.5 percent in 2001. The Indian IT and Electronics market in 2002-03 was worth US$ 20.63 billion of which US$ 12.7 bn consisted of software. The software and services exports in 2002-03 stood at Rs. 47,500 crore against Rs 36,500 cr in 2001-02. The IT Enabled services sector registered an impressive 65 percent growth in business at Rs 117 bn in 2002-03 against Rs 71 bn. ITEs share in total exports was 24 percent against 19 percent in 2001-02 and 14.5 percent in 1999-2000. Of Fortune 500 companies, more than 185 companies outsource their software requirements from India. Identified growing segments include IT enabled services, Web services, and E-commerce Information technology training. It is expected that by 2008 software and services sector would account for 7.7 percent of India's GDP. It is estimated that by 2008, software exports from India would be around US$ 87 billion which would generate a demand for IT hardware to the tune of US$ 50 bn.
  
  North America, the US in particular, is the largest market for Indian software exports The US and Canada's share in the global IT services is growing at the rate of 12-13 percent over the medium term. The US companies generally have a high level of outsourcing, particularly IT services. According to the strategic review (2003) of NASSCOM, the geographical distribution of Indian software exports include software and ITES-BPO; about 80-85 percent of the latter are to the US hence the increase in share of North America in total Indian IT industry exports in 2001-02 and 2002-03.

• COMPUTERS AND PERIPHERALS
  Indian market for computers and peripherals grew by 30 percent in last four years. According to Ernst & Young, PC sales in India will reach 22 million by 2010. In 2001 computer hardwares and peripherals sales in 2001 stood at US$ 4 bn. Desktop sales in 2000-01 registered 34 percent growth.  Major US companies having presence in Indian market include CISCO, Cognizant Technologies, IBM, Microsoft, Oracle and Texas Instruments. Demand for high performance computers including mainframe computers is increasing in Indian and international banks, Indian bourses, Indian railways, Indian and international airlines. Multinational companies enjoy 27 percent of computers and peripherals market in India followed by local brands' 20 percent and the balance being shared by small Indian assembling firms. The notebook market is around 50,000 per annum. One of the peripheral product, printer is registering impressive growth. India's hardware requirement is largely met through imports (75 percent). But this share is likely to increase further once India moves to a zero-duty regime for IT product imports in line with the Information Technology Agreement (ITA) of the World Trade Organisation (WTO).

  

• EDUCATION SERVICES
  US government has identified education as a significant service export sector. Exports of educational services to India is a major focus area for US. Indian students enrolment in US universities is growing at an average 20 percent per annum. 75 percent of them apply for graduate and post-graduate courses. At an average US$ 14,000 per student, US earnings from this sector is estimated at around US$ 336-340 mn annually. Of the two sub-sectors, India's  information technology education and training market size is estimated at US$ 88 mn. The management education market size could be anywhere between US$175-180 mn and the annual growth rate is estimated at around 20 percent. The US government finds distance learning  in India a growing segment and feels there is a strong potential for US schools to  develop tie-up with Indian universities. Currently, about 20 percent Indian universities have distance learning facilities.

• TELECOMMUNICATION EQUIPMENT
  Indian telecommunication sector  investment requirement is estimated at 2.5 bn per annum. Indian federal government plans to reach teledensity of 9 per 100 by 2007 and to achieve this 90 million direct exchange lines would be required compared with 20 mn in 2000. Cellular market in India is growing impressively. According to the Cellular Operators Association of India (COAI), the industry is expecting an investment of the order of over Rs 25,000 crore in next three years. The subscriber base by the end of 2002 is estimated at 10million which is expected to increase to 120 million by 2008. It has so far invested Rs 21,000 crore. There are 51 cellular mobile networks encompassing  about 1500 cities and towns covering more than 60,000 villages. In terms of different types of levy, cellular operators in India are to share 35-42 percent of their revenues with the federal government: licence fee (8-12 percent); spectrum usage charges (2.5-4.5 percent); service tax (5 percent); interconnect access charges (20 percent).
  
  In domestic long distance (DLD) sector, a massive investment to the tune of US$ 17-20 bn is chalked out to create facilities in 40 most populous Indian cities. The DLD market  revenue generation is estimated at US$ 5.5 bn by 2005 which is again expected to increase to US$ 12 bn by 2010. With the projected growth, the switching capacity will also expand accordingly. The two major telecom switch users are Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). According to a report, the annual growth rate of net switching capacity which was 16-18 percent  during 1992-97 has gone up to 22-24 percent during post-1997 period. Besides, demand for other types of switches for cellular services, ISDN, gateway, ATM etc  is also like  to grow significantly in coming years. Digital switching system is also gaining ground in India.
  
  Telecom cable is the fastest expanding sector. In view of the expansion projects being undertaken by the government for all the above mentioned telecom segments, the demand for telecom cable sector is likely to register significant growth in next couple of years. The telecable is classified into three categories, jellyfilled cable, paper insulated cable and optical fibre cable. Though jellyfilled cable  demand is  likely to continue for some more years, the optical fibre cable segment is likely to taste the real growth in longer terms.

• ENVIRONMENTAL TECHNOLOGY
  According to USCS estimate, Indian  environmental management market size is about US$ 3.2 bn. The annual growth of the business is around 15 percent. Major areas of investment identified include water, waste water treatment, recycling and sanitation, industrial and vehicular air pollution control, waste management, treatment and disposal, biomedical waste management, municipal solid waste management, clean and renewable energy equipment and environmental consultancy services. Of these, waste water management accounts for 50 percent of the total environmental management market. The waster water treatment market is estimated at over US$ 1 bn and growing at 14-15 percent. The bio-medical waste management market is estimated at US$ 200 mn. The market for air pollution control monitoring and testing technologies  (stationary and mobile)  which was estimated at US$ 180 mn is registering 15 percent annual growth.
  
  US presence is dominant with  40 percent share in India's total environ equipment imports. Anti-air pollution equipment market in the transport sectors estimated at US$ 300 mn. The present market for clean and renewable energy market is estimated at US$ 120 mn with 25 percent growth per annum. Important segments in this sector include wind energy, solar energy, mini-hydel project, waste-to-energy and cogeneration systems.

• AIR-CONDITIONING AND REFRIGERATION EQUIPMENT
  The size of Indian air-conditioning and refrigeration  market is estimated at US$ 821 mn. A number of MNCs from Korea, US, Japan, Europe has entered the Indian refrigeration market. Leading MNCs present in Indian air-conditioning and refrigeration markets are from US, Japan, Korea, Finland, Denmark and Germany.
  
  A potential Indian market which is likely to draw foreign investors in longer terms is the cold chain network. Despite  being the second largest  food producer in the world, the country does not have any cold chain network. The  refrigerated existing transportation infrastructure facilities are  substantially inadequate compared with the growing requirement of the facility.

• AIRPORT & GROUND SUPPORT EQUIPMENT SYSTEMS
  US majors like Raytheon, Honeywell, Airport Systems International, Airways ATM, Northrop Lockheed Martin, GE and Boeing are already there in the Indian aviation market. International and domestic air passenger traffic in India is likely to register 7 percent and 12.5 percent growth respectively, by 2010. By 2005 Indian airports are estimated to handle  60 million international passengers  and 300,000 tonnes of domestic and 1.2 mn tonnes of international cargo. Indian federal government  has decided to  lease four international airports: Delhi, Mumbai, Chennai and Kolkata (formerly Calcutta). Aggregate investment is estimated at US$ 4 bn. India has seven domestic airports, namely, Bangalore, Hyderabad, Ahmedabad, Goa, Guwahati and Cochin. Three international airports are being planned to construct with private participation at Hyderabad, Bangalore and Goa. 
  
  The aviation and communications equipments for which US companies can compete with their foreign counterparts in the Indian market include communications equipment, weather equipment, baggage handling and security information systems (the market size is estimated at US$ 35 mn), consulting services,  signage, aerobridges, navigational aids (GPS,ILS,VOR), utilities and power equipment, airfield lighting systems and  approach lighting, radar systems, management information systems, flight  information systems. Communications, navigation and surveillance (CNS)/air traffic management market is estimated at US$ 110 mn.

• BIOTECHNOLOGY
  Indian market for biotechnology  products is estimated at US$ 344 mn and the growth rate is estimated at 35-40 percent per annum.  With 60 percent of  the total market, human biotech products take the largest share followed by agric and veterinary biotech products 25 percent. Remaining 15 percent market is shared by medical devices and contract research and development.  Among the pharmaceutical biotech products, bio-drugs, vaccines and diagnostics dominate the market. Opportunities in India exist for biotech-based vaccines for HIV, cancer, diarrhea diseases, influenza virus, contraception, rotavirus, TB, malaria, H. influenza and pneumonia. Others Genetically engineered agricultural products will find huge market in India. So also, bio-pesticides and bio-fertilisers. Major players in this sector include Hindustan Lever, Dupont, Indo Seeds, ITC Zeneca, Hoechst, Novartis. Monsanto  set up seed joint ventures in India -- Mahyco-Monsanto Biotech India and Monsanto-Cargill India.

• MEDICAL EQUIPMENT
  Indian medical equipment market is estimated at US$ 1.85 bn. Of this, imported products account for 61 percent. Major global players in the market include General Electric, Siemens, Bayer, Boston Scientific, Wipro-GE Network Pickers, Phillips Medical Systems, Toshiba. With the growing demand for medical facilities across the country, the market for medical equipment in India is fast expanding. About 10-15 percent of country's total 1.1 billion population  want high quality healthcare services. 
  
  A number of private entrepreneurs is planning to enter Indian healthcare sector. Products for which market is growing include ICCU, Heart/Lung machines, linear accelerators, Doppler, ultrasound machines, MRI scanners etc. It is to be noted that cardiology equipment accounts for 20 percent of the total market followed by imaging system's 15 percent. Private sector entry into Indian insurance market has opened vast scope for high-end medical facilities and healthcare equipment market as well.  According to a Confederation of Indian Industry study, health insurance market is likely to expand to 377 mn by 2005.

• TEXTILE MACHINERY
  US government is of the view that the current millennium will register significant growth in Indian textile industry. The textile machinery demand is estimated to stand at US$ 2150 mn. It is estimated that by 2005 textile imports from India by Indian textile industry is likely to stand at US$ 40 mn. Potential subsectors include processing industry, knitting machinery, garment machinery, spinning machinery and shuttleless air or water jet looms and shuttle looms.

• POWER TRANSMISSION DISTRIBUTION RENOVATION & MODERNIZATION EQUIPMENT
  Indian federal and state governments' are putting increasing emphasis on toning up power transmission system. A number of State Electricity Boards (SEBs) have embarked upon massive power plant renovation and modernisation programmes. Annual equipment requirement for power plants modernisation and renovation is estimated at US$ 2 billion. Billing and metering equipment market itself is estimated at US$ 250-300 mn. Major international players in the market include ABB, Shannxi, Secure Meters.

• FRANCHISING
  Indian franchising market is growing at a fast rate. Potential markets include healthcare, food and beverages, computers, hotels etc, entertainment centres and retailing. Over the years, India-US Business Council, set up to enhance private sector cooperation in the bilateral trade and investment promotion in both the countries, exchanges views and suggests measures to strengthen the cooperation from time to time. The meeting is alternately held in New Delhi and Washington. This apart, India Interest Group, initiated by General Electric was formed with members of some major US corporations based in Washington.
  
  Confederation of Indian Industry (CII) targets to raise exports to US$ 15 billion by 2005 and  US$ 25bn foreign direct investment (FDI) by 2010. CII has identified 10 sectors for greater Indo-US cooperation : information technology; financial services; infrastructure; small sector; environment; energy; and telecommunications. Meanwhile, a report on benefit from Uruguay Round to developing countries Trade released by the US Department of Commerce reveals that US imports from India  increased much more rapidly than these countries' purchases  from the US. In last one decade (1992-2001) while imports from India has increased 157.62 percent, the US exports to India were up 96.37 percent. Textiles articles imports by US from India registered the highest growth of 273.8 percent. On the other hand, among  products imported by the US from India, cell phones registered  506.6 percent growth.

  Updated on October 22, 2003