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Avneet Jolly and Anupam Prakash
ASIA: "Amendment to the Intellectual Property Law of Vietnam" Aug. 09. 3-page Alert by Baker & McKenzie
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India Manufacturing: Brief Introduction
The Indian manufacturing sector is the mainstay of entire Indian industry as manufacturing output constitutes over 75 per cent of the index of industrial production (IIP). Indian manufacturers have adopted a global mindset while carefully selecting their product segments. They are continuously working to achieve cost excellence and marketing capability which has even attracted foreign players to proactively develop India as their sourcing and manufacturing hub.
India enjoys a competitive advantage on the global canvas owing to key reforms in taxation, infrastructure and clusters (like special economic zones [SEZs]) implemented by the Government, availability of reasonably-priced skilled labour workforce and a positive eco-system. Moreover, the global trend to manufacture and source products in low-cost countries has gained pace in the past decade, particularly in skill-intensive industries, and India has been able to leverage on the opportunity to its best.
Growth Trend
The HSBC India Manufacturing Purchasing Managers' Index (PMI) - a measure of factory production -was at 56.6 in February 2012. The latest reading indicated a marked expansion of the Indian manufacturing sector which was spurred by new orders (that touched a 10-month high) and a rise in new export business for the month.
The Indian manufacturing sector also showed moderate overall business sentiment in October-December 2011 quarter, as per the Industrial Outlook Survey conducted by the Reserve Bank of India (RBI) for the quarter. The business expectation index (BEI), which acts as a barometer of the overall health of the manufacturing sector, stood at 110.1 for the assessment quarter while RBI expects it at 117.2 for the January-March 2012 quarter.
The IIP for the Mining, Manufacturing and Electricity sectors for the month of December 2011 stood at 136.2, 190.7 and 149.8 respectively wherein manufacturing grew by 1.8 per cent. In terms of industries, 15 out of the 22 industry groups (as per 2-digit NIC-2004) in the manufacturing sector have shown positive growth during the reported month.
Manufacturing: Key Developments and Investments
Shanghai Electric, China's biggest power equipment company, is all set to establish a manufacturing facility in India. The company is in advanced stages of negotiations with French power major Alstom for a joint venture facility that would manufacture boilers for power projects
Detroit-headquartered automaker Ford Motor Co will make India its manufacturing hub for small, low-cost cars that would cater to markets in Africa and the Asia-Pacific region. The company will set up a plant in northwest India in 2014 that would entail an investment of US$ 1 billion and would have an annual capacity of 2, 40, 000 units. Ford's existing manufacturing unit in Chengalpattu is undergoing enhancements and is expected to be in full production mode by the end of 2012
Germany-based Hummel AG Group's subsidiary Hummel Connector Systems is establishing a manufacturing facility at Neelambur, near Coimbatore, entailing an investment of €3,00, 000 (US$ 3,94,360.03). Hummel produces cable glands, circular connectors, industrial enclosures, touch panels and electronics for medical, measurement and control technology
In order to price its new offering competitively, Japanese bike-maker Yamaha is planning to manufacture its soon-to-arrive 250cc sports bike locally in India
Japan-based electronics and durables giant Toshiba has commenced local manufacturing of selected TV models in limited numbers at a facility in Dehra Dun. In order to ramp up its volumes across various categories, the company is conducting a feasibility study to go-in for local manufacturing in a bigger way
Manufacturing: Government Initiatives
The Indian Government is laying intense focus on developing the manufacturing sector. It has set itself a target to ensure that 25 per cent share of gross domestic product (GDP) growth comes from manufacturing by 2022 and eventually creating 100 million job opportunities to make the growth inclusive.
Mr Talleen Kumar, Joint Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India, has stated that there are five more National Manufacturing Investment Zones (NMIZs) which are being proposed apart from seven of them which are ready for execution in the Delhi Mumbai Industrial Corridor.
The Indian Government has also invited Italian industry to get involved in the proposed NMIZs. Mr Anand Sharma, Commerce, Industry and Textiles Minister, India, has had a meeting with Italy's Foreign Minister Mr Guilio Terzi di Sant' Agata recently. India and Italy have Joint Working Groups (JWG) which give their recommendations about infrastructure, manufacturing, innovation and science, information technology and pharmaceuticals. More JWGs on tourism, hospitality and agro-processing are being considered.
The Government has also made certain recommendations for the manufacturing policy that would be unveiled during the announcement of 12th five year plan. The proposed manufacturing policy enlists the following recommendations:
Make amendments in duty structure to ensure equal opportunities to local manufacturers. In this regard, Government has proposed to impose 19 per cent duty on imported equipment for mega power projects. The cabinet has also agreed to give preference to indigenously manufactured electronic products (step-up value addition between 25-45 per cent in five years) in Government procurement
Public sector enterprises (PSEs) should focus on areas that hold national importance, but look commercially unfeasible to the private sector because of the heavy investments and risks involved. For instance: aircraft production
Ensure flexibility for entry and exit of public investment in the process of industrial growth by endorsing a single holding structure or new PSEs. The model is proposed to be a combination of a sovereign wealth fund, a single holding structure and the Government acting as a venture capitalist
Road Ahead
According to a joint report tiled 'Made in India-the Next Big Manufacturing Export Story', prepared by industry body CII and McKinsey, manufacturing exports from India could increase from US$ 40 billion in 2002 to about US$ 300 billion by 2015. This would make India rake-in a share of approximately 3.5 per cent in the world manufacturing trade.
Exchange Rate Used: INR 1 = US$ 0.0198 as on March 7, 2012
EUR 1 = US$ 1.314 as on March 7, 2012
Source: IBEF - GAI
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