As world economies restart their engines in a bid to regain lost ground due to the Covid-19 pandemic, India too shows signs of economic buoyancy and promise.
India’s Make in India initiative holds a key to the global economic revival, something that should interest Australian government ministries, corporate sector, entrepreneurs, institutions seeking R&D collaborations and Australia Inc.in general, among others. India assumes greater importance as several major world economies, including American, Japanese, German, British and South Korean look to move out and diversify their businesses from China. India has jumped to 63rd rank in the World Bank’s Ease of Development 2020 report, and has also been ranked as the 9th largest recipient of Foreign Direct Investment destination in 2019 by the World Investment Report 2020 of the United Nations Conference on Trade and Development (UNCTAD).
Defending the World
India plans to spend $130 billion on military modernization in the next 5 years, as achieving self- reliance in defence production is a key target for the government of India. The government has opened up the defence industry for private sector participation to provide impetus to indigenous manufacturing. The opening up of the industry also paves the way for foreign original equipment manufacturers to enter into strategic partnerships with Indian companies. Annual Turnover by private sector in Defence and Aerospace sector in 2018-19 is $2.4 billion.
A Defence export strategy has been formulated with a view to facilitating Defence Public Sector Enterprises (DPSUs) and private defence players in exploring business opportunities abroad. The total value of production related to Ordinance Factory Board and DPSUs together accounts for $8.0 billion.
100% FDI is allowed in defence industry; wherein 74% is allowed under automatic route and beyond 74% through the government route.
A 5.8% increase in defence allocation was recorded in budget 2020-21 compared to budget 2019-20. The allocation towards defence in budget 2017-18 stood at $ 41 billion with $ 13.3 billion (or 31.7% of the total budget) reserved for capital expenditure.
The total budget sanctioned for the Indian military for the financial year 2018-19 is $62.8 billion, accounting for 12.1% of the total Union Government expenditure for 2018-19.
There are 2 Defence Corridors in India (i) Uttar Pradesh, which leverages the existing manufacturing ecosystem in the state ideally suited for economic testing, and Research and Development facilities, and (ii)Tamil Nadu, which ensures a mature manufacturing ecosystem for investments and innovation
Service/ department-wise allocation as a percentage of total defence estimates 2017-18 (BE):
Amplifying growth
The world’s fastest growing industry, Electronics System Design and Manufacturing (ESDM) continues to transform lives, businesses, and economies across the globe. The global electronics market is estimated to be over $2 trillion. India’s share in global electronics manufacturing has grown from 1.3% in 2012 to 3% in 2018.
Technology transitions such as the rollout of 5G networks and Internet of Things (IoT) are driving the accelerated adoption of electronics products. Initiatives such as ‘Digital India’ and ‘Smart City’ projects have raised the demand for IoT in the market and will undoubtedly usher in a new era for electronic products.
In case of electronics items for defence, FDI up to 49% is allowed under automatic route, and beyond 49% through the government approval.
Domestic electronics market in India to reach $400 billion by 2025
With per capita disposable income and private consumption having doubled in the past 7 years, India has emerged as one of the largest markets for electronic products in the world.
The electronics market valued at $120 billion in 2018-19 is segmented as mobile phones (24%), consumer electronics (22%), strategic electronics (12%), computer hardware (7%), LEDs (2%) and industrial electronics (34%) comprising auto, medical and other industrial electronic products.
In order to position India as a global hub for ESDM, the Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) have been notified.
Sailing towards success
India is strategically located on the world’s shipping routes with a coastline of approximately 7,517 km. Maritime transport handles around 70% of India’s trading in value terms. The government has also introduced various fiscal and non-fiscal incentives for enterprises that develop, maintain and operate ports, inland waterways and shipbuilding in India.
The Government launched the ambitious Sagarmala Programme in March 2017, with the vision of port-led development and growth of logistics-intensive industries. Under Sagarmala Programme, $123 billion would be invested across 415 projects across the following identified components:
The projects identified under Sagarmala Programme are expected to have the following impact:
Cargo traffic on the rise
India has 12 major and 200 non-major/intermediate ports (under state government administration). Jawaharlal Nehru Port Trust is the largest major port in India, while Mudra is the largest private port.
During FY 2017-18, PPP projects handled 353.49 MT cargo i.e. 52.03% of total cargo handled in Major Ports. During FY 2018-19, 377.27 MT cargo was handled by PPP projects which is 53.96% of total cargo handled at Major Ports.
Cargo traffic in the country is expected to rise to 2,500 MT by 2024-25 from 1,072.23 MT in 2015-16. The major ports in India collectively handled 679.4 MT of cargo during 2017-18 compared to 648.4 MT a year ago; thereby registering a growth of 4.8%. During 2018-19, major and non-major ports in India handled a total cargo of around 1,282 MT. The traffic grew by 6.13% over the corresponding period of the previous year.
• 118 maritime projects requiring $7.7 billion investment have been approved in the last four years
• The cargo handling capacity of major ports reached 1534.91 MPTA in 2019-20
Share in traffic for major commodities (2019)
Source: INVEST INDIA, Department of Promotion of Industry and Internal Trade, Government of India