Access India Initiative: Indian Market

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Indian Market

Overview of the Indian market and relations between Italy and India
A market that continues to record impressive growth, considered increasingly important and strategic in the global arena by both companies and international analysts. This is how India, the second most populous and fifth largest economy in the world, appears today. Driven by the dizzying increase in the middle class and by domestic consumption, the Subcontinent has formidable growth rates (+ 7.2% in 2017, + 7.1% in 2018 and an estimate for 2019 which is around + 7.3%), thanks also to the reforms implemented in recent years by the Modi government that have given a strong boost to the entire economic system. This allowed India to qualify for the 63rd place in the WORLD BANK ranking on the ease with which it is possible to do business, going up by 14 positions.

Relations between Italy and India can today be considered extremely positive. Both Rome and New Delhi have inaugurated a new phase of collaboration: on the occasion of the recent meeting in New York between the respective Premieres of the two countries, Conte and Modi, the last one expressed the hope to strengthen bilateral and commercial relations and invited the Italian companies, especially SMEs, to take into consideration the great opportunities offered by the Subcontinent, especially with a view to productive investments.

However, much can still be done for the business between India and Italy, especially due to an important aspect: India needs technology, know-how and skills to cope with the extraordinary economic development it is going to encounter and the made in Italy can only benefit from a consolidation of its relations with what is destined to become the third global economy.

In 2018 the total trade between India and Italy reached 9.5 billion euros, up 8% compared to the same period of the previous year. Exports last year amounted to 3.96 billion euros (up 11% compared to the same period in 2017) and imports from India reached 5.53 billion euros (with an increase of 21.4 compared to 2017).

The main items exported in 2018 were: machinery and mechanical equipment for 1.5 billion euros; machinery and electrical equipment for 221 million euros; organic chemicals for a value of € 198 million; automotive components for 190 million euros, plastic and plastic items for an exported value of 189 million euros.

Italy, considering the last ten years, is the 17th investor in India, holding a 0.66% stake and a stock of around 2.44 billion euros. Among the main sectors: automotive, commercial services, services in general including financial, industrial mechanics and electrical equipment. According to the latest data available from Indiana (Central Bank), the flow of investments from Italy to India in the 2017-18 financial year amounted to € 268 million.

The main geographical areas in which Italian companies are present:

DELHI NCR & NORTH with about 180 companies.
MAHARASHTRA & WEST (MUMBAI AND PUNE) with about 250 companies.
in the outskirts of the city of CHENNAI (TAMIL NADU) and BENGALURU with a total of about 160 companies.
the City of CALCUTTA (West Bengal) with about 20 companies.
there are other Indian states that are attracting the interest of Italian companies such as TELENGANA, ANDRA PRADESH and MADYHA PRADESH.

The main sectors in which Italian companies operate are :

Agribusiness with around 49 companies.
Automotive with around 84 companies;.
Infrastructure and Construction Technology 16 companies.
Industrial machines with 133 companies in total.
Services with approximately 66 companies.
Fashion and Textiles with 54 companies.
Engineering (39 companies) Furniture and Materials (43 companies), Bank and Finance (8 companies), Education (8 companies), Health (9 companies), ICT and Electronics (12 companies), Logistics (16 companies), Pharmaceutical and Chemical (21 companies).

Why to invest in India

The Government encourages foreign productive and commercial investments through a series of measures (Make in India above all), to make India the first production hub in the world.
In India today it is easier to invest: Foreign Direct Investments in the country have gone from 22.1 billion euros in 2014 to 40.4 in 2018.
A favorable tax towards foreign companies: today manufacturing companies established after 01.10.2019 pay 17% of profits taxes.
India is looking for technology, know-how and skills to support its growth.
India will become the third world economy and investing in India today is truly far-sighted.

Make in India
"Make in India" is a campaign launched in 2014 by Premier Modi, that invites companies from around the world to establish their own factories in India and then export abroad. The campaign promotes investments in 25 strategic sectors for the national economy.

Modi intends to guide development towards a model focused on high-intensity production and intends to transform the Indian economy into a global industrial center.

India is becoming one of the main global destinations for the manufacturing sector: the Subcontinent is today proposed as the only real interesting destination in the Asian quadrant, in terms of volumes and growth.

The goals of "Make in India":

to guide development towards a model oriented towards high-intensity production and no longer services.
to transform the economy of the Subcontinent into a global industrial center.
to increase manufacturing growth by at least 10%.
to create 10 million jobs (of which at least 125,000 within the next twelve months).
to increase the number of foreign factories and infrastructure investments.

The sectors identified for the project

For the correct implementation of "Make in India", New Delhi has identified 25 key sectors, considered of greatest interest for foreign entrepreneurs, and which, according to Modi, present a greater potential to contribute exponentially to the growth of the country and to increase its role globally. These sectors will be subject of tax relief and incentives, including: automotive, IT, food processing, textiles, construction, infrastructure, tourism, chemicals, pharmaceuticals, electronics, energy and telecommunications.

Specifically, following are analyzed in detail peculiarities and development margins of some of the sectors mentioned above:

automotive: the Indian market is the fourth largest in the world, which has enormous potential and could produce more than 6 million cars a year until 2020. The automotive sector also enjoys Government support with regard to investment in Research and Development.
buildings / infrastructures: by 2017 it is estimated that around 880 billion euros will be allocated to the development of roads, motorways, railways and ports and the construction segment accounts for more than 10% of local GDP.
food processing: Foreign Direct Investments (FDIs) is allowed, equal to 100% automatically for most products. Furthermore, the presence of the enormous agricultural resources available in the country, tax incentives, liberalization and the rapid expansion of organized retail are driving the market.
textile / clothing: India is already the second largest producer in the world and the industry reached a value of around 90 billion euros in the 2016-2017 fiscal year, compared to 60 in 2013-2014; favorable government policies and the increase in domestic demand are the main drivers of growth.

According to the campaign, the Government, to facilitate the inflow of capital from abroad and create a more business-friendly environment, will continue in the process of streamlining of the bureaucratic procedures that hinder the entry of these capitals, implementing measures aimed at deregulation, which are both clear, rapid and transparent.

The Government also intends to further promote the role of micro, small and medium-sized enterprises, which can play a fundamental role in making the country the necessary leap to establish itself as a global hub for the productive sector.

To date, SMEs represent 90% of all industrial units and 40% of total local manufacturing exports. A situation very similar to the Italian one and that bodes well for the potential of our companies towards the Subcontinent.

The MODI government has also promoted other complementary and strengthening initiatives of the same Make in India:

DIGITAL INDIA, with the aim of providing adequate infrastructures (high speed internet services) e-Government, and digital enhancement for all citizens;
START UP INDIA, with the aim of increasing the rate of innovation of the Indian economy by outlining a regime of tax incentives and administrative facilities aimed at promoting the Start-UPS ecosystem in India;
SMART CITIES, with the aim of developing more than 100 smart and cutting-edge cities. The fundamental vision of the initiative is to provide an adequate water supply, to ensure the supply of electricity, sanitation, including solid waste management, efficient urban mobility and public transport, affordable housing, robust connectivity and digitization and better governance and better citizen participation;
NATIONAL HEALTH PROTECTION SCHEME, with two objectives: the creation of a network of infrastructures for the well-being of the nation, to promote complete basic health services to guarantee health insurance coverage for at least 40% of the Indian population that is without health services.