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Civil Aviation &
Aerospace-High Tech
US Aid vital
• In the past
five years there
has been positive
and intense engagement
between the US and
India which has
resulted in taking
up many collaborative
projects. The civil
aviation sector
is one of the fastest
growing areas of
Indo- US technology
and economic engagement.
The Spurt in the
growth of the Civil
Aviation market
has attracted a
high level interest
both in the government
and Industry of
USA. The government
of India and Indian
industry seeks technical,
human resource,
high-tech and commercial
support from the
US in its efforts
to modernize the
civil aviation industry
in India and to
meet the challenges
of its rapid expansion.
• The Indian
aerospace industry
is still at a nascent
stage and there
is a long way to
go in the development
of the Aerospace
industry. The conclusion
of the bilateral
civil aviation agreement
between India and
the US will also
help in the process
of developing the
Aerospace industry
in India. This agreement
will be in place
by 2010.
• India with
its strength in
the IT sector can
play a vital role
in the IT segment
of the Aerospace
industry. The Civil
aviation sector
has shown tremendous
growth in the past
3-4 years though
there has been a
decline in the past
due to the recession
and rising oil prices.
But we are confident
of a double growth
in the long run.
• There is
no presence of USA
in the airports
sector, however
as per the new government
policy of 100% FDI
being permitted
in the airport sector
through the automatic
route with such
a favorable investment
regime it is expected
that the airport
industry from the
US will come forward
and partner in the
growth of this sector.
The state government
has come up with
projects like Aero-
polis.
Urban Infrastructure
-Redefine PPP
• There is
going to be two-thirds
growth in urbanization
between 2001 and
2026. This will
lead to only 33%
urbanization rate
in India. There
is need to manage
urban density (pressure
on land and increasing
population). Substantial
investment in Urban
Infrastructure is
required. The government
has come up with
National Urban Renewal
Mission.
• There is
need for meeting
the demands of mobility
leading to demand
for better transport
solutions. The Eleventh
Plan aims at building
1000 km of fresh
Highways, converting
6500kms highways
into six lanes and
converting 29000kms
highways into four
lanes, modernizing
35 airports, creating
seven Greenfield
Airports. Government
should focus on
bringing a reduction
in the use of fossil
fuel usage, purification
of air etc
Redefine PPP, relationship
between private
sector and the government.
The private partner
could concentrate
on providing the
core service whereas
the public partner
should think about
how to capture more
value from the public
goods like having
a congestion tax,
enhanced property
tax, betterment
levis could be levied
on such projects.
Property tax is
not levied properly
in some cities.
There is a need
for having a new
management relationship
than just having
a transfer of funds.
Transportation &
Logistics-Develop
Hubs/Parks
The world spends
$ 2.35 trillion
a year on logistics,
which is growing
at a CAGR of 6-8%.
India spends about13%
of its GDP on logistic
costs. These are
the highest in the
world. 2/3 of overall
logistic costs in
India arise from
transportation and
warehousing.
• India has
2nd largest road
network in the world
with road industry
growing at 9% year
on year. However
the road industry
is highly fragmented.
There is no consolidated
platform available
on a corporative
basis to share technology
etc. Road freight
volume is growing
at 6-8% per annum.
• India has
2nd largest rail
network. There has
been phenomenal
growth in the last
7-8 years in railways.
However the fare/freight
ratio is very low
due to cross subsidization,
which needs to be
reduced. Premium
passenger services
are priced very
high which is not
a very viable strategy
since railways are
competing with airways
for premier segment.
Railways need to
consider provision
of complete logistic
solutions to its
freight customers,
in addition to decreasing
unit costs and providing
superior services.
• Logistic
hubs can be developed
along or near important
railheads through
joint ventures between
State Governments
and Railways, through
PPPs and direct
private sector participation.
These hubs are to
be strategically
located to capture
agro-industrial
produce in the hinterland
and to provide competitive
transport to expand
access to markets
for industries in
the covered areas.
• India has
the largest coastline
with 17 major ports
and many minor ports.
We have the largest
shipping fleet among
the developing countries.
But our service
share is only 1%
in the world market.
There is need to
develop and use
our inland waterways.
A great opportunity
lies in developing
and using our inland
waterways. There
is need to use a
Multi Modal logistics
between major and
minor ports
• Rural India
offers virgin territory
to marketers. 70%
of Indian villages
cannot be reached.
37% of our produce
is lost due to lack
of reach. There
is a need to and
synergize the various
sectors road, railways,
air, coastal
N-Energy-Need for
JVs with Private
Sector
One of the major
challenges that
India and the rest
of the world will
face is the energy
challenge. For a
continental sized
economy like India
to register double
digit growth in
the next several
decades, there will
be a massive energy
demand.
Nuclear energy is
both a clean as
well as scalable
source and in order
to face the twin
challenge of climate
change and energy,
there is no escape
from developing
it.
India has a well
established and
mature, more than
40 years old nuclear
industry with private
participation, a
well established
regulatory system
and a strong base
in skilled man power.
India's record in
terms of non proliferation
has been impeccable.
Relying on our own
Uranium resources
alone, it is estimated
that we can sustain
a program of 10,
000 MW over a period
of 40 years.
The Indo- US Civil
Nuclear Agreement
is the most significant
achievement in the
energy history of
two of the world's
greatest democracies.
The agreement has
set the course for
accelerating trade
and investments
in civil nuclear
energy. It has also
opened the international
uranium market to
India.
With a supportive
international environment
and no technology
denial regimes operating
against the country,
India can rapidly
expand in the nuclear
sector on a much
larger scale. India
has raised its nuclear
energy production
target to 60,000
MW by 2030, from
the earlier target
of 20,000 MW by
2020.
If there is a large
expansion in the
Indian nuclear sector
the prospects for
private sector in
various related
equipment and technology
components of the
project will be
significant. Some
of the benefits
for the private
sector are access
to dual use technologies;
participation in
areas such as equipments,
accessories, and
technology requirements
in the nuclear energy
segment.
There is no private
sector participation
in nuclear power
generation before
the sectors open
for the private
participation, a
clear separation
needs to be made
between the civilian
and strategic sectors
of nuclear energy,
which he said would
be completed only
by 2014.
The Indian nuclear
market has opportunities
worth billions of
dollars. Some of
the opportunities
for the US business
players in the Indian
nuclear sector are
sale of technology,
nuclear power plant
and uranium to India;
supply of equipments
not manufactured
in India; source
equipment manufacturing
in India for re-
exports to the US,
tap the India human
resources and skilled
workers such as
welders; provide
consultancy services
in the nuclear sector
etc. A number of
foreign players
are interested in
having Indian private
sector partners
for collaboration
ventures in the
nuclear industry
related to fields
such as technology.
There is a very
significant opportunity
in the domestic
area as well as
the bulk of the
new development
is going to come
on the Eastern Hemisphere
including India.
In all the segments
of the nuclear industry
there is a need
to get into joint
ventures due to
various high entry
barriers and in
order to successfully
venture into the
industry it needs
to have a global
reach. There is
lot of potential
for Innovative Contracting
as well.
Right now the nuclear
act does not allow
FDI and hence it
needs to be amended
to support FDI that
will bring great
opportunities for
India. Legal, regulatory
and policy frameworks
need to be set up
to facilitate FDI,
import of nuclear
power plants, uranium
etc.
However, the privatization
of the nuclear sector
needs to take place
in a cautious, step-
wise, highly regulated
manner for it to
be sustained.
The United States
and the US private
industry look forward
to expanding cooperation
with India in supporting
the flourishing
of its civil nuclear
power sector. Expanding
opportunities in
India's private
sector can enable
India to prosper
in the international
civil nuclear technology.
IT - Make Targeted
Investments
The Indian market
is one of the fastest
growing IT sector
markets in the world.
As a result there
is an increasing
focus by the Indian
IT majors on the
domestic market.
Traditionally India
has been an exporter
of IT products and
services rather
than a consumer.
But over the last
3-4 years there
has been an increased
demand for IT products
and services to
allow domestic corporations
and Indian operations
of global companies
to benefit from
the productivity
gains that IT expenditures
can generate.
The small and medium
sized companies
are investing more
in technology absorption
and up gradation
as they try to compete
and participate
in the global supply
chain as well as
the domestic supply
chain. The services
sector has been
a large consumer
of technology especially
the Telecom and
Financial Services
sectors. More recently,
the retail business
have also seen significant
investments in IT.
In addition, there
have been increasing
investments in the
Customer Relationship
Management (CRM)
as well as Human
Resource Management
(HRM) segments.
Today the IT and
BPO industry contributes
to about 5 % of
the country's GDP.
Last year the entire
Indian BPO industry
was worth $ 11 billion.
The KPO segment
has a huge potential
in India as all
the necessary ingredients
are present in the
country. The Indian
KPO segment has
the potential of
a compounded annual
growth rate of 38%
growing to $11-
12 billion by the
year 2010- 2011.
India, by implementing
a world class telecom
infrastructure,
adopting and maintaining
highest international
quality standards,
implementing information
and data security
protocols along
with the government
support, is targeting
an export potential
worth billions,
creating direct
and indirect jobs
for over 10 million
people.
The government is
spending on e- Governance
as well as Infrastructure
projects thereby
creating huge opportunities
for IT investment.
There has been an
impact of the current
economic downturn
on India but it
is not as severe
as in the developed
nations. One of
the ways to manage
the IT investments
in the current economic
scenario is to make
targeted IT investments
by increasing operational
efficiency and revenue.
Some of the suggested
innovative practices
could be looking
at hot markets/segments
that still have
the potential to
grow faster, integrating
one's business with
that of the customer,
doing more of farming
than going after
new businesses,
and focusing on
innovation in terms
of products as well
as services.
Manufacturing-Focus
on Purpose, Process
& People
Due to the present
day global slowdown
there has been a
rapid change in
the world economic
scenario.
One of the ways
organizations are
responding to the
economic changes
is by looking at
opportunities through
consolidation. In
a downturn the opportunities
in consolidation
acquisitions have
multiplied as companies
are available at
cheaper rates. Some
of the reasons resulting
in global consolidation
are exploiting new
markets, exploiting
product design and
innovation capabilities
in terms of value
added products etc.
and spreading the
risk rather than
being concentrated
in just one market.
In order to make
the global consolidation
process succeed
one needs to focus
on the three Ps
that is Purpose,
Process and People.
The migration of
manufacturing from
high cost countries
to relatively low
cost countries has
been an ongoing
phenomena for the
last four decades
with the desire
to reduce costs
on a long term basis.
There is also the
benefit of increased
cost variability.
However, as more
and more fixed costs
become variable
through contract
manufacturing there
are certain risks
that need to be
dealt with such
as exchange rate
risks, issues of
product liability,
warranty, quality
issues etc.
Some of the business
models adopted by
organizations running
their manufacturing
operations in India
are the Cost and
Reliability model
seen in the case
of contract manufacturing
by Indian Pharmaceutical
firms; Local for
Local model adopted
by consumer electronic
firms; Concept to
Product model as
seen in the case
of R & D in
the chemical sector
in India and Local
for Global model
adopted by automotive
OEMs and small car
manufacturers in
India.
A sustainable competitive
advantage can be
obtained through
Lean Manufacturing
which can provide
advantages in all
the four dimensions
whether it is cost
minimization through
waste reduction,
drawing better value
from business, enhancing
speed of execution,
reducing failure
rates etc.
One of the great
things that India
offers is the ability
to manufacture large
and small volumes
at competitive costs.
India also has a
good ability to
design and develop
products in engineering,
pharma, auto and
other segments.
The most sustainable
cost advantage in
India rests with
its good quality
of engineering professionals
especially in the
area of design,
development and
testing which constitutes
an enormous portion
of the cost of precision
components.
India's long term
cost advantage lies
in components which
have a reasonable
content of labor,
highly skilled operations,
items that can be
manufactured using
locally available
raw materials and
preferably locally
available machine
tools. India's long
term cost competitive
advantage in contract
manufacturing is
for products that
require modest quantities.
The downturn is
likely to accelerate
the demand for small
cars in India and
worldwide giving
India a huge opportunity
in contract manufacturing
as it has experience,
scale and competitive
advantage in the
small car sector.
Many auto component
manufacturers in
India are conversant
with multiple standards
like engineering
standards from Korea,
Japan, UK, Germany
etc. This is an
advantage that can
be leveraged for
contract manufacturing.
The biggest opportunity
that India offers
is the size of its
market.
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