Dr. Srabani Roychoudhury Visiting Scholar, Policy Research ... · Dr. Srabani Roychoudhury Visiting...
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Dr. Srabani RoychoudhuryVisiting Scholar, Policy Research Institute
Ministry of Finance, Japan
Associate ProfessorCentre for East Asian Studies
Jawaharlal Nehru University
(CEPA)Section :1 An analysis
November 2004,H.E Mr. Junichiro Koizumi and H.E. Dr. Manmohan Singh initiated India- Japan Joint Study group to give its recommendations for strengthening economic relations between the two nations.
June 2006 , Joint Study group submits report . “ huge untapped potential”
December 15, 2006 – A Joint Ministerial statement announcing the launch of negotiations for the conclusion of an economic partnership agreement (‘EPA’)/ comprehensive economic partnership agreement (‘CEPA’ or the ‘Agreement’)through a Joint Task Force (‘JTF’).
February 16, 2011 – India - Japan Agreement was signed in Tokyo.
August 1, 2011 - The CEPA came into force. Also, concessional rates of duties of various products were notified by the customs authorities vide Notification no. 55/2011 –Cus (NT) dated August 1, 2011
India Rule of origin Pharma Sector Agriculture Service Sector
Japan Rule of origin Custom duties FDI in other sectors
specially Retail, Banking and Insurance
The Agreement has 15 Chapters, 147 Articles, covering goods, services, rules of origin, movement of natural persons, telecom, financial services, investment, intellectual property rights, government procurement, sanitary measures, customs procedures and cooperation in other services.
Document size of 1083 pages inclusive of annexes
Liberalize and facilitate trade in goods and services between India -Japan
Increase investment opportunities and strengthen protection forinvestments and investment activities in both the countries
Ensure protection of intellectual property and promote cooperation in the field thereof
Promote cooperation for the effective enforcement of competition laws in each Party
Improve business environment in each country
Establish a framework to enhance closer cooperation in the fields agreed in the Agreement
Create effective procedures for the implementation and application of this Agreement and for the resolution of disputes.
Coverage of Japan-India CEPA: Trade in Goods (Market Access, General Rules, Rules of Origin,
Customs Procedures) TBT/SPS Trade in Services Movement of Natural Persons Investment Intellectual Property Government Procurement Competition Improvement of Business Environment Cooperation
For India: Access to US$ 5 trillion GDP
●For Japan: More business opportunities in India
Export 36,85,68Import 24,88,588Balance 11,97,047Year on Year % Change Export
4.9%
Year on Year %Change Import
7.2%
Share of Export
1.4
Share of Import
0.8
Trade between Japan and India April2011/April2012
Trade Between Japan and India 2008‐2011
Source: compiled from MOF and JETRO Japan
(Millions of USD)
Japan’s FDI into India has QUADRUPLED.Japan was the 3rd largest source of FDI in India in 2010.
Foreign Direct Investment in INDIA
FDI Break up from July 2011
July –Sep $496 Million
Oct-Dec $1,492million
Jan- Mar 2012 $565*million
•Provisional•Source JETRO
Trade in GoodsAbout 94% of the tariffs between Japan and India will be eliminated within 10 years (about 97% by Japan and about 90% by India) (on a trade value basis)Access to a highly developed Japanese market for the pharmaceutical sectorThe textile products including readymade garments
Service sectorServices sector, greater access for contractual suppliers, professionals such as accountants, researchers, tourist guides and management consultants who will now be able to provide their services in Japan.
Computer engineers but whole range of engineering services such as mechanical, electrical, construction, industrial, designengineers and project management specialists.
Instructors for yoga practitioners, classical musical and dance practitioners, chefs and English language teachers.
Computer engineers but whole range of engineering services such as mechanical, electrical, construction, industrial, design engineers and project management specialists.
Instructors for yoga practitioners, classical musical and dance practitioners, chefs and English language teachers.
Market Opportunities
Services
Investment opportunities in more sectors
INDIA’S STRENGTH•Human Resource-medical services-IT and ITES-educational services-Yoga- Legal services-Restaurant •Medical Tourism•pharmaceutical
OPPORTUNITY IN JAPAN•Aging population•Backend Support•Lifestyle Changes
JAPAN’S STRENGTH•Technology and proven SME•Large capital base•Processing industry•Need for market
OPPORTUNITY IN INDIA•SME needs a boost•Infrastructure development•Fruits and vegetables•Huge consumption market
Source: Japan Chamber of Commerce, Japan
India This agreement assumes more
significance it is the first time that India has concluded a bilateral agreement with an advanced industrialized country
It is also the first truly comprehensive agreement concluded by India as it goes far beyond the other agreements, given the wide range of issues it covers.
Japan With this agreement Japan
moves beyond the geography of East Asia.
With the need for new market to survive -India a growing economy and a growing population provides the necessary platform
An agreement encompassing a large area of cooperation is expected to give a boost in the positive direction
Section: 2 Some Insight
India’s ascendance as an economic power has among other things unraveled a huge consumer market.
Mckinsey Global Institute suggests that if India continues at an average 7% -7.5% growth, average household income will triple in next two decades and India will move from 12th position to 5th position as a consumer economy
Population of India 1,027,015,247.2 % of thepopulation Means > 2 million
Source: compiled from census data and Mckinsy report 2010
Estimated Population of India 1.4 billion
Source: compiled from census data and Mckinsy report 2010
There are 300 million children aged between 4–14 years in India — a vast market by any standards. They are today influencing buying products like mobiles, cars, air conditioners, which were earlier decided by their parents.Moreover, the age bracket of 10-14 years are often playing the role of a consultant as they are tech savvy and are able to access comparative data and give a justification to the product choice. At the same time double income has boosted economic power and parents have become more indulgent towards their children.
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Kids are decision makers !
With the vast majority of its population below the age of 30 years
This group has high disposable income,
internet savvy have a great love for brands and
gadgets.
They are well informed about global fashion and aspire to be trendy and in sync with the youth of the world.
High on consumerism and ever looking for new features in consumer durable products, they are high on replacement.
They have significantly changed the dynamics in the cosmetic market,
mobile phones and apparels
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“Darling” for the consumer goods industry!
New Consumer RURAL SECTOR
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Future of
India
There are regions of India that are growing at 15–30 per cent in terms of spending power. The aspirations of the populations in the semi‐urban and rural areas are also much greater than their urban counterparts, especially because they are being exposed to a range of products and services that they have never seen before. This translates into a larger marketing opportunity for companies.
Technology has given rural India a new identity
With a lot of policies driving literacy, health and community development in the rural sector, and a strong move to integrate the two worlds
New Consumer WOMEN
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The urban woman wants to break out from her traditional sacrificing image, but does not want to go all the way. She wants to conform to the values she believes in and yet wants to do her own thing.
This category has two distinct groups-The professional self earners-The educated house wifeHowever both are the key decision makers of the sectors under consideration
A growing number of high profile women, who desire the best and are creating niche market for power dressing and boutiques.
A strong desire for self indulgence, leading to self pampering in the form of beauty services, vacations.
Progressively Assertive !
This consumer is wealthy, eager to spend
and most importantly, has the desire to indulge in luxury.
This segment is in an emerging phase with a strong desire
to connect to luxury. Source: Consumer Analysis Technopack 2011‐2012
200 respondents in the family income bracket of Rs 100,000 ( $ 2000) to > Rs.300,000 (>$ 6000)per month
Age Bracket of 25 – 60 Selective Purposive Sampling Gender Males 26.5%, Female 73.5%
From National Capital Region- Delhi, Gurgaon and Noida
Age group25-30 2%30-40 28%40-50 64.8%50-60 5.2%
Family Income level above 100,000 rupees a month US $ 2000, Yen 150,000 an upwardly mobile
2.7% of Indian population pay income tax and this group is well within this category
Selective sampling such as to include professional and housewives.
Most of the families take an yearly vacation abroad.
MONTHLY INCOME
Compiled from Questionnaire data
• 25.7% of the Respondents are professional
- Earning Rs 100,000 a month
- They have high disposable income for self pampering
- Well travelled
- Major consumers of - cosmetics
• 71.9% of the respondent are
• Housewives • With very high
Disposable income• Spends sizable amount
of money on self • Strongly influenced by
international brands• Extremely scrutinizing
and strong price sensitive
• 2.4% of the respondent
• Both professional and housewives.
• In the category of income level 10 0 thousand and 200 thousand
Rupees as family income.
• Strong priority driven consumers
• Have little interest in self pampering
Section :3 Some Pointers
Compiled from Japan national Tourism organisation 2003‐2010
Pacific Asia Travel Agency estimates 12.5 million Indians travelled abroad in 2010 and by 2020, predicts the World Tourism Organisation, India will account for 50-million outbound travellers.
In 1997, India’s outbound market, the fastest growing in the world, stood at 3.7 million visitors. This year, it is estimated to touch between 11 million and 13 million.
“Greater spending power has resulted in Indian families taking multiple international holidays in a year,” says Thomas Cook India COO Madhav Pai.
Hotel Price Index by Hotels.com, the world’s leading hotel booking website, shows that Indian travellers are now the sixth largest spenders on hotels abroad.
On an average, Indians spent Rs. 6,722 while travelling overseas, compared to Rs. 4,136 while travelling within their country in 2010. .
2.9%
Compiled from Respondent data
Source: respondent data
?
Source: compiled from respondent data
Source: compiled from respondent data
Source: compiled from respondent data
Confederation of Industry of India claims 20% growth per annum for cosmetic market.
More women are in the job market and are also becoming independent financial decision makers.
As older women have more cash and are more conscious of their appearance, especially skin, they are willing to spend more on separate sets of creams and lotions that target problem areas.
Various surveys in 2011 highlight that males have developed a special craze for cosmetic application and their monthly expenses rose by about 60%-80% during the period.
New awareness in the rural sector, resulting in aspirations to follow the urban consumers.
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SME Sector Infrastructure financing
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…experience, technology and finance
WHAT INDIA NEEDS
Quality Labor
Manufacturing Sector
‘ Increase the share of manufacturing in GDP from 16% to 25% and create 100 million additional jobs by 2022. ’
(National Manufacturing Policy, Jun 08, 2011 )
Innovative strategies for entering SME sector of India growth potential calculated to be 55%
WHAT JAPAN CAN OFFER
Expertise and technology in such areas as steel, electronics, auto, pharma…
Human resource development
Finance
Salary (USD/month)
Viet Nam
Myanmar
Pakistan
Bangladesh
Sri Lanka
Cambodia
ThailandPhilippine
Malaysia
Indonesia
INDIA China
Increase in Basic Salary (%/year)
(Source: JETRO)
AVERAGE (177USD)Labor Cost in Asia
AVERAGE (9.4%)
Auto Components and Accessory market
Started with Japanese component but lost to China
Price being the major deciding factor
Further, growing trust on some Chinese companies
Some components of Japan continue to have a presence because of quality
India needs US $1 trillion and more towards infrastructure financing which includes
Road Ports Power Airports On a Public- Private Partnership ( PPP)
There are some Infrastructure financing companies who have necessary balance sheet strength to absorb Japanese long term debt and equity.
Reserve Bank of India (RBI) has now created a special category of Non- Banking Finance Company(NBFC) called Infrastructure finance companies
These companies are closely monitored by RBI hence is a good opportunity
- A legal framework between two government giving a clear direction of long term vision.- A bilateral agreement harmonizing a historical relation between two countries.- A document essential in current world scenario, where EPA/FTA is becoming a order of the day
Japanese business understanding of India market dynamics needs more probing
Positioning the product to the right segment of Indian consumers and addressing them effectively is important.
The need therefore is to focus and identifying the relevant consumer/ business segment
To do this it possibly requires an approach significantly different from that of the current approach.
The sectors selected were those which there are phenomenal opportunities for Japanese
business.
Japanese SME have a great market awaiting them.
With CEPA and strong government to government relations only way is
FORWARD
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