Dr. Srabani Roychoudhury Visiting Scholar, Policy Research Institute Ministry of Finance, Japan

Transcription

1 Dr. Srabani Roychoudhury Visiting Scholar, Policy Research Institute Ministry of Finance, Japan Associate Professor Centre for East Asian Studies Jawaharlal Nehru University

2 (CEPA) Section :1 An analysis

3 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 ).

4 February 16, 2011 India - Japan Agreement was signed in Tokyo. August 1, 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

5 India Rule of origin Pharma Sector Agriculture Service Sector Japan Rule of origin Custom duties FDI in other sectors specially Retail, Banking and Insurance

6 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

7 Liberalize and facilitate trade in goods and services between India - Japan Increase investment opportunities and strengthen protection for investments 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.

8 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

9 For India: Access to US$ 5 trillion GDP For Japan: More business opportunities in India

10 Trade Between Japan and India Source: compiled from MOF and JETRO Japan Trade between Japan and India April2011/April2012 Export 36,85,68 Import 24,88,588 Balance 11,97,047 Year on Year % Change Export Year on Year %Change Import Share of Export Share of Import 4.9% 7.2%

11 Japan s FDI into India has QUADRUPLED. Japan was the 3rd largest source of FDI in India in (Millions of USD) 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

12 Trade in Goods About 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 sector The textile products including readymade garments

13 Service sector Services 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, design engineers and project management specialists. Instructors for yoga practitioners, classical musical and dance practitioners, chefs and English language teachers.

14 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.

15 Market Opportunities Services Investment opportunities in more sectors

16 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

17 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

18 Source: Japan Chamber of Commerce, Japan

19 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

20 Section: 2 Some Insight

21 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 12 th position to 5 th position as a consumer economy

22 Population of India 1,027,015,247.2 % of the population Means > 2 million Source: compiled from census data and Mckinsy report 2010

23 Estimated Population of India 1.4 billion Source: compiled from census data and Mckinsy report 2010

24 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 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. Kids are decision makers! 24

25 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. Darling for the consumer goods industry! 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 25

26 New Consumer RURAL SECTOR There are regions of India that are growing at 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 Future of India With a lot of policies driving literacy, health and community development in the rural sector, and a strong move to integrate the two worlds 26

27 New Consumer WOMEN 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 wife However 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! 27

28 Source: Consumer Analysis Technopack 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.

29 200 respondents in the family income bracket of Rs 100,000 ( $ 2000) to > Rs.300,000 (>$ 6000)per month Age Bracket of Selective Purposive Sampling Gender Males 26.5%, Female 73.5%

30 From National Capital Region- Delhi, Gurgaon and Noida Age group % % % % 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.

31 Compiled from Questionnaire data MONTHLY INCOME

32 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

33 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

34 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

35 Section :3 Some Pointers

36

37 Compiled from Japan national Tourism organisation

38 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.

39 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

40 Compiled from Respondent data 2.9%

41

42 Source: respondent data

43 Source: compiled from respondent data?

44 Source: compiled from respondent data

45 Source: compiled from respondent data

46

47 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. 47

48

49

50 SME Sector Infrastructure financing

51 Auto Components and Accessory market WHAT INDIA NEEDS Manufacturing Sector Increase the share of manufacturing in GDP from 16% to 25% and create 100 million additional jobs by (National Manufacturing Policy, Jun 08, 2011 ) WHAT JAPAN CAN OFFER experience, technology and finance Expertise and technology in such areas as steel, electronics, auto, pharma Human resource development Finance Quality Labor Labor Cost in Asia Increase in Basic Salary (%/year) Viet Nam Myanmar AVERAGE (177USD) Pakistan INDIA China Innovative strategies for entering SME sector of India growth potential calculated to be 55% Bangladesh Cambodia Sri Lanka Indonesia Philippine AVERAGE (9.4%) Thailand Malaysia Salary (USD/month) (Source: JETRO) 51

52 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

53 India needs US $1 trillion and more towards infrastructure financing which includes Road Ports Power Airports On a Public- Private Partnership ( PPP)

54 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

55 - 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

56 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.

57 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 57

58 Comments