Heavy investment in India by global car companies in the hope that the fast-growing market would soon rival China are faltering as car sales fall and the depreciating rupee pushes up costs.
But the big brand carmakers such as Volkswagen, Ford and Renault-Nissan are now looking outwards, targeting vehicle shipments to countries abroad, such as the Europe and the U.S., as well as other emerging markets, HSBC said in a trade report on India.
Vehicles and transport equipment currently account for less than 7 percent of India’s total goods exports, but with the oversupply the carmakers have created in the Indian market, the report said it opened the way for India to become an auto export hub.
According to the bank analysts, car exports will be supported by the weaker rupee and the availability of skilled labour in India at a cheap cost. Rising labor costs in China have seen a decline in the mainland’s competitiveness, and this will provide a further boost to India’s automobile and related exports.
“We expect exports of transport equipment to increase by close to 15 percent a year in 2014-2030, far outpacing the 11 percent a year growth of total exports,” the report stated.
This was supported by strong growth in exports of heavy construction machinery made in India by companies such as Caterpillar, said AGS World Transport group CEO Michael Dye.
“This has turned into a good export engine for the country and is a huge business,” the NVOCC operator told JOC.com in Hong Kong.
India’s economy has expanded by less than 5 percent for the last two consecutive years, after growing by almost 8 percent a year in the previous decade, as weak domestic demand put the brakes on the economy. With exports accounting for just 25 percent of GDP, there is scope for India to rebalance away from the domestic economy towards exports, according to the HSBC trade report.
Yet India is expected to be the world’s fastest growing exporter between 2014 and 2030, and has the potential in that period to move from the 14th largest exporter of goods by value to the world’s 5th largest.
However, poor containerized rail service has been a factor hindering efficiency at India's largest port, Jawaharlal Nehru Port (Nhava Sheva). The congestion also trickles down with the port of Paradip at one point having 27 ships waiting to dock as rains and a jump in imports pushed its capacity handling to the edge. Marine Link reported that in the 2013-14 fiscal year, total cargo handled at Indian ports increased by 4.3 percent to 976 million tons.
India’s goods exports are currently dominated by labour intensive, low-skilled sectors. According to the Ministry of Commerce’s latest data, mineral fuels, lubricants and related materials; and jewellery, precious stones and semi-precious stones, accounted for around 35 percent of India’s total goods exports in 2013-2014.
“Looking ahead, however, we expect more capital and skill-intensive sectors like pharmaceuticals and transport equipment to emerge as major contributors to overall exports.With a lot of potential to leverage India’s raw material strength in textiles such as cotton, jute and silk; textiles exports are likely to contribute strongly as well,” the bank’s analysts said.
“Our forecasts suggest that exports of mineral fuels, lubricants and related materials will rise at a rate of just below 8 percent a year in 2014-30, lower than the average growth rate of around 11 percent a year for total exports over the same period.”
Textiles exports accounted for more than 20 percent of India’s total exports in 2001. Since then the share has fallen to less than 10 percent, but India is still the world’s second largest textiles exporter, second only to China.
The Ministry of Textiles in India has introduced policies to develop the industry, aiming to diversify both the product base as well as export markets, improving textile oriented technology and investing in new marketing strategies. This, combined with a weaker rupee, rising labor costs in China and safety compliance issues for factories in Bangladesh (another major textiles producer), give India an opportunity to increase its market share. HSBC expects India’s textiles exports to increase by 12 percent a year between now and 2030.
An enormous and urbanising population means there are parallels to draw between India and China. Like its giant northern neighbour, India’s rapidly expanding middle class will drive growing demand for consumer goods from overseas markets.
By 2030, India is forecast to emerge as the world’s largest middle class consumer market, surpassing both China and the U.S. The bank analysts said this is likely to be accompanied by a shift away from primary food articles, which currently dominate consumer goods imports, towards more technology-intensive items such as computers and mobile phones.
“This presents opportunities for exporters in advanced economies, especially those who are able to capitalize on existing brand awareness; but they will face strong competition from companies in China, which are likely to grab a significant share of India’s demand for technology intensive goods. Indeed, India’s mobile market is already an important source of revenue for Chinese companies, accounting for more than 11 percent of turnover at Shenzen based Huawei technologies, for example, one of the world’s leading telecoms equipment.
Source:- joc.com
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