The total pattern of trade between the U.S. and India would also seem to underscore this optimistic trend, as overall U.S.-India trade grew by an impressive 25% in 2003, while foreign investment jumped more than six-fold from $763 million in 2002 to almost $5 billion in 2003.
To gain a more meaningful understanding of just how North American processors can interpret and capitalize on these changes, we need to review some of India''s more recent economic initiatives, as well as some of it''s more important markets and economic indicators.
Over the last several years, India''s national economy has experienced impressive levels of growth, most recently posting GDP growth rates of more than 6%. This positive trend is even more apparent in many of its individual industrial groups like the chemical and plastics industries, which have consistently produced double-digit growth rates.
In an effort to help sustain and expand these plastics production levels, the Indian Dept. of Chemicals and Petrochemicals (DCP) has put forward several encouraging suggestions aimed at increasing per capita plastics consumption to 12kg by 2010. (Current consumption levels are about 3kg per capita, considerably lower than the global average of 20kg.) If India can succeed in its efforts, the country will become the third largest plastics consumer by 2010.
As part of this strategy, the DCP has proposed a 5% interest subsidy on loans intended for the purchase of more modern plastics processing equipment. Other ideas include lower import duties for important input materials and the establishment of a Plastics Development Council (PDC).
The DCP has also suggested that the government help plastics manufacturers take advantage of the trade-enhancing programs outlined in the comprehensive Export & Import (EXIM) Policy for 2002 to 2007. Within this framework, the DCP encourages foreign and domestic plastics manufacturers to use Special Economic Zones (SEZ) and 100% Export Oriented Units (EOU), as well as to develop complementary plastics recycling clusters .
U.S. exporters should also note that India''s 2002/2003 budget announced a commitment to initiate a two-tiered tariff rate by March 31, 2004 . This system would limit standard duties on raw materials, intermediate products, and components to 10%; and a 20% duty on finished goods. This move, if enacted, would represent a renewed commitment towards tariff reductions, a process that had slowed since the late 1990s.
Other important developments include the elimination of quantitative restrictions on imports along with many local content and minimum investment requirements on foreign investments. These developments are examples of the Indian government''s commitment to remedy their notorious systems of import-restrictive licensing.
These initiatives, along with production costs for plastics injection molds estimated to be 20% to 25% less expensive than in the U.S., will inevitably make India a promising investment option for many North American producers.
As previously mentioned, India''s plastics market has witnessed significant growth rates, estimated at around 15% to 17% annually over the last several years. In December 2003, the Plastics Exports Promotion Council of India (PLEXCONCIL) predicted that this trend would accelerate to roughly 20% in the next few years to come.
Of course, the growth in production levels has been largely mirrored by similar jumps in plastics consumption, generally forecasted to continue rising at around 10% annually through 2007. To better understand this growth, we will take a closer look at the some leading plastics consuming industries in India.
Aircraft: Perhaps the most exciting industry to watch in India is aviation. It is estimated that India''s domestic air traffic grew by 10.5% in the 2002 to 2003 fiscal year, while domestic and international air cargo expanded by 13.5% and 15.9% respectively. Going forward, both international and domestic air traffic is expected to increase annually by between 6% and 8%.
Telecommunications: India''s cellular phone industry is the star of this market. The 16 million cell phone subscribers recorded in 2003 is expected to more than triple to 50 million before 2006, producing compounded growth rates of about 40% through 2007.
Computers and peripherals: While the current penetration of personal computers into the India market has been unimpressive—around nine systems per 1000 people—there are significant indications that that ratio is about to rapidly improve. Some industry experts are even hoping that the PC market will double once expected tariff reductions are officially endorsed later this year.
Infrastructure: The plastics producers who service the construction industries are expected see real benefits from ongoing and planned infrastructure projects. It is estimated that $160 billion of investment in rural and urban housing will be needed by 2021, with another $345 billion of investments needed in the country''s electrical power capabilities.
Medical equipment: The medical equipment sector in India is expected to grow by about 16% annually in the coming years as Indians gain better access to health care, and as more foreign firms shift production to India.
Food packaging: Thanks mostly to India''s status as the world''s second largest food producer, and coupled with the poor state of its infrastructure system, the plastics packaging market has witnessed impressive growth. The packaging market presently consumes approximately 1.4 million metric tons of plastics and resins, and is projected to expand by 14% rate per annum.
In the past, India has been more known for it restrictive tariff levels, excessive import regulations, a stifling state bureaucracy, and a federalist system that has produced a hodgepodge of opposing state and national laws. However, many of the more egregious aspects of these obstacles have been removed or greatly diminished in recent years. These positive changes, coupled with the growing affluence of India''s 250 million middle-class citizens, have all significantly increased the opportunities for plastics producers in India. Add to this rosy scenario the growing likelihood of a detente in relations between India and Pakistan and you have an ideal time to begin to reconsider Asia''s other Goliath.
Agostino von Hassell, of the Repton Group (New York, NY). Contact von Hassell at [email protected].