India Calling - India-China Business Investment Opportunities

88 Pages·2013·3.71 MB·English

India Calling
India-China
Business Investment
Opportunities
kpmg.com/in
01 India Calling: India-China Business
Investment Opportunities
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Calling: India-China Business 02
Investment Opportunities
Foreword
This Knowledge Paper, prepared by KPMG, organized by the IMC. Our symposiums
for IMC’s annual flagship event – “India in China comprise a galaxy of eminent
Calling” – which is being held this year in speakers and delegates from both countries.
Shanghai and Guangzhou from April 7-12, The event would help to provide an excellent
2013. interactive platform and networking
opportunities for enhancing trade and
India and China share many commonalities business development prospects in both
and are ranked among the key emerging countries.
market economies of the world today. It is
therefore, fitting, that our strategic trade and We are certain that this India Calling
bilateral relationships reflect our common Conference to China will also meet with
interests and aspirations, and thus help to the same success and appreciation as
leverage the full potential of the multifaceted its predecessor events have. There are
historical bonds that bind our two countries. still many areas of potential cooperation
between Indian and Chinese businesses
India-China bilateral trade is expected to which need to be clearly identified, for
touch the landmark figure of USD 100 billion building an all-round mutually beneficial
by 2015. The current trade balance between business partnership between our two
the two nations stands in favour of China. countries. This mega event is a key step in
There is however, still massive potential that direction.
waiting to be tapped in terms of economic
and commercial partnerships in a wide range IMC and KPMG are committed to promote
of spheres between the two nations. the relationship, co-operation and business
between India and China.
China is currently trying to wean its
economy away from its export dependency,
stimulating domestic consumption.
It certainly has the potential to do so.
Domestic infrastructure development is at
the top of the Government’s priority list. For
example, the Chinese government has plans
to double its highspeed rail network (already
the largest in the world at over 8,000 km)
to about 16,000 km by 2020. China also
holds the record for fastest passenger train
in the world (486 kmph during a test run for
a planned maglev link between Beijing and
Shanghai). And as with the other cases,
China hopes to sell its high-speed trains to
the rest of the world – not just developing
countries but even highly technologically Niranjan Hiranandani
advanced places such as California. President
IMC
There is no doubt that despite current
international economic vicissitudes, China is
still in a solid growth phase. The Government
of China is continually establishing quality
physical and social infrastructure, thereby
providing golden opportunities to Indian
businesses to set-up projects there. In
addition, supply of goods and services
for large Chinese population that now
possessed an increasingly large purchasing
power, adds to opportunities for India.
This India Caling Conference is the twelfth Richard Rekhy
in the row of a series of such annual events
Chief Executive Offcer
KPMG in India
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
03 India Calling: India-China Business
Investment Opportunities
Table of
Contents
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Calling: India-China Business 04
Investment Opportunities
05
1. Executive summary
09
2. India and China: World’s leading growth economies
17
3. Comparative overview
17
• Labour productivity
17
• Capital stock
18
• Debt scenario
18
• Exchange rate
19
4. Bilateral trade and investment
27
5. Sector synopsis
28
• Agriculture & Food processing
31
• Asset management
34
• Banking
37
• Education
40
• Electronics & IT
43
• Infrastructure & Construction
46
• Pharmaceuticals
49
• T extiles & Apparels
52
• Transportation & Logistics
55
6. Business opportunities
60
7. Conclusion
61
8. Doing Business in India
77
9. Doing Business in China
85
10. About KPMG in India
86
11. About IMC
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
05 India Calling: India-China Business
Investment Opportunities
Executive
summary
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Calling: India-China Business 06
Investment Opportunities
Executive summary
The last two decades witnessed the China realized the increasing need of
entry of emerging economies on the inputs and thus not only invested in
world stage in all spheres. Growth in domestic strategy projects but also
the world economy has shifted from expanded the horizon to South East
developed to emerging countries with Asia and parts of Africa, in addition to
India and China being at the forefront positioning itself as a preferred trade
of this change. During 1991-2010, partner with US, EU and Japan. India
while the world economy grew at an has robust plans for South Asia, South
average growth rate of 2.7 percent East Asia and significantly is pursuing
only, China and India grew at an opportunities in US, EU. The fact that
average growth rate of 10.5 percent India and China account for more
and 6.5 percent respectively thus than 10 percent of world exports and
being the epicentres for growth of more than 43 percent of emerging
1 2
global economy despite the Global and developing economies’ exports
economic crisis. elucidates the plans of India and China
to transform themselves in to world’
China and India could stay afloat trading power houses.
amidst global crisis due to the inherent
strengths of the two countries, such However, the bilateral trade between
as large insatiable domestic markets both the countries remains the focal
rising middle class population, point of debates and discussions. With
high investments, and facilitative combined global trade of ~USD 4.6
regulations. Further, to sustain the trilion (2012 estimates), the share of
growth, the two nations are focusing bilateral trade is certainly the area of
on multi-barrel growth engines, improvement.
such as infrastructure development,
increasing domestic production and
consumption among others. But this
sheer pace of growth in both the
countries presents inevitable need for
inputs and thus, trade.
India’s global trade (USD billion*) China’s global trade (USD billion*)
Trade with China: Trade with India:
795.3 3,866.7
9.5% of total trade ~2% of total trade
*India the trade data is for FY 2012 *China the trade data is for CY 2012
Source: Ministry of Commerce and Industry, Government of India and National Bureau of Statistics, Source: Ministry of Commerce and Industry, Government of India and National Bureau of Statistics,
China China
China and India in the recent years witnessed revolutions
in transport, telecommunications, technology and
infrastructure sectors . In addition, both the countries
possess complementary strengths to facilitate mutual
trade and present strong mutual business opportunities.
The Governments of both the nations realized that time
has come to leverage the respective broad industrial bases
and resource endowments to gain competitive advantage.
Continuous economic dialogue, formation of working
groups in areas such as infrastructure, energy, technology
etc. and relaxation of FDI policies in some sectors are
steps in that direction.
01. World Development Indicators, February 2013, World Bank
02. World Economic Outlook, October 2012, International Monetary Fund
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
07 India Calling: India-China Business
Investment Opportunities
Currently, China and India collaborate agriculture and food processing The opportunities for business
the most in IT-Electronics sectors. present critical opportunities for Indian investments are almost self-evident
China presents itself as a good companies. and tangible, they are there primarily
location for business for Indian IT for the bold, the agile and the swift.
companies, while India, presents However, important areas The opportunities can be tapped
a great opportunity for Chinese of collaboration which are through economic cooperation,
innovation and precision in electronics underleveraged include the financial mutual dialogue, constructive trade
and consumer durables. and banking sectors. With the growth agreements, and increased mergers
and development of tier two cities
and acquisitions (M&A) among others.
In addition, Infrastructure in both India and China, need for
development, Farm machinery, rapid urbanization amidst increasing Given the opportunities, and dynamics
Transport & Logistics are witnessing disposable incomes present vital of contemporary global economy,
increased cross border investments. opportunities for two countries to it’s time that two countries respect
Recent policies in China that aim collaborate and strengthen the nerve each other’s competitive advantage,
to boost West and Central regions centres of economy. leverage synergies and pave the way
through heavy investments in to sustain their position as world’s
infrastructure, transport & logistics, leading growth economies.
Twelfth five year plan
Particulars India China
Period 2013-2017 2011-2015
Major goals • Faster growth • Higher quality growth
• Sustainable growth • Long-term prosperity
• Inclusive growth • Inclusive growth
Challenges • Depletion of energy and water resources • Resource depletion
• Higher energy use • Intensive energy use
• Increased pollution
Areas of • Introduction of crucial reforms • Sustainable growth
emphasis
• Infrastructure development • Transition to domestic consumption over exports
• Increased participation of private sector • Reducing disparities
• Reduction in inequality and poverty • Energy efficiency
• Conservation of energy and water resources • Environmental protection
• Enhancing managerial and labour skills • Scientific development
• Support farm sector growth • Development of western region
• Increased urbanization • Increased urbanisation
• Enabling institutions for MSMEs
Key economic • Annual GDP growth: 9-9.5 percent • Annual GDP growth: 7 percent
targets
• Annual inflation rate: 4.5-5.5 percent • Annual inflation rate: 4 percent or less
• Share of services in GDP (percent): Increase to 47
percent from 43 percent
Priority • Employment generation (Textiles & garments; • Biotechnology (drugs and medical devices)
industries leather and footwear; gems and jewellery;
• IT (broadband network, network convergence,
handlooms and handicrafts)
internet security infrastructure)
• Technology deepening manufacturing (machine
• High-end manufacturing (aerospace and telecom
tools; IT hardware and electronics)
equipment)
• Strategic security (aerospace; telecommunications;
• New energy (nuclear, wind, solar)
shipping; defence equipment)
• Energy conservation and environmental protection
• Competitive advantage (automotive; pharma)
• Clean energy vehicles
• New materials (high-end semiconductors)
Social • Improved literacy • Increase high school enrollment ratio to 87 percent
infrastructure from 82.5 percent
Source: Government of India; Government of China (2011 documents)
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Calling: India-China Business 08
Investment Opportunities
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
09 India Calling: India-China Business
Investment Opportunities
India and
China
World’s leading growth
economies
© 2013 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.