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MDA Technologies 3/2015

MDA Technologies 3/2015

Sensing the winds of

Sensing the winds of change in India As the curtains come down on the world’s largest industrial fair in Hannover, the Indian Lion’s roar to Make in India continues to resonate throughout the world, invigorating its position as the international hub of manufacturing and investment. The fair, where India has been granted the coveted Partner Country status, was inaugurated by the Prime Minister of India along with the German Chancellor Angela Merkel. With the ‘make in India’ lion unleashed, the Indian presence was pre dominantly visible all over the fair grounds and the city of Hannover. At the inauguration speech by the prime minister, he showcased the huge demand and demographic advantage that India offers, also he stressed on the enormous opportunities it creates for German as well as global businesses. But more importantly he underlined the significant steps his government was taking to ensure a smooth and swift entry for the worldwide industries to be a part of India’s growth story. Make in India The Make in India initiative is to achieve the long term sustainable growth of 10 % in the GDP of Indian economy through enhanced manufacturing. Currently manufacturing holds 15 % of India’s GDP. Prime Minister Modi wants the manufacturing sector to grow and contribute above 25 % to India’s GDP. From the engineering point of view the important sectors identified by the government are the Automobile and Auto components manufacturing, Chemical and pharmaceuticals, Construction and infrastructure, Electrical machinery and electronic systems, Renewable energy, Railways. To ensure that the make in India initiative transforms India into the global manufacturing hub and investment destination, Prime Minister Modi is making headway in improving the ease of doing business in India by introducing the new de-licensing and deregulation measures that reduce the complexity and significantly increase the speed and transparency. The next step is targeted at facilitating the infrastructure. In this regard, Prime Minister Modi has planned to build a ‘ pentagon’ of industrial corridors across the length and breadth of India. Several new Industrial corridors have already been declared. For example the Delhi-Mumbai industrial corridor (DMIC) or the Amritsar Kolkata Industrial Corridor. In each of the Industrial corridors, a dedicated railway freight corridor acts as the backbone. The plan is to develop new manufacturing zones, logistic hubs and residential townships and/or smart cities along the 1500 km long highway. 6 MDA Technologies 3/2015

NEWS AND MARKETS High tech manufacturing The definition of high tech, shifts with time and developing technology. Generally the high tech industry harnesses the cutting edge and the most advanced technology available. According to Govt. of India, this sector is expected to have the biggest growth potential and the highest economic impact. With the size and the purchasing power of the Indian middle class increasing rapidly and expected to double by 2020 and further double by 2030, India is unquestionably a huge market for the high end technology and products. The key problem for the Indian markets apart from being cost conscious is the fragmented and pluralistic consumer mindset with multilingual multi ethnic and diversities. This patchwork pattern of divergent lifestyles and changing mindsets requires varied business models and the companies need to adapt ‘go-to’ market strategies for different Indias. Some, German companies that are already well established in India recognized this very early. For example, Bharat Benz truck series that is a successfully indigenized product, using so called frugal engineering. It was developed by Mercedes Benz India for the Indian and the surrounding markets. The original high quality of the German product was adapted to cope with India’s challenging infrastructure conditions and requirements including a low price. Roadmap for Indo – German collaborations The main objective of Modi’s visit was to forge a collaboration that goes beyond the buyer-seller co-operation, to promote joint or completely owned ventures, R&D, and skill development across a wide range of sectors. So What does Indian government offer to German companies? A High level political support, A strong stake holder group for Indo-German partners consisting of all relevant stake holders including the governments and representatives from the industry, R&D institutions, financial institutions and banks, think tanks and academia etc. These groups identify the areas of interest and projects´s and develop mechanism for implementation. Providing industrial clusters with high tech infrastructure and integrated facilities for R&D, product development, design and testing facilities, associated manufacturing units, research labs and technical universities. Promoting intelligent manufacturing: The government of India (GoI) is promoting, the German companies which have strengths and significant market share in the Indian subcontinent to form a joint venture with India’s enormous software and systems integration sector. This would help not just in the Indian markets but also cater to the markets in Africa and Middle East. Information campaigns and Right market entry strategy: ‘Mittelstand ‘companies form the backbone of the German economy and its manufacturing strengths. Many of these companies are the hidden champions. Unlike the large companies these companies often lack proper information about the markets and opportunities and procedures for market entry into India. The GoI and its embassies are carrying out various campaigns to reach out to these companies through various channels. Institutes like IGCC (Indo german chamber of commerce) acts as a resource center to support German companies looking for guidance and formulating their market strategies. Outlook After the presentations by the Indian contingent the indications from the attendees, mostly the German business leaders, politicians and policy makers were great and optimistic. They were very impressed and motivated firstly by the way India has carried out this campaign of make in India. For the entire month before the Hannover fair started, the ‘lion’ was everywhere. Along with the magnitude of the campaign, the ‘movers and shakers’ of the German economy were also impressed by the preparedness and the presentations organized by the various sections of the Modi delegation. India and Modi, with his visions and actions so far have impressed the establishments in Germany, but what does that mean? Does it mean that from next quarter onwards the German companies start expansive business in India? Does it mean suddenly now the inflow of FDI in India increases twice or thrice? No, nobody is going to jump in and open the flood gates. But this definitely means that people from industry and government are going to start looking at India in a new and different way. They are going to consider about India as a location for global manufacturing base. In the following weeks of hannover messe, a strong response from the larger german companies could be seen with BMW announcing 50 % localization in production. Volkswagen following suit and Mercedes Benz doubling their production capacity in India. Honda announcing its plans to make India the largest two wheeler hub globally, and General Motors deciding to put manufacturing tasks in india as its top agenda as the prices in South korea start ballooning. Something unusual about the entire Modi affair is that there were no official government to government level agreements being signed. Well the answer to that will be probably in October, when Merkel meets Modi in New Delhi. www.makeinindia.com

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