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The
EU is India's largest trading partner and biggest foreign investor. Yet,
trade and investment between them is well below what it should be! In
order to correct this, a joint Commission was set up to identify the areas
of co-operation and highlight the problems. European consultants worked
with Indian experts from Federation of Indian Chambers of Commerce and
Industries (FICCI) and the Confederation of Indian Industries (CII).
Four
particular sectors were identified for European investments in India: -
a)
food processing b) mechanical engineering c) telecommunications d)
information technology
a)
Food Processing: -
This
represents 6.3% of GDP and consists of primary products consumed in their
natural state with packaged/processed food representing just 5% of final
consumption. Indian subsistence farming makes it one of the world's
largest producers of food but it accounts for less than 1.5% of
international food trade! Food processing needs an investment of nearly £5bn
(300 billion rupees) over the next five years mainly to improve
infrastructure; effective cold chain facilities, improved transport,
storage warehouse, new techniques for sowing, growing, fertilising and
irrigating as well as integrated livestock development.
b)
Mechanical engineering: -
The
Indian engineering goods sector is worth about £20bn and it has seen an
average growth rate of 5.9% since 1990. It has received the highest
foreign investment inflows of all the sectors, most of these meeting the
new demands of the automotive and consumer industries and infrastructure.
With the exception of automobiles, there are no quantitative restrictions
on the import of engineering goods.
c)
Telecommunications: -
Despite
being the sixth largest network in the world and the third largest among
the emerging economies, India has a telecom density of just 3.7%, far
below the world average of 10%. Cellular penetration is even lower at 0.1%
compared to China at 1.1% or Malaysia at 2%. There is a huge scope for
investment here as the Indian Government aims to achieve a basic
teledensity of 7% by 2007 requiring an additional 50 million new
connections, costing £25bn and realising service revenue of £100bn!
d)
Information technology (IT): -
India
is a leading exporter of software and software solutions. It is the most
competitive supplier of skilled IT professionals to the developed world.
Sadly, the IT sector contributes only 2% to India's GDP - compare this
with 40% of GDP in USA and 65% in Malaysia! It lags behind in every
respect: PC penetration (5 million), teleconnectivity (26 million
landlines) and Internet usage. Growth rate in this area is 50% per annum
and it is expected to contribute 28% of GDP by 2020.
Indians
have a natural flair for enterprise. Sadly, India is disabled and
disadvantaged by extensive bureaucracy - a "civil service"
culture - that frustrates potential foreign investors. Why should India
restrict foreign ownership of commerce and trade e.g. telephone companies
have a cap of 49% equity for foreign investors. How can India attract the
huge investment required to transform its telecommunications? Without such
investment it cannot realise the full potential of its pool of IT skills!
India
is a country ready for the investor. 50million middle-class Indians have
real spending power. There are many Indians in Europe and North America
with substantial funds to invest and the EU, including the EIB, is willing
to fund joint projects. The UK has not enjoyed full benefit of its EU
membership as it has failed to exploit the funding available for joint
projects. Germany has excelled in this way by using EU funding to invest
heavily in East and Central Europe. British Indians must examine how they
can tap into EU resources - technical and financial - that can propel
trade and investment between India and Europe. Indian investors in India
have equal opportunity to invest in Europe, including in the accession
countries. This could be an effective way to establish a market in the EU
for their products.
I
list below some useful websites for potential investors: -
www.inforegio.cec.eu.int
www.cec.org.uk/info/pubs/funding/contents.htm
www.cordis.lu/sme/home.html
http://sme.cordis.lu/home/index.cfm
www.fpb.co.uk
www.thebritishandhowtodealwiththem.com/readers
My
Report in the European Parliament: "Agreement for scientific,
technological and Intellectual Property (IP) co-operation between the EC
and India" (CNS010175-COM(01)0448) supports the Agreement signed by
India and the EU in November 2001. Information on this and other EU
matters can be viewed directly on www.europarl.eu.int.
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