MARKET ANALYSIS

All eyes are on India!

	image courtesy of www.cochinport.com

As Western governments wake up to the changing global landscape, countries that were previously overlooked are now taking centre stage.

At the 2006 World Economic Forum, India dominated much of the discussion on emerging international economies, with its ambition not only to be seen as achieving global best practice, but also for its companies to display the same drive and determination as those in the First World to become international players and leaders in their field.

India is showing the world it can, and will, compete with global giants and make its presence felt in the international arena.

Key facts on India’s growth

India’s total global exports during February 2006 were valued at US$7.8 billion, up 12.31% from US$7 billion during February 2005. India’s imports during February 2006 were valued at US$11 billion, up 21.38% over from US$9.1 billion in February 2005.

	Ferries docking at the Gateway of India, Mumbai

A major factor in the increased trade is India’s trade treaties with other countries. India has Free Trade Agreements (FTAs) with Sri Lanka and Thailand, Preferential Trade Agreements (PTAs) with Mauritius and Chile, a Comprehensive Economic Cooperation Agreement (CEPA) with Singapore, a Trade Treaty with Nepal and an agreement with Bangkok.

Bilateral trade between India and Chile during 2004-05 was US$447 million. Bilateral trade between India and Singapore has almost tripled during the past decade, from S$4 billion in 1995 to S$11.8 billion in 2004, making India Singapore’s 14th largest trading partner.

India’s trade with the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates) is set to exceed $20 billion this year, equalling India’s trade with Europe. Both parties have resolved to finalise an FTA by early 2007.

Along with Bangladesh, Pakistan, Nepal, Bhutan, and the Maldives, India is also in the process of creating the South Asian Free Trade Area (SAFTA), which seeks to cut goods tariffs among member countries to a low level by 2016.

India signed a Memorandum of Agreement in 2004 with eight West African countries – TEAM-9 – comprising Burkina Faso, Chad, Equatorial Guinea, Ghana, Guinea Bissau, Ivory Coast, Mali and Senegal) for economic, commercial and technical cooperation. India also formed a strategic trilateral group – IBSA – (India, Brazil and South Africa) with the two emerging powers of Africa and Latin America to promote economic, commercial and political cooperation.

India is also seeking trade agreements with other countries, including China, South Korea, Japan, Malaysia, Egypt, Israel, Russia and Australia.

Bilateral trade between India and Australia is pegged at $7.4 billion, making India Australia’s 13th largest trading partner.

Bilateral trade between India and China has increased by 224% during the last five years, from US$2 billion in 2000-1 to US$11.3 billion in 2004-5. This represents an average annual growth rate of around 44%.

According to India’s Union Minister of Commerce & Industry, Shri Kamal Nath, bilateral trade between India and China will exceed US$15 billion this year, and will rise to US$20 billion by the year 2007.

Opportunities for the transport and logistics community

The increase in international trade will have a huge impact on India’s transportation and logistics market, which was valued at around US$14 billion in 2004, and is expected to grow at a compound annual growth rate of around 7%.

One of the major hurdles faced by India’s logistics industry is inadequate infrastructure. The Indian government is making great efforts to improve trade by expanding port operations, investing in highway projects, and improving the rail network, and has announced plans to spend $17 billion in transport infrastructure by 2010.

In 2005, Indian Prime Minister Manmohan Singh set a target of 7-8% economic growth for 2006. International investment is on the increase, although the US is still India’s biggest investor, with $620 million of direct investment in 2004.

In 2004, DHL committed €128 million for investment in domestic express services in India, and acquired a majority stake in Blue Dart, a domestic courier with an extensive network covering 13,700 locations in India.

Rivals TNT and FedEx have also climbed aboard the India bandwagon, with TNT recently announcing its domestic foray into India, and FedEx declaring that, after China, India will be its next major frontier.

In March 2006, Neptune Orient Lines (NOL) announced that its new joint venture company has received approval ‘in principle’ from the Indian government to provide freight rail services in India.

As India’s market becomes progressively liberalised, the pace of mergers and acquisitions will most certainly pick up.

While analysts anticipate that China will grow by a factor of 20 to become the world’s largest economy by the year 2050, India’s economy is predicted to grow by a factor of 50 in the same time frame.

The Indian market is thus fairly and squarely in the spotlight for transportation and logistics companies, with many believing that India will eventually rival China in terms of opportunities.