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Asean gets prominence on India’s trade map

New Delhi, Oct. 16: India’s trade with Asean countries is expected to grow at an annual rate of 15-18 per cent, touching almost $ 24-30 billion by the year 2007.

A joint report on trade and investment between India and the Asean countries, prepared by McKinsey and Ficci, which will be showcased at the India-Asean business summit to be held on Thursday, identifies the increased share of Asean in India’s trade (from 6 per cent to 8-10 per cent) and growing GDP as the key drivers of growth. Asean accounts for approximately 6 per cent of India’s trade.

The report suggests that if India and Asean were to reduce trade and investment barriers, trade between the two would grow manifold.

The pharmaceutical sector is expected to witness an increase in exports of low-cost generics and APIs. Alternatively, the Asean countries may now shift their manufacturing base to India, bringing in 100 per cent FDI in this sector. The statistics collated by the report say the domestic segment will reach $ 10-12 billion by the year 2010 from $ 4 billion today. In the global bulk segment, India can expect a 5-6 per cent market share of the total $ 27-billion market.

Pointing towards the financial services sector, the report says investors will find attractive opportunities primarily in personal financial services, insurance and value-added services in corporate banking (through a joint venture with the local player). This sector is expected to observe an annual growth of 12 per cent, rising to $ 51 billion by 2007 from the current $ 28 billion.

The Indian information technology industry is expected to increase its revenues from the current $ 10 billion to $ 70-80 billion by 2008. This will result in multiple opportunities for both Indian and Asean companies, says the report. Four powerful forces that will drive the growth of this industry include—global majors under pressure to move to India, potential blockbuster customers set to take off, penetration of new service lines and the under-penetrated customer segment.

Speaking about trade opportunities in the oil sector, the report states that India is seeking investments from global oil companies to help explore new oil and natural gas reserves as well as to develop reserves and lay cross-country pipelines. Moreover, the opening up of the retail sector and the protection given to refining make projects financially attractive.

Infrastructure is also expected to grow manifold with the telecommunications industry growing to $ 13 billion by the year 2007, as new entrants gain critical mass. The report says that will require investments worth $ 20-25 billion over the next five years. Asean investors can here contribute either as service providers or infrastructure providers by taking a 49 per cent stake in joint ventures with Indian companies. While licences for basic, domestic long distance, international long distance services and infrastructure are available on tap, investors will have to buy into existing players to enter the cellular market.

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