post-covid cooperation between the czech republic ...economic stimulus package to help its...

Trade & Investment Opportunities in Machine Tool Sector in Karnataka

2 September 2020

Post-Covid Cooperation between the Czech Republic & Karnataka

2 September 2020 Presentation title

Bilateral Relations between India and the Czech Republic

Czech companies are invited to take advantage of huge opportunities that the Indian market offers for manufacturing in India especially in defense, automotive and railway sectors

Prime Minister Narendra Modi on H.E. Mr. Andrej Babis, Prime Minister of Czech Republic Visit to India in 2019

“

• Bilateral trade in 2019 - US$ 1567 Mn

• FDI of US$ 42.22 Mn up to March 2020

• Major Indian investments in Czech Republic-

Avia Ashok Leyland, Tata Global Beverages,

Infosys BPO, and Lloyd Coils Europe

Investments & Trade

• To strengthen and to expand relations

between scientific communities

• Promote implementation of joint projects

able to bind R&D centres with enterprises

from both the countries

India- Czech Bilateral Scientific and Technological Cooperation

• Key Agreements during India-Czech Joint

Commission Meeting at Prague in Oct 2018

• Czech Business Incubator & Honorary

Consulate opened in Bengaluru

• Czech Delegation visited Bengaluru in

Nov’19. Agreed to develop a Czech

Industrial Cluster near Bengaluru

Relationship with Karnataka


Opportunities to Karnataka –Changing Geopolitical Trends


Changing Geo-political Dynamics & Opportunities

US-China trade war

An existing trade war between US and China has started to intensify/prolong post COVID –likely to negatively impact exports from China to US.

New trade dynamics in Asia(EU-Japan, TPP)

CTPP evolved from TPP after US exit - 3rd largest FTA. EU and Japan's Economic Partnership came in force in 2019.

: Headwinds for China's exports

Globalization: a new regionalism

MNCs already in perusal of “China plus one” strategy are actively looking supply chain diversification.

Technology: Advantage Karnataka

Technology and Innovation will be vital in fast-tracking business remobilization. Karnataka leads India’s adaption to IoT, Industry 4.0, digital platforms & e-commerce.

Sustainability & Environment

COVID-19 has temporarily moved World away from climate change. Opportunity to developing countries to regain Industrial output.

Brexit & EU skepticism

EU-Britain trade to be impacted by removal of "free market"; FTAs to be reworked b/w UK & non-EU nations.


Global Outlook for ‘China Plus One’ Movement

Rising labor cost – avg. wages have more than doubled between 2011 and 2019

Increasing tariff risks - 50%+ of China's exports effected by US tariffs

De-risking overdependence on China –FDI in China has seen declining trend

Exchange rate depreciation has made of import of components and other supplies more expensive

-12.4%

20.3%

10.7%10.0% 8.9% 6.7% 6.3% 3.9%

% change in imports by US, 2019 H1 vs. 2018 H1

Trade with "Other Asia" growing while China trade shrinks

MexicoSouth KoreaChina EU (-UK)Taiwan India JapanASEAN

Source: IHS Markit Global Trade Atlas; BCG analysis

Pre-COVID"Japan has earmarked $2.2 billion of its record economic stimulus package to help its manufacturers shift production out of China"

Korean steel, hospitality companies are keen to relocate to India very soon"

- Consulate General, Republic of Korea

Post-COVID

"USA should Help Its Manufacturing Firms Move out of China; We should pay 100% of moving costs“

- White House National Economic Council

2 September 2020

Karnataka- 4th Largest Economy

Economic Overview

GSDP - US$ 226 bn –growing at 9.6%.

4th largest Industrial output (GVA) & exporter (US$ 78.3 B)

3rd rank in attracting FDIHighest per capita NSDP among major States

400 out of Fortune 500 companies

are in the State

Aerospace Investments

65%

R&D & Innovation Centres

44%

Biotech Investments

50%

Start-up Ecosystem

37%

IT/ITeS Exports

35%

Engineering Produce & Exports

20%

Apparel Produce & Exports

20%

Agri Produce & Exports

12%

Karnataka – Leader in Indian Industry Ecosystem

Rest of IndiaKarnataka’s Share


Combining Strengths of Czech Republic & Karnataka

Czech Republic Strengths

Auto, Auto Components and Electric Vehicles

Fourth largest manufacturer of automobiles in India, accounting 8.5% of the national automobile output.

Heavy Electrical Machinery and Machine Tools

2nd largest producer of special purpose and heavy electrical machinery

Defense and Aerospace

67% of Defense aircraft and helicopters are built in Karnataka, with 65% of country’s aerospace exports

Biotech and Pharmaceuticals

Home to 40% Indian biotech companies. 4th rank in Indian Pharma

Karnataka Strengths

AutomotiveGlobally, the Czech Republic is the second largest passenger car producer per 1 million inhabitants

High-tech mechanical engineeringThe Czech Republic is home to world-class mechanical engineers. Over 80 % of the sector’s output is exported.

Defense and Aerospace Prague, the capital of the Czech Republic, is home to the headquarters of the European Global Navigation Satellite Systems Agency.

Lifesciences Viread, a successful antiviral drug for the treatment of HIV/AIDS has been developed at the Czech Academy of Science’s Institute of Organic Chemistry & Biochemistry.


Support for Re-orientation of Supply Chains

License or Forward Integration Precision Eng.

Electronic Comp

Tool Making Mach

Auto Components

Aero & Défense

Case-B: Enhance Trade-Flow

Total Trade Flow ~ US$ 10 B

Back-end Sourcing

Mobile Components

ICB/PCB, Data Processing

Electrical Components

Consumer Durable

Woven Fabrics, Apparel

Athletic Footwear

Case-A: Reduce Input Costs

Total Trade Flow ~ US$ 36 B

Karnataka Offers a Great Opportunity to Czech Multinationals to build Resilient Supply Chains


Drivers for Machine Tool Industry

• Automobile & Auto-Components

• Heavy & Light Engineering

• Aerospace

• Agri Implements

1

2

3

4


Engineering & Machine Tool Ecosystem in Karnataka

Machine Tools

EngineeringOther Manufacturing

Industries

Heavy EngineeringLight

Engineering Automotive Textiles - Fabric

Steel & Forging Electronics

Pharma & Bio Food Processing

10%9%

12%

12%

12%

12%

* % share of India’s production, by value

20%20%

50%*▪ 2nd Heavy Eng. & Capital machinery

▪ 50% of Indian machine tool output

Driving Sectors

Mechatronic Systems

Automotive Food Processing

Textile Machinery

Consumer Goods Agri Implements Capital Machineries

Print and Paper Packaging Industry

Aerospace & Defense


Gurugram,

Rudrapur

Pune, Aurangabad

BengaluruChennai

Penukonda,

Vijayavada

Sanand

Karnataka Supplies 50% of Auto Components

▪ 8 Auto plants, contributing 9% of National Production

▪ 4.5 Mn+ passenger vehicles

▪ 2nd largest Automobile after-market

Auto

Connects 4 of 6 Auto & Component-

hubs in India within 600 Km

Opportunities - Demand Drivers

▪ Auto and Auto Component Clusters at Bidadi (near Bengaluru)

▪ EV Cluster at Ramanagara

▪ R&D and Incubation Centers to promote mobility technologies


Karnataka, the backbone of Indian Engineering sector

▪ Second largest producer of Engineering, Heavy electrical &

Electromechanical Components

▪ Largest exporter of Heavy & Light Eng. products– 20% share

Auto


▪ Toy & Light Engineering SEZ at Koppal (near Ballari)

▪ Precision Engineering SEZ in Belagavi

▪ Engineering SEZ at Mangaluru

Key Engineering Hubs

Jalandhar, Ludhiana

Mumbai, Pune

Belagavi, Bengaluru,

Mysuru Chennai, Coimbatore

Ahmedabad, Baroda, Jamnagar,

Rajkot

Jamshedpur, Rourkela

5 Industrial Clusters related to Engineering Machinery, Industrial Consumables, and Capital Goods


Karnataka, the Aerospace Hub of India

▪ 65% share of the Aerospace Production & Exports

▪ Highest value of Offset contracts are to placed on Karnataka companies

▪ Exports > US$ 1.0 Billion components to Boeing & Airbus


▪ KIADB Aerospace SEZ at Devanahalli (near Bengaluru)

▪ India’s first Private Aerospace SEZ in Belagavi

Inherent Ecosystem for Aerospace

Manufacturing Hub for Precision Engineering, Electromechanical Systems

MRO Hub of India; Network of 3000+ SMEs for niche offset contracts

Technology Hub: R&D & Innovation Centre

Design, Development & Engineering Services


Karnataka leads Indian Agri Implement sector

Mumbai

Hyderabad

Bengaluru

Foundry & Casting - Dharwad Machine Tool - Bengaluru

Steel: Ballari, Koppal, Tumakuru

Vendor Base: Bengaluru, Tumkur, Dharwad

Markets Catered from Karnataka

In-house Value Chain


▪ India’s First Agri Implement cluster in Bidar (140 Km from Hyderabad)

▪ Fourth largest producer of Agri. Implements with 10% share

▪ In-house Value Chain for 100% of the components & Skills


Business Opportunities to Czech Multinationals

• Gobal In-house Centre

• Advanced Manufacturing Systems

• Licensing & Contract Manufacturing

1

2

3


Drivers for Global In-house Centres

Centre of Excellence

Global Innovation Hubs

Data CoE, Advanced Analytics

Start-up Incubation, Centre of Excellence

IT/ITeS Support

Academia Collaboration

Karnataka ranks 2nd in India with 2,102 patent applications

Strategic Alliances with 15+ countries; 400+ Global Technology Centers

Centre of Excellence (CoE) in Data Sciences, Artificial Intelligence (AI), IoT & Cyber Security. 44 Big Data Analytics Colleges

Dedicated Startup Cell, 5 Tech. Business Incubators.Home to 536 of the 971 IoT start ups in India

Bengaluru is the Silicon Valley of India, with 3.0 Mn

talents in Technology/Knowledge Platforms

Growth through Industry-Academia Collab.- IISC, IIM, IIT-Dharwad, Manipal University


Drivers for Advanced Manufacturing Systems

R&D Procurement Production Sales & Distribution Services

Robotics Advanced Design & Prototyping

Robotic welding

Internet of Things/ Human Mach. Interface

Simulation with Inventory Management

Machine to machine augmented reality;Self governing system

Autonomous delivery with real-time tracking of product flow

Data Analytics/Machine Learning

Inventory managementMaximize process utilization

Predictive maintenance

Digital Engineering Digital prototypes

Digital supply chain –4.0

Digital supply chain – 4.0

3-D Printing Digital Prototypes

Inventory ScalingNew production formats; smaller batches

Local printing of spare parts

Mobile Applications / Artificial Intelligence

Instantaneous TrackingTouch points tailored to needs

Consumer preferences

Smart Factory

Karnataka is the home of Digital Technologies, with partners in all below fields right next to Business


Drivers for Licensing & Contract Manufacturing

Large Consumer Market – Access to 5 of 8 Metropolitans within 1000 Km

Gateway to Western markets (Africa, Middle East) – Port on west coast

EoDB support through dedicated MSME Department

Infostructure - access to Skilled Workforce at Affordable Costs

Quality Industrial Infrastructure along with Plug & Play option

Manufacturing Ecosystem

Karnataka is 5th largest base to SMEs, with more than 3.8 Lakh registered units


Pillars for Indo-Czech Collaboration in Karnataka

1Vibrant Policy Landscape

2Resource Base

3Reforms: Ease of Doing Business

4Social Infrastructure

5Industrial Infrastructure


Policy Landscape

Manufacturing

Services

Agriculture

1. Agribusiness and Food Processing Policy (2015)

1. Industrial Policy (2020)

2. Textiles Policy (2019)

3. Biotechnology Policy (2017)

4. Electrical Vehicle and Energy Storage Policy (2017)

5. ESDM Policy (2017)

6. Renewable Energy (2014)

7. Aerospace Policy (2013)

1. Retail & Trade Policy (2015)

2. Infrastructure Development Policy (2018)

3. Start up Policy (2015)

4. Tourism Policy (2015)

5. I4 Policy (2014)

6. NRI Policy (2016)

7. Animation, Visual Effects, Gaming and Comics Policy (2017)

Special Schemes

1. ESDM Cluster, Mysuru, Dharwad

2. Toys Cluster, Koppal

3. Textiles Cluster, Ballari

4. Agri Implements, Bidar

5. FMCG, Dharwad

Sector Specific Policies


Karnataka Industrial Policy 2020-25

Large & Mega Units MSMEs

Investment Promotion

Subsidy

Large Enterprises - Up to 2.5% of annual turnover

Mega Enterprises - Up to 2% of annual turnover

Micro Enterprises - Up to 30% of Value of Fixed Assets

Small Enterprises - Up to 25% of Value of Fixed Assets

Medium Enterprises - Up to 2.5% of annual turnover

Stamp Duty Exemption Up to 100% Up to 100%

Concessional

Registration ChargesUp to INR 1 per INR 1000 Up to INR 1 per INR 1000

Reimbursement of

Land Conversion FeeUp to 100% Up to 100%

Subsidy for Setting up

ETP

One time capital subsidy up to 50% of cost of ETP

(maximum of INR 2.5 crores)50% of Cost of ETP (maximum INR 50 lakhs)

Performance Linked Incentives is ‘a Milestone in post-GST era’


Resource Base

Demographic Dividend: 20 Million in the age group of 16 - 35 years

44

Universities

234

Engineering Colleges

Polytechnics

290

ITIs

1,777

Institutes of Excellence

Indian Institute of Management, Indian Institute of Science, National Institute of

Design, etc.

Public and Pvt. Industrial Training Institutions

290 Polytechnics, with seatingcapacity of 75,000

▪ High Labour Productivity

▪ Amongst the least industrial disputes in

the country

▪ Flexibility in employment of Fixed Term

Employment / Contract workers

▪ Affordable labour - 15% cheaper than

competing states

Labour Advantage


Ease of Doing Business

Single Window Agency

Dedicated Investor Facilitation Cell & Relationship Managers

Country Desks & Fast-Track Resolution Mechanism for Strategic Partners

Time Bound Grievance Handling

Enabling Business Environment

Investors

Govt. Departments

1. Investor can immediately set up unit upon obtaining Acknowledgement Certificate and filing self declaration

2. Relaxation from pre-establishment clearances under State Law for a period of 3 years

3. 3 yr. Moratorium under State Laws

Industries (Facilitation) (Amendment) Ordinance, 2020 1. The validity of the consent for operation increased

from five years – Red / 10 years- orange and 15 years - green

2. Self-certification/third party certification permitted for auto-renewals

3. Green category industry exempted inspections by the pollution control board

Environmental Reforms

1. Land up to 40 Units (206 Acre) can be acquired directly by the Industrial Units after SHLCC/ SLSWCC approval

2. Amendment in KLR Act for transfer of land for Industrial use

Land Reforms1. Fixed Term Employment permitted

2. Women Employees permitted to work in Night shifts

3. Exemption from provisions of Section 51 (Weekly working hours) & Section 54 (Daily working hours)

4. Industrial Establishments in SEZ exempted from all provisions of labour laws for 5 years

Labour Reforms

Formation of Task Force

Setting up Country desk

Policies & Incentives


Robust Infrastructure

Enabling Factors

► 414 Government Hospitals

► 62 NABH Accredited Hospitals

► Power surplus state

► 7 river systems drainage

area ~ 190,500 Sq Km

► 234 Engineering Colleges

► 280 Diploma Colleges

► 57 Medical Colleges

► 16 International Schools

A

B

DE

F

G

C

► Two important industrial corridors

▪ CBIC (Chennai-Bengaluru)

▪ BMEC (Bengaluru- Mumbai)

► 6500 Km of National & 70,000 Km State Highways

► 3.4 Lakh kms of road length

► 2 International Airports –

Bengaluru & Mangaluru

► 6 Domestic Airports –Mysuru, Ballari, Hubballi, Belagavi, Kalaburagi, Bidar

Roads & Highways

Railways

Airports

Industrial CorridorsHealth Infra

Water and Power

Institutions

► Rail network of 3540 km

► 20 major Rail junctions

Cochin540 km away


Tumakuru Machine Tool Park (TMTP) Exclusive Infrastructure for Machine Tool Industry

TMTP

Bengaluru

Key Players


Large Tracts of land with establish Ecosystem

1

2

3

4

6

8

9

5

7

Chikkaballapura

Ballari

D. Kannada

Mysuru

Yadgir

Chamarajanagar

Bengaluru (Rural)

Ramanagara

437.6 Ac.

450 Ac.

429.8 Ac.

813.5 Ac.

722.1 Ac.

Tumakuru 1,385 Ac.

779.3 Ac.

2

1

884.7 Ac.

852.3 Ac.3

4

5

6

7

8

9

Major Land Banks in the State

> 150 Industrial Parks and Estates

Fully digitized with GIS based online

maps

>12,000 Ac. in advanced acquisition stage near Bengaluru


Manufacturing supported by World Class Social Infrastructure

Mix business with pleasure for retaining intellect

Popular tourism destination including UNESCO Heritage Sites, attracting tourists from across the world

Varied regional cuisine with specialities such as Mysore Pak, Kori Gassiwhich are popular worldwide

Rich culture and heritage, including Yakshanga dance form and a high theatre presence

40+ five-star hotels in the state, such as Taj Group of Hotels, Hyatt, etc.

Shopping malls in the state offering a wide variety of world renowned brands

Bengaluru consistently ranked amongst the

best cities to live in India for expats

– Mercers quality of living report 2019

Bengaluru ranked most dynamic city in India

– JLL report 2019

Expatriate friendly ecosystem

40+ five star hotels &

15+ golf courses

27

Over 16 International Schools


Gunjan Krishna, IAS

Commissioner for Industrial Development & Director

of Industries & Commerce

Off: +91 080 2238 6796

Email : [email protected]

Thank You

Gaurav Gupta, IAS

Principal Secretary to Government,

Department of Industries and Commerce

Ph: +91 – 80 – 2225 2443

Email: [email protected]; [email protected]

mailto:[email protected]



post-covid cooperation between the czech republic ...economic stimulus package to help its...

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