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Indo Thailand Fta

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A cursory study of India-thailand FTA and impacts

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Indo Thailand Fta

  1. 1. FTA with Thailand : Indian AutoComponent Industry Perspective Pallav Vikash Chatterjee
  2. 2. Objectives of Study• To assess whether there are significant import threats affecting Indian auto-component industry• Assessing export opportunities for auto components through this FTA• Effect on investments due to the FTA
  3. 3. Findings : Imports• There is a potential manufacturing cost advantage that Thailand enjoys vis-à-vis India• Surplus capacities in Thailand – they may gain due to scale economies through exports• OEMs with bases in both India and Thailand will start sourcing specific components from there dependent on their sourcing policies and cost advantages.
  4. 4. Implications• There can be potential threat of building up & import surge from Thailand in automotive components• Government policy corrections / encouragement for local automotive industry required to counter the situation.
  5. 5. Findings : Exports• Indian automotive manufacturers have limited export opportunity to Thailand• Strong Japanese presence in automotive OEMs in Thailand – who have principally sourcing policies from Japan (strong linkage in Tier-I supplies)• Indian automotive component manufacturer have an FDI opportunity to set up manufacture of components in Thailand and exploit export opportunities to South Asia-Pacific
  6. 6. Implication• Indian auto-component manufacturers may find it beneficial to set-up manufacturing facility in Thailand and could also move their bases from India to Thailand.• Lower cost of manufacture in Thailand• Thailand already has global manufacturing hub for certain manufacturers – Toyota, Ford, GM, Honda etc.• Possible shift of manufacturing may happen because Indian requirement can still be met with imports from Thailand.
  7. 7. Thailand Advantage• Better economic environment (investor friendly policies)• Manufacturing cost advantage• Thai market structure
  8. 8. Business Environment India Source IFC report 2011India ranks 134th out of a list of 183 countries in ease of doing business : IFC ReportThailand ranks better – conclusion better ease will facilitate migration of investments
  9. 9. Thailand : better Economic Indicators Parameter Thailand India GDP 126 481 Per Capita GDP (USD) 6400 2840 Exports to GDP Ratio 64.8 13.3 Imports to GDP Ratio 57.5 13.9 Gross Domestic Savings / GDP (%) 31.1 24• The economic indicators are better than India•Significant difference of international trade (Exports / Imports) toGDP in Thailand in comparison to India
  10. 10. Investment Policies of Thailand
  11. 11. Country AdvantageParameter Units Thailand India Petrol ($/Liter) 0.42 0.7Fuel Diesel ($/Liter) 0.34 0.43 Kerosene ($/Liter) 0.39 0.13Power cents / KWH 8.1 13.4Interest Rate (%) 6.0 9.0Insurance Costs (%) 0.15 0.25 Plant Manager ($) 1600 1100-1300Labour Costs Engineer ($) 600 550 Worker ($) 150-200 200 Source: www.ibef.org

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