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India An Emerging Economic And Industrial Power

The pending elections in India may go a long way towards establishing the country as a serious economic, industrial and trading power on the world stage. The process of economic liberalization initiated by the Rao government has been gaining speed since 1991, unleashing notions of privatization previously held in check. The Indian market has appealed to traders and investors for some time. The attractions include a large population (estimated at 901.5 million), an economically competitive workforce and a commitment to democracy.

The gradual easing of the state's grip is enabling this appeal to turn into something more tangible, resulting in Indian trade and shipping becoming important factors in the international equation. Drewry's latest report, India — The Emerging Economic And Industrial Power: The Potential Impact on World Shipping and Trade, concludes that whatever the election result, few expect to see the liberalization process reversed. However, Drewry predicts that the economy may take "one step back for every two steps forward." Consequently, Drewry expects to see Indian exports expand over the next 10 years by approximately 25 to 30 million tons. The major export cargo — iron ore — may show little growth, but gains are expected in the agribulks sector, in alumina traffic and in the steel and manufacturing sectors. By 2005, India's imports — in terms of ton- I nage — may be close to double current levels and in reaching this conclusion, Drewry's report takes a conservative view on key growth trades such as coal and oil/refined products. The biggest difficulty India faces is matching political will to program funding. Domestic resources are insufficient for meeting the requirements created by infrastructure and other products. External funds — most likely channeled through joint ventures — are vital, given reports that the states and India's financial institutions only have approximately $7 billion to cover all infrastructural spending. Vast sums are needed for industrial ventures and power generation projects — a sector being closely monitored by coal suppliers.

Also critical is the position of India's ports. Congestion is a serious problem; and there is talk of crisis in the ports. Paradip, Visakhapatnam and Kandla are said to be affected the most. However, this is in response to a claimed increase in total traffic of approximately 10 percent. Drewry concludes that the most cause for concern lies in the least sophisticated sector — general cargoes and minor bulks.

Taking into account the planned increase in capacity with the corresponding residual traffic, a port capacity deficit of approximately one million tons has been projected. If trade growth — specifically in cargo sectors — keeps pace with overall economic growth trends, this deficit could increase to four or five million tons in the early part of the next century. Much will depend on the ability to attract private capital and management expertise into India's ports, and on the adoption of reforms which will greatly increase cargo handling efficiency. In 1994-95, the Indian shipping fleet reached an all-time high of 6.7 million gt. This positioned the fleet as the world's 17th largest. Moreover, Drewry notes that the Indian-controlled merchant fleet is becoming progressively more diverse as the effects of liberalization surface, and Indian companies new to shipowning and operation enter the market — particularly in the bulk sectors — backed by either domestic resources or overseas/joint venture capital. For a copy of the report Circle 1 on Reader Service Card

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