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There are several factors that affect evolution of an
industry in a particular region. The major factors impacting evolution are:
Policy proactiveness
The policy that a state
government adopts towards a sector directly affects its attractiveness for
further investment. For example, the Government of Andhra Pradesh has given
many concessions to the IT sector. This has prompted many IT majors, both
domestic as well as multinationals, to set up software development operations
in the state.
Availability of natural resources
Certain industries
like agro-based industries have a high dependence on availability of natural
resources. The availability of natural resources like limestone spurred the
growth of the cement industry in the state.
Capability
Availability of good quality manpower is a
must for all industries to flourish. High literacy rates and presence of good
education and vocational training institutions have ensured that the state has
well qualified manpower. This has been a major factor enabling the success of
Andhra Pradesh in sectors like engineering, IT and ITES. Given its strong base
of technical workforce, knowledge intensive industries are gradually taking a
lead position in the state.
Based on an assessment of the above factors, some of the
industries with potential for investment and growth in the state of Andhra
Pradesh are illustrated below:
This is the qualitative assessment to highlight relative interest of different
sectors. A case by case analysis is necessary before investment is made.
Source: KPMG analysis
Key industries
Agro-based
The agro-based industry in Andhra Pradesh employs around 65
per cent of its total population. The state produced 14.9 MMT of food grains in
2004-05. Production of oil seeds and cotton stood at 2.6 MMT and 2.74 million
bales of 170 kg (in lint) respectively.
Andhra Pradesh contributes 25 to 30 per cent to the total
seafood exports in the country. The state accounts for a large chunk of the
country's aggregate production of rice. It is a leading producer of cotton and
targets annual sales of US$ 2,553 million by 2010.
The food products industry contributes 19.36 per cent to total industrial production in the state. Andhra
Pradesh ranks second in the production of value added food products and beverages with a 10 per cent share of total value added in the country. Horticulture accounts for 4.01 per cent of agricultural gross state domestic product.
At present, 1.5 million hectares of land is employed for horticulture in the state.
Andhra Pradesh ranks first in the country in area and
production of mango, oil palm, chillies and turmeric. The state ranks second in
citrus and coriander; third in cashew; fourth in flowers and fifth in grapes,
banana, ginger and guava, based on area and production.
The state is keen to improve the research infrastructure in
the agro sector and has established several organisations. Several MNCs like
Conagra and Krafts Foods, among others, have established their facilities in the
state.
Mineral-based
Andhra Pradesh has huge reserves of key minerals such as coal, limestone, granite, bauxite and barytes. In fact, the state is estimated to have one-third of the country's total mineral wealth. Andhra Pradesh is the only southern state with coal deposits and
has 20 per cent of the country's limestone reserves and 27
per cent of its bauxite reserves. The world's best granite, Black Galaxy, is
found only in Andhra Pradesh. Andhra Pradesh is the second largest producer of
cement in the country. Larsen and Toubro's plant with a maximum capacity of 6
MTPA is the largest in Asia. Gujarat Ambuja Cements Ltd plans to invest US$ 160
million to set up a plant with a capacity of 2 MTPA.
Leather and leather products
Andhra
Pradesh with a livestock population of more than 46 million is a major producer
of hides and skins in the country. The state contributes about 19 million pieces
per annum, which accounts for 10 per cent of the country's raw material. The
leather industry in Andhra Pradesh produces a large range of products for the
domestic and international markets. |
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Source: Government Website
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Textiles
The state is one of the major exporters of textiles in the
country at US$ 90 million in 2003. There are about 1,050 weaving units with a
production capacity of 750 million metres of fabric in 2003. The state is one of
the leading textile processing centres with over 100 units and a processing
capacity of 13 million metres of cloth per annum. The average production of
medium and superior long staple cotton is 2.6 million bales. There are around 70
spinning mills in the state with a total spindleage of 18.3 million and 9 open
end spinning mills with 5,716 rotors.
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Ranks second in production of raw silk (3.8 million kg in 2000)
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Ranks fourth in production of wool (3.4 million kg in 2001-02)
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Highest number of handloom development centres (397 in 2000-01)
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Ranks fourth in the number of textile mills (98 in 2003)
The growth in the sector is attributed to highly suitable
soil and climatic conditions for cultivation of cotton crop, long traditions of
growing cotton and availability of labour at competitive wage rates.
Engineering
Andhra Pradesh has a well-performing engineering industry
producing a range of intermediate and final goods such as foundry and forging
items, machine tools, auto components, testing machines, material handling
equipment and components for defence production. The exports from this sector
stood at US$ 237 million in 2002-03. The state is the largest compressor
manufacturing centre in the country. Many global players like Tecumseh, BPL,
Electrolux, among others, have established their manufacturing facilities in the
state.
Automobile sector is one of the emerging sectors in the state
with more than 20 auto-component manufacturing companies. Mahindra & Mahindra
has a modern facility at Zaheerabad, with a capacity of over 10,000 units per
annum.
IT
The state has emerged as one of the leading software
exporters. It aims to capture 30 per cent of the market share in IT and ITES by
2009.
MNCs like Microsoft, IBM, Motorola, Oracle, Baan and Wipro
have set up their operations in Hyderabad. Some of the other major players in
the sector are CMC Ltd, DE Shaw, Infotech Enterprises, Intergraph, Mentor Graphics, Metamor, Ram Informatics Ltd,
Sierra Optima, SQL Star International Ltd and Visual Soft.
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Source: Government Website
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Pharmaceuticals
Hyderabad has emerged as a major drug manufacturing city with
a presence in the global market. Pharma industry in the state contributes more
than one-third to the country's total production. During 2000-01, the state
produced bulk drugs and formulations worth US$ 462 million and US$ 1,150 million
against the total production of US$ 1.66 billion and US$ 3.9 billion
respectively.
The exports from the state stood at US$ 500 million in
2002-03 registering an annual growth rate of more than 20 per cent. The sector
accounts for about 18 per cent of the total exports from the state.
Andhra Pradesh has pioneers in the field of medical/human and
animal healthcare biotech, namely, Shanta Biotechnics, Bharat Biotech, Krebs
Biotech, Biological E. Ltd, Jupiter Biosciences, Dr Reddy's Laboratories, among
others. Most of the companies have set up their R&D facilities in the state,
thus, making the state the pharmaceutical capital of the country.
Research support
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Indian Institute of Chemical Technology
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Centre for Cellular and Molecular Biology
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National Institute of DNA Fingerprinting
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National Institute of Nutrition, Central University
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R&D
The state is keen to encourage private sector participation
in improving R&D infrastructure. Many leading companies have set up their
facilities particularly in the pharmaceutical sector because of proactive state
policies.
Hyderabad bio-cluster
Hyderabad, the capital of Andhra Pradesh, has emerged as an
important bio-cluster with CCMB, ICRISAT and Osmania University forming the
academic backbone. Shanta Biotechnics, Bharat Biotech, Biological E. Ltd and Dr
Reddy's Laboratories form the industrial cluster in the state. The bio-cluster
focuses largely on vaccines and bio therapeutics.
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Lucent technologies, the US$ 38 billion telecom major and the
research wing of Bell Labs, has set up a facility at Hyderabad focusing on Third
Generation (3G) wireless software design. The facility started with a workforce
of 300 and has now increased to 600.
Aurobindo Pharmaceuticals Ltd, among the top five
pharmaceutical companies in India, is an R&D driven company based in Hyderabad
with presence across the world. Dr Reddy's Laboratories, a leading bulk drug
exporter based in Hyderabad, has a good presence in R&D and spends about 10 per
cent of its total revenues in drug discovery and R&D initiatives. The facility
operates with around 300 dedicated researchers.
BHEL, one of the country's leading producers of heavy
engineering products has established its R&D facility with wide interests in
power, CFD etc. The organisation plans to invest an additional US$ 8.9 million
into R&D. Auto majors like Skoda are planning to set up their R&D units with the
support of the Government.
Exports
The exports from the state stood at US$ 2.8 billion during
the year 2002-03. Over the years, the services sector has seen a significant
growth in exports. The agro-based industry was the second largest contributor to
exports in 2002-03 and the largest during 1996-97 to 2001-02.
Source: CM1E Prowess Database; size of the circle is indicative of the
size of the exports
The exports from the pharmaceutical sector continue to
increase and stand at US$ 50 million.
Investment*
Andhra Pradesh is an attractive destination for Foreign
Direct Investment (FDI) in the country. The FDI inflow was over US$ 3.6 billion
during 1991-2004. Petroleum refineries, thermal based power and irrigation are
the industries that account for major proportion of the investment.
Major projects include, a US$ 2.61 billion petroleum products
project being undertaken by Transworld Corporation, USA, at Visakhapatnam;
Kakinada Indian Oil LNG Consortium** including Malaysian Petronas plans to
invest about US$ 1.34 billion for LNG Storage & Distribution; Besicorp-Brooklyn
Power International and Pennsylvania Power & Light plans to invest a total of
US$ 483 million to set up a captive coal-handling jetty at Krishnapatnam port.
In addition to industry, many projects have been initiated in the infrastructure
sector like ports, roads, tourism and power. Two major projects with an
investment of over US$ 200 million are in the pipeline in the tourism sector by
International Management Group and Emaar Properties.
Source: Projects Today, Feb 2004
Foreign Direct Investment is an important driver of
industrial performance. An autonomous body "AP Invest" has been created for
needs assessment and road mapping of FDI and to give special care in providing
timely clearances and assistance for such units and also to remove the
administrative obstacles and managerial impediments.
Potential hubs for investment
Biotech
Andhra Pradesh is shifting its focus to one of the most
promising industries of the future, biotechnology, seen as a high growth
potential industry in India. With its vast resources the state can create a good
environment for biotech companies. The state's advantage is its vast reservoir
of human resource at a reasonable cost, wealth of R.&D institutions, centres of
academic excellence in biosciences. A vibrant pharmaceutical industry and fast
developing clinical capabilities, collectively point to a promising
biotechnology sector and have placed the state favourably in the global market.
Tourism
The travel and tourism industry is well on its way to
becoming one of the most powerful sectors and is anticipated to generate nearly
338 million jobs by 2005 with an annual growth rate of 4.8 per cent.
Acknowledging this potential, the Government is focusing on tourism for
generating greater employment and achieving higher economic growth.
The State Government has formulated an exclusive tourism
policy to translate its tourism potential into reality, highlighting attractive
destinations and to make it a tourist friendly state
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