TABLE OF CONTENTS
2. The actual situation of India’s´ infrastructure
3. Why German Investors or companies should invest
4. Potential industries & projects to invest in – an overview
5. Conclusion & Recommendations
The economic rise of Asia in the last 10 years will effect a new world political situation and a future transfer of power of the supremacy of the West to the Asian giants India and China. India has blossomed in the last ten years to a major world power and is one of the sovereign players in the international marathon of economic power today. The gross domestic products (GDP) of India and China have grown twice as fast as the GDP of the USA. Basically, a thesis can be established that the Indian energy market has indeed a strong, untapped potential, which is simply poorly marketed. Further, it can be mentioned that it is the renewable energy sector which has the greatest potential and should be of interest especially for German investors. But how did Germany position itself with its "Made in Germany” image as a supplier of high-performance operating expertise in the Indian market? This case study deals with the question of how German companies can position themselves in new and promising future markets. At first, it is necessary to clarify what the current situation in India looks like. Secondly, a SWOT-analysis will show India's strengths and weaknesses to gain insights into possible market potentials for German investors. At a closer look, weaknesses are actually opportunities for German companies but also for India's government, especially in the view of the increasing and huge investment for infrastructure projects, which is already omnipresent. In chapter three, actual business opportunities which appeal in the form of large-scale projects, development aid and investment tenders to German companies and investors, will show why the German industry should take the Indian energy market into serious consideration (Pfertsch, 2007, pp. 13 – 26; Peter & Das, 2004, pp. 1 – 18; Rothermund, 2007, pp. 11 – 13, 65 – 72, 102 – 110).
2. The actual situation of India’s energy infrastructure
With an economic growth of about 8.8 % in 2010, India is one of the fastest growing markets in the world. Its current population of 1.2 billion people makes India the largest and most populous country in Southeast Asia. (Germany Trade and Invest, 2010; Eurostat, 2010). Rapid industrialisation, urbanisation, and the associated consumerism are indicative of India's fast growing economy. Due to the rapid growth of the power sector and other energy intensive industries, India's dependence on coal as a fuel source is increasing by leaps and bounds. While energy represents one of the most important resources, India’s dependence on coal is questionable, because Indian resources of coal are declining and prices of importing coal are rising (in addition see figure 7 & 5 in the appendix). Yet, more than half the population depends on manually gathered fuel from traditional biomass as the only energy source. Poverty alleviation and inclusive growth are strongly linked to how India can ensure the energy supply necessary to increase its per capita energy consumption. Without an accelerated increase in per capita energy and electricity consumption, poverty alleviation in India will be insignificant. On the other hand decoupling economic growth from energy consumption through energy efficiency, energy conservation and demand-side management strategies, is an overriding necessity in view of the constraints and a sustainable development, irrespective of whether fossil fuels or renewable energy sources are used. (Kalpana Kochar et. al., 2006, pp. 5-18; GTZ India, 2009). Actually, the challenge is to close the gap between supply and demand of energy and electricity. Considering the condition of the electricity infrastructure, there are daily power failures of 10 – 15 % which cost almost 15 % of daily economic efficiency. According to the Indian government, 450 billion EUR of investments are necessary to ensure a functional infrastructure (Rothermund, 2007, pp. 192 – 194; Just & Löwik, 2008).In figure 1, it is significant that coal is the primary energy source but the importance of renewable energies is growing. But a sustainable development is complicated because of the huge amount of developing costs and the lack of financial opportunities of the Indian government. So the Indian government focuses on Private Public Partnerships and foreign investors in the hope that they may finance 60 % of the total costs to improve and maintain India’s energy infrastructure within the next 5 years.
Figure 1: Development Indian Energy Mix (1989 – 2007)
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Source: own compilation via Ministry of Statistics and Program Implementation (2008)
3.Why German Investors or companies should invest
To analyse why the Indian energy market should be interesting for German investors, a SWOT analysis will show what the market looks like from an investor’s point of view.
Abbildung in dieser Leseprobe nicht enthalten
(Germany Trade and Invest, 2010, p. 21; Just & Löwik, 2008; Flauger, 2010; EVONIK, 2010; VDI-Nachrichten.de, 2007)
The central problem of energy supply and its distribution is partly due to chaotic pricing. There is no central ministry for the energy industry but many other ministries which operate independently. As a result, weaknesses have arisen from non-communication, unnecessary bureaucracy and dispersion of efforts. The development of a modern National Grid and the installation of Smart Grid systems in buildings could help solving the unequal distribution of power transmission from areas with a surplus to areas with a shortage. (In addition, please see table 1 and figure 2 in the appendix). In table 1, it is obvious that there is a huge discrepancy within the several federal states and their grid connection to renewable power. The States Andhra Pradesh, Karnataka and Maharashtra are the main conurbation zones in India. But Tamil Nadu is a rural state. There is no grid connection at all or pipelines. Due to several international development projects, Tamil Nadu is able to use its natural resources of biomass and wind energy. It is not surprising that the government has elapsed too much valuable time to ensure that India develops into an attractive investment location. In 2010 they implemented new tax and fiscal reforms and public grants. The viability gap funding scheme is a public grant of the Indian government, which will award up to 20 % in addition to the total project costs of infrastructure projects (Ministry of Finance, 2008; Just & Löwik, 2008; Rothermund, 2007, pp. 186 – 187).