Mihir's Impressions

FDI: Stores a lot of possibilities for print and packaging industry

There has been a media-ripple surrounding the foreign direct investment (FDI) in India recently. In the highly globalised world of today we have information and money crossing borders at break-neck speed that never been witnessed ever before in human history.

Recently the Foreign Investment Promotion Board (FIPB) has approved the proposal of the Wall Street Journal, and DB Corp has received a nod to increase foreign equity in publication of newspapers including the business of developing, editing, publishing, printing, distributing and marketing newspapers and other publications.

One of the major economies of the world, India has been enjoying huge and regular FDI from diverse investors of all around the world for the last few decades, since 1991. India liberalised its economic policy after the 1991 economic crisis, when the care-taker government under Chandrashekar had to air-lift our entire gold reserve to UK and Switzerland to secure a loan of about 2.2 billion dollars in order to avoid bankruptcy.

Since the reforms foreign direct investment in the Indian business sectors, can easily be made in a variety of ways, through the Governmental and automatic routes.

However, the Joint Ventures are the most popular and preferred forms of making investment in Indian industry. At present, the most lucrative business sectors (as per a RBI report) for FDI in India (for the fiscal year 2011/12) are:

Manufacturing sector - Rs 9,337 crore

Infrastructure sector- Rs 4,439 crore

Financial Services- Rs 2,603 crore

 Communication Services – Rs 1,458 crore

Hospitality sector – Rs 870 crore

Retail – Rs 567 crore

Real Estate – Rs 340 crore

Mining – Rs 204 crore

Education – Rs 103 crore

Note: These numbers includes FDI through SIA/FIPB and RBI routes only.

The printing industry has also benefited due to foreign investments and technology sharing; howsoever tiny the numbers are.

In 2002, the Union government had decided to increase FDI limit to 74 percent in the non-news sector of the print media, with a goal of developing India into an “international printing hub”. Though we are not at the pinnacle yet, the stone that was rolled in 2002 is slowly and surely gathering moss. The collective stand of Indian print firms at the Frankfurt Book Fair will be one such attempt to attract foreign investors to Indian shores.

After the onset of liberalisation policies and as a few of the red tapes were lowered many print giants have come to India to avail its vast resources and cheap labour through joint ventures. Key alliances are: Mumbai-based Manugraph's alliance with DGM from United States. Ink solution major Micro Inks's tie-up with the German ink manufacturer Huber. Other strategic alliances exist between Interlabel (Mumbai) and Skanem (Norway), National Starch and Henkel (Germany), and PPL becoming a member of the Huhtamaki Packaging Worldwide, a global leader in consumer packaging in 1999, to name a few.

If the government is able to force through the bill for FDI in the retail sector (seems unlikely right now), the packaging and labelling industry might experience a boom with the arrival of retail giants like Walmart etc and their extensive packaging and labelling requirements.

Keep your fingers crossed.