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India Inc can use Thai gateway to all of Asean

BS Bureau in New Delhi | October 15, 2003 10:29 IST

Within a week of the agreement to establish a free trade area with Thailand, Indian businessmen have started scouting for opportunities there.

TVS Motor has started studying the option of setting up a manufacturing unit there, even as LML Ltd said it could source components from Thailand.

These companies are among a host of businesses in India that think there are significant gains to be made from the FTA. The beneficiaries include car-makers, two-wheeler companies, chemicals and plastics companies.

Moreover, as the FTA agreement talks of facilitating investments between the two countries, industry experts say Thailand could be the gateway for Indian companies to the whole of the Association of South-East Asian Nations (Asean), of which it is a member.

"This is the biggest opportunity for Indian companies," CII Deputy Director-General N Srinivasan said.

Indian two-wheeler majors like Bajaj Auto and TVS Motor have been eyeing such an opportunity by emerging as low-cost producers on account of their large volumes. India is the largest market for motorcycles in the world after China.

TVS Motor India Managing Director Venu Srinivasan said: "India offers a huge market, so does Asean. With the FTA in place, Indian companies can look at tapping the market potential in these countries, while also sourcing cheap components from Asean. We (TVS) are currently undertaking a feasibility study for Thailand. We are positively moving towards setting up a manufacturing unit in Thailand. We can start with a low investment. We may initially look at supplies from India."

Indian two-wheeler makers also see the possibility of sourcing components from Thailand.

"The component producers there are cost-competitive and their quality is as good as that of India. We could source from there," LML Ltd Chairman Deepak Singhania said.

Global automobile companies with a significant presence in Thailand top the list of beneficiaries as key components like gear boxes and parts used with spark-ignition internal combustion piston engines find a mention in the list of items under the "Early Harvest Scheme" that entails elimination of import duties by both the countries by March 1, 2006.

Thus, car makers like Toyota, Honda, General Motors, Ford and DaimlerChrysler are expected to benefit from the scheme.

Even Hyundai has said it might set up a component manufacturing business in Thailand to beef up its presence in the region.

The agreement could also benefit Indian producers of chemicals like polypropylene, acrylic polymers, polyethylene, polyurethanes as well as producers of plastic items like self-adhesive plates, sheets, film, foil, tape, strips and other flat products.

Though textile products are not included in the list, industry sources said India would benefit whenever the sector was included.

"The world is moving to the cheapest source, which is China and India. The advantage lies with India," Indo Rama Synthetics Managing Director OP Lohia said.

On their part, leading industry associations said their views were not sought before drawing up the list. "It seems that the initiative for the FTA came from India, while the list has been drawn up by Thailand," an industry source said.

Commerce ministry officials played down the opposition raised by certain quarters of the Indian industry. They maintained that Indian exports would get a fillip due to the FTA.

The gainers from the FTA deal with Thailand

  • Automobile majors who have component facilities in Thailand.
  • Indian two-wheeler companies looking for cheaper components.
  • Companies looking at expanding in the Asean region.
  • Chemicals and plastics companies.

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