Exports Strategy Yields Growth In Bangaru Telangana

Status of Exports from Telangana

Exports of Composite State of Andhra Pradesh in the year 2013-14 stood at Rs.149,800 crores for which latest data is available from Director General of Commercial Intelligence & Statistics, Govt. of India. As the state of Telangana was not having separate Export code, the data was captured by DGCIS, Kolkata with the Export Code for Composite state of AP (i.e., 080).
In view of the above, estimated export figures have been arrived for the state of Telangana from the available data of composite state of AP. A cursory examination of segment-wise exports of Composite state of Andhra Pradesh for the last 4 years and the estimated share of exports from Telangana in 2013-14clearly points success of previous strategies and policies.For example, the sectors such as Drugs & Pharmaceuticals, Engineering Items, Electrical & Electronic Parts ,Handlooms & Textiles and Handicrafts where the policies have placed high importance have consistently shown good growth rates.

Due to high development of Hyderabad and its surrounding areas, Telangana has been at the forefront of IT&ITES, Pharma, Engineering exports, and Gems & Jewellery.

Estimated Share of Exports Statistics in Telangana

Sectorial Export Performance

IT/ITES Service Exports

Due to the initiatives of successive governments, IT & IT enabled services now stand at as much as 65.5% merchandise exports of the state. The policy of IT Parks & SEZs has been hugely successful and the sector has achieved highest foreign revenue earnings for the state. While the sector did experience a slowdown from 2009-10 to 2011-12 due to international upheavals in the sector, the two decades of export performance has been commendable.

These initiatives however, need to be spread to Class II & III tier cities. As such parks and SEZs are lesser in number in other Cities like Warangal, Karimnagar and Khammam of Telangana State; these initiatives are proposed to be taken up there.

Drugs & Pharmaceuticals, Chemicals & Plastics

Drugs, Pharmaceuticals and Allied Chemicals along with exports of plastics stood at Rs.29,360crores growing at 42% over previous year. While the sector experienced minor setback in 2009-10 due to global slowdown, the performance bounced back smartly during the subsequent years.

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Telangana is among the leading states in pharmaceutical manufacturing and exports only after Maharashtra. The state accounts for around 25% of the country’s manufacturing and exports of pharmaceutical sector. The sector exports account for nearly 50% of the states IT exports. The sector accounts for 43.4% of the state’s manufacturing sector GDP or 4.79% of the state’s GDP in 2011-12 at factor cost at market prices.

Many major companies of international repute such as Dr. Reddy’s, AurobindoPharma, Divi’s Laboratories, Mylan(Matrix), NATCO, Hetero Drugs, Granules India, Neuland Laboratories, ShanthaBiotechnics, Virchow Laboratories, Glochem Industries Ltd., Indian Immunologicals Ltd., SMS Pharma, Suven Life sciences, Biological E Limited etc., are present in the state. The state is undisputedly the Bulk drug capital of the country. In the recent past, the state has witnessed huge investments in expansions, new projects, and also in the new Pharma SEZs.

Several of the companies are among the leading companies in the world having large number of bulk drug and formulation registrations of the world. For example, Aurobindo Pharma has second highest Type-II DMF filings with U.S. FDA among all the companies globally.

The state has 846 Type-2 Drug Master Files (bulk drug applications) out of India’s total of 2,841 with USA. Of the total 285 companies having DMFs, around 46 companies are from Telangana. All these achievements have enabled Telangana to be a dominant player in pharma sector in the country and the state would continue to do so in the coming decade as well.

Pharmaceutical sector is typical in the sense, across the world the approach to business is along well established lines. Innovator companies try to maximize their revenues through drug discovery, new molecule innovation, and maximizing revenues and profits through patented molecules while Generic companies try to maximize their profits by holding a large basket of molecules and in large number of markets.

World over 52% of the pharmaceutical requirements are met through imports. Exports can not start until product registration takes place in the country of import. Innovator companies occupy 75% of the world market while the rest is captured by generic companies. Usually, the first company to launch a generic version of a molecule as soon as patent of innovator product expires captures maximum share of the market.

As it takes to 3-5 years to develop generic version and register it in various countries, all generic companies carefully select the molecules they would like target in the coming 5-6 years. Many companies specialize in various segments such as bulk durgs & intermediates, contract manufacturing, specialty products, biotech, contract research and various steps in the value chain of drug discovery such as clinical trials, data management services, etc. New drug discovery requires high investments of the order US$2bn spread over period of 8 to 12 years.

This kind of investment are out of the reach of not only small & medium scale companies but also most of the top companies of India.

The state therefore, needs to allocate strong support for Drug discovery, Commercialization of new molecules, Patent search support, setting-up of common infrastructure facilities and advanced testing Laboratories. Thus far, the sector has been focused around Hyderabad i.e. in Ranga Reddy District and now the cluster has been rapidly developing in Medak, Mahaboobnagar and Nalgonda industrial areas. This cluster needs to be supported by creation of appropriate policy support.

Engineering Items

Engineering Industry comprising Heavy, light and Ancilliary industries has been third largest export revenue contributor for the composite state of Andhra Pradesh accounting for 25.7% of the states merchandise exports. However, this industry has experienced severe set-back during 2009-10 and again 2012-13 due to global and domestic economic slowdowns. The segment’s exports which were at Rs.1,368 crores have grown consistently to touch Rs.27,277 crores during 2011-12 underlying the importance of this sector.

It must be noted, that Telangana has a very week Auto & Auto component base. Similarly, the state has proven potential for Aerospace industry & Solar Industry. There is an immediate need to develop these clusters through policy initiatives.

Electrical & Electronic Parts

Electrical & Electronic component exports have grown from a meagre Rs.84 crores in 2003-04 in composite state of Andhra Pradesh to an estimated amount of Rs.1,493 crores in 2013-14 from the State of Telangana exhibiting one of the highest growth rates of all sectors before they fell during last two years owing to domestic and international industrial recession.

The sector is expected to peak in the coming years. The state has several heavy electrical engineering and transmission line manufacturers. With the initiatives of the Government, the state is also progressing in electronics & electronic component manufacturing, IT Hardware sectors. The state requires taking massive program to strengthen Electronic sector of the state and may encourage forging direct investment in the state through appropriate policy initiatives.

Handlooms & Textiles

Telangana State has several medium and small spinning & textile mills. However, the sector which contributes highest positive trade flows to India has been an underperformer especially due to lack of Garment manufacturing industry. The initiatives of the government such as setting up of Textile Park in Warangal would hopefully be translated into increased exports in the coming future.