Indo-Italian trade ties move toward non-traditional items

Italy is the fifth largest economy in the world which is marked by a strong services and industrial sector and predominance of dynamic family-owned small and medium enterprises. It’s foreign trade value is estimated at $440 billion.

‘There’s need for small and medium players to join hands’

INTERVIEW — BENEDETTO AMARI

The Italian ambassador to India, Benedetto Amari, in an interview with Huma Siddiqui, expresses satisfaction over bilateral ties, and sees scope for further cementing relations. Experts: How would you assess trade relations between India and Italy? Indo-Italian relations look like a ‘strong buy’—a bit under-valued, but with big potential for growth. There is a need to take advantage of the complimentarity of the two economies considering we are both ‘big’ in terms of ‘small’ companies. The results of 2000 are very good. There is growth of 30 per cent. In the first five months of 2001, this has gone up by 12 per cent. This was possible because the two parties concentrated on sectors like automotives: Fiat is strong in producing agri vehicles. We have plants in Noida for setting Fiat agri machines. We have industrial vehicles too. Two-wheelers, too, have a bright future in this country. Chemicals and fertilisers is also an important area. Is there a strong alliance between the small sector of the two countries? In India, the small sector contributes over 38 per cent to industrial production, whereas it is about 65 per cent in Italy. The high level of professional skills and the production cost advantage of Indian SMEs (small and medium enterprises) match well with the high propensity for technological innovation and external projection of Italian SMEs. There is need for small and medium players in both the countries to join hands to keep pace with their ‘big brothers’. A three-pronged strategy for increasing bilateral economic and industrial ties needs to be adopted—strengthen political and economic dialogue; increase Italian SMEs’ involvement in India, and diversify and focus on innovative sectors. Which sectors is Italy eyeing? Food processing is an interesting area for us. We have companies investing here. There is a special dialogue going on food processing through a joint venture. Some sectors, such as leather, electronics, plastics, mechanical, auto components, textile, food processing and packaging, marble and granite had been earmarked for credit. Is information technology a priority area too? Our IT sector is not much developed, but it is an area that is destined to grow faster. We have given 20 scholarships to Indian experts. These experts can then take up jobs in Italy. Basically, these are IT students who are encouraged to go to Italy, all expenses paid. We have also set up an NIIT desk at the Indo-Italian chambers in Mumbai. There are possibilities of both out sourcing and direct dealings. Italy is an interesting market because through us Indian companies can get exposure in the euro zone. What is the status of tourism? This sector has a lot of potential. AINIT, a national body in Italy to promote tourism, has an office in Mumbai. We issue almost 50,000 visas every year. We have an advantage of working in a framework of an agreement signed last year providing a more legal and concrete form to promote tourism. In November we have a seminar on tourism. In the aviation field, there are daily flights between Mumbai and Milan. We hope to increase the number, and are trying to get Alitalia to get back on the Delhi sector.

Bilateral trade has been growing rapidly with Italy emerging as India’s fourth largest export market in the European Union (EU) with trade exchange volume having trebled from 1991 to a level of $2.5 billion. However, there has been a slight setback in bilateral trade due to cyclical factors in recent years.

In 1999, India’s exports stood at $1.389 billion and imports amounted to $864 million, leaving a trade surplus of $525 million in India’s favour.

Major items of Indian export to Italy consist of textiles, yarns, readymade garments, leather and finished leather products, chemicals, dyes and pharmaceuticals, agricultural and engineering products, granite, marine products, gem and jewellery, carpets, iron ore and coffee.

India’s imports from Italy cover machinery and capital goods, non-electric machinery and its parts, machine tools, metallurgical products, iron and steel laminates, chemical and engineering products.

A scrutiny of the sectoral break-up of total investments made by Italian companies in India since 1991 reveals that the highest investment proposals have been in the transport industry which accounts for about 43.14 per cent of investment approvals from Italy. Food processing industries (16.33 per cent) account for the second place and metallurgical industries (14.64 per cent) figure next.

The bilateral development co-operation programme for 1999-2000 provided a grant of financial resources of $19 million to India basically designed to bolster social sector programmes in India.

A noticeable shift is taking place towards non-traditional products. Statistics do not show Indian exports of computer software to Italy. The main reason being that most of the work related to development of application software in Italy is executed by way of sub-contracts by the United Kingdom, the United States and Germany-based companies.

Similarly, large quantities of chemicals, pharmaceuticals intermediaries and dyestuff and other goods reach Italy through other EU countries, especially from Rotterdam. If these factors are considered, Indian exports to Italy could be much higher.

Most European banks have plans of pegging their currencies to the euro. Thus competition to Indian light engineering products, chemicals, bulk drugs etc. from the East European market is sure to increase. The northern manufacturing region is expected to have a growth explosion in view of its intra-EMU trade. In the process, it is expected to offer a variety of products at highly competitive prices.
Indian companies should look at maintaining representative offices either directly of indirectly through agents in major commercial centres like Milan, Rome and Bologna.