Falling tariff barriers, changing consumer needs, and new trade regulations are rewriting the rules of the game across sectors. The underlying need for companies, however, is to ''value add''. For pharma companies to move from bulks to basic research, for auto components manufacturers from parts to 'systems', and for chemicals firms to make speciality chemicals. But every industry faces varying challenges in doing so. We look at the 10 most important sectors and rate their competitiveness against a changing global industry.

AUTO COMPONENTS
A New Drive
Quantum improvements in quality are helping Indian vendors find global buyers.

This should have been the hardest industry to take global. Until 20 years ago, the Rs 20,000-crore auto components industry churned out parts for outdated vehicles. Pricing was on cost-plus, and there was virtually no R&D or exports. Still, the industry has rapidly brought itself to a position where it can see itself exporting $1 billion (Rs 4,800 crore) worth of components by 2004-05.

For instance, Bharat Forge, India's largest exporter of auto components, has bagged a Rs 60-crore order for forgings from China. Foreign collaborators of the Delhi-based Anand Group are relocating some of their units to Anand's factories. ''India is highly competitive in metal parts, electricals, forgings, castings, plastics and tyres,'' points out Vishnu Mathur, Executive Director, ACMA.

What has helped is the entry of foreign car majors. With their modern vehicles, they brought in knowhow that has helped Indian vendors go up the learning curve. Some key components for Ford's Ikon were designed in India. Hyundai and Toyota have also helped develop vendors. And now, most of them have plans of sourcing components from India. Indian vendors may never become tier 1, but there are tremendous opportunities nevertheless. Says Amit Kalyani of Bharat Forge: ''We are ready to grab that opportunity.''

-Swati Prasad

AGRO-BASED PRODUCTS
A Victim Of Wastage
Fix the supply chain, and India's agro-sector can turn into a big export earner.

India is the largest producer of tea and milk, the second-largest producer of fruits, vegetables, and wheat, but its exports were a mere Rs 28,162 crore last year. Reason? The absence of an effective supply chain from the farmer to the consumer. There are multiple intermediaries but few cold chains, leading to wastage. India processes less than 2 per cent of its fruits and vegetables compared to Thailand's 30 per cent and Brazil's 80 per cent. Similarly, India has the largest cattle stock but just 1 per cent of the meat is processed into value-added products.

The industry, however, is growing. According to estimates, the processed foods industry, comprising farm products and consumer foods, will grow by 2006 to Rs 2,50,000 crore from Rs 1,44,000 crore today. apeda, the industry's apex association, is lobbying for removal of some export restrictions, especially on wheat and wheat products. Investment in processing and supply chain, however, can unleash the sector's competitiveness over the long term.

-Swati Prasad

CHEMICALS
Specialities Play
Cost-effective R&D is opening up a lucrative niche for Indian manufacturers.

The Indian chemicals industry is a minnow in the global market, but it just might find a profitable niche to grow in-speciality chemicals. Take Jubilant Organosys, for example. It is the largest manufacturer of speciality and fine chemicals in the country, and is the world's second-largest manufacturer of pyridine (used in agrochemical and pharma industries) and its derivatives. It is also one of the top manufacturers of acetaldehyde, acetic anhydride, ethyl acetate, and latex. A fifth of Jubilant's revenues comes from exporting 25 such products to 50 countries. Says Shyam S. Bhartia, CMD, Jubilant (formerly Vam Organics): ''Indian companies may not be global leaders overall, but they do lead in select categories.'' India currently accounts for 2-3 per cent of world specialties production, which is concentrated in US, Europe, and Japan. India's advantages are lower costs (Jubilant, for instance, uses agro-based acetaldehyde and not the more expensive petroleum-based acetaldehyde) and the ability to not just develop speciality chemicals, but do so cheaply. In fact, most analysts expect global players to tie up with Indian manufacturers for cost advantage. For companies such as Jubilant, that's good news.

-Vandana Gombar

STEEL
A Lumbering Giant
A number of hurdles stand in the way of steel becoming competitive.

India is the 10th largest producer of steel in the world, but the industry is plagued by overcapacity, high cost of capital, inefficiency, and labour problems. And last year, it posted a combined loss of Rs 4,000 crore. The only profit-making exception: Tata Steel. But things should look up in the coming fiscal. Prices this year have been revised seven times and currently quote at about Rs 6,500 per tonne. In the global arena, Indian steelmakers face a tough battle. Congestion and lack of handling facilities at Indian ports along with anti-dumping duties and litigation in the US, threaten exports. Despite those issues, India's exports this year to the Far East, China and EU have gone up. The domestic market, however, continues to lag. India's per capita consumption of 24 kg compares poorly with China's 87 kg. Since steel is largely a domestic industry, unless companies find ways of increasing local consumption, there is little chance of them becoming globally competitive.

-Swati Prasad

HEALTHCARE
Needed: More Corporates
India has the skills, what it needs now is big-ticket investments.

The Rs 103,000-crore Indian healthcare industry has inherent cost advantages. A bypass surgery in India costs only around Rs 40,000, while in the US, it could cost anything upwards of Rs 6 lakh. Yet, the industry is too fragmented and unorganised to capitalise on it. Says Analjit Singh, Chairman and CEO, Max Healthcare Institute: "Though India has high surgical skills, our competency levels drop sharply when it comes to primary and secondary healthcare." According to a CII-McKinsey report, the market is expected to grow to over Rs 2 lakh crore by 2012, but more than Rs 1 lakh crore in investment is needed. The solution: More corporate investment.

-Swati Prasad

IT SERVICES
The Reigning Star
Unbeatable skills, competitive costs and a huge brand equity will keep India the world's preferred it vendor.

This is the industry that proved to the world that India could compete globally and win. Since 1981, revenues in the sector have soared from Rs 4.4 crore to Rs 48,000 crore last year. According to a Nasscom-McKinsey study, revenues from it and it-enabled services could touch $57 billion (Rs 2.79 lakh crore) by 2008. Why? Three big reasons. One, India is still the cheapest provider of it services. Two, it has the most manpower available. And three, companies the world over will continue to focus on their core businesses and seek ways to cut costs. That means-despite competition from Ireland and Israel, among others-Indian it and it-enabled services will continue to prevail.

-Vinod Mahanta

PHARMACEUTICALS
Strong Contender
The move from bulk drugs to generics and value-added new drugs augurs well for India's pharma industry.

India ranks 13th among drug producing countries in value terms, and fourth in terms of volume, with an 8 per cent share of the global pharmaceuticals market. Does that make it a global player? Yes and no. Yes, because exports have been rising steadily over the years and in 2001-02 were valued at Rs 8,730 crore, and also because years of reverse engineering have given the industry enough competence to be able to quickly develop drugs that go off patent, and make significant strides in basic research. So much so that India's first multinational (Ranbaxy) may well come from this sector.

The short-term strategy of the bigger pharma companies entails licensing molecules (they have an 80 to 90 per cent cost advantage), focusing on novel drug delivery system (making a patentable change in an existing molecule, mostly in terms of dosage), and targeting drugs whose patents are expiring (called generics). The American market for generics is estimated to be worth $80-90 billion (Rs 38,400-43,200 crore) over the next five years, and Indian drug-makers could get an increasing share of it. Money from licensing and generics will help them invest more in basic research, which will be crucial post 2006 when reverse-engineering of patented drugs will no longer be allowed.

Already, most companies have stepped up their R&D expenditure. Dr Reddy's spends 8 per cent of turnover on R&D, up from just 3.3 per cent two years ago. Ranbaxy spends Rs 100 crore, and Dabur Rs 40 crore. Others such as Wockhardt, Cipla, and Sun Pharma invest between 5 and 8 per cent of sales on research. Says Dilip G. Shah, a pharma consultant: ''Serious efforts at molecular research started only around 1995, so breakthroughs should happen over the next few years.'' The industry is keeping its fingers crossed.

-Swati Prasad

MANPOWER
The World Needs You
Be it cooks, teachers, nurses, or engineers.

Everybody knows that for decades now, the semi-skilled Indians have headed to the Middle East. But did you know that Indian railway engineers are in demand in the UK? Or that oil and gas professionals are witnessing a surge in demand? Ditto with teachers and nurses, where the US and the UK can't seem to get enough of them. Here, the low cost of labour is proving to be India's advantage. Sensing the opportunity, states like Himachal Pradesh have set up what is literally called a "Foreign Employment and Manpower Export Bureau", aimed at securing employment for not only professionally trained persons, but also the skilled and semi-skilled workers. The bureau has over 1,400 candidates-all ready with passports. They span 160 trades ranging from driver to cooks, and, of course, the ubiquitous computer programmer. The face of onshore BPO?

-Vandana Gombar

TEXTILES
Looking Good
Fear not the coming end of the quota regime.

More than half of India's Rs 120,000-rore textile industry's revenues are derived from exports. If you thought that the phasing out of ''quota'' markets under the multi-fibre agreement (MFA), which currently account for 80 per cent of exports, hangs as a Damocles' sword over the industry, think again. 2005 will emerge as an opportunity for those companies that are readying to tap the larger orders that can come their way post-MFA. That is when the country can add on to its inherent cost advantages and play the economies of scale card. That is the trigger that would allow it to proceed to its $50-billion (Rs 24,000 crore) export target of 2010.

-Vandana Gombar

SMALL SCALE INDUSTRY
Not A Lost Case
Despite dereservations, the industry is in fine fettle.

They account for almost half of India's exports, and they have stood up surprisingly well to the easing of imports. That's the story so far of the Rs 6,90,396 crore small scale industry. The epilogue will definitely not be a happily ever after, but it will not be a tragedy either. Even with total dereservation of the 749 items reserved for the SSI, there are niche strengths in some vertical sectors that will ensure that they continue to contribute to the economy. ''Knowledge-based (SMEs) are likely to acquire prominence,'' says the economic advisor at the SSI Ministry, C.S. Prasad. They would be the units tapping a part of the emerging global outsourcing opportunity.

-Vandana Gombar