Reform should be people-driven, simplify processes: Modi at G20
Prime Minister Narendra Modi in his address to the G20 nations in Brisbane on November 15 spoke of the need for reform - to make it people-driven and that it should lead to simplification of processes. Speaking at a retreat and lunch before the G20 summit, Modi said reform should be technology driven and should have scale and address the root causes, according to tweets posted by ministry of external affairs spokesperson Syed Akbaruddin. “Reforms should lead to simplification of processes...& processes of governance must be reformed – PM@narendramodi to G-20,” said a tweet. He said: “Reform is a continuous multi-stage process... must be institutionalized - Globally, reforms are handicapped with perception of being government programs, a burden on the people, this needs to change.” “Reforms should lead to simplification of processes... and processes of governance must be reformed,” he said. “Reform is bound to face resistance... must be insulated from political pressures. Reform has to be driven by the people.... cannot be by stealth,” he added. Earlier, in his first engagement of the day, Modi said repatriation of black money kept abroad was a key priority and called for “close coordination” on the issue during a meeting of BRICS leaders. The G20 membership comprises a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85 percent of global gross domestic product and over 75 percent of global trade. The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, Britain, the US and the European Union.
Modi pushes for increased economic engagement with ASEAN
Prime Minister Narendra Modi on November 12 met a host of Southeast Asian leaders as he made a major push to increase economic engagement between India and the 10-member ASEAN and said his government places equal emphasis on ease of doing business in India as well as on making policies attractive. Modi met his Thai and Malaysian counterparts, Prayut Chan-o-cha and Najib Tun Razak, as well as Sultan of Brunei Hassanal Bolkiah and Singapore Prime Minister Lee Hsien Loong. In his separate meetings with the four ASEAN leaders, Modi spoke about the ‘Make in India’ campaign launched to attract business to India and discussed possibilities of economic cooperation with them. He also met Myanmar opposition leader Aung San Suu Kyi. In his maiden speech at the ASEAN-India Summit in Nay Pyi Taw, Modi said there will be major improvement in India’s trade policy and environment and his government would move ahead with connectivity projects with ASEAN “with speed”. Modi said his government was laying stress on infrastructure, manufacturing, trade, agriculture, skill development, urban renewal and smart cities. “Make in India is a new mission. I invite you to this new environment in India. Indian companies are also keen to invest in and trade with ASEAN,” he said. He suggested that a review be conducted of the India-ASEAN Free Trade Agreement on goods to improve it further and make it beneficial to all. Modi appealed that the FTA on Services and Investment, which still awaits inking, “be brought into force at the earliest”. He said to deepen connectivity with ASEAN, a special purpose vehicle is proposed to be set up to facilitate financing and quick implementation of projects. He invited the ASEAN block to “come and participate in building India’s 100 smart cities and renewal of 500 cities”. Modi also said both sides should move quickly towards mutual recognition of degrees, a major stumbling block in the inking of the FTA on goods and services. Referring to the Regional Comprehensive Economic Partnership Agreement, which is being negotiated, Modi said it can become a springboard for economic integration and prosperity in the region. He also referred to the issue of maritime trade and passage, a touchy subject especially in context of China’s growing assertiveness over the South China Sea, and said that everyone has the responsibility to follow international law and norms on maritime issues, as is done in the realm of air passage. “In future, we will also need this in space,” he said. On the South China Sea, he said that for peace and stability, everyone should follow international norms and law and hoped the Code of Conduct on South China Sea can be concluded soon on the basis of consensus. At a dinner gala in the evening, Modi and US President Barack Obama shook hands and Obama called him a “man of action”. Modi held a bilateral meeting with Myanmarese President Thein Sein on November 11 after his arrival. The ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, Philippines and Vietnam.
Sushma Swaraj woos UAE investors
External Affairs Minister Sushma Swaraj sought investment from foreign and Indian entrepreneurs in the United Arab Emirates (UAE), highlighting government’s “clear policies to facilitate business environment, transparency and speed” to “make India an investment and manufacturing destination”. “Our focus is growth with good governance and transparency with an eye on manufacturing, infrastructure and trade,” she said in an interaction with the business community. Highlighting her government’s achievements, she said it was “firmly committed to bring back growth, have clear policies which will facilitate business environment, transparency and speed, well thought out decisions. The result is there before you in just five months: GDP growth is showing early signs of recovery”. The minister said making India an investment and manufacturing destination was Prime Minister Narendra Modi’s utmost priority. She said the “Make in India” campaign, launched by Modi on September 25, represented an attitudinal shift in the way India relates to its investors. “I feel that there is no better time than now for the UAE business community to join our hands as partners in India’s growth story. There are immense possibilities to enhance trade and investment cooperation.” Seking to allay fear of investors, the minister said: “I understand the apprehensions in the minds of some of you regarding your past experiences of investments in India. But let me assure you that our government is committed to honour the commitments made and opening up of sectors for foreign investment.” “Bilateral Trade and Investment Protection Agreement between India and UAE have entered into force with effect from 23 September 2014 and would facilitate safety of your investments,” Sushma Swaraj added. She said that the UAE was among the countries with which India has a Double Taxation Avoidance Agreement “having certain preferential features conducive for increased investment in India”, as she promised that investments from UAE into India would “not only be safe but would also provide good returns”. “Indian investors are already one of the largest groups in the UAE. In turn, UAE can also become a substantial source for meeting our investment requirements. Moreover, the UAE and, especially Dubai, can become our gateway to larger MENA region and, indeed, to Africa as a whole,” she added.
Toshiba to invest $30 mn in power T&D business in India
Toshiba Corporation has announced that it will invest about $30 million in a power transmission and distribution business in India. The Japanese firm said the new investment will be for expanding the production capacity of Toshiba Transmission & Distribution Systems (India) Pvt. Ltd. in Hyderabad. “Toshiba Corporation will reinforce its transmission & distribution (T&D) business in India with a 3-billion yen (approx. $30 million) investment in new production capacity at Toshiba Transmission & Distribution Systems (India) Pvt. Ltd. (TTDI) in Hyderabad,” the company said in a statement . This investment is part of the $100 million Toshiba plans to invest in T&D business in India by 2016. “India is a high growth market that Toshiba has positioned as a strategic base for its power-related businesses,” said Katsutoshi Toda, chairman and managing director, TTDI. A new line for large power transformers will come on line in spring 2015, at the same time as the full scale launch of a new line for switchgears. Alongside its existing production line of small- and medium-capacity transformers and low- and medium-voltage switchgears, the new power transformer line will support production of 765kV transformers with a capacity of 500MVA, while the new switchgear line will produce high voltage products. “Toshiba is seeking to secure a 20 percent share of the Indian market by 2018, and also reinforce Toshiba Transmission & Distribution Systems (India) Pvt. Ltd. as a core T&D production base for other major markets, including Europe, ASEAN, and Africa,” added Toda. India continues to record high economic growth, and long-term capital investment for infrastructure is expected in key areas such as electricity and transportation. In T&D, the Indian government is promoting measures to increase the number of 765kV substations, toward increasing the country’s transmission capacity five times by 2017. This policy is driving demand for large power transformers and high voltage switchgears. Toshiba established Toshiba Transmission & Distribution Systems (India) Pvt. Ltd. in 2013 by acquiring T&D business from Vijai Electricals Ltd for $200 million and also started operation of a new power transformer facility in Russia in February 2014.
Cisco to invest $1.7B in India to capture more government contracts: Report
Cisco Systems Inc., the networking gear maker, will invest $1.7 billion in its Indian operations to expand its market and win more contracts as the country goes on a digitization drive under a new administration, The Economic Times reported on November 17, citing a company executive. The investment includes a $40 million innovation fund, the paper said, citing Dinesh Malkani, president of Cisco Systems India Private Limited. Cisco’s CEO John Chambers has said he is “betting big” on India as Prime Minister Narendra Modi’s government promotes a Digital India umbrella program, which consolidates ongoing and new government projects to improve government- to-citizen services on the back of greater access to the Internet. India is looking to spend more than $5 billion on expanding its broadband networks to connect more villages over the next three years, and anticipates a market of $15 billion locally over the next few years in the area of “Internet-of-Things,” which refers to the increasing proliferation of sensors that can send back signals on everything from the stress inside a car engine to the strain on a human heart. Cisco is marketing its concept of “smart cities” in India and Modi has said he wants to see the rise of a 100 such cities. The company has also implemented many of these ideas at its Bangalore campus, its largest outside the U.S.
India-US agreement on food stockpiling welcomed
World Trade Organization (WTO) head Roberto Azevedo has welcomed the India-US deal on food stockpiling which clears the way for implementing the international trade agreements reached last year at the meeting of WTO ministers in Bali. “This breakthrough represents a significant step in efforts to get the Bali package and the multilateral trading system back on track,” Azevedo said on November 13. “It will now be important to consult with all WTO members so that we can collectively resolve the current impasse as quickly as possible.” The International Chamber of Commerce (ICC) also hailed the India-US agreement calling it “an important milestone for the global economy.” “Today’s breakthrough is a real victory for all of us-business governments and consumers-and we look forward to seeing rapid action to implement the deal on the ground,” ICC Secretary General John Danilovich said. The Paris-based ICC had campaigned for a deal to end the stalemate over food security that had held up the implementation of the Trade Facilitation Agreement (TFA). Danilovich met Indian Commerce Secretary Rajeev Kher in Delhi last month. Along with other elements of the Bali package of agreements, TFA “has a huge potential to boost growth and create up to 21 million new jobs, the majority of which would be in developing economies,” Danilovich said. Noted the timing of the India-US agreement, he said, “Together with the deal at the Asian Pacific Economic Cooperation (APEC) summit to expand the WTO’s agreement on information technology, we can safely say this was the week when multilateralism was put back at the centre of trade policy-making.”
Exim Bank to boost Indian project exports to $50 bn
In what could give a major boost to India’s growing economic influence across Asia and Africa, the Exim Bank of India aims to increase Indian project exports to $50 billion within the next five years from the current levels of $27 billion. This will be done through the bank’s innovative initiatives and by leveraging the increasing opportunities in Africa and Asia, Yaduvendra Mathur, the bank’s chairman and managing director, said. He said, as of the end of September this year, there were 374 project export contracts valued at $26.85 billion supported by the bank under execution in 78 countries across Africa, Asia and the Commonwealth of Independent States (CIS) by 112 Indian companies. “These projects have been supported by Exim Bank through a mix of funded and non-funded facilities,” Mathur said in Accra. He said, Exim Bank, in collaboration with the African Development Bank, was also setting up a Project Development Company (PDC) in Africa to identify and develop infrastructure projects with the objective of providing the Indian private sector an opportunity to invest in and implement such projects in Africa. The PDC is expected to provide specialist project development expertise to take the infrastructure project from concept to commissioning. It shall focus on infrastructure projects that have specific strategic interest for India. It is expected to provide an entire gamut of project development expertise to identified projects. Mathur said government of India’s support would be critical to achieve this target for India. “Exim Bank proposes to organise a series of stakeholders’ seminars to seek industry feedback for creating a level playing field for Indian project exporters,” he added. Meanwhile, the Indian government has extended two additional Lines of Credit (LoCs) to the the Gambian government valued at $22.50 million for financing an electrification expansion project for greater Banjul area and $22.50 million for financing replacement of asbestos water pipes with UPVC pipes there. The LoC agreements to this effect were signed Oct 29, 2014, by Debasish Mallick, deputy managing director, on behalf of Exim Bank and by Minister of Finance and Economic Affairs, Kebba S. Touray, on behalf of the government of The Gambia. With the signing of these two LoC agreements totalling $45 million, Exim Bank, till date, has extended five LoCs to The Gambia, on the direction of the Indian government, taking the total value of LoCs extended to $78.58 million. The first LoC of $6.7 million was extended to The Gambia in November 2005 for financing the supply of 500 tractors with spares and assembly. The second LoC of $10 million was extended August 2008 for construction of the National Assembly Building Complex in Gambia and the third LoC of $16.88 million was extended in October 2012 for completion of the same complex. The Gambia is a country located in West Africa, and is surrounded by Senegal and a short coastline on the Atlantic Ocean in the west. It is situated around the Gambia river which flows through the country’s centre and empties into the Atlantic Ocean. The main items that India exports to Gambia are cotton, cereals, man-made fibres and electrical machinery and equipment. Under the LOC, Exim Bank will reimburse 100 percent of contract value to the Indian exporters, upfront upon shipment of goods. The LoCs will be used for sourcing of goods and services from India. With the signing of these agreements, Exim Bank has now in place 188 LoCs, covering 63 countries in Africa, Asia, Latin America, Europe and the CIS, with credit commitments of over $10.51 billion, available for financing exports from India. Exim Bank’s LoCs afford a risk-free, non-recourse export financing option to Indian exporters. Besides promoting India’s exports, Exim Bank’s LoCs enable demonstration of Indian expertise and project execution capabilities in emerging markets.
Services export up 5.3% at $ 12.94 b in September
Services exports rose 5.3 per cent to $ 12.94 billion in September this year compared to the same month last year. However, import of services during the month fell by 9.1 per cent to $ 6.17 billion against the year-ago period, according to the RBI data. In August 2014, services exports were nearly flat at $ 12.24 billion. The import of services was up 7.5 per cent at $ 6.77 billion in August over the year-ago month. The cumulative receipts of exports in services during April-September stood at $ 79.05 billion, while cumulative payments (or imports) were at $ 43.04 billion. Services export in 2013-14 stood at 167.01 billion, while imports were at $ 88.19 billion. The services sector contributes about 60 per cent to country’s gross domestic product.
IT firms see best hiring quarter in three years
Indian IT sector has seen robust head count addition in the recently concluded September quarter, making it the best in three years. A scan of recent quarterly reports, show top five IT firms have hired 35, 200 employees on a net basis in the July-September quarter, up from 14,300 employees in the same quarter last year. The previous best was September 2011 quarter, when these firms added over 40,000 people. The strong hiring trend comes amid reports that $118-billion domestic IT industry hiring will slow due to automation and change in business models. According to report by research firm Crisil, incremental recruitment by the IT services industry will halve to 55,000 in fiscal 2018 from 105,000 in fiscal 2014, despite a 13-15 per cent revenue growth forecast for this period. It also pointed out reduction in employee costs from 69 per cent of total costs in fiscal 2013 to 64 per cent in the last fiscal. In the July-September quarter, Cognizant lead the pack accounting for a third of the hiring. The firm added 12,300 employees, which is the best in its history. Tata Consultancy Services saw net head count addition of 8,326. Infosys (4,127 employees), Wipro (6,845 employees) and HCL (3,831 employees) also saw healthy net additions. “The skills that we need shift a little bit. So we want to make sure that we do not have any skills mismatch. So, we scarified a little bit of utilisation so that we have the right skills for the changing demand and position ourselves well so that we do not have revenue leakage as we go into next year,” Cognizant President Gordon Coburn said in the recent earnings call. According to foreign brokerage firm J.P. Morgan top six companies (including Tech Mahindra) collectively hired more employees 38,009 on a net basis, in the September 2014 quarter, than in any quarter over the past three years. “For us it the most striking statistic of September 2014 quarter,” analysts Viju K. George and Amit Sharma wrote in a research note. “This has partly to do with utilization peaking in the sector (except Tech Mahindra & Wipro). It also has to do with catchup from fresher commitments made at the campuses some time ago. Nevertheless, adjusting for these two factors, we find employee addition in the sector heartening. Lateral hiring is still over 50 per cent of total hiring on aggregate,” the report said. “Strong hiring numbers across the industry indicate confidence on pipeline and current assessment of growth opportunities. We do recognize that part of the hiring would be to build bench and provide cushion against increasing attrition rates. Nonetheless, the magnitude of increase in hiring numbers is a significant positive,” according to Kotak Institutional Equities. “Admittedly, employee growth is not a perfect indicator of demand strength but there cannot be fulfilment of strong demand (if it exists) without employee addition. Not everything can be automated to obviate employee hiring and where automation is doable, there are limits to how much automation companies can single-mindedly pursue without sacrificing revenue growth,” J.P. Morgan noted.
India will cross 6% growth in 2015-16: Jayant Sinha
Expressing confidence that India will cross 6% GDP growth in 2015-16, the new Minister of State for Finance Jayant Sinha said the priority of the government will be job creation and inflation management. “We are expecting the growth to pick up and be on the accelerating trajectory. Hopefully we will cross 6-6.5% next year,” Sinha told reporters soon after taking charge. He further said the economy will return to 7-8% sustainable growth trajectory in the coming years. The economic growth slumped to 4.7% in 2013-14 and is estimated to be between 5.4-5.9% in current fiscal. The 51-year old Sinha, an IIT-Delhi and Harvard alumnus, was inducted as the Minister of State during the expansion of Union Council of Ministers of Prime Minister Narendra Modi yesterday. Sinha also expressed hope that the government will be able to push the Insurance Bill and the Constitutional amendment bill on Goods and Services Tax (GST) during the Winter session of Parliament beginning November 24. Referring to the Insurance Laws Amendment Bill, which seeks to raise FDI cap in the sector from 26% to 49%, he said: “when it comes to Parliament we are confident that we will get the support that we require”. As regards GST, Sinha said: “that itself has gone through years and years of preparation and consensus building ... We are sure will be able to show some positive results in this session”. On fiscal situation, he said, it was well in hand and the government is monitoring the situation very closely with respect to tax collections. Referring to the priorities of the government, he said they have already been articulated by the Prime minister and the Finance Minister. “First, creating jobs is very important for us and for the economy. The second area that we have emphasised and we have done well on is obviously managing inflation and price rise, which has been a major election issue and I think we have done remarkably well on that,” Sinha said, adding it was necessary to get the investment cycle moving. Earlier, he was briefed by senior officials in the Ministry soon after taking charge. He assumes office at a time when the Ministry is preparing the Budget for 2015-16. “We have been fortunate to have tailwinds of lower oil prices which are going to help on the expenditure side. So when we take into account we are very confident that we will be able to achieve our fiscal targets,” he said. Sinha was elected to the Lok Sabha in May this year from Hazaribagh in Jharkhand. His career has seen him work as an investment fund manager and management consultant.
RBI to invite applications for payment banks by November-end: Raghuram Rajan
The RBI will invite applications for setting up of small and payment banks – aimed to cater to small businesses and low income households – by the end of this month after putting in place final norms in this regard. Besides, Reserve Bank is also planning to revamp its cash management system, Governor Raghuram Rajan said. Addressing micro-financiers at a Nabard function , Rajan also said that microfinance borrowers should be protected from arbitrary loan pricing. The RBI Governor also reiterated his reservation against repeated loan waivers by various state governments, saying the move distorts credit pricing, thereby also disrupting the credit market. “There should be a reasonable ceiling on interest rate on loans from microfinance lenders for consumer protection,” he said. Following the October 2010 crisis in the then undivided Andhra Pradesh that crippled the MFI sector, an RBI-appointed Malegam panel had suggested 26 per cent monthly cap on interest rates for the sector. This cap was notified by the central bank in April 2012. The Andhra Pradesh crisis began after the state government banned recovery by any coercive means, following a string of alleged suicides by micro-credit borrowers. Both Andhra Pradesh and Telangana governments have declared loan waivers for the farmers hit by cyclone Phailin last year. While the Telangana government has given the mandated 25 per cent of the written off loan amount to the banks, Andhra Pradesh has not done it so far. Banks have over Rs 1.3 trillion exposure to the farm sector in these two states.
India sole major economy to see growth picking up: OECD
India is the only major economy that is projected to see a pick-up in its growth momentum, the Organisation for Economic Cooperation and Development (OECD) said in London on November 12. The Paris-based think tank whose members are mostly developed countries and some emerging countries like Mexico, Chile and Turkey, said most major economies, including the US, Brazil, China and Russia, are expected to experience stable growth momentum. The OECD readings for the month of September are based on Composite Leading Indicators (CLI) that are designed to anticipate turning points in economic activity. “India is the only major economy where the CLI points to a pick-up in growth momentum,” OECD said in a statement. The September CLI for India touched 99.1, the highest since May when it stood at 98.6. The OECD, however, said the CLI indicators point towards a weak growth momentum in Europe. “Within the Euro area, the CLI continues to point to a loss of growth momentum, with stronger signals of a slowdown in the case of Germany and Italy. In France, however, the outlook continues to suggest stable growth momentum,” it said. While India has recorded economic growth of below 5 percent in the last two financial years, the Reserve Bank of India has forecast the economy to grow at 5.5 percent in 2014-15 and at 6.3 percent during 2015-16. In a development that should bring comfort to India’s central bank to ease interest rates, data showed on November 12, the country’s factory output grew at 2.5 percent in September even as retail inflation to a record low of 5.52 percent during October. Commenting on the data on industrial production, the Federation of Indian Chambers of Commerce and Industry (FICCI) said in a statement : “It is heartening to see the positive growth of manufacturing in September which seems to be broad based too.”
Double delight: Industrial output up, price rise slows
Industrial output growth gathered strength in September and retail inflation cooled to a fresh record low in October, providing some signs of an economic revival and bolstering the case for an interest rate cut. Data released by the Central Statistics Office (CSO) on November 12 showed industrial output grew a better-than expected 2.5% year-on-year in September, the fastest in the past three months led by a spurt in the capital goods segment. In August, industrial output rose an annual 0.5%. Separate data released by the CSO showed retail inflation at 5.5% in October, against the previous month’s 6.5%. The October figure is the lowest since the Centre started computing the new series of data in January 2012. Cooling food and fuel prices helped moderate the overall numbers. The latest inflation data saw India Inc repeat its call for the Reserve Bank of India to cut rates when it reviews monetary policy on December 2. Finance minister Arun Jaitley, in an interview to TOI, had called for a reduction in interest rates following moderation in price pressure. The RBI has so far resisted calls for reducing interest rates citing stubborn inflationary pressures but some economists said they expect some easing in the months ahead. “Both sets of data released this evening were better than expected with CPI easing to 5.5% from 6.5% last month and industrial output rising 2.5% from 0.5%. Given that the pace of normalization in inflation has been relatively faster than that of growth, we maintain our view of cumulative 100 basis poins easing in policy rates by FY16,“ said Rohini Malkani, economist at Citigroup, India. India Inc stepped up the pressure for an interest rate cut and said the industrial output data signalled early signs of revival based on what it called “feel good factors and positive investor sentiment. “We welcome the drop in inflation based on consumer price index and hope this would propel the RBI to reduce policy rates in its forthcoming monetary policy especially as consumer demand continues to be tepid,“ said Chandrajit Banerjee, director- general at the Confederation of Indian Industry . The industrial output data showed the capital goods sector, a key gauge of economic activity, rose 11.6% year-onyear in September compared with a decline of 6.6% in the year earlier period and a fall of 9.8% in the previous month. The consumer segment continued to remain sluggish. Consumer durables contracted an annual 11.3% in September compared to a decline of 10.6% in September 2013 while consumer goods fell an annual 4% compared to an expansion of 1% in the previous year ago period. The inflation data showed the moderation was led largely by softening food prices. Prices of vegetables de clined 1.5% year-on-year in October while overall food and beverages prices rose 5.7% year-on-year slower than the double digit levels in the past. “These numbers should be viewed with caution. First, the base effect is pronounced and will be so in November too when the CPI index peaked. These numbers could turn around in December and January when the index had come down last year. Second, the ministry of agriculture has forecaste lower kharif output for cereals, pulses and oilseeds. This being the case, there could be some upward bias on inflation in the coming months,“ said Madan Sabnavis, chief economist at Care Ratings.
DISCLAIMER
This newsletter is compilation of news articles from various business-e-newspapers and in no way is an endorsement or reflection of Embassy of India, Berne views.
