View: Another opportunity to put India’s economic house in order

Source:  Economictimes.indiatimes.com-Apr 27, 2020

Opportunity has knocked on India’s door many times in the past and it’s doing so again. Can India grab it? Or will it go by tradition of never missing an opportunity to miss an opportunity?

The ultimate make in India moment has arrived and if handled intelligently India could secure a better place in the new world economic order. It would mean jobs and an easier recovery from the devastation caused by the pandemic.

CEOs of manufacturing giants have got a serious case of ABC – Anything But China – from a mild one of just thinking about it. They want to move or at least lessen their dependence. An active hunt for other host countries is on.

PM Narendra Modi has a real opportunity to steer the Indian ship to a better place. India is already a player in services – although Corona has seriously affected back office operations — but now it has a rare chance to become one in goods. The leadership has to think fast, think big and most importantly think through the steps needed. It may have to go beyond the Gujarat cadre to find answers.

Mukesh Aghi, president of the US-India Strategic Partnership Forum, told me the three top priorities for India should be transparency, land reforms and labour reforms. “The fundamental issue for US companies – and by implication for European and Japanese companies — is lack of predictability and transparency in policy making. A multinational company must feel part of the consultative process to build confidence,” says Aghi.

USISPF has emerged as an important channel of communication between US companies and the Indian government, especially in these Covid times. Apart from webinars and connecting state government officials to company bosses, Aghi and team ensure the policy conversations go smoothly. US officials are also often in the mix.

Earlier this month the team sent a practical “to-do” list in key sectors for India’s Covid-19 Economic Response Taskforce. From allowing restructuring of loans to giving easier access to foreign portfolio investors to deferring certain compliance deadlines to using low oil prices to provide relief on consumer loans to filling up government job vacancies – it’s 10 pages of useful recommendations.

India is among the top five destinations on every major CEO’s list but it is NOT the automatic choice. The million reasons why – political and bureaucratic — are well known. We have a special ability to tire people out with over confidence (size of the Indian market) and infinite arrogance (ministers dis investors instead of wooing them).

If India is to grab this Corona-induced opportunity, it has to sweat it out along side Vietnam, Cambodia and Bangladesh. As in the past, the competition is proving more nimble.

If India wants to be a bigger part of the US supply chains, this is the time to show reliability. The list of essential services and critical workforce can be aligned – India can basically map the US list along with what it deems critical so supply links are neither broken nor choked.

The government must also ensure flawless implementation. Companies shouldn’t have to beg for switches used in data centres or negotiate with police to access their godowns to get laptops for their workers. As one business insider told me, “If you can maintain the supply links now, US companies will turn to you for more.”

Think of the equipment needed for a 5G future – phones, TVs, laptops – if that’s the next wave. If a sensible electronic eco-system existed, Apple could be exporting tens of billion worth of equipment out of India. The medical manufacturing industry is another that could shift base if the environment were friendlier.

Honeywell was looking to set up a plant in Maharashtra in a hurry to mass produce N-95 masks but struggled to get permission. It decided to use the existing facility but it still has hoops to jump. If there was a time to move quickly, it is this.

Finally, the opening of the economy can’t be as chaotic and thoughtless as the closing was. Upper class bureaucrats never imagined the exodus of migrant workers because they were thinking Gurgaon, not Bihar. When it’s time for the workers to return, they must have the dignity of state transport at the very least.

India’s stimulus package of $22.6 billion may not be enough to cover the fallout from Covid. It’s important that no one fail – neither the public nor the private sector. And not the workers.

Indian economy set for weakest quarter of growth in 5 years

Source: The Economic Times, Aug 27, 2019

The Indian economy likely expanded at its slowest pace in more than five years in the April-June quarter, driven by weak investment growth and sluggish demand, according to economists polled by Reuters.

That would reinforce concerns seen in the minutes from the central bank’s August meeting, which showed policymakers were worried about weak growth and indicated further rate cuts in the next few months to boost the slowing economy.

The poll median showed the economy was expected to have grown at a year-on-year pace of 5.7% in the June quarter, a touch slower than 5.8% in the preceding three months. But a large minority – about 40% of nearly 65 economists – expect an expansion of 5.6% or lower. Read the rest of this entry »

15 ways to define India’s slowdown

Source: LiveMint.com, Aug 14, 2019

The rain has stopped. You step out of home to run a few errands. On the way, you find ₹500 note lying on the ground. You pick it up and put it in your trouser pocket, thinking you’ll donate it to the local charity. But you give in to temptation as soon as you cross the local book shop and buy the latest bestseller for ₹500. The bookseller is an alcoholic and uses the money to buy his stock of alcohol for the day. The liquor shop owner takes the ₹500 and walks across to the local cinema and buys the ticket for the latest movie, featuring his favourite heroine. He also buys some atrociously priced popcorn and a soft drink. The cinema owner has to go attend a wedding at the other end of the town and he gives that very ₹500 note to a taxi driver, given that his driver is on leave. Read the rest of this entry »

IMF forecasts India’s growth will improve to 7.5% in the next fiscal

Source: Livemint.com, Jan 22, 2019.

NEW DELHI: India will grow at a world-beating 7.5% in 2019-20 amid slower global expansion, the International Monetary Fund (IMF) said, upgrading its October forecast of 7.4%.  “India’s economy is poised to pick up in 2019, benefiting from lower oil prices and a slower pace of monetary tightening than previously expected, as inflation pressures ease,” IMF said in an update to its biannual World Economic Outlook (WEO) on Monday.


The review comes even as trade tensions and a weakening Europe cast a shadow over global growth.
IMF estimates India to grow 7.3% in 2018-19 and 7.7% in 2020-21. India’s contribution to world growth has risen from 7.6% during 2000-08 to 14.5% in 2018, according to IMF.

Without naming India, IMF said that in emerging markets and developing economies, where inflation expectations are well-anchored, monetary policy could provide support to domestic activity as needed.
With retail inflation slowing to an 18-month low of 2.19% in December—though services inflation remains elevated—many analysts believe the Reserve Bank of India’s (RBI) monetary policy committee will cut policy rates at its review meeting on 7 February.

“We will take necessary steps to maintain financial stability and to facilitate enabling conditions for sustainable and robust growth,” RBI governor Shaktikanta Das said in his first speech at the Vibrant Gujarat Summit on Friday after taking charge as the central bank’s 25th governor last month.

 

India shines in ease of doing business, but this is where it lags behind

Source: Financial Express, Nov 12, 2018

India has emerged as one of the biggest ‘improvers’ in the World Bank’s Ease of Doing Business index with the leap of 23 spots to rank at 77 this year, from 100 last year, among 190 countries. However, Laveesh Bhandari – an economist and head of Indicus Foundation – wrote in The Indian Express today that though the ease of doing business study does indicate a positive change over the last year in some areas, including enforcement of contracts, paying taxes, and registering property, where the country performs poorly, there is much that it does not capture.

According to Bhandari, the massive jump in ranking is correlated with an improvement in ratings as well, which have seen a rise of 6.6% over last year. Therefore, in the two years, the position of India has gone up on Doing Business index dramatically from 130 to 77 this year. Read the rest of this entry »

India’s flagging economy draws dire warnings of recession

Source: The Economic Times, Sept 29, 2017

NEW DELHI: Prime Minister Narendra Modi came to power on a euphoric wave of promises to boost India’s economy, add millions of jobs and bring “good times” to the developing nation.

Three years later, India’s economic prospects look decidedly grimmer. India’s economic expansion has slowed to its lowest level in three years. Small businesses are struggling, or even shutting down, after overhauls of the nation’s currency and sales tax system. Modi’s own allies warn of a dire outlook, with some raising the specter of an economic depression.

While government ministers have urged patience, analysts and others in Modi’s governing Bharatiya Janata Party are not so sanguine about the current trends.
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India jumps 16 spots on Competitiveness Index

Source: Business Standard, Sept 28, 2016

India jumped 16 places for the second year in a row to the 39th rank on the World Economic Forum’s (WEF) Global Competitiveness Index 2016-17. It was ranked 55th in 2015-16. This is the largest gain made by any country on the list.

Switzerland was ranked the most competitive country for the eighth consecutive year, followed by Singapore, the United States, the Netherlands and Germany.

The rankings measure countries’ performance on three indicators — basic requirements, efficiency enhancers, and innovation and sophistication factor. Performance on these in turn is measured through sub-indicators.

“Thanks to improved monetary and fiscal policies, as well as lower oil prices, the Indian economy has stabilised and now boasts the highest growth among G20 countries. Recent reform efforts have concentrated on improving public institutions (up 16), opening the economy to foreign investors and international trade (up four), and increasing transparency in the financial system (up 15),” said the report.

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Dark clouds over India’s growth engines

Source: Business Standard, May 30, 2016

New Delhi: A rather peculiar aspect of India’s growth structure under the new Gross Domestic Product series has been the stellar performance of the micro, small and medium enterprises (MSME) in the manufacturing segment.

With the bigger manufacturing companies struggling over the past few years, it was these smaller companies that provided the much needed fillip to manufacturing growth.

The Reserve Bank of India’s analysis of the Ministry of Corporate Affairs database confirms this. Gross value added (GVA) by these companies grew at a staggering 17.3 and 16.2 per cent in 2013-14 and 2014-15, respectively, dwarfing the value addition by their larger counterparts who grew at a modest 10.1 and 12 per cent over the same period.

index

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Amazon sets the pace for e-commerce in India

index.jpgSource: Business Standard, May 26, 2016

New Delhi: Seattle-based e-commerce giant Amazon should be happy that even before it turns three in India on June 5, the company has emerged a leader in this market. Before rivals can protest, we are not talking numbers yet. The American player has won the first round simply because it has successfully pushed competition to change the narrative and metrics of the online play.

Earlier this week, the almost nine-year-old poster boy of Indian ecommerce, Flipkart, announced in three separate interviews that customer satisfaction would be its mantra from now on. GMV or gross merchandise value of goods sold on the platform, till now the benchmark for success, will be kept aside, said Binny Bansal, who became CEO of Flipkart in January. Not too long ago, Snapdeal CEO Kunal Bahl had the same to say about shedding the GMV goalpost.

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India :100% Foreign Direct Investment permitted in E-Commerce

e-commerceSource: INDOLINK

On 29th March 2016, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion (DIPP) vide Press Note 3 (2016 Series) released the guidelines for Foreign Direct Investment (FDI) on E-commerce.

FDI up to 100% under automatic route (without prior approval from government) is  permitted in Business to Business (B2B) e-commerce.  Restrictions on FDI in Business to Consumer (B2C)  will continue. No FDI is permitted in B2C E-commerce.

  • A manufacturer is permitted to sell its products manufactured in India through e-commerce retail.
  • A single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.

In order to provide the clarity on this, E-commerce business is categorized in two categories:

  1. Marketplace based model of E-commerce: Marketplace based E-commerce model means providing of an information  technology (IT) platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. 100% FDI is permitted in marketplace model of e-commerce.
  2. Inventory based model of E-commerce:  Inventory based model of e-commerce means an e-commerce activity where the inventory of goods and services is owned by e-commerce entity and it sold to customers directly. FDI is not permitted in inventory based model of e-commerce.

With this press note there is more clarity about e-commerce business in India . Also,  it seems for B2C e-commerce to be open for FDI, going to take some more time.