India’s largest home appliance maker LG Electronics India has invested Rs 200 crore to manufacture premium side-by-side refrigerators in the country in line with the make in India initiative.
The new line was inaugurated at LG’s Pune plant on Tuesday. It will also make double-door and single-door refrigerators. The unit will have production capacity of over two lakh units.
Hong Ju Jeon, managing director of LG Electronics India said, localization has been a key differentiator as we have continuously developed products based on Indian insights. “Last year we started manufacturing window inverter AC in India at our Noida manufacturing facility, this year we are starting side by side refrigerator production,” he said.
The new investment will help LG to expand its product line up in India and the company will launch 15 new side-by-side refrigerators this summer season. These products are typically priced above Rs one lakh.
LG India vice president Deepak Bansal said LG is already the market leader in side-by-side refrigerators with around 53% share and the new investment will help to further consolidate this. “We would also look at exports of side-by-side refrigerators from India,” he said.
Located at Ranjangaon near Pune, the LG facility is spread over 52.8 acre. The plant also manufactures televisions, washing machines, air-conditioners and monitors.
The government is hopeful of an increase in foreign direct investment (FDI) inflows in the coming months despite global headwinds, a senior official of the industry department said on Thursday. The official said the number of pending FDI proposals from China are lowest at present.
“Foreign inflows have an effect because of the global slowdown that we are seeing for the last 18 months… but we are hopeful (as) India has shown very great numbers compared to the rest of the countries. So, we are hoping that we would be making up for all that,” said Manmeet K Nanda, joint secretary, Department for Promotion of Industry and Internal Trade (DPIIT).
FDI equity inflows fell nearly a quarter to $10.3 billion in the quarter to September 2022 from $13.6 billion a year earlier. In the first half of this financial year, FDI equity inflows shrank 14% to $26.91 billion from $31.5 billion a year earlier, while total inflows were 8.8% lower at $39.09 billion in the April-September period from $42.86 billion a year ago.
Nanda said investments and equity inflows usually improve towards the last quarter of a financial year. On the number of pending FDI proposals from China under Press Note 3 of 2020, she said “pendency is probably the lowest at this point in time”.
As per the press note, the government had made its prior approval mandatory for foreign investments from countries that share a land border with India to curb opportunistic takeovers of domestic firms following the pandemic.
India emerged as one of the leading investment destinations for billionaires across the world, as per the UBS Billionaire Ambitions Report 2022.
The report is based on surveys, questions and information from the UBS Evidence Lab on over 2,500 billionaires across 75 markets.
Billionaires are looking to put more of their money in India due to the strong growth of the region’s economy, according to the report.
Among the sectors, the billionaires favour energy, possibly due to today’s supply constraints and the accelerating secular transition to renewables. In the report, 58 per cent of the billionaire respondents chose India and Southeast Asia as their chosen markets for investment. Only 42 per cent of respondents picked China.
In contrast to the rest of the world, India’s billionaire population flourished, as it surpassed the United Kingdom to become the fifth-largest economy in 2022. India with a more youthful labour force also overtook China as the fastest-growing of the world’s major economies. At the same time, the number of Indian billionaires grew from 140 last year to 166 with their aggregated wealth expanding by 25.7 per cent to USD 749.8 billion.
The “UBS Billionaire Ambitions Report 2022” published earlier this month said that “North America, with its huge domestic market and vibrant entrepreneurial culture, also remains a popular region. While still ahead of the rest of the world, mainland China lags these regions somewhat.” Few seem to be interested in investing in Western Europe despite it being a major economic bloc.
It is not only in investments that China has seen a fall from a year ago. The ranks of billionaires have also fallen. Mainland China’s zero-COVID policy slowed the growth after many years as the world’s fastest-growing large economy. There were 540 billionaires, down from 626 a year before. After a decade of significantly increasing, total wealth reduced by a fifth (19.9 per cent) to USD 2.0 trillion. However, China is not alone. With the falling markets, the billionaire population around the world has declined.
In March 2022, there were 2,688 billionaires worldwide worth USD 12.7 trillion, down from 2,755 individuals with USD 13.1 trillion in 2021. Asia-Pacific was the region with the largest billionaire population globally at 1,084 with a total wealth of USD 4.2 trillion, in comparison to 1,143 individuals and USD 4.7 trillion a year ago. UBS report noted that the total wealth and number of billionaires is likely to have reduced further since March due to declines in asset prices.
The number of billionaires in the United States, home to about a third of billionaires globally, was also steady witnessing a slight rise from 724 in 2021 to 735. Total wealth increased by 6.9 per cent to USD 4.7 trillion. Notably, finance and investments had the highest number of billionaires (392 in total) and one of the greatest turnovers. Taken together, their total wealth totalled USD 1.7 trillion. 50 new billionaires were created during the year, while 30 dropped from the list.
The new billionaires included fintech disruptors, private equity and hedge fund partners. The second most populous sector, technology, witnessed a considerable flux. There were 41 new tech billionaires while 57 disappeared, leaving a total of 348 worth USD 2.2 trillion. This instability demonstrates the dynamism of a sector where barriers to entry are low, and innovation is perpetual.
Manufacturers blossomed amid extraordinary demand for durable goods, as well as the emergence of new electric vehicle and battery entrepreneurs. There were 338 manufacturing billionaires in 2022 worth a total of USD 1.1 trillion, with 44 new billionaires joining the list while 37 dropped from the list. This year’s UBS billionaire report revealed that 95 per cent of surveyed billionaires believe that they should use their wealth or resources to help tackle global challenges.
Two-thirds said that it is their responsivity to “lead the way” while almost a third believe that they should use their wealth or resources to help tackle these challenges. More than 40 per cent of the billionaires surveyed see smart agriculture as one of the sectors where they can make the greatest impact, along with clean water and poverty alleviation.
The surveyed billionaires also see opportunities in green energy as well as waste management and recycling, they believe the government has a greater potential role in these areas.”This year’s report highlights how many of the wealthiest in society see it as their responsibility to lead the way, using their wealth or resources to help tackle unprecedented environmental and societal challenges,” said UBS’s George Athanasopoulos, Head of Global Family and Institutional Wealth, and Alice Page, Head of Ultra High Net Worth Solutions Group, in a joint statement.
“The combination of plentiful long-term capital and innovation has the potential to create huge change and opens up new opportunities for a different approach to investing.” “We remain realistic about the ability of private capital on its own to solve the world’s problems. While we see this convergence as a clear trend, will it be done on a sufficient scale to help meet the UN’s sustainability goals (SDGs) and the race to zero carbon? There are reasons for optimism and those who can connect billionaires to opportunities globally, such as UBS, play an important role in this trend.”
From a sector perspective, technology and health continue to draw interest from the surveyed billionaires although these industries of late witnessed a decline in valuations and interest in the public equity markets.
It is the eighth report from the Swiss bank covering billionaires, focusing on their wealth and ambitions during an era of historic wealth generation, business innovation and impact philanthropy.
Credit and Finance for MSMEs: Micro, Small, and Medium Enterprises are a critical instrument in India’s growth trajectory. As per the National Sample Survey’s (NSS) 73rd round, the MSME sector has created 11.10 crore jobs and has contributed a whopping 31 per cent to the country’s overall GDP. The sector is poised to grow even more with a strong push from the Government’s Make in India initiative, favorable regulations, shifting global supply chains, and the increasing interest of global investors (FDI) to invest in India. The confluence of all these factors will aid the growth of MSMEs in India and directly contribute to India’s vision of a $5 trillion economy.
wever, is the lack of credit accessibility. As per reports, there is an addressable credit demand of Rs 40-45 trillion from the MSME sector against which only Rs 20 trillion is available through the formal banking system. While the government and the RBI have collectively brought several structural reforms and regulations to accelerate credit to the MSME sector, the gap remains high.
The emergence of the co-lending model (CLM) in India for priority sector lending (PSL) is a welcome development in bridging this gap and re-shaping the MSME credit industry. In the co-lending setup, banks and NBFCs can disburse joint loans to end borrowers. Banks can leverage the partnerships to build a scalable PSL-compliant retail portfolio and extend loans to MSMEs. NBFCs, on the other hand, have distribution networks in areas where the presence of banks is minimal, and can target customer segments that are creditworthy but not able to access credit from the formal banking ecosystem. NBFCs specialize in underwriting MSMEs using assessed income and a deep knowledge of the local ecosystem, are cost-efficient in collections, and have sustained low delinquency numbers.
Role of technology
The increased adoption of technology and the formalization of traditional sectors have led financial institutions to rethink their approach when it comes to servicing the MSME space. Co-lending has emerged as one of the most important focus areas in recent years, forging collaboration between banks and fintechs. Co-lending partnerships have been a win-win for all stakeholders and have helped unlock a dormant pool of capital. Access to credit has become affordable and more accessible for end consumers. This unique arrangement has the potential to present massive opportunities in the future, unlocking a credit flow of more than $10 billion in the next 24-36 months.
New opportunities
Technology plays a critical role in accelerating the process of bringing new MSMEs into the formal financial ecosystem. New-age NBFCs and fintechs are using the latest technology, data analytics, and algorithms to onboard, underwrite, and service customers across the country. Meanwhile, traditional banks and NBFCs are investing in technology upgradation and automation. Both factors are leading to the digitization of processes in retail credit offering at a never-seen-before speed.
A platform-led digital co-lending partnership between two regulated entities creates a powerful information-sharing framework that allows both partners to securely and seamlessly exchange critical data.
This ongoing and real-time information exchange empowers the partners to identify, assess, and satisfy borrower needs accurately and quickly, backed by a robust API integration layer in the backend. Furthermore, technology-enabled co-lending ensures that the entire process is fully automated starting from the application step to the disbursal stage. It improves the turnaround time of these processes, thereby bringing in higher efficiency. With the advent of technology and B2B platforms, banks and NBFCs can now have a completely digital experience of co-creating a partnership. Processes such as the discovery of new partners, defining a credit policy, defining the processes, loan allocation, data and document transfer, fund transfer, portfolio management, and collections are all digitized. With the data flow and loan journey being digital, reconciliation, invoicing and accounting becomes seamless, enabling MSMEs to experience a transparent and accountable procedure.
Given the role of MSMEs in driving national economic growth, the collaborative model between new-age digital lenders and traditional financial institutions can help bridge the credit gap, and bring micro and small firms within the ambit of the formal financial ecosystem.
Irfan Mohammed is the Chief Business Officer of Financial Services at Yubi and Arjun Sood is the Deputy Vice President at Yubi Co.Lend. Views expressed are the authors’ own.
The World Bank on Thursday projected a growth rate of 6.5 per cent for the Indian economy for the fiscal year 2022-23, a drop of one per cent from its previous June 2022 projections, citing deteriorating international environment. In its latest South Asia Economic Focus released ahead of the annual meeting of the International Monetary Fund and the World Bank, the Bank, however, noted that India is recovering stronger than the rest of the world. The Indian economy grew by 8.7 per cent in the previous year. “The Indian economy has done well compared to the other countries in South Asia, with relatively strong growth performance… bounced back from the sharp contraction during the first phase of COVID,” Hans Timmer, World Bank Chief Economist for South Asia, told PTI in an interview.
India, he said, has done relatively well with the advantage that it doesn’t have a large external debt, there are no problems coming from that side, and that there is prudent monetary policy, he observed. The Indian economy has done especially well in the services sector and especially service exports. “But we have downgraded the forecast for the fiscal year that just started and that is largely because the international environment is deteriorating for India and for all countries. We see kind of an inflection point in the middle of this year, and first signs of slowing across the world,” he said. The second half of the calendar year is weak in many countries and will be relatively weak also in India, he said. Timmer said that’s mainly because of two factors.
One is the slowing of growth in the real economy of high-income countries. The other one is the global tightening of monetary policy that tightens financial markets and not just that it leads to capital outflows in many developing countries, but it also increases interest rates and uncertainty in developing countries which has a negative impact on investment. “So, it (India) has done relatively well. It is not as vulnerable as some of the other countries. But it’s still in tough weather. It (India) has to navigate the higher commodity prices and there are more headwinds at the moment,” he said in response to a question. India is doing better than the rest of the world, he said, adding that there are more buffers in India, especially large reserves at the central bank. That’s very helpful. “Then the government has very actively reacted to the COVID crisis,” he said.
The Indian government has set an example for the rest of the world, like expanding social safety nets, using digital ideas. “I think it’s almost up to a million people that they are reaching at the moment. It’s a good response also,” he said. At the same time, he said that he does not agree with all the policies of the Indian government. “Especially their reaction to the high commodity prices might seem logical in the short run, but might backfire in the long run. For example, the export ban on wheat and the export ban or the very high tariffs on rice exports,” he said. They seem logical to create food security domestically, but ultimately that creates more problems in the rest of the region and the rest of the world. “So not all policies are optimal, but a strong reaction to the crisis in terms of relief efforts, strong monetary policies, and in general a trend towards a more business friendly environment,” Timmer said.
Responding to a question, he said since India needs to address some of the key concerning issues. “Although we look at a relatively favorable growth rate, it is growth that is supported by only a small part of the economy. It sounds good, but if it is not coming from a much broader base, then that growth rate of a relatively small part of the economy doesn’t translate into significant growth of income for all the households,” he said. Timmer pointed out that only 20 per cent of the women are participating in the labor market. “That is a problem that has to be addressed. You don’t solve that just by extending your social security system. That’s important. Ultimately, the people should be given the tools to generate income themselves,” he said.
“What we have seen in the region and to some extent in India also is that the government was not really prepared to absorb all those shocks that we are seeing in the region. The COVID shock, the war in Ukraine and the commodity prices are once in a lifetime shocks and they come one after the other and then the environmental disasters also,” he said. Both the government and the people are not prepared to cope with that. And that is because just too few people are fully participating in the economy, he argued, adding that that’s a high priority for India to make progress there. “In India, the focus is on the existing big firms. Focus is on FDI. And that’s all very good. The focus is on social safety nets. That’s also very good. But it’s not enough. You need to integrate more people in the economy,” Timmer said.
FINANCE Metaverse unfolds a new dimension, a new universe – a space where our real world, augmented reality, and virtual reality intersect, seeding an immersive and collaborative shared virtual 3D environment. In the metaverse-sphere, cryptocurrency and digital art, namely non-fungible tokens, are commonplace. While technocrats, gaming platforms and social media fans are busy talking about the extraordinary experience one will witness in the metaverse, people are looking at alternative digital possibilities and eager to find new pathways to seamless financial transactions.
Sighting the near future, Metaverse has not only become the new favourite of large technology companies, but also the new favourite of the investment industry.
Digitally acquired fintech solutions are revolutionising how transactions are carried out in real life. With cashless transactions witnessing an upswing, these will form the basis of financial transactions carried out in the metaverse – forming the backbone of the huge economic metaverse ecosystem.
Metaverse is expected to become an important digital platform for personal and business interaction. In fact, financial data management and financial transaction management that match real life scenarios provided by financial technology solutions will contribute to the meta-universe, making the meta-universe as indispensable as a real life situation.
To make this new environment as immersive and realistic as possible, the ability to manage finances and transactions intricacies will be critical. The pandemic encouraged people to interact and pay digitally more than ever before. As a result, fintech adoption boomed worldwide.
Cryptocurrencies:
Based on the current blockchain technology, cryptocurrencies exercise better security, seamless transactions, reduce settlement processes and provide efficient transactions, establishing cryptocurrencies as the official payment method in the metaverse and eliminating the use of the various currencies to carry out financial transactions entirely. However, each cryptocurrency performance will have to be gauged in the metaverse towards becoming the preferred standardised choice for carrying out transactions.
Metaverse wallets:
Following a similar pattern to digital wallets, the only difference is that metaverse wallets will help store cryptocurrencies. The wallet can be used for carrying out financial transactions one does in real life. For example, the metaverse wallets can be used to buy and sell products, like NFTs or virtual real-estate, on the metaverse platform. Similarly, it can also be used for receiving or transferring tokens between users within the metaverse.
Financial Literacy:
Helping customers analyse real-world financial decisions in the virtual world by recreating those scenarios in the metaverse by using ‘gamification’ can boost financial literacy while eliminating the risks with real, hard-earned money. Inculcating the concept of gamification, financial institutions can leverage financial literacy among individuals. With the quest to attract yet retain its consumer base, fintech services create applications targeting the younger generation to better grasp various financial concepts like budgeting, taxation, investing, stock trading and even buying properties.
Virtual employee onboarding and training
With the pandemic leading to the adoption of remote work, the real scope of interaction and socialising between employees has become limited to a screen. Owing to enhancing the user experience of financial service professionals, these institutions can create a virtual office in the metaverse where the employees and; digital avatars can work in a simulated real-world environment. Employees can talk, interact, and hang out with each other in the metaverse, quite like the real-world paradigm. Additionally, metaverse accommodates virtual meetings for new employees.
Onboarding and carrying out associated activities like training them.
While the metaverse fintech ecosystem is a universe one might just be equipped for, financial institutions will have to make smart investments in the digital economic ecosystem of the metaverse if they want to succeed on the platform and be future-ready. Be it visiting a virtual mall and; expenditures, attending an event/conference or comprehending basic finance through gamification, metaverse could add a robust dimension to the world of finance.
Foreign direct investment (FDI) has been rising annually in contrast with the heavy selling by foreign portfolio investors (FPIs) in recent times. Gross FDI inflows were at $83.6 billion in FY22, surpassing $82 billion a year earlier. It stood at $74.4 billion in FY20. Services and manufacturing sectors accounted for a major share of FDI in FY22, RBI said in its monthly bulletin. However, net FDI moderated to $39.3 billion in FY22 from $44 billion a year ago, due to higher outward investment by Indian entrepreneurs and repatriation by foreign investors, RBI said.
India’s cumulative FDI stands at around $570 billion.
“FDI investments normally look at the long-term potential of a country and are rarely withdrawn. The high flow of FDI indicates that India is a bright destination for foreign investment,” said Bank of Baroda chief economist Madan Sabnavis. “The potential is in several sectors such as IT, finance, FMCG, auto, drugs, telecom etc. These investments are typically made by companies which seek JVs or take up stakes in domestic companies. They could be VC funds that support startups here.”
Given the long-term view, FDI investors are not present in the trading segment.
Over two-fifth of the 1,200 global business leaders surveyed in the US, UK, Japan and Singapore plan to make additional or first-time investments in India, consulting firm Deloitte had said in a report last year.
FPIs have been withdrawing ever since the US Federal Reserve began the process of winding up purchases of treasury bonds and mortgage-backed securities it had been making to support the economy during the pandemic. Inflation sparked by the surge in commodity prices amid the Russia-Ukraine conflict have led to the further tightening of monetary conditions through policy rate hikes, hastening the withdrawal of investments by portfolio investors. FPIs have pulled out a net $21.3 billion in 2022 so far.
India’s foreign exchange reserves fell to $596 billion at the end May 6 from a record of $642.453 billion on September 3 last year as the Reserve Bank of India (RBI) sold dollars from reserves to arrest the speed of the rupee’s depreciation and quell foreign exchange volatility.
India’s Finance Minister Nirmala Sitharaman at the Silicon Valley invited investors to be part of the country’s growth story while pitching for collaboration with the US in financial services and emerging technologies. Speaking at a round table hosted by the Confederation of Indian Industry (CII) and the US Chamber of Commerce’s US-India Business Council (USIBC), she said financial technology (fintech) represents a unique opportunity for sustainable and inclusive growth.
“With a growth forecast of almost 8 per cent in FY 2023, India is likely to remain the world’s fastest growing major economy over the next few years, driven by the continued expansion of its technology and start-up ecosystems,” Sitharaman told a group of eminent corporate executives in the Silicon Valley.
“The US-India collaboration in financial services and emerging technologies will support increased investment and innovation, and fintech represents a unique opportunity for sustainable and inclusive growth,” said the finance minister as she invited leading investors to become part of the India growth story.
Moderated by Atul Keshap, president, USIBC, the executive gathering was also joined by Dr V Ananth Nageswaran, Chief Economic Adviser, Government of India; Taranjit Singh Sandhu, Indian Ambassador to the United States; Rajat Mishra, Additional Secretary, Department of Economic Affairs, Ministry of Finance; and Nilesh Shah, chairman, CII National Committee on Financial Markets.
“There is a fintech revolution happening in India. As a country that runs the largest financial inclusion programme in the world to the country that has highest fintech adoption rate globally to the highest number of real time online transactions globally, India has a lot to offer to the world,” said Sandhu.
“The financial sector in India has recently seen PM-guided and FM-led reforms. We hope that the US venture capitalists, endowment funds and asset management companies look at India to start their new journey or scale up existing operations and partner and grow,” he said. Keshap said the discussion reinforced that innovation around fintech will be a critical to reach USD500 billion in annual trade between the US and India.
“Global leaders in these fields from the USIBC and the CII member companies shared an ambitious vision for how fintech can power a free and prosperous Indo-Pacific. I stand in strong support of what business leaders, VC’s, and institutional investors are doing to make that vision possible,” he said.
“As a hotbed of innovation with a vibrant start-up ecosystem, India is full of opportunities for investors. India is home to one of the fastest growing fintech markets in the world, with transaction values estimated to grow at a CAGR of 20 per cent to reach USD138 billion by 2023,” said Shah.
“Under Finance Minister Sitharaman’s leadership, India has continued its accelerated growth despite the external shocks of COVID-19 and global conflicts, and the round table attendees looking to invest in India’s expanding fintech market hold high expectations for its continued success,” he said.
Among the businesses and funds that attended the event were Blackstone, Brevet Capital, Citi, Nova Credit, Western Digital, Palo Alto Networks, The Regents of the University of California, Lightspeed House Ventures, Insight Partners, Morgan Stanley, Powerhouse Ventures, Blume Ventures, Bow Capital and Nasdaq.
Construction equipment major JCB on Thursday said it has opened its newest factory in India set up at an investment of 100 million pounds (nearly Rs 995 crore), with British Prime Minister Boris Johnson inaugurating the facility.
The plant located at Vadodara in Gujarat will fabricate parts for global production lines and will be capable of processing 85,000 tonnes of steel annually, JCB said in a statement.
The company, which started manufacturing operations in India in 1979 with its first factory in Ballabgarh near Delhi, currently has six factories in the country at locations including Jaipur and Pune.
JCB Chairman Lord Bamford said in its first year of full production, JCB India manufactured just 39 machines and “by next year will have made a total of half a million”.
“This country is now a major engineering power and being here has transformed our business. It has been a fabulous success, with so much more potential for growth. Such progress has only been possible by continued investment and the opening of our new Gujarat facility is an important step in growing our business here and around the world,” he said.
India has been JCB’s biggest market every year since 2007 and one in two of every construction machine sold in India today is made by JCB, the company said.
Commenting on the new unit, JCB India CEO and MD Deepak Shetty said, “This new facility will create around 1,200 direct jobs when complete and thousands more in the supply chain.” JCB India said its new plant will be a gender-diverse manufacturing facility employing 50 per cent women. The company has also set up a skills centre at the plant where young professionals will be trained to work on diverse job roles in manufacturing.
India is expected to attract USD 100 billion foreign direct investment (FDI) in 2022-23 on the back of economic reforms and ease of doing business in recent years, industry chamber PHDCCI said on Thursday.
It also said the current financial year is expected to attain a GDP growth of more than 8 per cent.
However, the inflation scenario has been stoked by rising international commodity prices, particularly of crude oil, it said.
“India is expected to attract a USD 100 billion FDI inflow in 2022-23 supported by various ground touching economic reforms and significant ease of doing business in recent years,” the chamber said.
It has suggested a ten-pronged strategy to strengthen the economic growth and achieve the target of becoming a USD 5 trillion economy in next five years. The suggestions include speedy infrastructure investments, inclusion of more sectors under the PLI scheme, increase in public investments in agriculture sector, addressing the high commodity prices and shortages of raw materials.
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