A metaverse fintech ecosystem: What the future of finance looks like

Source: Financial Express, 18 July 2022

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.

The author is CEO, and Director, Tarality

India remains attractive for FDI investors

Source: Economic Times, 18 May 2022

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.

Be part of India’s growth story: Sitharaman at Silicon Valley

Source: Financial Express, 26 April 2022

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 opens new factory in Gujarat with 100 mn pound investment

Source: Financial Express, 21 April 2022

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.

FDI may touch USD 100 bn in 2022-23 : PHD Chamber

Source: Financial Express, 14 April 2022

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.

SKF to scale up investments in India to double global revenues

Source: Economic Times, 23 March 2022

Swedish auto component major SKF is looking at scaling up investments across its functions in India as part of a strategy to double global revenues, on improved margins, by the end of the decade.

In an exclusive interview, SKF Group Global President & CEO Rickard Gustafson told ET that India is a large market and an important one for SKF. Given the group’s focus on increasing regionalization in Asia to more than 85% from about 60% as per its recently outlined strategic framework, there will be opportunities for investments in property, plant and equipment in the country, to support growth ambitions.

“I am optimistic about the Indian opportunities and the Indian economy. And in order to support those opportunities, we need to invest not just in our footprint but also in our supply chain,” Gustafson said, without sharing details of the investments earmarked for the local market mid-term.

He added the group has strong technical capabilities and there are a number of different industries, such as high speed machinery, agriculture, railways and electrical motors, which are of “high interest.”

The Rs 25,938-crore Production Linked Incentive (PLI) Scheme approved by the government to encourage indigenous manufacturing of eco-friendly vehicles and components with advanced auto technologies especially augurs well for the local industry.

He said, “If the Indian government incentivizes the shift toward a greener future, I think that is good not just for India, it is good for the globe, because you’re a big part of the globe. Of course, it will also drive demand. And that’s good news for SKF.”

Gustafon said the three global megatrends – electrification, automation, sustainability – will amplify growth opportunities in India. “Electrification – that’s part of the sustainability agenda. Renewable energy is going to be key. Renewable energies will require rotation, we play there. I truly believe that we’re going to see more focus on hydrogen to drive more and solve the energy crisis. To compress hydrogen, you need high speed rotation. We play there. Carbon Capture will be another tool that we need to use in order to really reduce our CO2 footprint globally. And that will require compression and rotation. So these are some areas where I think there are business opportunities,” said Gustafon.

Globally, SKF Group itself is targeting net zero emission at its manufacturing facilities by 2030 and across its suppliers by 2050.

Overall, given the growth prospects in the country, Gustafon expects India’s role in global operations to expand over the next few years. “We already have a very sizable operation here in India. which I hope will continue to evolve, grow and further excel. And over time, my ambition is to ensure that India becomes an even bigger and even more important part of our global portfolio,” he said.

SKF Group reported a turnover of Rs 69,811 crore in 2021. India currently accounts for about 5% of global revenues.

Separately, Gustafon said there would be challenges in the global supply chain on account of the conflict between Russia and Ukraine. However, the degree of impact will vary geographically.

“Inflation is on the rise, because of this (war). Energy prices are going up. Ukraine and Russia are big suppliers into the global food market, which of course will be impacted by this. It is not good news for the global economy. I think, though, that Europe will be probably more impacted by this than maybe Asia and other parts of the world,” he said.

SKF Group will work at securing its supply chains, improving cost productivity and increasing product prices to address inflationary pressures. “There are only a couple of levers that you can pull and we’re going to pull them all. First and foremost, we need to secure our supply chains, and have multiple sources. We need to drive our own productivity and effectiveness to compensate for this. And of course, we need to raise our prices. We also need to use the price mechanism in order to safeguard our business and our margins,” he said.

SKF is the world’s largest bearing manufacturer, employing 44,000 people across 108 manufacturing units.

Supply chain resilience initiative in the works: Japan to invest $42 bn to boost economic ties

Source: Financial Express, 20 March 2022

Prime Minister Narendra Modi said on Saturday Japan aims to invest $42 billion (5 trillion yen) over the next five years in India, after a meeting with his Japanese counterpart Fumio Kishida in the national capital to bolster bilateral cooperation.

Both the leaders held meetings as part of the 14th India-Japan Annual Summit. This is Kishida’s first visit to India as Japan’s Prime Minister. Boosting bilateral ties, Modi said at a joint press conference, will not only benefit the two countries but will also help initiatives for peace, prosperity and stability in the Indo-Pacific region. Former Japanese Prime Minister Shinzo Abe had in 2014 announced Moscow’s investment and financing of 3.5 trillion yen in New Delhi in five years.

Both the sides signed six pacts in areas of cybersecurity, capacity building, information sharing and cooperation, and agreed to forge a clean energy partnership as well. Kishida and Modi are also expected to agree to convene a two-plus-two meeting between their foreign and defence ministers at the earliest, an official said.
Sources said the two sides are working on a Supply Chain Resilience Initiative (SCRI) -– the trade and economy ministers of India, Japan and Australia launched the SCRI on April 27, 2021. The initiative seeks to enhance the resilience of supply chains in the Indo-Pacific region and to develop dependable sources of supply and to attract investment. As initial projects, sharing of best practices on supply chain resilience; and holding of a matching event have been completed.

Japan has been the fifth-largest investor in India, with foreign direct investments of $36.4 billion between April 2000 and December 2021. It accounted for 6% of the cumulative FDI inflows into India during this period. However, India has been running a huge trade deficit with Japan. Until January this fiscal, while India shipped out products worth only $5.2 billion, Japan’s exports to India hit as much as $12 billion.

“There has been progress in the economic partnership between India and Japan. Japan is one of the largest investors in India. The countries are working as ‘one-team, one-project’ on Mumbai-Ahmedabad high-speed rail corridor,” Modi said.

Both the leaders, earlier in the day, discussed ways to boost economic and cultural linkages between the two countries at Hyderabad House, according to the Prime Minister’s Office (PMO). This year also marks the 70th anniversary of the diplomatic relations between India and Japan.

India, France push blue economy & investment partnership

Source: Economic Times, 21 December 2021

François Delattre, Secretary-General, Ministry for Europe and Foreign Affairs of France, is on an official visit to India from December 20-22. The visit comes on the heels of the Annual Defence Dialogue held on December 17 in New Delhi between Rajnath Singh, Defence Minister and Florence Parly, French Minister for Armed Forces.

Foreign Secretary, Harsh Vardhan Shringla, had bilateral talks with the Secretary-General on December 21. Both sides took stock of the bilateral relationship and discussed the potential for cooperation in sectors such as defence and security, space, cybersecurity and the digital economy, blue economy, education and people-to-people contacts, energy, health and climate change. Ambassadors of India and France joined the talks.

India’s trade with France has witnessed a steady rise in the last decade reaching USD 10.75 billion in 2020. Despite the pandemic, it is estimated that bilateral trade between the two countries in 2021 has reached USD 8.85 billion. To tap the full potential of bilateral trade and economic relations, both sides reiterated their commitment to restarting negotiations on the India-EU Free Trade Agreement.

France has emerged as a major source of FDI for India with more than 1,000 French establishments already present in India. France is the 11th largest foreign investor in India with a cumulative investment of USD 9.86 billion from April 2000 to June 2021 which represents 1.80% of the total FDI inflows into India. Most big French groups have their subsidiaries in India such as BNP Paribas, Capgemini, Airbus, Dassault, Arkema, L’Oréal, Sanofi, Total, etc. There are around 200 subsidiaries of Indian businesses established in France, which employ more than 6,000 people. Among Indian investments in France, majority are in IT services, pharmaceuticals/biotechnologies and hospitality sectors.

Reaffirming their shared commitment to a multipolar world and faith in multilateralism, the Foreign Secretary and the Secretary-General also held discussions on a number of regional and global issues of mutual interest, including cooperation in the European Union in view of the forthcoming French Presidency, Indo-Pacific, UNSC, situation in Afghanistan, among others, according to officials.

Delattre will be visiting Mumbai on December 21-22, where he will meet other Indian officials.

PM Gati Shakti plan, single window clearance to further push FDI inflows in new year

Source: Financial Express, 21 December 2021

A series of steps taken by the government to promote ease of doing business and liberalisation of foreign direct investment norms have helped India receive record FDI inflows so far this year, and implementation of measures like PM Gati Shakti, single window clearance and GIS-mapped land bank are expected to further push investments in 2022.

Notwithstanding the global slowdown and the COVID-19 pandemic, total foreign direct investments into India rose to a record USD 81.72 billion in 2020-21. During April-July this fiscal, FDI (foreign direct investment) into the country increased by 62 per cent to USD 27.37 billion.

“Increasing FDI is a reflection of global trust in India’s growth story. World wants reliable partners. India is providing all those parameters of growth which the investors would like to see before investment.

“Further steps like rolling out of PM Gati Shakti National Master Plan (NMP), single window clearance and GIS (Geographic Information System) mapped land bank would help in attracting further investments,” Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Anurag Jain told PTI.

The government is making all-round efforts to improve ease of doing business, he said, adding that the compliance burden has been reduced in more than 25,000 compliances over the last few years.

“Structural reforms and a series of measures to promote ease of doing business, start up programmes and liberalisation of FDI policy are bringing in transformational changes in the industrial landscape. Efforts of the Centre to support the startup ecosystem has also created a buzz about India in the business and investment sector of the world,” Jain said.

He added that so far 19 central government ministries/departments and 10 states have boarded the national single window system, which has been soft launched as a single point of clearance for investor related issues, as of now.

Similarly, the India Industrial Land Bank is GIS enabled and has mapped over five lakh hectares of land, over 4,500 industrial parks, and shows vacant industrial plots available for investors, he added.

Among several areas, the government has relaxed FDI norms in coal mining, defence production, contract manufacturing, and single-brand retail trading.

Foreign direct investment equity inflows into India have touched USD 548 billion between April 2000 to June 2021, which is further strengthening the country’s credentials as an investment destination. About 28 per cent of the FDI came through the Mauritius route. It was followed by Singapore (22 per cent), the US (8 per cent), the Netherlands, and Japan (each 7 per cent) and the UK (6 per cent). The other big investors have been from Germany, Cyprus, France and Cayman Islands. Since 2015-16, total FDI inflows, which comprise equity inflows, reinvested earnings and other capital, have been recording significant growth. In that fiscal, the country received FDI worth USD 55.55 billion, an increase of 35 per cent over the previous year.

FDI stood at USD 60.22 billion, USD 60.97 billion, USD 62 billion and USD 74.4 billion in 2016-17, 2017-18, 2018-19 and 2019-20, respectively.

The key sectors which attracted the maximum FDI include services segment, computer software and hardware, telecommunications, trading, construction development, automobile, chemicals, and pharmaceuticals.

Although FDI is allowed through the automatic route in most of the sectors, in certain areas such as telecom, media, pharmaceuticals and insurance, government approval is required for foreign investors.

Under this route, a foreign investor has to take prior approval of the respective ministry or department whereas for the automatic route, an overseas investor is only required to inform the Reserve Bank of India (RBI) after an investment is made.

At present, FDI is prohibited in as many as nine sectors. They are lottery business, gambling and betting, chit funds, ‘nidhi’ companies (a type of NBFC), real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.

The government had made prior approval mandatory for foreign investments from countries that share land border with India to curb “opportunistic takeovers” of domestic firms following the COVID-19 pandemic, a move which was aimed at restricting FDI from China.

According to experts, the high growth story of FDI into the country would continue in 2022 as well. S Anjani Kumar, Partner, Deloitte India, said international business leaders remain confident of India’s short- and long-term prospects and are readying plans to make additional and first-time investments in the country.

“FDI is one of the key levers that will help achieve India’s USD 5 trillion GDP goal. While foreign investment inflows into India have been consistently rising over the past five years, to achieve this GDP goal, a more proportionate contribution to gross capital formation (new greenfield assets) and the increase in exports can be achieved through greater FDI in manufacturing,” Kumar said.

According to a Deloitte survey ‘India’s FDI Opportunity’, the country scored highly for its skilled workforce and prospects for economic growth, and it has the strongest positive perception in the US when compared to markets such as China, Brazil, Mexico, and Vietnam.

Nischal Arora, Partner – Regulatory, Nangia Andersen LLP, said, “We expect the FDI to grow at a healthy growth rate of 10-15 per cent on the backdrop of PLI (production linked incentive) schemes being introduced and operationalised during 2021-22 in over 12 manufacturing sectors requiring substantial capital investments which may be funded through, among other source, FDI”.

UAE based retail giant, Lulu Group will invest Rs. 2,000 crore in Gujarat to set up a shopping mall

Source: Economic Times, 11 December 2021

This was announced during a meeting between Bhupendra Patel, Chief Minister of Gujarat and Yusuff Ali MA in Dubai. An MOU in this regard was signed by Rajiv Kumar Gupta, additional chief secretary signed on behalf of Gujarat Government and Yusuff Ali CMD of Lulu Group.

According to the MOU, Lulu will set up a shopping mall between Ahmedabad and Gandhinagar which will create employment to more than 5,000 people. The construction is expected to start by the first quarter of 2022 and be completed in 30 months.

Government of Gujarat will facilitate Lulu Group with all necessary assistance and clearances and also depute a senior IAS official to follow up the procedures.

Apart from this, Lulu Group will also set up food processing and logistics centers in Baroda and Surat for exports.

“The government will make every effort to ensure that land and any other assistance is provided to the group so that they can begin work,” said the Chief Minister.

“Gujarat holds a very special place in my heart, this is where I first learnt the basics of business as my father had family business in Ahmedabad. So I feel very excited to invest in Gujarat and hope we can expand further in this Vibrant state,” said Ali.

The group has also recently opened Lulu Hypermarket in Bangalore, spread across 2 lakh sq ft, while Funtura is set up across 60,000 sq ft – the largest indoor entertainment zone in India.

Lulu currently operates more than 220 hypermarkets and shopping malls in the Middle East, Egypt, Indonesia, Malaysia and India. Globally, Lulu Group employs more than 57, 000 people. Lulu hypermarkets and department stores have a 32 per cent share of the retail market in Gulf Cooperation Council countries.

The group also has invested in India’s retail market with malls in Kerala and Uttar Pradesh. Group’s latest mall is slated to be opened by next week at Kerala’s capital Thiruvananthapuram while Lucknow Lulu Mall is expected to be open for shopping by march 2022.