AAPI: 2018

DELHI, 20th December 2018

Index of this Newsletter

INDIA

INDIA & THE WORLD

21.1. Chinese firms invested USD 2 billion in Indian start-ups last year: Report
21.2. ‘Bazzar’, Cirque du Soleil’s debut show in India, is an intimate throwback to the company’s early years
22.1. Opinion | How to end Venezuela’s nightmare
22.2. Opinion | Maximizing India’s development finance
23.1. Qatar to withdraw from Opec as of January 2019: Minister
23.2. All you wanted to know about de-globalisation
24.1. India, 15 others account for world’s 80% malaria cases
25.1. Sotheby’s first-ever Mumbai auction features works by modernists, including a rare piece by Amrita Sher-Gil

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DELHI, 20th December 2018

NEWSLETTER, 20-XII-2018

INDIA

– GENERAL POLICY, INFRASTRUCTURES, COUNTRY FINANCES, ETC.

1.1. The political cost of farm distress

Livemint, 22 Nov. 2018

As farmers are beginning to realize their electoral clout, political parties have to come up with smarter solutions to deal with agrarian distress

The last two years have been filled with images of farmers dumping potatoes, tomatoes and onions by the roadside and resorting to distress sales of grains and pulses, with government in states and at the centre turning a blind eye. This is in sharp contrast to the alacrity with which governments move when onion prices touch ₹40 a kilo, convening meetings, cracking down on traders and initiating imports. No surprise that farmers across India have come to realise that governments are more concerned with the well-being of the urban consumer and it is they who are bearing the cost of low food prices. They are also starting to understand that unless they prove their strength as a community by taking to the streets and marching to cities, as well as electorally, little will change.

That rural anger can cause noticeable political damage was proved beyond doubt when the ruling Bhartiya Janata Party performed poorly in rural areas in the Gujarat elections. Ground reports from the current phase of state elections suggest that farmers in Madhya Pradesh, Chhattisgarh and Rajasthan have set the tone of electoral discourse in these states. Simultaneously, they are also setting the stage for the general elections next year to remind governments that there is a political cost to ignoring rural India.

On the other side, opposition parties, in a hurry to ensure political gains, are promising sops that may not help farmers in the long run. First, loan waivers can only be a temporary palliative which disproportionately benefits medium and large farmers, leaving out marginal growers who are more exposed to informal loans. Second, it is practically impossible for the government to procure all crops at minimum support prices (MSPs). The way out is a mix of different approaches: support prices, direct income transfers and freeing up agricultural markets from the clutch of the powerful trader lobby.

Take the case of pulses. It makes sense for the government to procure directly from farmers at MSP and, instead of hoarding and resorting to open market sales at a later date, introduce it under the subsidized public distribution system. This will not only help farmers growing pulses with better prices, but also improve India’s terrible nutritional indicators—about 38% of our under-five children are stunted. Moreover, robust procurement of pulses can wean farmers away from input intensive and water guzzling crops such as rice and sugarcane.

The other area that needs urgent reforms is agricultural markets. Currently trader lobbies in states determine prices non-transparently and at an enormous cost to farmers. The Union government’s attempt to free up markets for farm produce has failed to show results. Even farmer organizations have not realized the importance of a competitive and pan-India national market. For instance, farmers in election-bound Madhya Pradesh are now selling garlic at around ₹7 per kg, while half a day’s distance away in Delhi, consumers are paying ₹80 per kg. That’s a staggering 1,100% mark up. What stops a jobless youth from buying garlic cheap in Madhya Pradesh and selling it at a premium in Delhi? The current set of regulations, since one needs a licence in Madhya Pradesh to purchase the garlic, and local traders resist new entrants who tend to drive up wholesale prices and cut their margins.

Reducing the wedge between wholesale and retail prices will benefit both farmers and consumers, and help mitigate the policy dilemma as to how to pay farmers a better price while keeping food inflation in check.

To resolve the problem, the Narendra Modi government drafted a model marketing act and launched an electronic platform for trade in farm produce. But beholden to trader lobbies, states are yet to reform markets in true spirit. Wholesale markets are replete with entry barriers like prohibitive licence fees. The Union government has to deploy the political capital to reform farm markets with the same zeal as it did while implementing the goods and services tax.

The other pressing problem faced by the Indian farmer is that they are often at a loss about what to plant without any useful market intelligence. They take the previous year’s prices for a particular crop as a market signal, not where prices will be when they harvest their crop. When in mid-2016 pulses were retailing at a high of ₹200 per kg, following consecutive years of drought, farmers raised crop area to such an extent that production increased by over 40% in a year. Wholesale prices crashed soon after. Even today, different agriculture departments in states promote cultivation of perishables like tomatoes simultaneously, pushing farmers with incentives, clueless of any crash in market prices due to a sudden spurt in production.

The Union agriculture ministry can play a role here similar to what the US Department of Agriculture does for its farmers by providing timely market intelligence services. But despite the Prime Minister’s call to double farmer incomes which seems increasingly elusive due to the price problem, the ministry remains preoccupied with raising production and setting historic records, unable to shake off the ghosts of the food-insecure 1960s.

The agriculture sector is changing rapidly and requires proactive policy management to be able to maximize benefits for all stakeholders.

How can the government address problems in the farm sector? Tell us at views@livemint.com

1.2. Indians, more than others, think their work is useless

Livemint, 6 dec. 2018, Nikita Kwatra

Indians are particularly pessimistic about their jobs, with around 12% considering their work socially useless. This is one of the highest proportions in the world behind only Japan, Poland and Israel

Everyone complains about their jobs, but how many consider their work useless? A new study by Robert Dur of Erasmus University Rotterdam and Max van Lent of Leiden University draws attention to this less explored aspect of employment and throws up an estimate on the number of people who do not find their jobs worth doing.

The two analyse data from more than 100,000 workers across 47 countries and find that, on an average, 8% of the world’s workers consider their jobs socially useless, while 17% seem doubtful about the social usefulness of their jobs.

Indians are particularly pessimistic about their jobs, with around 12% considering their work socially useless. This is one of the highest proportions in the world behind only Japan, Poland and Israel.

Interestingly, the authors find a higher share of people finding their jobs meaningless in the private sector compared with the public sector. About 11% of those employed in private businesses consider their jobs useless, significantly higher than the 3% in the public sector. Within the private sector, more workers consider their job socially useless when their work involves routine tasks or they work in finance, sales, marketing, and public relations departments. According to the authors, this could be because many of these jobs involve harming people more than helping them.

On the other hand, public sector jobs in education, health and the police are rarely perceived as socially useless.

The authors suggest that Karl Marx’s theory of alienation, which holds that division of labour into highly specialized parts can make meaningful work look meaningless, partly explaining why some professionals find their jobs utterly useless.

Another potential reason for perceived uselessness could be labour hoarding, when firms hire more workers than necessary during recessions resulting in ‘on-the-job underemployment’.

2.1. An economist who never pulled his punches

Livemint, 20 Nov. 2018, Vivek Dehejia

T.N. Srinivasan is one of a very select group of economists who could take satisfaction in knowing that they played a consequential, intellectually grounded role in shaping an important event in world history—in this case, India rejoining the global economy in 1991

It is with great sadness that we learned of the passing of economist T.N. Srinivasan—T.N. as we all knew him—on 11 November in Chennai. The moving obituary by Niranjan Rajadhyaksha in this newspaper (“An economist for all seasons”, 12 November) conveyed his intellectual accomplishments and his impact both on the discipline of economics and on economic policy in India, so I need not repeat those here in any detail.

I will, however, reiterate that T.N., along with Jagdish Bhagwati and Padma Desai, deserves the lion’s share of credit for developing the intellectual consensus around economic liberalization well before the 1991 economic reforms. Indeed, it is no exaggeration to say that they laid the groundwork for 1991 and made it possible. While it may be unfashionable to say so today, I firmly believe that ideas and the individuals who articulate them do matter in shaping public policy outcomes and, in this, T.N. played a hugely important part. He is one of a very select group of economists who could take satisfaction in knowing that they played a consequential, intellectually grounded role in shaping an important event in world history—in this case, India rejoining the global economy in 1991.

My first and vivid recollection of T.N. was at an Asia Society event in New York, sometime shortly after the 1991 economic liberalization. Then Union finance minister, Manmohan Singh, was giving a talk, and my Columbia classmate, Pravin Krishna, and I were in the audience, as was our thesis supervisor, Bhagwati, Srinivasan, and other luminaries. In the Q&A following the talk, T.N. got up and asked Singh a tough question, no mere soft ball, as you might have expected from one of the intellectual architects of the liberalization that the finance minister was presiding over.

This was characteristic of T.N. He could be blunt and direct when he thought it necessary and he never pulled his punches because the interlocutor happened to be a friend or someone in power (or, in this case, both). Economists today could learn a lesson from this.

My next and more personal recollection was of a Festschrift conference at Columbia in honour of Bhagwati in late 1994 or early 1995, a time when I was in the throes of wrapping up my doctoral dissertation. The central chapter of my dissertation, on the then raging debate on whether economies in transition from central planning to capitalism and markets should do so with a “big bang” or via gradualism, was a theoretical model that deployed a branch of mathematics known as optimal control theory. As this was not a type of mathematics that my primary supervisor, Bhagwati, was familiar with, he wanted me to get the green light from T.N. that my mathematical analysis was correct—recall that his early training was in mathematics and statistics, as was the case with so many of that generation who ended up becoming economists.

Thus it was that, on the sidelines of the conference, I sat with T.N. and went over my equations with him. He was generous with his time and made some very helpful observations on how I might better present and explain some of my findings—and, to my great relief, he gave a thumbs up to my maths.

My next interaction with T.N. came about a decade later, during a conference organised by economist Elias Dinopoulos, another Bhagwati student at Columbia, at the University of Florida. As it turned out, the highlight was the result of a sudden and unexpected ice storm that hit the American south, and caused Atlanta airport to shut down. Some of us trying to fly out of Gainesville, Florida, reached the airport, only to be told that we were re-booked the next day. Thus it happened that a few of us—Krishna, another Columbia classmate, Devashish Mitra, and T.N., got together for an impromptu dinner that evening. T.N. was in especially gregarious form and we heard priceless anecdotes of the early days of the Planning Commission, the drama surrounding the 1991 economic liberalization, and, of course, some of the usual gossip about other economists who shall remain nameless.

My latest and, sadly, as it was to turn out, last meeting with T.N., was at a dinner hosted by Reserve Bank of India (RBI) governor Urjit Patel following the C.D. Deshmukh Memorial Lecture at the RBI in April 2017, given on that occasion by economist Willem Buiter. Both Buiter and Srinivasan, along with economist Kenneth Kletzer, had supervised Patel’s doctoral work at Yale. And so there was much discussion, among other topics, of the great economics tradition at Yale, in its own way as illustrious as the other great Ivy League economics departments, notably Harvard, Columbia and, more recently, Princeton.

What stands out, though, from that event, is a very personal recollection. While I knew that Srinivasan was called T.N. by just about everyone, I maintained the old-fashioned Indian attitude of respect for elders and called him “Professor Srinivasan”. He responded right away: “Please, call me T.N.” I recall how incredibly gracious and warm he was, inviting me to visit him in Chennai sometime. I remembered, in particular, that he made it a point to be in Chennai every December for the music season, and expressed the hope that I could join him there for a concert sometime. Sadly, that visit never happened, and so the Mumbai dinner proved to be my last contact with this great economist and great human being. RIP, T.N.

Vivek Dehejia is resident senior fellow at the IDFC Institute, Mumbai. Read

2.2. The RBI and the flip flop finance ministry

Livemint, 29 Nov. 2018, Rohit Prasad

What is astonishing is that a government which had earned plaudits for institutionalizing a new monetary policy framework with a clear and transparent mandate for the central bank is now involved in dismantling that very edifice

Many argue that there is an inherent contradiction between accountability of the central bank to the executive and its autonomy from the finance ministry. In this context, the macroeconomic literature on ‘time consistency of policy’ and the game theoretic literature on ‘sub-game perfect equilibria’ has much to say.

Let us examine a two-stage game in which workers’ unions set wages in stage 1—high wages based on high inflation expectations, or low wages based on low inflation expectations. The government sets interest rates in period 2 resulting in an actual level of inflation that may be lower or higher than the expected inflation. This setup encapsulates the truth that many decisions have to be made in anticipation of policy rather than with full knowledge of it.

If the unions set a high wage rate, then costs are likely to increase across the board and result in high inflation. Hence, the government is forced to keep interest rates high. But if the unions set a low wage rate, then the government has the choice of setting a high or low interest rate. In all, there are three possibilities—low wages and low interest rates, low wages and high interest rates, and high wages and low interest rates. The first possibility results in higher-than-expected inflation, while the second and third possibilities result in an inflation rate that matches expectations.

Governments tend to favour the possibility with low interest rates and low wage rates because that tends to reduce unemployment levels, the interest burden of the government and the fiscal deficit. According to the political business cycle theory, this tendency of the government gets exacerbated on the eve of elections. Hence, when unions choose low nominal wage rates, the government will choose low interest rates resulting in low real wages. This is the best outcome for the government and the worst outcome for the workers. Anticipating this, workers will negotiate higher wages in stage 1. This results in a high-cost economy where output and employment levels are no greater than they would be if workers had chosen low wages and the government had chosen a high interest rate, but inflation is much higher. The situation is suboptimal for all concerned. This game has one other Nash equilibrium in which unions choose low wages in stage 1 and the government keeps interest rates high in stage 2. This equilibrium not only gives both the government and workers a higher payoff than the equilibrium described previously, but also maximizes overall social welfare, described as the sum of the payoffs to the workers and the government.

However, the operationalization of this equilibrium requires the government to credibly commit to keeping interest rates high in stage 2 (after unions have irreversibly committed to low wages in stage 1), even though it is not in its short-term interest to do so. This is the ‘time inconsistency’ problem, referred to as ‘sub-game imperfection’ in game theoretic literature.

Ceding authority to an autonomous apolitical central bank is an institutional mechanism that allows the government to make a credible commitment to a conservative monetary policy. This institutional fix enables the socially optimal outcome to be achieved and results in the maximization of the welfare of the citizens to which the government is accountable.

There are, of course, counter-narratives that question the need for central bank autonomy. Repeated interaction between citizens and the elected government could resolve the time inconsistency problem without an independent central bank, provided the government is far-sighted and so long as there is a positive probability that the government will get re-elected. Further, the impact of fiscal policy on inflation and of monetary policy on output growth suggests that a measure of coordination needs to be achieved between the fiscal and monetary authorities.

But what is astonishing is that a government which had earned plaudits for institutionalizing a new monetary policy framework with a clear and transparent mandate for the central bank is now involved in dismantling that very edifice. The ‘partisan theory’ enunciated by Hibbs in 1975 postulates that left-leaning governments tend to be more focused on employment, while right-wing governments tend to be more cognizant of the adverse impact of inflation on the savers in the economy. This suggests that if severe pressures on the Reserve Bank of India (RBI) were to be felt, they should have come in the previous United Progressive Alliance government, not in the current dispensation.

Let there be no doubt on the magnitude of the demands the government is making. As enunciated by Ronald Hasse, central-bank independence relates to three areas in which the influence of government must be either excluded or drastically curtailed. Personnel independence refers to the influence the government has in appointment procedures. Financial independence refers to the ability given to the government to finance government expenditure either directly or indirectly through central-bank credits. Policy independence refers to the elbow room given to the central bank in the formulation and execution of monetary policy. The current demands, which include the appropriation of RBI reserves to ease the fiscal burden, the relaxation of credit norms on SMEs, and the easing of capital adequacy requirements, blow even the veneer of financial and policy independence of the central bank out of the water.

A certain measure of tension was only to be expected on election eve. But the magnitude of the current flip flop borders on the schizophrenic.

Rohit Prasad is a professor at MDI, Gurgaon. Game Sutra is a fortnightly column based on game theory. Read Rohit’s previous Mint columns at www.livemint/gamesutra

3.1. India's solar capacity at 27.4 GW till Sept-end'

PTI, Nov. 14, 2018

New Delhi: The country's total solar energy capacity stood at 27.4 GW, including 23.2 GW utility-scale solar, 3.4 GW rooftop solar and 0.8 GW off-grid solar, at the end of September, according to a report released on Tuesday.

Total installation in 2018-19, however, is expected to decline by 55 per cent to 4.1 GW over the previous year and well short of the Ministry of New and Renewable Energy's annual target of 16 GW, the report by BRIDGE TO INDIA said.

The country added total utility-scale solar capacity of 1.2 GW in July-September, taking capacity addition to 1.9 GW in the first half of 2018-19.

These numbers are down 43 per cent and 44 per cent over respective periods a year ago. Leading developers to add capacity in the quarter were Softbank (400 MW) and Acme (300 MW). As much as 55 per cent of new capacity addition came up in Rajasthan, it said.

Speaking about the slowdown, Vinay Rustagi, Managing Director, BRIDGE TO INDIA, said, "Indian solar market has grown spectacularly over last four years but is struggling to sustain because of policy and execution challenges. The slowdown is worrying for all stakeholders.

"We are witnessing increasing volatility in tender issuance, auctions and capacity addition because of poor coordination between different government agencies and constraints in transmission capacity and land acquisition."

He further said, "The MNRE has not helped matters by failing to decisively address GST and safeguard duty issues. Arbitrary ceiling tariffs and poor tender design have resulted in tenders getting routinely cancelled and/ or undersubscribed.

"As a result, gap between tenders issued and auctions completed has been widening for a year. Our revised best-case estimate for solar capacity by March 2022 is 67 GW, well short of the 100 GW target unless decisive remedial steps are taken immediately.

However, the study said that one bright spot in the solar market is rooftop solar, which is growing at a robust 70 per cent annually. Unaffected by policy uncertainty and not reliant on land or transmission infrastructure, this market is benefiting from sharp fall in module prices -- down 30 per cent in the past nine months, it added.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

3.2. 2018 a sobering year for renewable energy in India

Livemint, 27 Nov. 2018, Tanya Thomas and Malvika Joshi

The number of new renewable energy projects and rock-bottom power tariffs impacted India’s renewable energy sector in 2018

Mumbai: The renewable energy sector in India has had a sobering year in 2018 with the number of new projects slowing down and investors finding that the sector is generating both lower power and financial returns than they expected. A Crisil report in August projected solar installations in FY19 would fall to 7,400 megawatts (MW) from a decadal high of 9,363MW in FY18. The pipeline of projects has weakened as well, with the Solar Energy Corp. of India Ltd looking to cancel bids of 2,400MW this year as tariffs were above its expectations while aggressive bidding by some firms to build portfolios has started to squeeze returns.

“It’s not a great time for those who have invested in solar energy right now,” an industry executive said. “We’re seeing some investors let their top teams go for investments being far below expectations.”

In the past month alone, three top executives in the renewable space have stepped down: Sanjay Chaturvedi, chief executive officer of renewable energy at Macquarie Group; Vinay Kumar P., managing director and chief executive (renewables) at Brookfield Asset Management; and Rohit Modi, CEO at Essel Infra and Smart Utilities.

In May, Mint reported that Essel Infra is in talks with various investors to sell its solar power plants. In October, it concluded a deal to sell four power transmission lines to Edelweiss-backed Sekura Energy for ₹6,000 crore. Mint has learnt that Brookfield is currently on the lookout for a new head of India’s renewable practice.

Mint has reported in the past that Macquarie is in talks to buy assets from ReNew Power Ventures Ltd and from Canadian Solar.

Spokespersons for Essel Infra, Brookfield and Macquarie declined to comment for this story.

“All of the renewable space is facing trouble,” said the person quoted above, asking not to be named. “We are seeing acquisition deals falling through in the solar sector this year. There has been no respite from 18% GST (goods and service tax) on modules while interest rates are on the rise and squeezing margins for developers.

“Many investors came into renewables expecting higher returns, quick Ebitda growth, but none of that has played out yet,” he added. Ebitda stands for earnings before interest, taxes, depreciation and amortization, and is a measure of profitability.

A top official at an infrastructure-focused fund operating in India said the number of new projects coming up has slowed down considerably, as a result of which there is too much money chasing too few projects, leading to excessive competition among investors. He said even though the reasons for senior executives stepping down could vary across organizations, the subdued performance of the sector is certainly a common thread.

“Exits have been difficult as markets are volatile. Renewable energy firms, although keen on more projects, are taking a cautious approach. Rupee has depreciated and imports have become more expensive and at the same time, tariffs have gone down steeply,” he said.

A recent Mercom report said solar installations declined for the first time in Q2 FY18 after four consecutive quarters of growth. In July-September, solar installations were at 1,599MW, a 52% decrease when compared with 3,344MW installed in Q1 2018. Installations were also down about 21% year-on-year (y-o-y) compared with 2,025MW installed in Q2 2017. The decline has been attributed to uncertainties around trade cases, module price fluctuations, and PPA (power purchase agreement) renegotiations after record low bids that contributed to a tender and auction slowdown in 2017. All of this resulted in a weaker project pipeline for 2018.

“For a lot of projects in renewables, the valuations (by a private equity investor) was based on Ebitda-growth based strategies,” a senior executive at a PE firm said. “You compare this to current returns from the public market and then decide on whether to make the investment. Very often, there isn’t a fundamental analysis done on the renewable project itself. There is no data set available, on say, past generation from the project. The investor takes on inordinate risk in investing in such projects.”

The Indian government has set an ambitious target of generating 100GW of solar power by 2022 from the existing installed capacity of 21.65GW. Tariffs for electricity produced at utility-scale solar farms touched an all-time low of Rs 2.44 per kilowatt-hour earlier this year, but have since risen from those levels. A report from ratings agency Crisil released in August predicted that India would fail to meet its renewable energy target.

4.1. What the Odisha Land Rights Act can teach us

Livemint, 20 Nov. 2018, Niloufer Memon and Soumitra Pandey

It is rooted in the mission of turning titled slums to liveable habitats, so beneficiaries have access to better sanitation and credit

On 16 October 2017, the Odisha state government ordained the Odisha Land Rights to Slum Dwellers Act, 2017. A historic legislation in many ways, the Act seeks to grant land rights to 200,000 slum households and enable them to access better healthcare, education and housing services. It is rooted in a broader mission of turning titled slums to liveable habitats, so beneficiaries have access to better sanitation and credit and are able to lead better lives. Well drafted and sensitive to the real needs of slum dwellers, the legislation is both a pioneer and a champion for the rights of those residing in informal settlements.

However, well-intentioned legislation is hardly newsworthy in India. Despite government support and political will, legislations fail to achieve impact because of implementation challenges. Implementation is trickier for programmes that involve multiple government stakeholders. Navigating complex procedures coupled with limited capacity are perhaps the biggest barriers to translating policy into impact. Given its political context, land sits at the apex of such complexity. Nevertheless, Odisha’s land rights legislation is taking on these challenges and is striving to meet the deadline of allocating the certificate of land rights to 200,000 households at the earliest.

Allocating land rights to eligible households is a complex process. It involves identifying eligible slums, mapping land, validating demographic details and finally granting titles. Further, the Act by design elevates the voice of the community by stipulating the formation of slum dweller associations (SDAs) in each slum, which comprise community members who actively participate in the process and compile the final list of eligible slum households. The state government has recognized that executing such a feat will require support from external stakeholders. The implementation of this Act has therefore been a multi-stakeholder effort that reflects a strong collaborative approach.

The state government’s department of housing and urban development, in partnership with Tata Trusts, has led the implementation process. While Tata Trusts are the project managers on the ground, different partners are responsible for activities within the realm of their expertise. Technical partners like the Spatial Planning and Analysis Research Centre, Transerve and Surbana Jurong deploy drone surveys to map land and create slum boundaries. They receive strategic direction and guidance from Omidyar Network. Twenty-four local non-governmental organization (NGO) partners carry out household surveys to capture demographic data to establish title eligibility. NGOs also create community awareness and formulate the SDAs. Local government stakeholders facilitate the convening of community members and add method and protocol to the process. They also facilitate access to physical maps from revenue departments for determination of land eligibility. Importantly, the Act advocates for the community as the most critical stakeholder and all partners work in tandem to uphold that tenet. Community awareness, buy-in and participation are accounted for all through the process to ensure that democracy is not lost in the midst of following legal processes.

This collaborative approach has brought together unique strengths and, in that sense, the implementation has been able to embody best practices from some of the most sophisticated land titling programmes globally. However, despite being the holy grail of the development sector, collaboration, especially with multiple stakeholders, comes with its own set of challenges. Learnings from the ground have reasserted the importance of three critical mechanisms. First, strong accountability frameworks. The legislation is unique in its determination to stick to a time frame. Accountability lies at the core of such commitments and establishing these frameworks that outline accountability and chain of command will ensure that issues can be resolved efficiently. Accountability frameworks also incorporate decision-making roles and empower stakeholders to effectively deal with crises.

Second, a critical need to invest upfront on alignment and on creating tighter management protocols. Given the novelty of the programme, there is no existing template to ensure success. However, clarity in laying out roles, management structures, and creating standard operating processes in parallel will not only ensure a smoother process but also serve as a credible public good to other states or programmes with similar aspirations. We have been witness to many successful multi-stakeholder programmes and absorbing the best practices that emerge here can help in creating a stronger guide.

Third, a mechanism to course correct and define change management protocols along the way. There is a need to both capture and utilize learnings that will arise from this exercise to further fine-tune the implementation process. By defining in-process measurement metrics, capturing progress, distilling learnings and adopting a strong feedback loop, the Act will be able to create a template that other states can learn from.

The Odisha government is on the cusp of a revolution with the potential to not only better the lives of one million slum dwellers but also the ability to set an example for other governments who believe that access to land and access to dignity are not that far apart.

This is the first of a two-part series.

Niloufer Memon and Soumitra Pandey are with the Bridgespan Group. Views expressed are personal.

4.2. India’s maternity laws need serious tweaking

Livemint, 3 Dec.2018, RituparnaChakraborty

Shoddy legislation remains the main reason behind India’s persistently low female labour force participation rate

India will never put poverty in the museum unless we raise women’s labour force participation. The Maternity Benefit bill last year had its heart in the right place but unintentionally led to higher caution on the part of the employers, leading to lower levels of hiring of women. The government has been responsive to this criticism and proposed some tweaks to the policy. But the proposals need to be braver and bolder.

Let’s recap. When the provisions of the amendment to the Maternity Benefit Act came into force effective 1 April 2017, it was lauded by industry as a progressive step towards improvement in securing the employment rights of women. TeamLease conducted a study in May on the effects of the amendment on women’s employment and on representation of female workforce in India by surveying employers across 10 key sectors.

According to the study, there could be significant job losses for women in India in the short to medium term. India offers one of the world’s most generous maternity leave policies. But India is also probably the only country where the entire financial burden of the maternity leave is supposed to be borne by the employer. In most countries, the cost of maternity leave is shared across the government, employer, insurance and other social security programmes (Singapore—eight weeks employer and eight weeks public funds; Australia and Canada—100% public funds; France—social insurance scheme; Brazil—mixed contribution from the employer, employee and government).

A few remedial measures suggested in the TeamLease study for addressing and mitigating this issue include cost sharing between employer and government by way of reimbursement once the employer furnishes the proof of payment of maternity leave wage, slab-based tax rebates offered by the government on actual maternity wages paid, setting up a government insurance scheme to pay for maternity wages, and leave sharing in the form of 13 months maternity and 13 months paternity to negate any possibility of gender bias.

On 12 September, the ministry of labour and employment proposed changes that have five drawbacks. First, wages equivalent to only seven weeks shall be reimbursed by the government of India to employers who employ female workers and provide maternity benefits of 26 weeks’ paid leave. Second, to enable an entity to avail the incentive, the female employees working in the entity concerned should be earning wages less than ₹15,000. The Employees’ State Insurance (ESIC) Act mandates that all employees earning wages of ₹21,000 or less shall be covered under the Act. But the proposal to consider employees earning wages of ₹15,000 or less, with the conditions attached to it, does not seem justifiable. This is owing to the fact that the women earning wages of ₹21,000 or less but are employed in non-implemented areas are not entitled to the benefits and the employer is forced to bear the entire cost. Yet another important factor to be borne in mind is that large number of female employees, especially in information technology, information technology-enabled services, pharmaceutical, logistics, banking, financial services and insurance, and service sectors, are paid wages of ₹15,000 or ₹21,000 or higher per month.

The third drawback is that the female worker has to be a member of Employees’ Provident Fund Organization (EPFO) for at least one year and must not be covered under ESIC. The conditions set forth above lack logic or reasoning considering a) entitlement to maternity benefits kicks in once an employee completes 80 days (less than three months) of continuous service, and b) an employee is entitled to the benefits under the proposed incentive only if she has been a contributing member of EPFO for at least a year and is not covered under ESIC.

Fourth, the added provisions such as crèches with certain prerequisites (caretakers, visits by mothers, suitable location) that are mandatory for commissioning mothers lack clarity. Last, the Maternity Benefit Act, 1961, as amended from time to time, is a state government legislation, implying thereby that state governments may amend the Act from time to time to extend benefits higher and incremental to the benefits recommended by the central government.

The seven weeks reimbursement limit must be extended to a minimum of 13 weeks. The period of wages of 13 weeks could also stand to be extended to all female employees who are not covered under ESIC, without any preconditions on wage ceiling or membership of the provident fund organization for one year, etc. Further, the government must set up crèches with all the attendant facilities proposed in the Maternity Benefit (Amendment) Act, 2017, and allow employees eligible for such benefits to use these crèches at a very nominal cost. Bringing the Maternity Benefit Act under central legislation will also help maintain uniformity.

Such changes in the Act will likely encourage employers to provide employment opportunities to women without any gender discrimination and thus bring women into the mainstream of India’s progress. Hiring and employee retention will no doubt improve as well. With such active steps, we have genuine hope of raising India’s overall female labour force participation from the present 26% to a competitive level like China’s 60%.

Rituparna Chakraborty is co-founder at TeamLease Services Ltd and president at Indian Staffing Federation.

5.1. Bankrupt firms in India to get a new and quick rescue option

Livemint, 26 Nov. 2018, Gireesh Chandra Prasad

Under the so-called ‘pre-packaged’ bankruptcy schemes, creditors and shareholders will approach a bankruptcy court with a pre-negotiated reorganization plan, as prevalent in countries such as the US and the UK

New Delhi: The Union government is set to introduce a quick corporate rescue option, which will be finalized mostly in boardrooms than in courts, as it seeks to avoid prolonged and costly legal battles over the resolution of bankrupt companies, said a top government official. Under the so-called “pre-packaged” bankruptcy schemes, creditors and shareholders will approach a bankruptcy court with a pre-negotiated corporate reorganization plan, as prevalent in countries such as the US and the UK.

With this step, the government aims to cut down on litigation and ensure that deadlines are met. A time-bound resolution of bankrupt assets is crucial as it would help prevent any erosion in their value. A consensual approach to corporate rescue will also save cost.

Corporate affairs secretary Injeti Srinivas said pre-negotiation among stakeholders under the proposed scheme has to be done in a transparent way. “We have to see if we need to recognize pre-packaged bankruptcy plans in the law or if it is something that we can do even now. We will ask the Insolvency and Bankruptcy Board of India (IBBI) to look into it,” Srinivas said in an interview.

IBBI is responsible for implementing the Insolvency and Bankruptcy Code (IBC).

Under the existing regime, companies or their creditors move a bankruptcy tribunal to explore future options for the defaulting entity, which receives protection for a maximum of 270 days from any recovery of dues. Litigation during this period, a frequent event in big cases referred to tribunals by banks, delays the resolution.

The National Company Law Tribunal (NCLT) has in many cases excluded the time lost in litigation from the 270 days available for all parties to agree on a corporate rescue plan to avoid viable companies from slipping into liquidation. India’s new bankruptcy regime, which became fully operational by December 2016, has so far led to the resolution of about 60 cases.

Experts said that under the pre-packaged scheme, creditors and shareholders would move the bankruptcy court with an agreed scheme so that it gets sanctity and becomes enforceable.

Without the court’s approval, a pre-arranged scheme remains just a commercial contract and enforcement becomes tricky if one of the parties eventually backs out.

“Pre-packaged resolution schemes are prevalent in developed insolvency jurisdictions. It can significantly reduce the time taken as well as the intricacies of the resolution process. However, this may require an amendment to the law,” said Sumant Batra, managing partner and head of insolvency practice at law firm Kesar Dass B & Associates.

Many large cases of default referred to bankruptcy tribunals, prodded by the Reserve Bank of India, have witnessed intense litigation as major shareholders resisted losing control of their prized assets and potential investors either sought to protect their rights or get their rivals disqualified.

Bad loans worth about ₹10 trillion have crimped the ability of India’s state-run banks to lend to new projects. Allowing pre-packaged bankruptcy deals could sidestep the difficulties associated with lengthy court proceedings for bankrupt businesses.

“This is something for which the time has come,” said Batra.

5.2. What can India teach us about start-ups?

Livemint, 29 Nov. 2018, Ejaz Ghani

Instead of chasing large, mature firms from other locations, India would do better to focus on its small enterprise sector

The role of entrepreneurship and start-ups in job creation has a long intellectual tradition. While the great giants of economic history recognized the link between start-ups and job creation, controversies remain. Do small or large enterprises contribute more to job growth? Do small entrepreneurs represent a “push” entrepreneurship, where entrepreneurs start a business out of necessity, rather than “pulled” in by great opportunities? Why do some cities attract more entrepreneurs? Are there big differences in business drive across male- and female-headed enterprises? What lessons can be drawn from India’s experience with entrepreneurship and start-ups?

Empirical evidence has shown that there is a very strong link between start-ups, especially small enterprises, and job growth in India (see ‘Who creates jobs’—Ejaz Ghani, William Kerr, and Stephen O’Connell, World Bank). There is a strong upward relationship between employment growth and the number of start-ups.

Evidence also suggests that the rate of new start-ups in India is too low, given the youth bulge, and its stage of development. A comparison of the new business registration density in India with the rest of the world confirms that the number of start-ups in India is low, although it is trended upwards and has improved. Demographic dividend and youth bulge in India has increased the need for a rapid increase in the number of start-ups to create more jobs. Nearly 1 million new workers will join the labour force every month for the next two decades. This is equivalent to the entire population of Sweden joining the labour force every year. So, the rate of start-ups need to increase to cope with India’s demographic trends.

Entrepreneurship and the rate of start-ups are more fluid in India compared to an advanced economy such as the US. This may be due to India being at a much earlier stage of development compared to the US. There is also huge heterogeneity in the spatial distribution of start-ups within India. What explains heterogeneity across cities and states? Anticipation of abnormal returns is not the key driving force, and demographics have limited explanatory power. The two key factors that predict the start-up rate are local education levels and the quality of local physical infrastructure. These patterns are true for both manufacturing and services.

Human capital, especially education, is more important for start-ups. Technology penetration, as measured by the number of internet users, is also strongly associated with more start-ups in services. Education improves skill and spreads ideas faster and wider. There are well-understood limits to the pace with which countries can accumulate physical capital, but the limitations on the speed with which the gap in human capital can be closed are less clear. Because of the strong link between human capital and entrepreneurship, policymakers should remove any constraints that restrict the growth in the quality and quantity of local educational institutions.

Physical infrastructure is more important for manufacturing than services. It is essential for supporting a modern economy. Goods and services cannot be produced and delivered without roads, electricity and internet. And moving people is as important, if not more important, as moving goods. Investing more in roads, bridges and schools is an essential part of developed economies. This is even more fundamental in developing countries, where there’s much more to be done than in advanced economies.

India’s employment growth in the manufacturing sector has displayed two under-appreciated facts. First, much of the employment growth has come in the form of small enterprises, accounting for over 80% of jobs in the manufacturing sector. Second, the rate of start-ups in the small and medium enterprises (SMEs) sector has increased in the tradable sector, but contracted in the non-tradable sector (see ‘Informal Tradable and Employment Growth of Indian Manufacturing’—Ghani, Kerr, Segura, World Bank). While it may not be surprising that manufacturing employment growth has followed from improved connectivity and trade reforms, the degree of imbalance towards SMEs is too strong to ignore. Globalization has promoted the rise of SMEs.

Reflective of its manufacturing prowess, Gujarat has shown the most robust growth across various dimensions of SME growth. SME growth is much stronger in the leading states, perhaps twice the rate of that in lagging states. However, the variation across states is much less than the differences observed between tradable and non-tradable industries.

What about women-headed new enterprises? Despite its recent economic advances, India’s gender balance in entrepreneurship and start-ups remains among the lowest in the world. Empirical results suggest that inadequate infrastructure affects women entrepreneurs more than men, because women are often responsible for a larger share of and, often, more time-consuming activities. In particular, transport infrastructure and paved roads within villages play an important role. Travel in India can be restrictive and unpredictable, and women face greater constraints in geographic mobility imposed by safety concerns and social norms. In addition, better electricity and water access may reduce the burden of women in providing essential household inputs for their families and allow for more time to be directed toward entrepreneurial activities.

There are several policy levers that can be used to increase the number of start-ups in India. Instead of being preoccupied with firm-chasing and attracting large mature firms from other locations, think small. Small enterprises are India’s strength, not its weakness, as they create more jobs, and the large number of SMEs has positioned India well to cope with potential twists and turns in globalization, rising inequality and disruptive technology. Job growth is predicted by higher concentrations of small and young establishments. Think small.

Ejaz Ghani is lead economist at the World Bank.

- AGRICULTURE, FISHING & RURAL DEVELOPMENT

6.1. UP Government will inaugurate dairy plants in Kannauj, Kanpur in December

PTI, Nov. 20, 2018

Mathura: The UP government will inaugurate two dairy plants in Kannauj and Kanpur in the first week of December, state minister Laxmi Narayan Chaudhary has said.

Efforts are on to get Kannauj and Kanpur plants inaugurated by Prime Minister Narendra Modi, the dairy development minister told reporters here.

The Kannauj plant, which will be cow milk based with an investment of Rs 120 crore, will have a capacity of 1 lakh litres per day; while the Kanpur plant is coming up for an investment of Rs 180 crore and would cater to mixed milk need of the people, he stated.

Kanpur plant would process 5 lakh litres milk daily, Chaudhary added.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

6.2. Smaller FMCG firms race ahead, put bigger rivals on notice

Livemint, 26 Nov. 2018, Ravi Ananthanarayanan

The rapid growth in revenue of local and regional FMCG companies can throw up a few risks for their national peers

The September quarter saw smaller FMCG companies growing at 38% versus 15% for the national firms.

When the goods and services tax (GST) was rolled out in July 2017, one question was whether large fast moving consumer goods (FMCG) firms would gain at the expense of the unorganized sector. While it may take a few years before one can have a certain answer, managements of most large listed firms have so far not called out any significant changes on this front.

But an answer to this question could lie elsewhere. Small and regional companies are faring much better than the larger ones in recent quarters, according to retail sales data of the FMCG sector, provided by market researcher firm, the Nielsen Co. While the top 50 firms contributed to 60% of revenue in the 12 months ended September with a healthy 10.6% growth, the tail-end of 48,000 companies grew by a much higher 18.5%. What’s even more interesting is that this growth differential has risen in the past few quarters (see chart). The September quarter saw smaller companies growing at 38% versus 15% for the national firms.

This raises a question of whether it’s not the large national firms but the regional and local brands that are taking share away from the unorganized sector. While Nielsen has not commented on this aspect, it mentions that the presence of regional companies is chiefly in the packaged food categories. It also says that existing companies are growing their revenues. That supports the theory that they are taking share from those below them.

While regional companies appear to have adapted to the GST regime quickly, they may also have benefited from the spread of modern retail stores in smaller markets. Modern trade stores in metro locations increased by 18% in the September quarter over two years ago. But growth was higher elsewhere, with the smaller towns (population less than 100,000) seeing a 58% increase. Regional companies would have readily supplied to these stores, tapping into the higher growth in these store formats.

What implications does this trend have for listed firms, especially if it sustains in the long run? As of now, everybody is growing, so the impact is not much. But large firms will be keeping a close watch. The rapid growth in revenue of local and regional companies can throw up a few risks. Firstly, their growing size could make them more aggressive competitors in pockets. Stiff competition can pose a risk to national brands, especially if it is widespread in most markets. Secondly, e-commerce and modern trade will continue to expand in smaller markets, giving these companies a better distribution reach, despite not having scale benefits.

Lastly, when these companies reach a certain revenue mark, or growth hits a ceiling in their core markets, they could spread to adjacent regions and even go national. Capital may not be a hindrance, as the private market has shown its eagerness to fund such brands. This can then turn into a key risk for national firms. Of course, it also presents an opportunity for the national firms to grow through acquisitions.

Investors will do well to watch this developing trend, as it could pose a risk to valuations at some point.

7.1. Take heart, mustard oil and olive oil is healthy for you

Livemint, 21 Nov. 2018, Teena Thacker

US FDA has found credible evidence to support that consuming edible oils high in oleic acid, such as mustard oil and olive oil, may reduce risk of heart diseases

New Delhi: Consuming mustard, olive or canola oil can help keep heart diseases at bay, the US Food and Drug Administration (FDA) has said. The top US regulatory authority has found credible evidence to support that consuming edible oils high in oleic acid (a monounsaturated fatty acid) may reduce the risk of coronary heart diseases. The health claim will now be allowed on the packaging labels for edible oils. However, these oils must contain at least 70% of oleic acid to meet the criteria, added FDA.

FDA commissioner Scott Gottlieb said the endorsement by the regulatory body gets them one step closer to the ultimate goal of “improving nutrition and reducing the burden of chronic disease”.

According to FDA, manufacturers of these oils can choose to include a health claim on their labels saying that “supportive but not conclusive scientific evidence suggests that daily consumption of about 1 tablespoon (20 gm) of oils containing high levels of oleic acid, may reduce the risk of coronary heart disease”.

It added that the label must include a disclaimer making it clear that to achieve this benefit, these oils “should replace fats and oils higher in saturated fat and not increase the total number of calories you eat in a day”.

According to a study published in Lancet, in 2015, heart ailments caused more than 2.1 million deaths across all ages, or more than a quarter of all deaths, in India.

In the age group of 30-69 years, 1.3 million cardiovascular deaths were reported, of which 0.9 million, or 68.4%, were caused by coronary heart diseases.

Dr Anoop Misra, chairman, Fortis-C-DOC Centre of Excellence for Diabetes, Metabolic Diseases and Endocrinology, and chairman, National Diabetes, Obesity and Cholesterol Foundation (N-DOC), said the endorsement by US FDA strengthens the fact that monounsaturated fats are good for health.

“In India, there is massive misinformation about oils and fats. Some even propose unlimited use of saturated fat oils (ghee, coconut oil, etc.), which are extremely bad for liver and metabolism,” Dr Misra said. “Oils with high monounsaturated fats (the cheapest is mustard) are beneficial and should benefit Indians with high propensity to develop heart disease, if taken about 20 gm daily.”

Monounsaturated fatty acids (MUFAs) are a type of unsaturated fatty foods that are good fats and have a number of health benefits. Dr Misra said that among the oils available in India, olive oil has the highest oleic acid content, followed by canola, mustard and peanut oil. “While canola oil has 63% oleic acid, olive oil has 73%, peanut oil 46%, mustard 60% and soyabean 23%.”

Other than edible oils, almond, pistachio and avocados are high in oleic acid. Specific edible oils available in different parts of the world include high oleic sunflower oil, high oleic safflower oil, high oleic canola oil, olive oil and high oleic algal oil.

FDA’s claims were based on the findings of six small clinical studies, saying that consumption of high oleic acid oil lowered cholesterol levels. “By allowing such claims on food product labels, we at the FDA also hope to encourage the food industry to reformulate products,” Gottlieb said in a statement.

7.2. 70% of population to have city gas in 3 years

BusinessLine, 23 Nov. 2018

The CGD network is in keeping with what had said in 2015 at the Urja Sangam, a global meet on hydrocarbons.

At the meet, he had called for enhancing the domestic production to reduce the energy import bill of the country by at least 10 per cent by 2022. He had also said that his government aimed to extend the reach of Piped Natural Gas (PNG) to one crore houses in the next five years.

Growing coverage

In 2014, only 66 districts were covered by the CGD network. But today, CGD projects are being implemented in 174 districts, the Prime Minister said. As per the commitment made by various entities in the ninth bidding round, around 2 crore PNG (domestic) connections and 4,600 CNG stations are expected to be installed in the next eight years across the country. This has expanded the potential coverage of the CGD network to about 50 per cent of population spread over 35 per cent of India’s geography.

In total, 86 GAs were awarded during the ninth round. Of these, two awards were challenged and therefore are sub-judice. Some fall in regions where elections are due, and hence, are under the model code of conduct. This is why the PM laid the foundation stones for projects in just 65 GAs from New Delhi. “The government is focussed on developing a gas-based economy. LNG terminals, a nationwide gas grid and a city gas distribution network are being developed to strengthen the gas infrastructure across the country,” Modi said.

Minister for Petroleum and Natural Gas, Dharmendra Pradhan said, “Presently, the share of gas in the country’s energy mix is just over 6 per cent and the aim is to reach the 15 per cent mark, while the world average is 24 per cent.”

“Efforts are not only being made to increase the use and supply of gas, but also to produce gas through agro-wastes and other products and include the same into the CGD network,” Pradhan added.

According to the Ministry, till September, 96 cities or districts in different parts of the country were covered under the CGD network development plan. About 46.5 lakh households and 32 lakh CNG vehicles are availing the benefit of clean fuel through the existing CGD networks.

8.1. India, Australia ink five MoUs to increase bilateral investments

Livemint, 22 Nov. 2018, Rajrishi Singhal

Both sides agree to boost cooperation in agriculture, hit pause button on talks for regional CECA pact

India and Australia on Thursday signed five memorandums of understanding (MoUs) for increasing bilateral investments and furthering cooperation in key sectors such as agriculture. However, both governments decided to hit the pause button on negotiations for a Comprehensive Economic Cooperation Agreement (CECA).

The MoUs were signed after Indian President Ram Nath Kovind met Australian Prime Minister Scott Morrison. Both held discussions to take forward Prime Minister Narendra Modi’s discussions with Morrison on the side-lines of the RCEP (Regional Comprehensive Economic Partnership) meeting in Singapore recently.

The five agreements build a pathway to implement the report titled, An India Economic Strategy To 2035, popularly referred to as the Peter Varghese report, which seeks to enhance Australia’s engagement with India. Former Australian high commissioner to India Peter Varghese has recommended that Australia focus on 10 sectors and 10 states to deepen and enhance its relationship with India.

Accordingly, Canberra has decided to focus its energies initially on education, agribusiness, resources (such as coal) and tourism. As part of these initiatives, it has also decided to open a consulate general in Kolkata.

The CECA, being negotiated between India and Australia since 2011, has now been officially paused for some time. The Australian government, however, has not given up hope and sees a window of opportunity for bilateral trade agreement under the aegis of RCEP, whenever it is concluded.

This was conveyed by Simon Birmingham, Australian minister for trade, tourism and investment, while speaking at the India Business Summit 2018, in Sydney. His contention was that the India-Australia CECA could then become part of the regional trade architecture achieved through RCEP.

Both governments began negotiating CECA in 2011 and the talks have progressed in spurts, held up primarily on account of two sticking points: India’s demand for free movement of professionals (or Mode-4 in trade jargon) versus Australia’s demand for enhanced agriculture market access in India.

CECA is an improvement over free trade agreements because it encompasses, apart from trade in goods, cross-border investment and services trade.

Birmingham said the Varghese report was commissioned when Australia realised that the conclusion of the CECA with India was going to be “challenging”.

Later, speaking to a group of Indian journalists, Birmingham said: “We have paused for some period of time those active negotiations. Australia would be willing to pick them up if we saw some change in the circumstances. RCEP is an amazing opportunity to form a significant Indo-Pacific trading bloc. It’s, of course, taking a lot of time and focus of trade negotiators. It is only fit and proper that in collaboration with all the other RCEP partners, we put our best efforts in getting the best possible outcomes. There is no reason why we cannot achieve a trade outcome of equal substance and meaning that a bilateral FTA would achieve through the regional processes of RCEP.”

He added that he was heartened by the fact that India had joined in the latest commitment (in the Singapore round of talks) to try to finalize RCEP by next year; in addition, he said that since India had agreed to some of the comprehensive elements of the RCEP agreement, some of the past difficulties faced in concluding CECA talks might now be overcome.

Countries did not have to make a binary choice between either CECA or RCEP, since Australia had both bilateral and plurilateral agreements with many countries, Birmingham added.

When asked about Australia taking India to the World Trade Organization (WTO) over sugar subsidies, he said that both are rules-based countries and this was the best way to settle disputes between two friendly nations. He also said that it was possible to settle the issue outside WTO and he had extensive discussions with Indian commerce minister Suresh Prabhu about it.

Birmingham also said that it was possible to look into the Varghese report for solution: The report recommends that Australia collaborate with India in weather forecasting to help in crop production and in priority areas for development. With this improved capability, India will then have a reduced need for subsidising farmers.

The author is in Sydney on the invitation of the Australian government.

8.2. Onion growers in tears as prices crash

BusinessLine, 22 Nov. 2018

The crash in onion prices is making growers cry in Karnataka and Maharashtra even as the harvest has just begun in other major producing States such as Gujarat, Rajasthan and Madhya Pradesh.

A clutch of factors, including huge carry-forward stocks, the slowdown in movement to consuming States such as Tamil Nadu and Kerala on account of Cyclone Gaja, and poor demand from exporters is weighing on prices of the bulb. In some markets, including Yeola in Maharashtra, the modal prices fell as low as ₹325 per quintal on Thursday.

Trade sources said that stock from the previous season is still stored with farmers, traders and stockists. This is creating supply pressure on the market as they are looking to dispose the previous crop ahead of the full-fledged arrival of the new crop. It is expected that prices may come under further pressure as arrivals are set to increase in December and January in the central and northern States.

Quality concerns

“There is still a huge quantity lying with farmers. We have no clue exactly how much is stored with them. But with the new crop starting to arrive, demand for the old crop has declined sharply. This is reflected in the overall reduced prices,” said Jaidatta Holkar, Chairman, Lasalgaon APMC.

Trade sources said that the stored onion is of inferior quality, which is hurting price sentiments.

Due to the rain defiicit n many parts of the country, farmers and traders anticipated better prices for the crop. But the expectations fell flat as prices, instead of going up, started tumbling due to poor quality and higher arrivals.

“Farmers are bringing the old stock, which is quoting around ₹450 a quintal. There are huge quantities stored with farmers. The new crop is ruling around ₹1,500 a quintal in the markets. But the weak price sentiment is influencing the new crop prices, too, “ said Holkar.

Impact on new crop

“If arrivals of the old crop continue beyond December, there is a possibility that the new crop’s prices will suffer. And we may see prices slipping below what is being quoted now,” Holkar added.

Anticipating better prices, farmers and stockists had stored large quantities. “They had anticipated higher prices after Diwali. But their calculations failed because early-sown onion has already started hitting markets, putting pressure on prices,” said Ashok Walunj, a leading onion trader in Mumbai.

Notably, the prices quoted in November are the lowest in several years for the comparable period. Traders attribute this to the increased supplies of old and new crops.

9.1. Walmart raises stake in Flipkart to 81.3%

BusinessLine, 20 Nov. 2018

Amidst the raging controversy over the exit of co-founder Binny Bansal from Flipkart, Walmart has quietly gone ahead and increased its stake in Flipkart to 81.3 per cent from 77 per cent, which it had acquired for $16 billion in May.

The other equity holders in Flipkart are: Tencent 5.37 per cent, Tiger Global 4.77 per cent, Binny Bansal 4.2 per cent, Microsoft 1.53 per cent, Accel 1.38 per cent, Iconiq Capital 0.98 per cent, Temasek 0.29 per cent and UBS 0.19 per cent, as per data sourced from data intelligence platform, paper.vc.

In May, Walmart had said that it is acquiring a 77 per cent stake in Flipkart for $16 billion. This included an equity infusion of $2 billion into the e-commerce venture. A good part of the total equity infusion might have resulted in an increase in its stake by 4.3 per cent.

Post Walmart primary, as per estimates, SoftBank Vision had a 19.08 per cent stake, Tiger Global 18.83 per cent, Nasper 11.78 per cent, eBay 5.61 per cent, Tencent 5.41 per cent, Accel 5.31 per cent, Sachin Bansal 5.10 per cent and Binny Bansal 4.82 per cent.

In talks with investors

Walmart had earlier said that it was in talks with other investors to buy into Flipkart and one of the main investors that it had pursued was Google. But with the increase in its stake to over 80 per cent, it remains to be seen whether Google and a few others would be keen to pick up stake in the Indian e-commerce company and whether the rest of the investors would want to sell their shares.

Walmart said it is in talks to bring new investors into Flipkart. One person familiar with the matter said that Flipkart is in discussions with Google, Intel and existing investor Microsoft to raise more capital. The valuation of Flipkart might also have gone up since May when it was valued at $20 billion because of the huge success of its festival season sales which concluded recently.

As per the filings, Binny Bansal has been named as the sole founder of Flipkart now that Sachin Bansal has exited the company completely. Binny Bansal can remain a director as long he satisfies the ‘minimum ownership threshold’. He can remain a director on the board till he owns at least 3,532,977 ordinary shares in the company. Walmart can replace him with an independent director in case the stake falls below the ownership threshold limit.

9.2. Khadi sales jump 3-folds in FY18; KVIC to run 'Khadi Express' train to boost sales

PTI, Nov. 26, 2018

New Delhi: State-run Khadi and Village Industries Commission (KVIC) has said the sale of Khadi products rose over three-folds in the last three fiscals and 'Khadi Express' train will be run to create awareness about the segment.

According to KVIC, the Khadi turnover was Rs 811 crore in 2014-15 and it increased to Rs 2,509 crore in 2017-18.

"We have written a letter to Indian Raiways for running a Khadi Express train which would exhibit Khadi products linked with Mahatama Gandhi in view of his 150th birth anniversary," KVIC Chairman Vinai Kumar Saxena told PTI BHASHA.

The five-bogie Khadi Express train would also have the facility to sell the Khadi products to people and will run through all those places in the country where Mahatama Gandhi had stayed. The train will be stationed at those stations for one day.

The demand of Khadi products has increased as Prime Minister Narendra Modi himself appealed to the people of the country to buy these clothes, he said.

Saxena said the sale of Khadi products grew at an average rate of 6.68 per cent per annum during 2004 to 2014, but it grew at the rate of 37 per cent in the last four years.

The number of sales outlets for Khadi products has been increased to 1,060 in the last four years, he said adding exhibitions were organised in 50 countries on October 2 to create demand for such products.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

10. Agriculture in India: Information About Indian Agriculture & Its Importance

IBEF, last updated in Nov. 2018

Introduction

Agriculture is the primary source of livelihood for about 58 per cent of India’s population. Gross Value Added by agriculture, forestry and fishing is estimated at Rs 17.67 trillion (US$ 274.23 billion) in FY18.

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of India’s exports and six per cent of total industrial investment.

Market Size

During 2017-18* crop year, food grain production is estimated at record 284.83 million tonnes. In 2018-19, Government of India is targeting foodgrain production of 285.2 million tonnes. Milk production was estimated at 165.4 million tonnes during FY17, while meat production was 7.4 million tonnes. As of September 2018, total area sown with kharif crops in India reached 105.78 million hectares.

India is the second largest fruit producer in the world. Production of horticulture crops is estimated at record 307.16 million tonnes (mt) in 2017-18 as per second advance estimates.

Total agricultural exports from India grew at a CAGR of 16.45 per cent over FY10-18 to reach US$ 38.21 billion in FY18. In April-August 2018 agriculture exports were US$ 15.67 billion. India is the largest producer, consumer and exporter of spices and spice products. Spice exports from India reached US$ 3.1 billion in 2017-18. Tea exports from India reached a 36 year high of 240.68 million kgs in CY 2017 while coffee exports reached record 395,000 tonnes in 2017-18.

Food & Grocery retail market in India was worth US$ 380 billion in 2017.

Investments

According to the Department of Industrial Policy and Promotion (DIPP), the Indian food processing industry has cumulatively attracted Foreign Direct Investment (FDI) equity inflow of about US$ 8.57 billion between April 2000 and June 2018.

Some major investments and developments in agriculture are as follows:

The first mega food park in Rajasthan was inaugurated in March 2018.

In 2017, agriculture sector in India witnessed 18 M&A deals worth US$ 251 million.

A loan agreement of US$ 318 million was signed between the Government of India, Government of Tamil Nadu and the World Bank in December 2017 for the ‘Tamil Nadu Irrigated Agriculture Modernization Project' through which is expected to benefit around 500,000 farmers in the state.

Government Initiatives

Some of the recent major government initiatives in the sector are as follows:

In September 2018, the Government of India announced Rs 15,053 crore (US$ 2.25 billion) procurement policy named ‘Pradhan Mantri Annadata Aay SanraksHan Abhiyan' (PM-AASHA), under which states can decide the compensation scheme and can also partner with private agencies to ensure fair prices for farmers in the country.
In September 2018, the Cabinet Committee on Economic Affairs (CCEA) approved a Rs 5,500 crore (US$ 820.41 million) assistance package for the sugar industry in India.
As of March 2018, the Government is working on a plan to provide air cargo support to promote agriculture exports from India.
The implementation of Pradhan Mantri Fasal Bima Yojana (PMFBY) will be made faster and the government is aiming to increase the coverage under the scheme to 50 per cent of gross cropped area in 2018-19.
The Government of India is going to provide Rs 2,000 crore (US$ 306.29 million) for computerisation of Primary Agricultural Credit Society (PACS) to ensure cooperatives are benefitted through digital technology.
Around 100 million Soil Health Cards (SHCs) have been distributed in the country during 2015-17 and a soil health mobile app has been launched to help Indian farmers.
With an aim to boost innovation and entrepreneurship in agriculture, the Government of India is introducing a new AGRI-UDAAN programme to mentor start-ups and to enable them to connect with potential investors.
The Government of India has launched the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) with an investment of Rs 50,000 crore (US$ 7.7 billion) aimed at development of irrigation sources for providing a permanent solution from drought.
The Government of India plans to triple the capacity of food processing sector in India from the current 10 per cent of agriculture produce and has also committed Rs 6,000 crore (US$ 936.38 billion) as investments for mega food parks in the country, as a part of the Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA).
The Government of India has allowed 100 per cent FDI in marketing of food products and in food product e-commerce under the automatic route.

Road Ahead

India is expected to achieve the ambitious goal of doubling farm income by 2022. The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Furthermore, the growing use of genetically modified crops will likely improve the yield for Indian farmers. India is expected to be self-sufficient in pulses in the coming few years due to concerted efforts of scientists to get early-maturing varieties of pulses and the increase in minimum support price.

The government of India targets to increase the average income of a farmer household at current prices to Rs 219,724 (US$ 3,420.21) by 2022-23 from Rs 96,703 (US$ 1,505.27) in 2015-16.

Going forward, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food processing industry will offer several benefits.

References: Agricultural and Processed Food Products Export Development Authority (APEDA), Department of Commerce and Industry, Union Budget 2018–19, Press Information Bureau, Ministry of Statistics and Programme Implementation, Press Releases, Media Reports, Ministry of Agriculture and Farmers Welfare, Crisil

*as per 4th advance estimates

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

- INDUSTRY, MANUFACTURE

11. JSW Steel to invest over Rs 5,000 cr on manufacturing capacity

PTI, 18 Nov. 218

JSW Steel plans to pump in over Rs 5,000 crore to strengthen its downstream manufacturing capacity and is also keen to pursue stressed downstream assets that will come up for bidding in the next round.

JSW Steel, which announced a capex investment programme of nearly Rs 45,000 crore to expand its capacities in Karnataka and Maharastra, is planning to invest over Rs 5,000 crore to strengthen its downstream manufacturing capabilities, company’s Joint MD Seshagiri Rao told PTI.

This will enable the company to re-orient its product mix and focus on high value special steel products and customisation, he said.

“As part of its effort to ramp up downstream capabilities, JSW Steel will also pursue stressed downstream steel assets that will come up for bidding in the next round,” he added.

“The next set of assets is either downstream or very small capacities. So, if it makes sense to our downstream integration strategy. We will evaluate the asset and pursue,” Rao said.

The investment in downstream capabilities by JSW Steel is aimed at capitalising the incremental demand expected to be generated across sectors for specialised steel.

While 300 million tonnes (MT) of steel consumption is expected to come in, the steel intensity across applications is coming down.

“This is where the demand for very high value steel products is rising. Circular economy is becoming very active,” Rao said.

Jayant Acharya, Director Commercial - Marketing and Strategy, JSW Steel, said, the company will “reduce focus in commodity space and enter into alloy steel and special steel space to make the business more sustainable in the long term. Our aim is to look at more and more de-competitive business segment as a key indicator of focusing more on special steel categories“.

As part of its long-term play, the company is de-priortising its focus on commodity steel space.

According to Rao, while overall capacity of JSW Steel will grow by 40 per cent over the next three years, the downstream capacity will increase by 60 per cent, colour coated capacity will go up by 140 per cent and tin-plate capacity will increase six-folds.

The company expects special steel products to contribute 40 per cent of its future volumes while customisation products will add the rest 60 per cent.

“We are not going to produce commodity. Basis our very customised steel portfolio and high-end value-added product mix, the business will become less volatile,” Rao said.

JSW Steel believes that it is unperturbed about new competition from global steel players.

“We think there is enough space for growth and healthy competition is good. If you look at competition earlier, certain companies which were stressed were at times forced to sell materials at lower prices to generate cash flows whereas with healthy competitors that problem will be eliminated to some extent,” Acharya said.

The company said that it sees the Indian steel landscape becoming more mature from a competition perspective.

“We see our growth potential with respect to India across short, medium and long term. I don’t think we need to worry about the competitive landscape,” he added.

12.1. Honda crosses 25 million milestone in scooter sales

BusinessLine, 19 Nov. 2018

The country’s largest scooter maker Honda Motorcycle and Scooter India (HMSI) on Monday said its scooter sales have crossed the 25 million mark.

From achieving 10 million sales in 13 years, Honda added another 10 million customers three years after that, the company said in a statement.

“From activating the scooter market to becoming the largest selling two-wheeler in the country, Honda Activa transformed the way Indians ride. Honda remains committed to bring the Joy of Riding to our customers by meeting their ever-growing and evolving demand with the core strength of advanced technology and innovation,” said Yadvinder Singh Guleria, Senior Vice-President, Sales and Marketing, HMSI.

Honda aims to lead the next wave of growth of scooters which has started in Tier-II and -III towns, he said.

Sales of scooters saw a revival 18 years ago across the country, when Honda launched the ‘Activa’ brand in the dying scooter segment. Accelerating the segment contribution from just 10 per cent in 2001 to the current 32 per cent, the performance and reliability of Honda scooters paved way for scooterisation in the Indian two-wheeler market, the company said.

Honda is already leading the wave with scooters accounting for over 60 per cent contribution from Chandigarh, Goa, Kerala, North-East and over 55 per cent from Himachal Pradesh, it added.

Honda has the largest scooter portfolio in the industry ranging from rural-utilitarian Cliq to India’s top-seller Activa to the premium 125cc range including Activa 125 and Grazia.

12.2. Royal Enfield has taken the game to 650cc from 350cc

Livemint. 18 Nov. 2018,Malyaban Ghosh

Royal Enfield’s Siddhartha Lal is banking on the Interceptor 650 and Continental GT 650 to do internationally what the Classic 350 did in India

New Delhi: Royal Enfield, the motorcycle unit of Eicher Motors Ltd, has dominated the middleweight motorcycle segment for almost two decades in India, but it is set to face a flurry of challenges from domestic and international companies such as Bajaj Auto Ltd, Triumph Motorcycles, BMW, Harley-Davidson and the recently relaunched Jawa Motorcycles over the next two years.

Classic Legends, a subsidiary of Mahindra and Mahindra Ltd, relaunched on Thursday Jawa Motorcycles in India in three variants—the Jawa, Jawa Forty Two and the Jawa Perak bobber—at prices that pitch them directly in the territory dominated by the Royal Enfield Classic 350.

Siddhartha Lal, chief executive officer of Eicher Motors, is unperturbed.

In an interview with Mint after the launch of Interceptor 650 and Continental GT 650 in Goa last week, Lal said the competitive cost structure and scale of operations set up in India will allow Royal Enfield to grow international operations by selling motorcycles at prices that will fetch good margins.

While the next range of Royal Enfield motorcycles will hit the roads only from 2021 as stricter emission norms are scheduled from April 2020 in India, each of those products will be developed with an eye on global markets. Royal Enfield will also replicate its international strategy for domestic dealers, expecting them to recover operating costs from selling apparels, accessories and servicing while returns from motorcycle sales shall be counted as profit.

Edited excerpts from the interview:

What is the strategy behind launching 650cc motorcycles in India?

In India, above 500cc motorcycles are very expensive and normally imported. In a market of 20 million motorcycles, just 10,000 to 15,000 units are in the 500cc and above segment because the market is not served well. Our objective is, the way we catered to the entry of midsize motorcycles with the 350cc offerings, we want to replicate the same with the upper midsize. That’s the direction we are going in.

We have around 3.5 million customers riding Royal Enfields today, and most of them have upgraded from 150cc or 200cc motorcycles to 350cc ones. With the new 650 Twins (Interceptor 650 and Continental GT 650), we wish to give similar jump in sophistication, refinement and speed but with only one step jump in affordability. Our objective is to expand the mid-size motorcycle cycle segment in every market we will enter.

Will the 650 Twins play a crucial role in expanding brand Royal Enfield globally?

For us, it is not only about India now. So, when we were considering the 650 Twins, we had a global concept in mind. We are already present in markets outside India and knew what people wanted. The customers outside love the modern classic concept of Royal Enfield products but with bit more power, refinement and highway worthy.

We have been gathering a team of professionals who have done this kind of work over the last four of five years, since in India we have not done this kind of work. So our technology centre in United Kingdom now has 140 engineers and designers compared just none about five years ago. This was a collaboration project between the global team sitting in UK and our technology centre in Chennai. So this was always meant to be a global project and the 650 Twins are our calling card for the world.

From a business point, what are the benefits of trying to establish the company at a global level?

There is a huge vacant spot in the mid- size modern classic type of motorcycles, and most of the European and American motorcycle manufacturers have moved to bigger motorcycles since they prefer to make low volume and earn high margins. On the contrary, we are going after scale.

So the market there usually starts at 850cc, and we are coming at a notch below at 650cc but it has similar attributes. So we have a home market, which is giant in terms of scale, and it gives us the right cost structure and we also price our products to get the scale. And with lower cost structures then we can get some cracking (read, extremely competitive) prices for the international markets.

Customers are delighted about our prices in US, UK and Europe. To establish the brand, we have expanded our distribution network a lot and are giving a lot of support and service even beyond the distribution network. It’s a long-term strategy. It took us almost 15-20 years in India to get to this point and may be in the next couple of decades, we can get the same success in other markets.

What about protecting your turf in India from the competitors who will enter the market in the next couple of years?

That’s how most companies operate. They see someone doing well in a particular segment and earnings high margins and they try to get a share of the pie. It is not that easy because there is a reason behind the success of an incumbent in a competitive market, and it’s not that companies have not tried to enter our market before. Honestly till now, there have been many failures.

In a competitive market, incumbent has advantages like critical mass, distribution network, deep knowledge of consumers and we have an entire ecosystem around our motorcycles.

Also, we are not sitting still on our new developments. We have new motorcycles under development for the existing segments that we are in. Also, we have pushed the game. Since everybody is looking at our 350-500cc segments, we have taken the game to 650cc now which will take another 3-4 years for others and there are no shortcuts.

Also, people value the Royal Enfield brand along with the product and our products have great resale value, it’s like a liquid asset which is hard for others to replicate.

(The) positive thing is the market will grow with others coming in.

When are the new products expected and what is your expectation on volume growth in India?

Anything that is entirely different from our existing portfolio like the Twins will be launched by 2021 because 2019 and 2020 will go into renovating our existing product portfolio because of the new emission norms. Every product for Royal Enfield in the future will be done with a global lens.

I think the insulation has come down for us in terms of having a deep order book, and therefore the curve for us is not a straight linear upward curve...now the curve will have some ups and downs.

So, the days of 50-60% growth compounded over the last 6-8 years is quite unheard off and we have been through that. Now, we have settled down in normal growth. Now if the Indian commuter market targets a growth of 6%, then, we will target 12%.

Is there a new dealer strategy in India along with the global expansion?

Already our apparel and accessories are becoming strong businesses in their own right, though they will always be dwarfed by motorcycle sales because it’s such an enormous number.

For our dealers in India, and especially outside, having a range of clothing and accessories are imperative for their profitability since they make more money from these than motorcycle sales—especially in outside markets. Overtime in India also, we want profit from apparels, accessories, service and parts to be the major share and not motorcycle sales. They should be able to cover their cost from these and the proceeds from motorcycle sales should be profit for them.

13. Textile & apparel exports jump 33% in October on higher overseas demand

Business Standard, Nov. 19, 2018

Mumbai: Textiles and apparel exports jumped by a staggering 33 per cent in October because of higher overseas demand. Led by the US, the largest importer of India’s clothing, the boom has been triggered by recovery in the global economy. Depreciating rupee helped boost realisations of textile, apparel exporters.

According to data compiled by the Ministry of Commerce, the country's textile and apparel exports stood at Rs 1,986 billion for October 2018 as against Rs 1,489 billion in the corresponding month last year. While overall textiles exports posted a jump of 28 per cent, shipment of apparel from the country shot up by 54 per cent in the month under consideration. Being closely linked with the country's economy and employment generation, the increase in exports indicates recovery in the global economy. The export figures have rebounded after a decline in shipment last year.

“The positive trend in exports for the entire textiles value chain has been the result of Confederation of Indian Textile Industry’s (CITI’s) continuous persuasion with the government, and the pragmatic approach shown by the ministries concerned. Timely policy intervention supported growth in such exports. The textiles industry was under severe stress especially after the implementation of the goods and services tax (GST),” said Sanjay K Jain, Chairman, CITI.

The positive trend implies visible signs of recovery after a difficult period. Industry experts hope that the Centre would continue to take progressive measures to boost exports and limit imports. Continuous growth in exports and index of industrial production index would result in boosting employment, scaling up production and, most importantly, making “Make in India” initiative a reality for the sector.

“September 2017 saw an unusual growth in garment exports with Indian exporters booking orders to take advantage of the old method of duty drawback. During the month, exporters booked orders accepting advance payments as well. So, overall export figure showed a sharp increase in September 2017. Comparing that with September 2018, however, there was around 27 per cent de-growth in garments exports. In October, therefore, the export figure for textiles and apparel is not an appropriate indicator of actual growth,” said Rahul Mehta, president, Clothing Manufacturers’ Association of India (CMAI).

He said the rupee depreciation really helped India's growth in exports in the segment. "But, it remains to be seen whether the current growth continues. This is possible only when the rupee continues to depreciate against the dollar, but currencies from other competing countries, including China, Bangladesh and Sri Lanka, remain steady, which is highly unlikely," said Mehta.

The Center has offered several sops, including Merchandise Exports from India Scheme (MEIS), a package of Rs 60 billion last year, to boost exports.

The domestic textile industry is projected to reach $250 billion by 2019 from an estimated $150 billion in November 2017.

India's textile and apparel export stood at $39.2 billion in FY18 and is expected to increase to $ 82 billion by 2021.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

14.1. Bosch Home Appliances to invest 100 mn Euros over next four years

BusinessLine, 21 Nov. 2018

Bosch Home Appliances will invest 100 million Euros over the next four years, plans to set up a refrigerator factory, as it seeks a double digit growth in this segment.

Addressing reporters, Soumitra Bhattacharya, Bosch Ltd’s Managing Director and President, Bosch Group, India said that this is a part of the Group's overall strategy to transition from a hardware-only company to one that can blend both hardware and software. Bosch, which is renowned for as a automotive components maker has its business spread across four business sectors; mobility solutions (Engines and other manufacturing service), consumer goods (including household appliances and power tools), industrial technology (including drive and control) and energy and building technology.

“India can be an innovation hub for developing software based on AI, blockchain, IoT across varied industries,” he added. On setting up of the refigerator factory, the company is yet to decide on the location but officials said that it is confident of achieveing double digit growth, on the back of German technology.

Bhattacharya also pointed out that Bosch is gaining increased relevance by implementing robotics and automation solutions that are used in smart manufacturing and connected industry solutions, which the world is moving to. An example of this is the electronics that go into a refrigerator, which is manufactured with sensors built-in through which a person can operate it from a smartphone.

Recently, Volkmar Denner, Chairman of the Board of Management, Bosch Group told BusinessLine that in India, the transformation of Bosch into a leading IoT company is especially evident and the heavy investments to drive this forward is in line with that.

In the recent quarter, Bosch’s Mobility Solutions turnover has increased by 12.3 per cent, with a large contribution coming from domestic automotive sales that went up by 15.1 per cent. Within the Mobility Solutions business, the Powertrain Solutions division performed especially well, registering double-digit growth of 10.3 per cent. The Automotive Aftermarket division grew by 20.9 per cent after recovering from impact of Goods and Services Tax (GST) implementation last year.

Also, Bosch’s business beyond the Mobility Solutions sector registered a strong double-digit growth of 14.3 per cent. The main contributors were the energy and building technology sector and the power tools division.

In June, Bosch said that it will invest Rs 1,700 crore in the next three years in India as it hedges its opportunities in both electric, diesel vehicles and also transitions into a technology company by focussing on IoT and Artificial Intelligence (AI).

14.2. Auto component production likely to rise 12-14% in FY19, says study

Business Standard, Nov. 22, 2018

Bhubaneswar: Auto component production in 2018-19 is expected to increase by 12-14 per cent in this fiscal year, aided by robust growth in domestic and export markets. Exports of automobile components from the country were valued at $13.5 billion in 2017-18 (FY18). According to the forecast by the Automotive Component Manufacturers Association of India, exports will surge to $80 billion by 2026. The domestic auto components industry expects to register revenues of $200 billion by then. Revenues in the auto components industry have risen at a CAGR of 6.83 per cent, growing from $26.44 billion in 2007-08 to $51.20 billion in FY18.

Domestic original equipment manufacturers (OEMs) contribute 55.97 per cent to the industry’s turnover, followed by exports (26.20 per cent) and domestic aftermarket (17.82 per cent).

A report by the India Brand Equity Foundation (IBEF), a trust established by the Ministry of Commerce, says exports of auto components from the country rose at 11.42 CAGR during 2008-09 and FY18, with the value more than doubling from $5.10 billion to $13.5 billion. Europe accounted for a volume share of 34 per cent during FY18, followed by North America and Asia, with 28 per cent and 25 per cent share, respectively.

The growth of global OEM sourcing from India and the increased indigenisation of global OEMs is turning the country into a preferred designing and manufacturing base. The Indian auto components industry is expected to register a turnover of $100 billion by 2020, backed by strong exports. The auto components industry accounts for 2.3 per cent of the country’s gross domestic product in FY18. During FY18, 3 million people were directly and indirectly engaged by the industry.

The IBEF study expects India to be the fourth-largest automobile producer globally by 2020 after China, the US, and Japan. Also, the auto components industry is expected to become the third-largest by 2025.

The auto components industry is expected to follow OEMs in adoption of electric vehicle (EV) technologies. The global move towards EVs will generate new opportunities for automotive suppliers. The mass conversion to EVs may generate a $300-billion domestic market for EV batteries in India by 2030.

Major global OEMs have made India a component sourcing hub for their operations. Several global tier-I suppliers have also announced plans to increase procurement from their Indian subsidiaries. India is also emerging as a sourcing hub for engine components, with OEMs increasingly setting up engine manufacturing units in the country. For companies like Ford, Fiat, Suzuki, and General Motors, India has established itself as a global hub for small engines.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

15. Engineering Industry in India

Last updated in Nov. 2018

Introduction

The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to India’s economy.

India on its quest to become a global superpower has made significant strides towards the development of its engineering sector. The Government of India has appointed the Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products and services from India. India exports transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners to various countries of the world. The Indian semiconductor industry offers high growth potential areas as the industries which source semiconductors as inputs are themselves witnessing high demand.

India became a permanent member of the Washington Accord (WA) in June 2014. The country is now a part of an exclusive group of 17 countries who are permanent signatories of the WA, an elite international agreement on engineering studies and mobility of engineers.

Market size

Turnover of capital goods industry is estimated to have reached US$ 70 billion in 2017^.

India exports its engineering goods mostly to the US and Europe, which accounts for over 60 per cent of the total exports. Engineering exports for the period of FY18 were US$ 76.20 billion as against US$ 65.23 million in the same period previous year. Exports of electrical machinery and equipment grew at a CAGR of 7.00 per cent during FY10-18 to reach US$ 6.7 billion in FY18. The figure stood at US$ 1.28 billion for Apr-May 2018.

The electrical equipment industry observed a witnessed a record seven-year high growth of 12.8 per cent in 2017-18, on the back of increase in government spending on rural and household electrification schemes and programmes to improve power distribution.

Construction equipment industry of India is expected to grow over 18 per cent in 2018-19.

Investments

The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing costs, technology and innovation. The above, coupled with favourable regulatory policies and growth in the manufacturing sector has enabled several foreign players to invest in India.

The Foreign Direct Investment (FDI) inflows into India's miscellaneous mechanical and engineering industries during April 2000 to June 2018 stood at around US$ 3.45 billion, as per data released by the Department of Industries Policy and Promotion (DIPP).

In the recent past there have been many major investments and developments in the Indian engineering and design sector:

Schneider Electric and Temasek acquired Larsen & Toubro’s (L&T) electrical and automation business in May 2018.

Government Initiatives

The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100 per cent FDI. With the aim to boost the manufacturing sector, the government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles.

In the Union Budget 2018-19, the government allocated US$ 92.22 billion for the infrastructure sector. Allocation to the defence sector was raised to US$ 45.57 billion under Union Budget 2018-19. In addition, Make in India policy is being carefully pursued to achieve greater self-sufficiency in the area of defence equipment including air-craft.
The Union Cabinet has approved incentives up to Rs 10,000 crore (US$ 1.47 billion) for investors by amending the M-SIPS scheme, in order to further incentivise investments in electronics sector, create employment opportunities and reduce dependence on imports by 2020.

Road Ahead

Turnover of capital goods industry is expected to increase to US$ 115.17 billion by 2025F. India’s engineering R&D market will increase from US$ 28 billion in FY18 to US$ 45 billion by 2020F. Sales of construction equipment are expected to reach 90,115 and 100,000 in 2018 and 2022, respectively, while the market size of construction equipment industry is expected to grow from US$ 4.3 billion in FY18 to US$ 5 billion by FY20.

Exchange Rate Used: INR 1 = US$ 0.0149 as of Q1 FY19.

Note: F- Forecast, As per media reports from November 2017

References: Media reports, Press releases, EEPC India, Press Information Bureau (PIB), Department of Industrial Policy and Promotion (DIPP), The Confederation of Indian Industry (CII), Indian Electrical & Electronics Manufacturers’ Association (IEEMA).

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

- SERVICES (Education, Healthcare, IT, R&D, Tourism, etc.)

16.1. How Indian companies can minimize disruption during disasters

Livemint, 2 Dec. 2018. Abhijit Ahaskar

To ensure business continuity is not affected during such calamities, companies are turning to disaster recovery (DR) plans, offshoring data centres, or outsourcing them to cloud service providers

New Delhi: Disasters—be it the terrorist attack in Mumbai on 26 November, 2008, the tsunami in 2004, or the floods in Kerala in 2018—tend to disrupt businesses in a big way, causing a lot of turmoil and anxiety among employees and huge losses for companies. Estimates from insurance giant Swiss Re pegged economic losses from natural and man-made disasters at $306 billion, worldwide, in 2017.

To ensure business continuity is not affected during such calamities, companies are turning to disaster recovery (DR) plans, offshoring data centres in locations across safer zones, or outsourcing them to cloud service providers completely. For instance, companies in Japan, where floods occur every year, have moved their data centres to Malaysia.

Just taking back-ups is not good enough: Most of the time, companies think taking back-ups is good enough for business continuity. “The real challenge lies in regular testing of data restoration and the frequency of the backup, depending on how dynamic your data is. So, if a company’s data is changing almost on a daily basis, they cannot be taking a back-up at the end of the week.” says Vishal Jain, partner, Deloitte India.

Simulating, testing: A must: While having a plan helps, it is not sufficient unless companies are testing their DR strategy through simulation. When it comes to actual simulation of an event to check if the DR plan is working or not, most Indian companies are not fully prepared, rues Jain. “Simulation not only makes the company prepared, but also incorporates disaster preparedness into the company’s DNA. Training of staff is also important for disaster so they are mentally prepared.”

But are Indian companies doing enough? There is an increase in awareness among Indian companies on this topic in the recent past as a result of cyber security attacks and flood situations, notes Santhosh Rao, senior director analyst at Gartner. “Mature Indian enterprises are re-looking their backup and DR process and architectures and making necessary changes and investments. However, the level of maturity is relatively low overall.”

Jain corroborates that people are talking more and that awareness of becoming more resilient for disasters, be it man-made, natural or terrorism, has grown. “The challenge is how much are companies doing and that depends on the company’s risk appetite and that varies from sector to sector and companies to companies and the size of the data. In the services industry, such as banks or IT companies, the risk is high from a data point of view.”

Will data localization be an issue? The recently-proposed draft data protection Bill, which is set to replace existing cyber laws, strictly mandates companies to store all governance-related data on servers within India to protect the privacy of Indian citizens.

Jain feels data localisation will not be an issue as India is a vast country, with geographical variations, allowing companies to set up DR sites in different regions where the risk of disaster is lower.

Whenever the primary site fails, companies can access all the applications from the secondary site.

Disaster recovery sites explained

Hot DR sites: These sites operate as virtual mirror of a firm’s data centres. They are available 24x7 but have a high cost of ownership.
Warm DR sites: These offer all the working of data centres but stay in a semi-functional state until the firm initiates backup.
Cold DR sites: These by default don’t offer DR support, but can be used to supplement hot or warm sites after procuring the relevant hardware and software. Recovery can take time.

16.2. Amazon's Audible debuts with 400 Indian titles

Livemint, Nov. 15, 2018

Mumbai: Global audiobooks market leader Audible launched its first Indian title on Tuesday, marking its formal entry into the country. The audio adaptation of Mafia Queens of Mumbai, a 2011 crime thriller by Hussain Zaidi and Jane Borges, was revealed at Mumbai’s Royal Opera House as a spoken word excerpt performed by actors Rajkummar Rao, Radhika Apte and Kalki Koechlin.

Audible leads the booming spoken audio entertainment market with a curated mix of audiobooks, radio and television programs and audio versions of newspapers and magazines. The American company, which introduced the first digital audio player in 1995, was bought by e-commerce giant Amazon.com Inc. in 2008.

After a complimentary 30-day trial (90-day for Amazon Prime members), a premium Audible subscription will cost «¤??199 per month. In the US, a monthly plan starts at approximately «¤??1,090.

According to Donald Katz, founder and chief executive officer (CEO) of Audible, Inc., the decision to enter India was inspired by the country’s growing economy, and traffic snarls. “Traffic is our bread and butter,” he says. “All you have to do is find out how many people drive by themselves and then you add the number of hours they spend—in the US, I think that figure is about 600 million hours per week.”

Audible India, which was in the Beta stage so far, offers more than 200,000 full-length audiobooks and original programs, including 400 Audible-exclusive titles by Indian authors. These original productions feature authors that frequent bestseller lists, such as Rashmi Bansal, Shashi Tharoor, Ashwin Sanghi, Preeti Shenoy and Ruskin Bond.

The catalogue also includes Durjoy Datta’s audio-first title The Last Boy To Fall in Love, and audio performances of Rabindranath Tagore’s Gitanjali and Kabuliwala.

Katz says in terms of top-performing genres, the audiobooks market has clear leaders. “When the narrative is the first person voice, it tends to have a real power. Anything about how to live or self-help tends to have very high [numbers].”

In January, Google had launched Google Audiobooks in India, closely followed by Storytel, an audiobook firm from Sweden.

In terms of global sales, audiobooks are clearly outperforming e-books, whose sales have been in decline. According to data from UK-based Publishers Association, spending on audiobooks has more than doubled in the past five years.

“It’s a medium that always should’ve been mainstream, right up there with movies. Because [like movies] it is breaking storytelling out of the world of text because technology created an opportunity,” says Katz, adding, “I think [the growth] is sustainable. The biggest trend for us internationally is people listening at home because of smart speakers.”

Audible is reported to be the highest employer of actors in New York, and has also collaborated with big-ticket Hollywood actors like Colin Firth, Kate Winslet and Dustin Hoffman. Katz hopes to recreate the Audible model of finding and sustaining a creative professional pool in India. “Most actors agree with the analogy that acting for Audible is like long-distance running, and acting for the movies is like sprinting because the sustaining [the audio narrative] is a particular art.”

Going forward, Katz plans to introduce regional literature and storytelling forms on the platform. “I’m excited about going into regional languages. We’re starting with English partly because we can bring this vast catalogue of oral culture in English to India,” he says.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

17.1. Digital lending to MSMEs to grow up to US$ 100bn annually in 5yrs

PTI, Nov. 22, 2018

New Delhi: Even as fears are expressed about credit flow to small businesses in the immediate term, a study Wednesday pegged digital lending to the MSME sector to grow 15 times to up to USD 100 billion annually in five years.

This will be possible largely on the back of a reliance on informal sources of funding, the study by impact investing firm Omdiyar Network and consultancy firm BCG said.

"As of 2018, most of the credit demand for USD 600 billion is being met through informal sources...India stands on the cusp of a watershed moment and can serve as a case study for other nations to elevate the role of MSMEs in the economy," Omdiyar's partner and managing director for India, Roopa Kudva, said.

The study comes even as there are concerns with regard to flow of credit to the micro, small and medium enterprises (MSME) sector as the non-bank finance companies, which have upped their play in such loans, face troubles.

There are also concerns on the continuing impact of demonetisation and GST on the sector, due to which the RBI board has advised the central bank Monday to come up with a scheme to restructure loans of up to Rs 25 crore.

The study said there are 60 million MSMEs having turnovers of less than Rs 250 crore at present and they are a major contributor both to the country's GDP as well as to employment generation.

However, the contribution of Indian MSMEs is far below that of their counterparts in the US or even China as they lack access to formal sources of finance and pay interest rates which are 2.5 times the ones charged by the formal sector, it added.

The study argues that this scenario will undergo a rapid change, stating that 40 per cent of the MSMEs will be receptive to digital lenders.

This will be possible on government policies like introduction of the unified payment interface (UPI) and goods and services tax (GST), massive reduction in costs of data connectivity and also the 'India stack'.

"Easier and cheaper credit through digital lending has the potential to trigger a virtuous cycle for formalisation: up to 85 per cent of MSMEs could be formal by 2023," BCG's senior partner, Saurabh Tripathi, said, adding that at present 60 per cent of MSMEs depend on informal sources of finance.

An increasing number of MSMEs are willing to share their data online and 60 per cent believe they will get larger amount of payments through the digital means in the next three years, the study said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

17.2. Digital disruption' to add 1.4 mn new IT jobs in India by 2027: Cisco-IDC report

PTI, Nov. 16, 2018

New Delhi: India is likely to add over 1.4 million new IT jobs by 2027, primarily driven by emerging technologies like cybersecurity, Internet of things (IoT) and Big Data, a report by Cisco-IDC said.

According to IDC InfoBrief, commissioned by tech major Cisco, new-age jobs will add more than 5 million positions worldwide by 2027.

"Of the 9.1 million IT positions in India in 2017, 5.9 million job postings from employers were for new-age roles," it added.

The report said roles like social media administrator, machine learning designer, and IoT designer would be most sought after in the coming years.

It pointed out that about 22 per cent IT professional respondents said they self-funded their certification courses, while about 50 per cent of them underwent some training in 2017 - a reflection of the growing importance of upskilling in a rapidly changing technological landscape.

About 15 per cent IT professional respondents said took training leading to certification in 2017.

Interestingly, the report stated that seven out of 10 organisations look for IT certifications when hiring or promoting and getting certified put an applicant ahead of 85 per cent of his/her peers.

The top 10 technology trends impacting Indian job scenario include cybersecurity/data security, Big Data, Data analysis visualisation, IoT, Business Intelligence, Artificial Intelligence, Machine Learning, Virtualisation/Software defined infrastructure, Converged Infrastructure and cloud solutions/technologies.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

18.1 India smartphone mkt reaches all-time high shipment of 42.6 mn in Q3'18: IDC

PTI, Nov. 16, 2018

New Delhi: Smartphone shipments in India touched an all-time high of 42.6 million units in July-September 2018 quarter, registering an year-on-year growth of 9.1 per cent, according to the research firm IDC.

This is the first time when the smartphone market is at par with the feature phone market with each segment contributing 50 per cent to the overall mobile phone market, IDC said in a statement.

Xiaomi led the smartphone tally with shipment of 11.7 million units and 27.3 per cent market share, followed by Samsung 9.6 million units (22.6 per cent share), vivo 4.5 million units (10.5 per cent share), Micromax 2.9 million units (6.9 per cent share) and Oppo 2.9 million units (6.7 per cent share).

"With the duty hikes in place and the dollar fluctuation, smartphone vendors are expected to raise prices of devices in the coming months rather than absorbing the cost or clocking it under cash backs and financing schemes etc," IDC India Associate Research Director Client Devices and IPDS Navkendar Singh said.

Moreover, offerings like AI, full-screen displays with notches, and higher memory configurations are expected to drive volumes from low to mid-range devices, carving out an affordable premium segment, especially for the upgrades, Singh added.

In the USD 400 and above segment (premium category), OnePlus clocked its highest ever shipment in a quarter and surpassed Samsung and Apple in terms of shipment in the said quarter.

"With the onset of festive season, shipments in Q3'18 were primarily driven by the e-tailer channel in preparation for the multiple sale events in the run-up to the Diwali festival," IDC India Associate Research Manager Channel Research Upasana Joshi said.

Additionally, strong online exclusive portfolios driven by brands like Xiaomi, Honor, Realme, Asus, OnePlus, etc. resulted in quarter-on-quarter (QoQ) growth of 37 per cent, taking the online share to 39 per cent in the third quarter of 2018, she added.

The offline segment registered a slower annual growth of 6.6 per cent in the September 2018 quarter, IDC said.

With 2.1 per cent y-o-y growth, the feature phone market registered shipments of 43.1 million units in the September 2018 quarter.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

18.2. Over 10 lakh crore invested in telecom sector in 2 years’

BusinessLine, 15 Nov. 2018

Vodafone Idea to infuse ₹25,000 cr equity after ₹4,974-cr loss in Q2

India’s telecom sector has invested nearly ₹10.44 lakh crore in communication infrastructure and the industry installed a total 5 lakh mobile towers and 20 lakh Base Transceiver Stations (BTSs) in the last two years.

Maharashtra topped the charts with 1.64 lakh BTS units, followed by Andhra Pradesh with 1.50 lakh and Karnataka with 1.41 BTSs, according to data released by Tarang Sanchar, a web portal for sharing of information on mobile towers and electro magnetic frequency emission compliances.

The portal was launched in May 2017. A telecom tower typically houses about 2-3 BTSs (equipment on towers).

“The significant enhancement of the national telecom infrastructure with growth in the number of BTSs, which will directly impact connectivity across the country. The emerging technologies such as 5G, Internet of Things, Augmented Reality, Virtual Reality are becoming more pervasive by the day. Therefore, in order to sustain the momentum and to put India at the apex of technological advancements and innovation, better connectivity cannot be discounted,” Rajan S Mathews, Director-General at Cellular Operators’ Association of India, said.

“With the commercial deployment of 5G expected by early 2020, everything will pivot on better connectivity, both in terms of quality and speed. For this to happen seamlessly, robust telecom infrastructure is a must,” he added.

19.1. Infosys is ‘boring’ but CEO Salil Parekh has big plans

Livemint, 22 Nov. 2018, Sundeep Khanna and Deepti Govind

Infosys CEO Salil Parekh is hoping the company becomes ‘more boring’ during his tenure, even as he proceeds on a frenetic pace on acquisitions, dealmaking and pushing its digital business

Bengaluru: Ten months into his role as chief executive of Infosys Ltd, Salil Parekh is hoping the company becomes “more boring” during his tenure, even as he proceeds on a frenetic pace on acquisitions, dealmaking and pushing its digital business. He has achieved his first goal: restoring stability to the company that less than a year ago was racked by the abrupt exit of his predecessor Vishal Sikka, following differences with co-founder N.R. Narayana Murthy. The return of stability prompted chairman Nandan Nilekani to remark recently that Infosys had become boring again.

In this short time, the 54-year-old industry veteran has made two acquisitions (Fluido and WongDoody), bagged billion-dollar deals, given the digital business the required urgency, appointed new leaders for key verticals, restructured compensation and still found time to meet 95 of the company’s key customers across the globe. That means he is on the road for as many as three weeks a month, leaving him with little time to spend with his three sons aged 13, 18 and 20.

Vitally, he has also built bridges with the men who matter. He shares an easy rapport with non-executive chairman and co-founder Nandan Nilekani, who, he says, is always “a call away” but also has a special relationship with Murthy, who has often invited him home for a cup of coffee or a meal. Which is probably why he is unequivocal about what he has inherited.

During the course of an exclusive interview to Mint on his first 300 days and his plans for the future, at his corner office surrounded by massive palm trees in Bengaluru’s Electronic City, Parekh says “what has been built here by the founders and all the leaders is an exceptional business”.

A Bollywood buff, who still manages to watch a movie every weekend, Parekh is candid enough to admit that only the next 5-7 years will tell if the recent stability at the company is here to stay. Challenges abound for the man who studied engineering at IIT Bombay and then Cornell University, before going on to a career in consulting, first with EY’s consulting division and then Capgemini after it bought the former. With growth in the global IT services business continuing to remain subdued, deals are being fiercely contested. Market leader Tata Consultancy Services Ltd (TCS) has been setting a scorching pace, especially in the digital services business. There is also the vexed issue of work visas in the US, with the Donald Trump administration threatening major changes.

Parekh’s way of dealing with that has been to push local hiring in that country. In the past 18 months, Infosys has hired over 4,000 people in the US.

He refuses to be drawn into a conversation on his leadership style, saying that’s for others to comment on but he’s clear about what it will take to drive the company’s future: “My view is, the more relevant you are for the client, the more likely you’ll succeed.”

One thing is certain: Parekh’s business model for Infosys won’t be out of any business book since he doesn’t read those, preferring instead ones that deal with economics or history or 2,000-year-old cultures. Salil Parekh is here to be his own man.

19.2. Growth, not profit, is Cognizant’s new priority

Livemint, 19 Nov. 2018, Varun Sood

Beginning January 2020, Cognizant will look to improve profitability by 10bps every year and expects a growth rate of 7-11% in constant currency terms

New Delhi: Cognizant Technology Solutions Corp. is back to what it did best for most of its 24 years: focusing on growth. According to its mid-term strategy beginning next year, the Nasdaq-listed company expects to grow between 7% and 11%, retain its 19% operating margin and promises to spend at least $600 million on acquisitions every year.

Cognizant’s new approach is in contrast with its current strategy, which has prioritised profitability over revenue growth. The company was pushed by activist investor Elliott Management Corp. in November 2016 to abandon what it felt was an “antiquated, growth-at-all-costs” business model.

In 2017, Cognizant had promised to improve its profitability to 19% by the end of December 2019.

Last Friday, when Cognizant held its first ever investor day event in New York, the management reaffirmed its stated guidance of improving operating profitability. However, the company said that beginning January 2020, the firm will look to improve its profitability by only 10 basis points every year. It expects organic revenue growth of 6-9% and another 1-2% from acquisitions, translating into 7-11% growth in constant currency terms.

One basis point is one-hundredth of a percentage point.

Finally, the company will spend 25% of its annual free cash flow on acquisitions. “It is clear that Cognizant’s focus is back on getting industry-leading growth as a 10bps improvement profitability is just another way of saying we will retain our margins,” said a Mumbai-based analyst of a domestic brokerage, requesting anonymity.

“We thought the CTSH (Cognizant) analyst event had some positives and negatives. On the positive side, management provided information around the depth of offerings, offered a longer-term margin framework that we think is entirely appropriate (10+bps/year starting in CY20), and it will be moving to GAAP earnings in CY19,” Keith Bachman, an analyst with BMO Capital Markets, wrote in a 16 November note. “On the negative side, we think CTSH implied guidance for CY19 remains a bit aggressive.”

Cognizant’s analyst day was important for four reasons.

One, prioritising profitability over revenue growth had led to heartburn among its investors and analysts. Sample this: Cognizant improved its profitability to 18.3% from 16.1% in January-March 2017, but during this time the company’s year-on-year constant currency revenue growth declined to 6.6% from 11%. Understandably, over the past one year, Cognizant shares have under-performed Nasdaq or the firm’s larger peer Accenture Plc and even smaller Indian rival Infosys Ltd.

Two, Cognizant’s aggressive outlay for acquisitions means that the company’s approach of investing in digital technologies is similar to its larger rival Accenture. For now, none of the home-grown IT firms, including Tata Consultancy Services Ltd, Infosys or Wipro Ltd, have shared any spend reserved for acquisitions as part of their capital allocation policies.

Three, Cognizant’s analyst day event was similar to the annual analyst gathering of Accenture. The company shared its strategy on how it is scaling up Cognizant Interactive business. Again, like Accenture, Cognizant too detailed its focus areas in “digital”. In addition to Cognizant Interactive, the company expects to generate more revenue from analytics and artificial intelligence platforms.

Four, Cognizant’s strategic outlook over the next five years should assuage investor concerns amid news that the company is in the midst of finding a successor to CEO Francisco D’Souza sometime next year.

“The issue of succession planning is the responsibility of the board and we are continuing to assess and continue to make plans on that topic. We have nothing to announce at this point,” D’Souza told analysts on 30 October after Cognizant declared its third-quarter earnings.

20.1. Video streaming market in India to reach US$ 5 billion by 2023: BCG report

Livemint, Nov. 22, 2018

New Delhi: The over-the-top (OTT) video streaming market in India is set to touch $5 billion by 2023, according to a report by Boston Consulting Group (BCG). The expansion of the country’s online video base is likely to be driven by rising affluence, increase in data penetration in rural markets and adoption across demography like women and older generations, BCG said in its titled Entertainment Goes Online report.

At a size of $500 million, 82% of the users in the Indian market are currently engaged on advertising-led video-on-demand platforms (AVoD) versus 18% who pay for content on subscription-led (SVoD) services, the report said.

The report estimates that by 2023, there will be 40-50 million users paying for SVoD content while 600 million will be engaged on AVoD platforms. Development of strong content pieces and the evolution of a paying habit will be responsible for strong SVoD growth, the report said. Like developed markets, most users will use two to three OTT apps. While most OTT services started off with movies and a licensed library, the current focus, led by American streaming service Netflix, is on creating original content. Further, the launch of Reliance Jio in September 2016 has heralded a new era of media consumption on the mobile in the country. The report is based on a consumer survey and seeks to understand their motivations in adopting OTT content over other conventional modes of content delivery. Survey results showed that there is room for many types of OTT models including SVOD, AVOD and TVOD (transaction-based platforms) to succeed in the market.

“Majority of India consists of single TV households. Affordable data has created an alternative medium where consumers, for the first time, can tap into content on the basis of an individual’s preference at a time and space convenient to them. While the current market operates with a largely advertising paid content paradigm, consumers are not averse to paying for the convenient content access that OTT unlocks,” Kanchan Samtani, partner and director, BCG, said in a statement.

The study identified three types of consumers in the Indian market. First are the traditionalists who primarily consume content on media other than OTT platforms, these are heavy watchers of television and are distributed equally across metros and tier-one and tier-two cities. Then are the OTT experimenters who have significant consumption on both conventional and OTT platforms but are heavy watchers of AVoD content, 60% of these are present in the metros. Finally, there are the early adopters—whose primary consumption occurs on OTT platforms and mostly on SVoD services, 70% of these are found in metros. While early adopters are still a more urban phenomenon, going forward it will be more equally distributed.

By 2023, 650 million or 48% of India’s Internet users are expected to be from rural areas, the report said. With development of regional content by various players, the rural market is poised to become a significantly large opportunity for players.

There are an estimated 197 million households in rural India with a TV, of which 160 million are cable and satellite (C&S) households, while smartphone penetration is multiples of that and growing. Given the challenges of electricity availability, TV screen, C&S connections, it is possible that rural India adopts OTT even ahead of C&S viewing in some pockets. The report estimates that nearly 50% of Internet users in India, by 2020, will be from rural India and rural internet penetration could grow to as much as 35%.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

20.2. Malabar now beckons, via Kannur airport

Livemint, 10 Dec. 2018, Gireesh Chandra Prasad

For chief minister Pinarayi Vijayan, Kannur airport sends the right signals to court foreign funds and resources

Kannur: For Anuraj, a technology professional working in Bengaluru, it’s an eight-hour drive to reach Parassinikkadavu, his northern Kerala hometown located in Kannur district.

Anuraj, who uses only one name, is relatively lucky—his friends from Kannur working in Hyderabad must travel 1,400km either by road or rail to visit their homes. Alternatively, they can fly to Mangaluru in Karanatka or Kozhikode in Kerala (south of Kannur) and then complete the last 100km and 140km, respectively by road. For them and thousands of others, visiting their home in North Kerala promises to be an easier affair starting Sunday.

The reason: A new international airport that opened in Kannur this weekend. Overnight, this tier II city finds itself on the global aviation map, becoming the fourth airport in the state after Thiruvananthapuram, Kochi and Kozhikode. The new airport aids growth of budget air travel and provides unprecedented connectivity for residents, returning migrants and tourists, transforming their experience of travelling to the picturesque northern tip of Kerala known as Malabar.

But the big question is whether this emerging narrative of connectivity in contemporary India, which entails taking transport to people rather than the other way round, will become an economic force multiplier. Budget travel in India has acquired a new dimension with the launch of Ude Desh ka Aam Nagrik (UDAN), an ambitious plan to make air travel accessible and affordable to mofussil India.

Malabar connect

North Kerala, it may be remembered, received even rail connectivity only somewhat recently—when the Konkan rail line linked Mumbai, Goa and Mangaluru in 1998 along India’s western coast. The region is still economically backward compared to the southern part of the state. Prior to this, locals or visitors had to take a circuitous rail route to reach Malabar, discouraging tourism.

Not surprisingly, the region has suffered the consequences. According to the Kerala State Planning Board, Kannur district’s economic output was ₹30,000 crore in FY16. In contrast, the output for Kochi was ₹54,000 crore and that of Thiruvananthapuram was ₹43,000 crore in the same year.

The new airport, which is expected to rewrite the region’s economic history, is equipped with a 3,050m runway, enough to accommodate any large aircraft operating medium-haul flights with a full load of passengers and cargo. Its footprint would extend from direct flights to the Saudi Arabian port city of Jeddah and Singapore, a popular destination for outbound Malayali migrants in South-East Asia. Work is already underway to extend the runway to 4,000m, which would bring it on a par with Delhi, Hyderabad and Bengaluru, says V. Thulasidas, managing director of Kannur International Airport Ltd (Kial), the public-private partnership that executed the project.

Traditionally, Malabar has lost out in the tourist rush to God’s Own Country. Part of the reason was lack of easy connectivity. This, despite its cultural legacy of folk and martial art forms, beautiful beaches and the amalgamation of the colonial legacy of the Dutch, Portuguese and British manifesting in its forts and churches. Last year, over 5,100 foreign and close to 700,000 domestic tourists visited the district. In comparison, Thiruvananthapuram received over 420,700 foreign tourists and 2.5 million domestic tourists. Kochi received over 453,900 foreign tourists and about 3.2 million domestic tourists in the same year.

While the airport construction was underway, locals had been making stealth trips to the airport; as a result, pictures of the facilities have been circulating for a while on social media. When it was opened for public visit for a week from 5 October, the response was overwhelming—close to 150,000 people visited that weekend alone.

The right signals

For chief minister Pinarayi Vijayan, who is from Kannur and leads the Left Democratic Front (LDF) government, the airport is key to sending the right signals to court foreign funds and resources the state so desperately seeks to bridge the glaring infrastructure deficit. Vijayan told Mint that the new airport would bring more tourists to Kannur, Kasaragod and Wayanad in northern Kerala, and Kodagu or Coorg in Karnataka. It would also help in attracting investments to the region, he said.

“Besides benefiting the numerous families here with non-resident workers, Kannur airport has also increased the possibility of air travel becoming a preferred mode for travel within the state,” Vijayan said in response to an emailed query from Mint. Now, it takes over 11 hours to travel from Kannur to state capital Thiruvananthapuram, covering 470km by road. Many people, therefore, make an overnight train journey.

According to Vijayan, some international airlines have shown interest in flying to Kannur. As of now, Air India Express, which launched the inaugural service to Abu Dhabi, and GoAir have commenced operations. SpiceJet and IndiGo are expected to start operations shortly.

“Demand drives growth in aviation market and when market grows, more demand is created,” Thulasidas, who was chairman and managing director of Air India for over four years from 2003, said in an interview.

“We could not so far fully exploit the tourism and industrial development potential in Kannur and Kasaragod region because of infrastructure constraints,” the chief minister said. “The airport addresses these to some extent.”

This is the second significant connectivity project in the state— which is still recovering from the aftermath of a devastating flood—after the Kochi metro in June 2017.

“An airport is like a magnet that attracts people, businesses and economic activity,” said Thulasidas. Export of spices, high-value handlooms and perishables such as flowers, vegetables and marine products from the region are expected to get a boost with the increased connectivity.

A force multiplier?

Thulasidas claims a greenfield project of this nature could have a potentially transformative impact in the region. “This is an airport for two states—Kerala and Karnataka,” he says.

According to him, a key reason for the growth of the information technology (IT) industry in Thiruvananthapuram, Kochi and Kozhikode was the connectivity provided by international airports in these cities, implying something similar could pan out in Kannur.

The state administration is now working on a plan to develop roads for quick access to the airport from six directions, including from Thalassery, Wayanad and Mahé—all prominent towns in Malabar.

In addition, both Kial and the state government are planning mega projects in and around the airport, offering new jobs and creating investment opportunities for private players. In anticipation, real estate prices in the region have soared.

“In 2005, a cent of land (one hundredth of an acre) in Kannur used to cost about ₹35,000. Now, it will fetch about ₹5 lakh,” says Anuraj.

“As far as employment is concerned, we expect that in the initial years, around 2,000 people will be directly employed by all the agencies, which is bound to go up as operations expand,” says Thulasidas.

Two ground handling firms, two housekeeping companies, one cargo handling entity, private security firms and businesses coming up in the airport such as duty-free and other retail outlets, hotels and convention centres are among the potential employers.

Kial has initiated plans to set up an airport township for all the people employed at the airport, which will have facilities for shopping, education, entertainment, healthcare and sports, he says. Similarly, the state government is planning a big industrial park of 4,000-5,000 acres around the airport for businesses such as IT parks, multi-speciality hospitals and a knowledge city for higher education.

Ramachandran Kadannappally, who represents the Kannur constituency and is the state minister for ports, told Mint in an interview that the airport had the most modern facilities and would help develop not just the district but also the entire state.

Lure of air travel

Kerala, with four international airports, articulates the explosive growth in air travel in Asia’s third-largest economy that has made this mode of transport more affordable for the common man. India is projected to overtake the UK to become the third-largest air passenger market by 2025, by which time China would have reached the top spot overtaking the US, according to International Air Transport Association (Iata).

India wants to expand capacity four-five times to handle a billion passenger trips a year over the next decade and a half. This would need up to ₹4 trillion in investments. The Airports Authority of India (AAI) will spend ₹20,000 crore in the next four years. Prime Minister Narendra Modi’s cabinet last month decided to privatize six airports in Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru.

“Building facilities like airports have a strong multiplier effect in economic development. The notion that air travel is a luxury has changed. It is widely seen as a necessity now,” said Dhiraj Mathur, leader of defence and aerospace practice at PwC India.

However, this is easier said than done, given that many projects in the previous cycle of investments have faltered. India started focusing on investing in airports, highways and other infrastructure projects in a big way in 2000 during the Vajpayee government’s term, a trend which had been maintained by every successive government, said Pronab Sen, former chief statistician of India. The downside of this investment boom is the huge bad debt problem that has crippled banks’ ability to finance new projects.

Sen said a key development challenge was to revive private investments in infrastructure projects as the state could not do it all by itself. “Better project design, more realistic assessment of risks and robust revenue models are essential for projects to succeed,” he said.

Meanwhile, locals continue to root for the Kannur airport, but in their typical sardonic humour. “The only new public asset to have come up in Kannur town in the last decade is a bus stop,” says a retired government official on condition of anonymity.

INDIA AND THE WORLD

21.1. Chinese firms invested USD 2 billion in Indian start-ups last year: Report

PTI, Nov. 14, 2018

Beijing: Confidence of cash-rich Chinese investors in India is increasing as they have invested over USD 2 billion last year, according to a report released Tuesday by a top consultancy firm while a leading bank in China said it has set up a USD 200 million fund for investing in Indian MSMEs.

More than 350 Chinese mostly representing Chinese Venture Capital (VC) funds, angel investors participated in a day long pitching session and seminar organised by the Indian Embassy in partnership with the Start-up India Association (SIA) and Venture Gurukool here on Monday.

Forty-two Indian entrepreneurs representing 20 Indian start-ups took part in the event which was expected to fetch good investments for the Indian firms, Prashant Lokhande, Counsellor Economic and Commerce of the Indian Embassy who addressed the event said.

"India has always been an attractive investment destination for China, however from 2015 onwards, the country has witnessed significant increase in investments from Chinese firms, primarily in start-ups and technology platforms", a research report called 'India China: Start-ups & Beyond' compiled by KPMG was released at the seminar said.

"In 2017, Indian start-ups received Rs 129 billion (USD 2 billion) from China, a growth of 3x as compared to previous year. The surge in investments indicates an inclination of Chinese to shift or expand out of China to leverage the benefits of cheaper labour, new markets and less domestic vulnerability," the report said.

In terms of investments in the Indian start-ups, Chinese firms have predominantly focused on e-commerce, followed by transportation and fintech, with majority of the biggest deals in late-stage e-commerce sector, it said, adding that some of the major investors in the Indian startup ecosystem include Alibaba, Ctrip and Tencent.

The Chinese investments in Indian start-ups included Media net, snapdeal, paytm, makemytrip, Hyke, Practo, Dailyhunt, the report said.

Speaking at the seminar Zheng Bin, CEO of the Industrial and Commercial Bank of China (ICBC) India gave an overview of Indian start-up ecosystem and how to invest in them at the 2nd 'Start-up India' Investment Seminar organised by the Indian Embassy here.

"He also informed that the ICBC India has established a USD 200 million fund for investing in the promising Indian micro, small and medium enterprises (MSMEs) and ventures," the Indian Embassy said in a statement on Tuesday.

The ICBC, a top state-run Chinese bank which is the country's largest lender by market value, has opened its branch in Mumbai in 2011.

Four out of the 12 Indian firms which took part in the first start-up India investment seminar held here last year got funding from the Chinese VCs to the tune of USD 15 million, the press release said.

In the current round, 7-8 start-ups out of 20 participants may get commitment to the tune of USD 30 million, it said.

The event was planned to expose the Chinese VCs and investors to the promising Indian start-ups on one hand and help Indian start-ups to reach out to the huge Chinese investors community for receiving investment for growth of their companies, it said.

Addressing the event Acqino Vimal, Deputy Chief of Mission said Chinese investors should take part in the development process of India growth story through investing in Indian start-ups.

He said India's young demography, rapid economic growth and fast pace urbanisation and its challenges work as hotbed for growth of Indian entrepreneurs and start-up ecosystem, as well as provide them opportunity for offering unique, innovative, and affordable solutions for these challenges.

During the seminar, a report "India China: Start-ups & Beyond" by KPMG giving detailed account of Indian start-up ecosystem and why it is right place for making venture investments, was unveiled.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

21.2. ‘Bazzar’, Cirque du Soleil’s debut show in India, is an intimate throwback to the company’s early years

Livemint, 16 Nov. 29018, Vatsala Chhibbe

The acrobatic acts at Cirque du Soleil’s Bazzar include duo roller skating.

Two men on either end of a teeterboard, a simple wooden contraption that resembles a seesaw, alternately spring upward in a roomy circus tent. Their leaps lengthen after each landing—5ft, 10ft, 15 ft—until the rhythm is broken by an airborne somersault, and a few seconds later, a swift double somersault.

A few hours before Canadian entertainment company Cirque du Soleil’s debut performance in Mumbai, the backstage is bustling. Acrobats turn focus on pre-show stretches, wardrobe assistants arrange neon wigs on a compact shelf, and costume and make-up transformations begin, adding colour and character to the blur of figures and faces. Meanwhile, on the “Blue Mat”, a space for artists to work out and unwind, a break-dancer indulges a huddle of cameras with an impromptu routine, while a bemused crew member hurries past mumbling, “That’s performers for you”.

This heightened energy in a compact space befits Bazzar, Cirque du Soleil’s 43rd original production, and the first to premiere outside of Canada. According to show director Susan Gaudreau, the production, which took two years to complete, is a throwback to the company’s early days. In 1984, Cirque du Soleil co-founders, Guy Laliberté and Gilles Ste-Croix, secured government funding for their modest troupe of 20 street performers who went on to reinvent the make of a circus act. Le Grand Tour du Cirque du Soleil, an yearlong tour of various cities in Quebec presented a “nouveau cirque”—acrobatic acts that prioritized performance, technique and design without the use of animals and standard-issue clowns. Since then, the troupe has expanded into a global live entertainment company with 4,000 employees, including 1,400 artists from nearly 50 countries. Their scope of work has expanded to include multimedia productions, immersive experiences, and an upcoming theme park.

Artists backstage

But Bazzar alludes to simpler beginnings. The two-hour show features a comical Maestro with well-defined shoulder pads directing a colourful acrobatic troupe, while facing glitches caused by a trickster woman. Indian elements in the production are limited to the title and the two mallakhamb acts, in keeping with Cirque’s approach of creating shows that can travel across countries and cultures, and “articulate in a way that is universally understandable”.

According to Finn Taylor, senior vice-president of touring shows for Cirque du Soleil, the company has been contemplating a suitable way to enter the Indian market for a few years now. “We wanted to introduce the brand appropriately to this new audience that was never exposed to Cirque du Soleil before,” he says.

Bazzar does feel like a tentative introduction—the production is humbler in ambition and scale than the company’s more iconic shows such as O, The Beatles Love and Ka, but also more affordable. Performed in an intimate 1,500-seater Big Top tent 62ft high and 135ft in diameter, Bazzar plays out like a slick montage of Cirque’s signature performances—unnerving trapeze acts, energetic pyro routines and dizzying rollerblading.

After more than two decades, these physical feats still manage to evoke awe and disbelief, and some degree of dread that is not entirely unwarranted. Earlier this year, aerialist Yann Arnaud, who had worked with the company for more than a decade, died after suffering a 50ft fall during a live performance of Volta in Florida.

Artists rehearsing for the teeterboard act.

In an effort to maintain safety and quality standards, this contemporary circus travels with its familiar ecosystem for touring shows. “It is like a mobile village that includes one large entrance tent, a VIP tent, the artistic tent, a kitchen, offices and more. The production material for the Bazzar tour travels via 25 sea containers, carrying close to 700 tonnes of equipment,” says Gaudreau.

Bazaar offers a promising teaser for Cirque’s full-fledged landing in South Asia and Africa. Next year, the company will premiere its first resident show in China, titled X (The Land Of Fantasy), while Bazzar will travel to the Middle East and Greece. “Our long-term objective is to establish a strong and lasting presence in India with our large-scale productions,” says Taylor. “For now, we are here to learn and see what touches, excites and entertains the Indian population.”

Bazzar will be performed between 15 November and 9 December in Mumbai and 25 December and 6 January in Delhi. Tickets available on Bookmyshow.com

22.1. Opinion | How to end Venezuela’s nightmare

Livemint, 6 Dec. 2018, Ricardo Hausman

This will require coordination between the Venezuelan democratic forces and the international community

Wishing a problem away is seldom an effective strategy. While the international community has had its attention focused on other issues, the Venezuelan catastrophe has deepened. If current trends continue, it will only get worse.

A day’s work at the median wage now buys 1.7 eggs or a kilogram of yuca, the cheapest available calorie. A kilogram of local cheese costs 18 days of median-wage work; a kilogram of meat costs almost a month, depending on the cut. Prices have been rising at hyperinflationary rates for 13 straight months and inflation is on track to surpass the 1,000,000% mark this month. Output continues to fall like a stone: Opec reports that in October 2018, production was down 37% year-on-year, or almost 700,000 barrels a day.

According to Alianza Salud, a coalition of NGOs, new malaria cases in 2018 have shot up by a factor of 12 since 2012, bringing the total to over 600,000, which is 54% of all cases in the Americas. Large swaths of Venezuela’s territory have been ceded to criminal organizations, including terrorist groups such as Colombia’s Farc and ELN, which collude with the National Guard in the production of gold and coltan, as well as running illegal drug trade.

As a result, Venezuelans have been leaving in droves, creating a refugee crisis of Syrian proportions, the biggest ever in the Americas. Going by Facebook reports, which says 3.3 million Venezuelan users were abroad, my research team at the Center for International Development at Harvard University estimates that there must be at least 5.5 million, overall. Of those tweeting only from Venezuela in 2017, by November, over 10% had left the country. Colombia, Ecuador and Peru, despite their valiant efforts, are facing increasing difficulties in coping with the refugee flow. It is patently obvious that Venezuela’s problems will not be solved unless and until there was a regime change. After all, both the regime and the economic collapse are the consequences of the elimination of basic rights. Venezuelans cannot invest and produce to satisfy their needs, because economic rights have been taken away; and they cannot change wrongheaded policies, because their political rights have been taken away. A turnaround will require the re-empowerment of Venezuelans.

Fortunately, an end is in sight to this nightmare, but it will require coordination between the Venezuelan democratic forces and the international community. 10 January marks the end of President Nicolás Maduro’s term, which started with his election in 2013. His election to a second term in May was a sham: The major opposition parties and their candidates were prevented from running, and the US, Canada, the EU, Japan and major Latin American countries, among many others, refused to recognize the outcome. That means they do not recognize the legitimacy of Maduro’s presidency after 10 January.

The logical solution is for the national assembly, elected in December 2015 with a two-thirds opposition majority, to resolve the constitutional impasse by designating a new interim government and a new military high command that can organize the return to democracy, and end the crisis. However, they are wary of doing so, because they fear that they will be ignored at best, or, at worst, jailed, exiled, or tortured to death, and thrown out of a 10th-floor window, as happened in October to Fernando Albán, a Caracas city councillor. Unless the armed forces respect the national assembly’s decisions, they will be hard to enforce.

That is why this solution requires coordination between the international community and Venezuela’s democratic forces. Those forces are unsure of the international support they will get and the international community is unsure of the democratic forces’ plans and cohesion.

As with any coordination problem, there are good and bad self-fulfilling outcomes. For now, because the international community has not made clear who will be recognized as Venezuela’s legitimate government after 10 January, and what level of support will be provided, Venezuela’s democratic forces have been unable to coalesce around a solution.

However, the Venezuelans have been doing their homework and laying the organizational groundwork for change. Political parties, trade unions, universities, NGOs, and the Catholic Church have come together in an initiative called Venezuela Libre. They have organized congresses in each of Venezuela’s 24 states, attended by over 12,000 delegates, and, on 26 November, they held a national event to issue a manifesto delineating a path back to democracy. In addition, they have been working on a detailed economic plan, amply discussed with the international community, to overcome the crisis and restore growth. This is an excellent opportunity for the international community to move toward a coordinated solution: An explicit refusal to recognize Maduro after 10 January, coupled with recognition of the national assembly’s decisions regarding the transition government and help implementing them. A clear message should be sent to the Venezuelan armed forces that the national assembly’s decisions must be respected.

A solution to the Venezuelan catastrophe is not only desirable, but also possible. The world cannot afford to let this opportunity slip. 10 January can become a new beginning.

Ricardo Hausmann is director of the Center for International Development at Harvard University.

22.2. Opinion | Maximizing India’s development finance

Livemint, 06 Dec. 2018, Ejaz Ghani

Only by combining resources will it be possible to achieve the necessary levels of financing

The Fourth Industrial Revolution, along with internet penetration and access to smartphones, has changed the outlook of people everywhere. Everyone can see how others live and this has raised their aspirations and expectations. People are demanding improved infrastructure to meet their aspirations.

This aspiration is particularly acute in the developing world, given the poor infrastructure and huge development financing needs. It is estimated that infrastructure investments needed in energy, transport, telecommunications, water and sanitation, education, and health projects will amount to more than 5% of gross domestic product (GDP) in developing countries. Meeting the financing gap needed for infrastructure services will be one of the biggest challenges in development. Unlike in the UK and the US, in developing economies, nearly 70% of the funding for infrastructure projects comes from the government budget, 20% from private players, and 10% from multilateral development banks. In the developed world, the financing mix of infrastructure projects is very different, with less than 40% being funded by governments and the private sector contributing more than 50% of financing needs.

While the infrastructure financing gap is huge in the developing world, the potential for attracting private investment for infrastructure projects is also huge. The basic traits of infrastructure projects, such as market size, long-term steady revenue stream, and investment returns that exceed inflation, make them attractive for institutional investors. The funds managed by institutional investors in Organization for Economic Cooperation and Development (OECD) countries exceed $100 trillion. Their allocation to emerging-market infrastructure projects is tiny.

Many developing countries have launched programmes to attract private investments into infrastructure projects. India has experienced a rapid increase in the number of public-private partnership (PPP) infrastructure projects during the last two decades. The government has established institutional structures in the ministry of finance and line ministries to scale up PPP projects. A fast-growing economy and public-sector capabilities to prepare, procure and implement PPP projects have played a key role in creating markets and improving efficiency gains. The electricity and road sectors have attracted the lion’s share of PPP investments in India. This is just the start (Ejaz Ghani, Arti Grover Goswami and William R. Kerr, Highway To Success; and Spatial Dynamics Of Electricity Usage In India, World Bank). India’s energy efficiency market, estimated to be more than $12 billion per year, is one of the largest untapped energy-efficiency markets in the world. Ports and railways have also attracted investment, but at the lower end.

Commercial banks have dominated the financing of infrastructure projects. This amounts to the government transferring a huge amount of risk from public to the private sector. With the structure of financing such that there is heavy reliance of private financing on the public sector and with heavy termination clauses included in PPP contracts, the government is potentially exposed to fiscal risks. The number of foreign partners financing infrastructure projects have been few in the past.

India and most of the developing world face a twin challenge—closing the infrastructure financing gap and changing the composition of financing. Given rising global macroeconomic and trade concerns, changing the composition of financing is as important as maximizing infrastructure capital. Changing the composition of capital flow also has the potential to increase the efficiency and sustainability of public finance and infrastructure projects.

Looking to the future, there exists a huge potential for creating markets and improving the preparation and regulation of PPP projects in areas such as time taken to prepare projects, contract management, risk management, socioeconomic impact, affordability, and bankability of projects, and meeting the strategic importance of development goals. While commercial banks will continue to be an important source of infrastructure finance, capital markets need to play a bigger role, given the increased demand for long-term sources of finance for infrastructure projects. Bond markets, especially local currency bond markets, will be critical to filling the infrastructure-investment gap. There is also a need to avoid currency mismatches from borrowing in foreign currency for projects that generate revenues largely in local currency. More fiscal reforms could also generate more revenues to bridge the infrastructure financing gap. Taxation will play a key role in incentivizing investment and ensuring that the proceeds of investment are redistributed and reallocated in line with sustainable development priorities. A lot more regulatory and institutional reforms are also needed to make infrastructure projects more attractive for private investors.

Developing countries have overcome many of these challenges with outstanding success in road and energy projects. Many infrastructure projects give a social return that is greater than the benefits to individuals paying user fees and this makes it more challenging to monetize the benefits of infrastructure projects and create cash flows for potential investor. Rural road networks, investments in education and health, and women-headed small enterprises are examples of projects that have greater social benefits than the cash flows they can generate. A second generation of infrastructure projects is emerging that is presenting a host of untapped potential.

No country can sustain growth and reduce poverty without maximizing development finance. Maximizing finance for development, from billions to trillions, will not come from a single financing instrument. Only by combining resources—international and domestic, public and private, corporate and philanthropic—will it be possible to achieve the necessary levels of financing. Even then, policymakers will need to improve expenditure policies to target resources to people who are most in need. The challenge is to increase both the scale and impact of financial resources, improve linkages, and build partnerships. More can be done to strengthen the framework and tools needed to engage the private sector and maximize finance for development.

Ejaz Ghani is lead economist at the World Bank.

23.1. Qatar to withdraw from Opec as of January 2019: Minister

Livemint, 3 Dec. 2018, Eric Knecht, Reuters

The decision to withdraw from Opec came after Qatar reviewed ways to enhance its role internationally and plan its long-term strategy

Doha: Qatar said on Monday it was quitting Opec from January to focus on its gas ambitions, taking a swipe at the group’s de facto leader Saudi Arabia and marring efforts to show unity before this week’s meeting of exporters to tackle an oil price slide. Doha, one of Opec’s smallest oil producers but the world’s biggest liquefied natural gas (LNG) exporter, is embroiled in a protracted diplomatic row with Saudi Arabia and some other Arab states.

Qatar said its decision was not driven by politics but in an apparent swipe at Riyadh, minister of state for energy affairs Saad al-Kaabi said: “We are not saying we are going to get out of the oil business but it is controlled by an organisation managed by a country.” He did not name the nation.

Al-Kaabi told a news conference that Doha’s decision “was communicated to Opec” but said Qatar would attend the group’s meeting on Thursday and Friday, and would abide by its commitments.

He said Doha would focus on its gas potential because it was not practical for Qatar “to put efforts and resources and time in an organisation that we are a very small player in and I don’t have a say in what happens.”

Delegates at Opec, which has 15 members including Qatar, sought to play down the impact. But losing a long-standing member undermines a bid to show a united front before a meeting that is expected to back a supply cut to shore up crude prices that have lost almost 30 percent since an October peak.

“They are not a big producer, but have played a big part in it’s (Opec) history,” one Opec source said.

Qatar’s Opec exit marks the growing dominance over policy making in the oil market of Saudi Arabia, Russia and the US, the top world’s three oil producers which together account for almost a third of global output.

Riyadh and Moscow have been increasingly deciding output policies together, under pressure from U.S. President Donald Trump on Opec to bring down prices. Benchmark Brent is trading at around $62 a barrel, down from more than $86 in October.

“It could signal a historic turning point of the organisation towards Russia, Saudi Arabia and the United States,” said Algeria’s former energy minister and Opec chairman, Chakib Khelil, commenting on Qatar’s move.

'Unilateral decisions’

He said Doha’s exit would have a “psychological impact” because of the row with Riyadh and could prove “an example to be followed by other members in the wake of unilateral decisions of Saudi Arabia in the recent past.”

Qatar, which Al-Kaabi said had been a member of Opec for 57 years, has oil output of just 600,000 barrels per day (bpd), compared with Saudi Arabia’s 11 million bpd.

But Doha is an influential player in the global LNG market with annual production of 77 million tonnes per year, based on its huge reserves of the fuel in the Gulf.

Opec members Saudi Arabia and the United Arab Emirates, and fellow Arab states Bahrain and Egypt, have imposed a political and economic boycott on Qatar since June 2017, accusing it of supporting terrorism. Doha denies the charges and says the boycott aims to impinge on its sovereignty.

Al-Kaabi, who is heading Qatar’s Opec delegation, said the decision was not political but related to the country’s long-term strategy and plans to develop its gas industry and increase LNG output to 110 million tonnes by 2024.

“A lot of people will politicize it,” Al-Kaabi said. “I assure you this purely was a decision on what’s right for Qatar long term. It’s a strategy decision.”

Oil surged about 5% on Monday after the US and China agreed to a 90-day truce in their trade war, but prices remain well off October’s peak.

Asked if Qatar’s withdrawal would complicate Opec’s decision this week, a non-Gulf Opec source said: “Not really, even if it’s a regrettable and sad decision from one of our member countries.” Amrita Sen, chief oil analyst at consultancy Energy Aspects, said Qatar’s withdrawal “doesn’t affect Opec’s ability to influence as Qatar was a very small player.”

Al-Kaabi said Qatar Petroleum planned to raise its production capability from 4.8 million barrels oil equivalent per day to 6.5 million barrels in the next decade. Doha also plans to build the largest ethane cracker in the Middle East.

He said Qatar would still look to expand its oil investments abroad and would “make a big splash in the oil and gas business”.

Reuters’s Florence Tan in Singapore, Rania El Gamal in Dubai, Ahmed Ghaddar in Vienna and Lamine Chikhi in Algiers contributed to this story.

23.2. All you wanted to know about de-globalisation

BusinessLine, 20 Nov. 2018, K. Venkatasubramanian

“Be Indian, buy Indian.” That was the clarion call given to fellow Indians against the British, by freedom fighters led by Mahatma Gandhi, to rescue domestic industry (and induce a bit of patriotism among the masses).

A century later, the political leadership of the US seems to be fighting a pitched battle with China based on a very similar credo. This is fanning global fears about a possible slowing down, if not derailment, of the global economic recovery, due to de-globalisation.

What is it?

The term de-globalisation is used by economic and market commentators to highlight the trend of several countries wanting to go back to economic and trade policies that put their national interests first. These policies often take the form of tariffs or quantitative barriers that impede free movement of people, products and services among countries. The idea behind all this protectionism is to shield local manufacturing by making imports costlier. The present talk around ‘trade war’ and ‘de-globalisation’ cropped up after the US, in March, imposed 25 per cent and 10 per cent duty on steel and aluminium imports, respectively, from certain countries, citing national security and job creation as the triggering factors.

A 25 per cent tariff was then imposed on over 1,300 other Chinese products. China hit back by imposing additional levies on a range of American imports, including walnuts, raisins and almonds. The value at stake in the US-China trade wars range from $100-150 billion. The European Union too has jumped into the fray, with a 25 per cent duty on certain US products.

But if tariff wars are one aspect of de-globalisation policies, some facets can cost countries dear too. Britain’s divorce with the EU is estimated to cost companies on both sides $80 billion a year without a trade deal.

Why is it important?

We still live in a highly globalised world, and these protectionist moves upend the fundamental premise on the basis of which global growth is estimated and organisations such as the WTO regulate global trade. When large, industrialised and prosperous nations break ranks to erect new entry barriers for goods and services, this can drastically impact the fortunes of their many trade partners.

All calculations of global economic growth, inflation and interest rates then go haywire. The US economy, for instance, imports a lot of inexpensive manufactured goods from China. If a tariff war increases costs of imports into the US, its domestic inflation may rocket and US interest rates may increase faster.

India may not be much affected by the recent rash of tariffs, given that the US derives only a little over one per cent of its steel and aluminium imports from India. But de-globalisation with respect to the mobility of services and people can impact both the export of services, and the trend of Indians migrating abroad for higher education and jobs.

Why should I care?

If you are an investor in the markets, you have every reason to worry. The BSE Metals Index fell over 13 per cent from March after the news of trade wars came in. The recent global bull market is predicated on a global recovery and de-globalisation can puncture the optimism very quickly.

What starts with goods can also move to the people. The US and the UK have already made immigration norms very stringent for outsiders.

The bottomline

If you thought globalisation was evil, de-globalisation may well make you change your mind.

A weekly column that puts the fun into learning

24.1. India, 15 others account for world’s 80% malaria cases

Livemint, 21 Nov. 2018,Neeru Chandra Sharma

The report is in tune with the recent findings by the ICMR, which observed that there has been a gradual shift of the parasite burden from Plasmodium vivax to Plasmodium falciparum

New Delhi: India, along with 15 countries in sub-Saharan Africa, contributes to about 80% of the global burden of malaria, according to the World Malaria Report, 2018, released by the World Health Organization (WHO) on Monday.

India is endemic to malaria and carries the burden of two major malaria parasites, Plasmodium falciparum and P. vivax. P vivax is a milder form of malaria, while falciparum is a deadly form of the disease.

The report is in tune with the recent findings by the Indian Council of Medical Research (ICMR), which observed that there has been a gradual shift of the parasite burden from Plasmodium vivax to Plasmodium falciparum.

The WHO report has highlighted that about 82% of estimated vivax malaria cases in 2017 were reported from just five countries—India, Pakistan, Ethiopia, Afghanistan and Indonesia. However, Plasmodium falciparum is also significantly contributing to the disease burden. “In South-East Asia, malaria is endemic in nine out of 11 countries, accounting for nearly 70% of the burden outside the WHO African region. Nearly 62% of the cases are due to P. falciparum,” WHO said. In the region, India and Indonesia accounted for 68% and 21% of reported cases, and 65% and 16% of malaria deaths, respectively.

WHO said five countries accounted for nearly half of all malaria cases: Nigeria (25%), Democratic Republic of the Congo (11%), Mozambique (5%), India (4%) and Uganda (4%).

25.1. Sotheby’s first-ever Mumbai auction features works by modernists, including a rare piece by Amrita Sher-Gil

Livemint, 23 Nov. 2018, Radhika Iyeng

On a Friday afternoon, Sotheby’s international head, India and South Asia Art, Yamini Mehta, glides across the marble expanse of Bikaner House in Delhi. With 7 hours to go before Sotheby’s auction preview titled Boundless: India, the gallery walls are carefully being adorned with a constellation of artworks. One of them—a burst of cerulean blue and unruly lines—is a 1961 painting of London’s St Paul’s Cathedral by F.N. Souza, made during a transitional period in his career.

The Boundless: India auction will take place in Mumbai on 29 November. It is a landmark auction for Sotheby’s—its first in India’s financial capital, which will become its 10th sale location globally. The pieces featured at the auction, as the title suggests, transcend time and geography. The works are from both pre- and post-independence period and include those that have been made in France, London and India. There are the staple Progressives: Tyeb Mehta, M.F. Husain, S.H. Raza, as well as works by Arpita Singh, Mrinalini Mukherjee and Bharti Kher. Also on sale are drawings and photographs from the private collection of Pritzker Architecture awardee, B.V. Doshi.

Amid the bustle of crew members dressed in fluorescent orange jackets, Mehta tiptoes over sheets of cardboard, plastic, Styrofoam and bubble wrap. She walks towards a large, yet to be mounted painting veiled by translucent paper. She pulls down the cover, revealing Tyeb Mehta’s Durga Mahisasura Mardini, 1993 (estimated at ₹20-30 crore)—a rare Mehta artwork, which depicts Durga in combat with the buffalo demon, symbolical of the battle of good over evil. It was made in response to the 1992-93 riots in Mumbai, in the wake of the Babri Masjid demolition.

It is the tale behind a painting by Amrita Sher-Gil, however, that may be an exceptional crowd-puller: The Little Girl In Blue (1934) has resurfaced in the public realm after eight long decades—and the eight-year-old depicted in the painting is the artists’ cousin, Babit, who today, at age 92, still remembers what Sher-Gil was like.

In 1941, a month before her 29th birthday, Sher-Gil battled the consequence of an abortion gone awry that proved to be fatal. During her brief 10-year career, Sher-Gil, who was on the precipice of inimitable stardom, had painted at least 145 documented artworks. Certain pieces became unquestionably popular: Young Girls (1932), Group Of Three Women (1935), Woman On Charpai (1940), for instance. Others ebbed into darkness, quietly remaining in the ownership of discreet family members or friends, never to meet to public eye. The Little Girl In Blue (1934), which was bought by Hungarian Indologist and art critic Charles L. Fabri, was one of them. Estimated to be sold at ₹8.5-12.5 crore, the painting will take the centre stage at Boundless: India, slated to be held a week before Sher-Gil’s death anniversary.

For a nonagenarian, Babit or Lalit Kaur Mann (nee Sher-Gil), has a remarkably coherent memory. In an email interview, she describes the day when the artist visited her house in Amritsar in 1934 and painted her portrait. “My father, Col. Sir Buta Singh, entertained a lot (of guests) and the house was always full of visitors. Children kept away from grown-ups those days, but we had heard about Amrita, so we were quite curious as she seemed mysterious and different. I remember her always wearing a sari or a long dark skirt with a blouse. My mother, Lady Buta Singh (Mahinder Kaur), was a great friend of Amrita’s. She spent most afternoons at our Nowshera House. Her family home, Majitha House, was just across the road and she used to just walk over. One day, Amrita told my mother that she wanted to paint me. My mother agreed. Those days, children did what their elders told them to. So, when my mother told me that Amrita wanted to paint me and sit for her, there was no argument, I obeyed!”

It was one of the first paintings Sher-Gil would make after she’d move back to India from Paris. In a correspondence with her parents (dated September 1934) she wrote, “I wish to return (to India) primarily in the interest of my artistic development. I now need new sources of inspiration and here you will perceive, Duci (her father), how utterly mistaken you are when you speak of our lack of interest in India, its culture, its people, its literature, all of which interest me profoundly…” (published in Amrita Sher-Gil: A Portrait In Letters & Writings, edited by Vivan Sundaram, Vol. I).

In the backyard of Nowshera House, amid the orange trees and lush grape vines, Sher-Gil would go on to paint a somewhat bored and forlorn-looking Babit, directing the young girl to look away, much in contrast to many of her self-portraits, which often carried her rebellious, frontal gaze. In The Little Girl In Blue, Babit appears distant, her thick black hair tucked behind her ears, her plump, red lips seemingly full of utterance, closed shut. “I don’t remember looking forlorn,” says Babit, “but perhaps it was probably because it was very difficult to sit for an hour at a time and not move. I remember (Amrita) constantly urging me to ‘Sit still!’” The silhouette of the woman in pink, which fills the left column of the frame, possibly a domestic help, came in later. “There was no one present while I was being painted,” recalls Babit. “She must have added the second figure later.”

When the painting was complete, Sher-Gil presented it to Lady Buta Singh. “But my mother didn’t like it at all,” says Babit. “My mother told (Amrita) that she could paint over it, as she wasn’t happy with it. So, we thought no more about it.”

Mehta reasons that Babit’s mother rejected the painting partially because she didn’t think the likeness was “pretty enough”. “The mother said, ‘Oh, but this doesn’t look like Babit. I thought it is going to look more like a photograph.’ And Amrita being herself, saucily responded, ‘Well then, maybe you should’ve just got her photograph taken!’”

Unbeknownst to them, three years later, Sher-Gil exhibited The Little Girl In Blue at a solo show at Faletti Hotel, Lahore which is where it caught Fabri’s (who was rumoured to be her lover) eye. In a letter to her parents (dated November 1937), Sher-Gil wrote, “The exhibition is attracting a good deal of attention and drawing quite a large crowd….The small picture that I painted at Amritsar—Mahindro’s daughter—The Little Girl In Blue, has been sold” (published in Amrita Sher-Gil: A Portrait In Letters & Writings).

In addition to this piece of historical value, Boundless: India also features personally created works by famed cartoonist R.K. Laxman. “I don’t know if R.K. Laxman’s work has been featured in an auction before,” says Mehta. There are also Air India posters designed by Nargis Wadia, from the artist’s own collection. “This auction is very important to us, since it has been kind of personally curated by us,” explains Mehta. “We wanted to have a mix of contemporary art, design, sculptures and photographs. So, there is something for everybody. You can get an Air India poster for ₹60,000 or a Tyeb Mehta which will fall into the multi-crore bracket.”

Boundless: India will be on view on 27-28 November in Mumbai. The auction will take place on 29 November.

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