AAPI: October 2020

DELHI, 20th OCTOBER 2020

Index of this Newsletter

INDIA

INDIA & THE WORLD

21. Real estate gold mine in railway stations
22. Digital manufacturing could be the next big opportunity for India
23. Reliance Jio partners with 22 foreign airlines for inflight internet connectivity
24. The reality behind Reliance’s retail rush
25. Can India replace China as the world’s factory?

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DELHI, 20th OCTOBER 2020

NEWSLETTER, 20-X-2020

INDIA

– GENERAL POLICY, INFRASTRUCTURES, COUNTRY FINANCES, ETC.

1.1. For a better India, we need more people's startups

Livemint, 02 Oct. 2020, Roopa Kudva , Sushant Kumar

Social enterprises, which try to solve vital, chronic problems for people, exemplify the nature of business Gandhi would have espoused

The birth anniversary of Gandhi is an apt occasion to reflect on the relevance of Gandhian values to the world of impact investing and social entrepreneurship. The impact investing industry’s broad mission—to drive inclusion across financial services, education, healthcare, property rights and other sectors—reflects Gandhi’s vision for an inclusive India, where every citizen can be a proposer.

It is generally believed that Gandhi was opposed to industrialization and business. Indeed, he has written against machines taking over the job of craftsmen and making the lives of factory workers miserable. His preferred alternative was spinning charkha, and physical work. As he explained, his criticism of modern machines was aimed at the social order that benefited only the rich and provided little benefit to the working class. His views evolved in close association with the business leaders of those times, whom he considered critical pillars of society and of the freedom movement.

Gandhi’s views of businesses as an instrument to advance societal well-being seem very relevant in today’s context. He believed that businesses should exist in a symbiotic relationship with the community. The purpose of a business should include progress and well-being of all stakeholders, not just profits for owners. Businesses have a responsibility to operate at the highest standards of ethics and transparency. These views are gaining currency, as the world takes stock of decades of unfettered profit-maximization. This year marks the 50th anniversary of Milton Friedman’s New York Times article, where he wrote “the sole social responsibility of a business is to increase profits". There is growing sense that this approach has led the world to inequality, concentration of wealth and global warming.

The world today seeks a more holistic approach by businesses—going beyond profit maximization and keeping in mind the interests of all stakeholders. Social enterprises, which operate with an intentionality of solving vital, chronic and difficult problems for people and advance inclusion and equity, exemplify the nature of business Gandhi would have espoused.

Gandhian principles apply in four ways to social entrepreneurship. First, his approach to building the freedom movement was driven by values. His pursuit was spiritual, with unshakable foundations of truth, non-violence, ethics and transparency. Entrepreneurship is challenging and presents many moments of self-doubt and fatigue—social entrepreneurship even more so. Entrepreneurs driven by a larger purpose and supported by enduring values are better geared to stay the course. A solid foundation of purpose, ethics and transparency helps stay focused on bringing about transformative impact. This purpose-orientation is the core of building sustainable enterprises.

Second, Gandhi believed in inclusion. His talisman to recall the face of the weakest when contemplating a decision applies well in the context of designing products and services for the population segment impact investors focus on—those in the lower middle-income and lower-income groups of India’s income distribution. Beyond affordability, entrepreneurs need to consider education, language skills, and social and cultural milieus when designing for underserved segments. Similarly, thoughtfulness about harms helps avoid unintended exclusions.

Third, the idea of trusteeship was critical to Gandhi’s economic thinking. He believed businesses are trustees of wealth created by a society, and should apply this wealth for advancement of the community. Increasingly, the idea of trusteeship is being discussed in the context of technology and data governance. The goal is to make data available for societal value by shifting from ownership by large firms towards a trusteeship model, governed by communities.

Lastly, Gandhi was not dogmatic. While he was unyielding in foundational ethics and values, he was open to changing his tactics based on new knowledge, consultations and his own experiments. This flexibility of tactics and testing new ideas can help entrepreneurs stay nimble and progressive.

The world is navigating turbulent waters on many fronts as we deal with a pandemic. The momentum that impact investing has been gathering will accelerate, as greater attention is paid to building resilience and catering to the needs of lower-income populations and small businesses. Amid this, Gandhi’s enduring simplicity of values, purpose and ethics can be the sheet anchor we need.

Roopa Kudva is partner and MD, and Sushant Kumar, principal, Responsible Tech, at Omidyar Network India.

1.2. How Flipkart, BigBasket, Amazon are hiring more female delivery agents

ET Bureau, Oct. 12, 2020, Sreedha Basu

A state-level football player for several years, 24-year-old Khatun, joined East Bengal Football Club's newly formed women's team as goalkeeper some months ago. Covid-19 - and the lockdown - put a stop to that, hitting her income and forcing Khatun to take up a job at Flipkart as a data entry operator.

TeamLease Services cofounder Rituparna Chakraborty said that large ecommerce and logistics players are actively committed to improving the gender diversity ratio.KOLKATA: When the Flipkart Big Billion Days sale kicks off this week, Mohima Khatun of Howrah in West Bengal will be among the thousands in the supply chain working around the clock to deliver goods to customers. What stands out about Khatun, however, is this: not only is she among the few women across India delivering furniture and large appliances, but she's also a professional football player and coach to 60-plus kids at a football academy. A state-level football player for several years, 24-year-old Khatun, joined East Bengal Football Club's newly formed women's team as goalkeeper some months ago. Covid-19 - and the lockdown - put a stop to that, hitting her income and forcing Khatun to take up a job at Flipkart as a data entry operator. "I found an indoor job a little boring. An opportunity to be part of the delivery network excited me," she said. She switched to the large goods supply chain, which involves visiting customer locations to deliver items. A typical day starts at 5 am when she gets in some football practice, then reporting to work at 7am, after which she and a driver set off with the consignments. She averages 15-16 deliveries a day--everything from washing machines to beds-and has a personal best of 23 deliveries, a record for her hub. The job gives her a lot of satisfaction, said Khatun, and she hopes to continue with it in some form, even after returning to football once the pandemic is over. "We moved out of our village over a decade ago as we faced a lot of taunts because I was a girl playing football. But my family supported me, and even after my father's sudden death, I continued. Now I don't let any jibes bother me," she said. Women such as Khatun are still in the minority but their numbers are gradually scaling up across the ecommerce ecosystem. Several Flipkart's fulfilment centres (FCs) such as Farrukhnagar in Haryana and delivery hubs in areas like Wadi, Nagpur, and hubs in Howrah, Kolkata, have women 'wishmasters,' which is what field staff are called. Others like BigBasket, Swiggy and Amazon are also hiring more women delivery agents. Amazon set up an all-women delivery station in Gujarat last month.

Improvement in Gender Diversity Ratio "We've taken various initiatives, mainly around safety, and creating a conducive culture to attract women into our supply chain fold," said Amitesh Jha, senior vice president, Ekart and marketplace, Flipkart. TeamLease Services cofounder Rituparna Chakraborty said that large ecommerce and logistics players are actively committed to improving the gender diversity ratio. "From about 7-10% of the overall delivery agent workforce about a quarter ago, now most companies are looking at improving it to 25% in the medium to long term with an eye on improving productivity, reducing turnover as well as increasing the talent pool," she said. Additionally, men and women who have either been rendered jobless or had their earning potential significantly reduced because of the pandemic are looking at picking up delivery agent roles, Chakraborty said. "It has become an effective stopgap solution," she said.

2.1. Snapdeal on-boards over 5,000 manufacturer-sellers in 9 months

PTI, Oct. 11, 2020

Though it began on-boarding new manufacturers directly as sellers from January, majority of the sign-ups have taken place in the September quarter, the official said, thanks to the lockdowns and the resultant shift in consumer behaviour. It can be noted that every online seller/service provider has benefited from the lockdowns.

Snapdeal allows manufacturer-sellers to ship directly to buyers, which means that their stocks are not stuck in the warehouses of online platforms.Homegrown marketplace Snapdeal has added over 5,000 manufacturer-sellers on its platform so far this year, most of them in the September quarter, exceeding the target it had set for itself earlier in the year, a top company official has said. Though it began on-boarding new manufacturers directly as sellers from January, majority of the sign-ups have taken place in the September quarter, the official said, thanks to the lockdowns and the resultant shift in consumer behaviour. It can be noted that every online seller/service provider has benefited from the lockdowns. Adding new sellers will help the e-tailer to ramp up its Diwali sales plans as direct shipment to buyers help manufacturers move stocks faster to customers. The leading value-focused marketplace has over 5 lakh registered sellers and over 70 million visitors every month who can buy from over 213 million listings and its network covers over 26,000 pin codes. A large chunk of the new manufacturer-sellers are into kitchen gadgets like juicers, food processors, steel & copper utensils, crockery items, bed linen, fashion accessories like watches & wallets and a wide range of apparel including kidswear, sarees and suits and regular use items like T-shirts, track pants among others, according to the company. There are also many manufacturers who offer a range of fitness equipment like tummy trimmers, resistance bands, weights, etc. Most of these manufacturer-sellers are from small towns manufacturing hubs like Meerut, Ludhiana, Tirupur, Jaipur, Panipat, Surat, and Rajkot. Ahead of its festive sales push, Snapdeal recently opened 25 logistics centres in major metros like Mumbai, Delhi and Bengaluru as well in small towns like Surat, Jaipur, Panipat, Gurugram, Bahadurgarh, Yamuna Nagar, Rajkot, Bhiwandi, Agra, Noida, and Mathura. Snapdeal allows manufacturer-sellers to ship directly to buyers, which means that their stocks are not stuck in the warehouses of online platforms.

2.2. State Bank of India's digital startup, YONO, could be a $40 billion goldmine

IBEF, Sep. 17, 2020

State Bank of India’s (SBI) digital start-up YONO (You only need one) is being valued at US$40 billion and the bank is aiming to start it as a separate entity as a long-term plan. At present, the YONO platform has 2.76 crore users and has sourced Rs 20,000 crore personal loans and Rs 24,000 crore agriculture gold loans, with 50% leads for home loans and MSME loans being generated on the platform. Furthermore, it is adding 70,000 customers daily and providing loans worth Rs 70 crore per day.

Mr Rajnish Kumar, Chairman, SBI, said, “The companies which are making losses are valued at US$10–20 billion, YONO which is such a versatile platform has been making good amount of profits, using that benchmark YONO should be valued at $40 billion, but we haven’t commissioned any independent agency to value the platform.”

“Hiving YONO off as a subsidiary is a very good possibility but a couple of things have to be done, we should have APIs that could be given to other banks but first looking at the opportunities with our customer base we want to perfect that and then look outside,” said Mr Kumar.

Mr Siddharth Purohit, analyst, SMC Institutional Equities, said, “No doubt SBIs YONO platform is quite world class but it will not be value accretive as long as it is under the SBI roof, look at SBI cards it is one of the best valued NBFCs today. So, if tomorrow SBI decides to hive YONO off as a subsidiary the market will determine its value basis that.”

“The platform created by any bank such as SBI is very different from a pure play payment venture or an insurance aggregator, cause for a Bank this is just an enabler to a larger business,” said Ashvin Parekh, founder, Mr Ashvin Parekh Advisory Services.

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

3. Tata Power venture TPRMG's 200 microgrids expected to be ready by 2021

IBEF, Sep. 21, 2020

TP Renewable Microgrid (TPRMG), a Tata Power venture, is expected to complete 200 microgrid installation work and make it ready for use by next year, the Rockefeller Foundation said — a partner in the clean energy project.

Tata Power had announced in November 2019 that it would build an arm, TPRMG, to set up 10,000 microgrids to supply power to 5 million homes across India.

The Rockefeller Foundation, a US-based philanthropic organisation that partnered with Tata Power for this initiative, said it is using experience, expertise and demonstrated success to date in India to help lead the creation of large-scale, transformative partnerships.

Such alliances and tie-ups, it said, break down the silos between conventional utilities and innovative emerging technologies, unleashing a new wave of last-mile electrification that combines grid and off-grid, fosters public-private alliances and promotes clean, renewable and sustainable energy solutions.

Mr Ashvin Dayal, Senior Vice President, Power Initiative, The Rockefeller Foundation, stated PTI in an email response to a query, “Since the launch of TPRMG last November, the first microgrids are up and running with customers connected and additional construction is underway across Bihar and Uttar Pradesh. The TPRMG team is working hard, we expect to have the first 200 sites ready in 2021,”

He added that the outbreak of COVID-19 has impacted the speed at which the project was being implemented in India. India is home to one of the world's largest "un-electrified and under-electrified" populations, where communities still use non-grid sources such as diesel generators to power more than 40 percent of rural enterprises, especially in states such as Bihar and Uttar Pradesh. Off-grid solutions will help India rapidly meet the urgent energy needs of communities, and they are also inexpensive. Indian off-grid power solutions market is nice, he said. In a report, the Energy, Climate and Water Council (CEEW) noted that there is a business potential in India for distributed renewables and clean energy technologies more than USD 50 billion.

Dayal stated the Rockefeller Foundation has been operating in the region in India for quite some time. Smart Power India (SPI) was launched in 2015 by the Rockefeller Foundation, which funded the establishment of 300 mini grids operated by a diverse collection of private companies, benefiting more than 2.5 lakh customers.

"Last year's partnership with Tata Power, which set up what will become the world's largest mini-grid company, reached 10,000 villages and served over 25 million people," he added.

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

4.1. Government to set up Medical Devices Park in Kerala

Press Information Bureau, Sep. 23, 2020

Kerala will soon house one of the first medical device parks in the country, focusing on the high-risk medical device sector to provide full range of services for the medical devices industry like R&D support, testing, and evaluation.

MedSpark, the medical devices park envisaged as a joint initiative of Sree Chitra Tirunal Institute for Medical Sciences & Technology (SCTIMST), an autonomous institute of the Department of Science and Technology (DST), Govt. of India, and the Kerala State Industrial Development Corporation Ltd (KSIDC), the industrial and investment promotion agency of the Government of Kerala is going to be established in the Life Science Park, Thonnakkal, Thiruvananthapuram.

This medical device park will stand out with its emphasis on the high-risk medical device sector involving medical implants and extracorporeal devices, in which SCTIMST scores with its knowledge.

The Medical Devices Park will create an enabling support system for R&D, testing and evaluation of medical devices, manufacturing support, technology innovation, and knowledge dissemination, all of which are the full range of services that the medical devices industry seeks. These services can be utilized by the medical device industries located within the MedSpark as well from other parts of India. This will benefit small and medium-sized medical devices industries, which dominate the medical devices sector.

Pinarayi Vijayan, Chief Minister, Government of Kerala, will lay the foundation stone for Medical Devices Park on Thursday, 24th September 2020.

“Sree Chitra has made substantial contributions to the biomedical devices sector over the last 30 or more years and has established itself as a pioneer in this field. This is a milestone for biomedical devices industry in the country and is fully aligned with the Honorable Prime Minister’s Vision of Aatmanirbhar Bharat”, said Dr. VK Saraswat, NITI Aayog Member and the President of SCTIMST

“The aspect that will distinguish this Medical Device Park from the few other similar projects proposed in the country is that it will focus on the high-risk medical device sector involving medical implants and extracorporeal devices, the domain in which SCTIMST has considerable expertise and experience,” Prof. Ashutosh Sharma, Secretary DST commented.

“The park is being established under the Technical Research Centre for Biomedical devices program of the DST, through a knowledge partnership with KSIDC, Government of Kerala, tapping the ecosystem that exists in the city with several research and academic institutions and health care centers. It was possible with the support of various departments of the Central Government and Niti Aayog,” said Dr. Asha Kishore, Director, SCTIMST.

MedSpark can leverage the existing advantage of the Kerala State in the high-risk medical device manufacture and develop it into the most sought-after destination for setting up medical device industry in India.

Currently, Kerala has several medical device companies with an annual turnover more than Rs. 750 crores (US$ 102.06 million), most of them operating with technologies transferred from SCTIMST.

When completed, the MedSpark will have:

A Medical Device Testing & Evaluation Centre accredited to international agencies
An R&D Resource Centre for facilitating R&D in medical device domain, the services of which would be shared by the entities within the Park
A centralised Knowledge Centre for skill up-gradation with facilities for conducting training and providing support on regulatory issues, clinical trials, etc.
A Technology Business Incubation Centre for promoting start-ups and early-stage companies
A set of Modular Manufacturing Units for lease by the industries coming to the park or land modules for setting up manufacturing units
The business model for the MedSpark is self-sustaining in which its operational expenses will be generated from its revenue streams. Funding from the state and central governments (both Kerala State and Central) through various schemes will meet the capital expenditure and deficit in income against expenses during the initial stages
It is expected that the project would provide direct employment to 1200 people. Besides, employment generation up to 4000 – 5000 jobs through the supporting industries like OEM suppliers, service providers, and marketing/post marketing support activities.

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

4.2. India’s crackdown on NGOs, in four charts

Livemint, 30 Sep. 2020, howindialives.com

Latest amendments to the law that regulates foreign grants to Indian NGOs continues the recent pattern of raising compliance costs

Last week’s amendments to the law that regulates foreign grants to non-government organisations (NGOs) continues the recent trend of the centre making greater administrative demands on them, increasing their cost of compliance. The centre says the changes are aimed at “strengthening the compliance mechanism, enhancing transparency and accountability" in a key funding source for the NGO sector. Civil society says the new regulations are ill-conceived and only add to the difficulty of their functioning.

Three amendments in particular have riled NGOs: opening a pass-through bank account in a specified branch in New Delhi, stopping NGOs from transferring foreign grants to other registered NGOs, and the lower cap on administrative expenses. Each has significant financial and compliance implications for NGOs.

Foreign grants received by NGOs are regulated by the Foreign Contribution (Regulation) Act, 2010, or FCRA. In order to receive foreign funds, an NGO has to register with the ministry of home affairs. It is assigned a unique FCRA registration number, to be renewed every five years.

Under the current regime at the centre, renewal has become more difficult, NGOs say. In 2015, the centre increased e-filing requirements. NGOs had to make quarterly filings of foreign grants received. They also had to notify within 15 days any changes in bank account, name, address, aims, objectives and key functionaries.

Around the same time, the centre started weeding out duplicate FCRA registration numbers—over time, several NGOs had accumulated more than one registration number. In 2019, the Centre for Social Impact and Philanthropy (CSIP), Ashoka University, did a deep-dive into the FCRA database as part of a report titled ‘Estimating Philanthropic Capital in India’. This study showed that the Centre cancelled 10,069 FCRA registration in 2015 and another 4,943 in 2017. (Disclosure: howindialives.com was the data partner to CSIP, Ashoka University, in the above-mentioned study.)

The impression that went out was large-scale violations and NGOs being barred en masse from accessing foreign funds. But this purge was mostly the cancellation of duplicate numbers. However, along with it also came instances of NGOs being barred from accessing foreign grants, and an increase in compliance requirements and scrutiny. This has impacted the number of FCRA-registered NGOs and the amount of foreign funds raised by them in recent years.

The latest set of changes add to this feeling of siege. The first change is that every FCRA-registered NGO will have to open an FCRA-marked bank account with a designated branch of State Bank of India in New Delhi. These accounts will be the point of entry for all foreign grants. NGOs can subsequently route these funds to their existing FCRA-marked accounts across the country.

According to CSIP, of the 21,490 NGOs that filed FCRA returns for 2018-19, only 1,488 were registered in Delhi. That’s only 7% of NGOs. Thus, this new rule will require functionaries of about 20,000 NGOs, spread across India, to come to Delhi to open a pass-through bank account.

The second change is stopping the practice of an FCRA NGO transferring foreign grants received by it to other FCRA NGOs. NGOs cite such re-transfers as mutually beneficial. It leverages the spirit of collaboration that is typical of civil society. Large NGOs can also work with smaller NGOs, who work on the ground but can’t raise foreign funds on scale by themselves.

In 2018-19, according to CSIP, 4,107 NGOs registered in 380 districts—or about one in five FCRA NGOs—received such re-grants. The total amount transferred was ₹1,768 crore and the median transfer value was ₹7.6 lakh. In other words, half the 4,107 NGOs received a re-grant of less than ₹7.6 lakh. The centre is now seeking to shut this route.

A majority of FCRA NGOs don’t receive big foreign grants. About 46.5% of these 21,490 NGOs did not receive any foreign grants in 2018-19. Another 41.6% received foreign grants only up to ₹1 crore. The sector as a whole received ₹16,343 crore in 2018-19, which is 5% of what Indian companies received through foreign direct investment (FDI) that same year. They are now being asked to bear an additional cost of compliance.

The third change is lowering the cap on administrative expenses from 50% of foreign funds received to 20%. NGOs say this is needless micro-management and cost structures vary from project to project. It is particularly difficult for NGOs whose work revolves around advocacy rather than projects. In 2018-19, there were 1,328 NGOs whose administrative expenses exceeded 20% of their total foreign funds.

NGOs say the new rules place more discretionary powers in the hands of bureaucrats and increase their compliance burden. And it will further widen the trust deficit between NGOs and the centre.

howindialives.com is a search engine for public data

5.1. Private defence business gets one more nudge

Livemint, 01 Oct. 2020, Arjun Srinivas

India is yet again working the policy lever to get private players into defence production. Will it work?
Indian companies, which have seen many a false dawn in the defence sector, are latching on to this new push, saying the right things, initiating plans and doing the odd deal

BENGALURU: From 1 October, India moves into a new regime for defence systems production and acquisition. Under the larger ambit of the government’s Atmanirbhar Bharat tilt, the new policy seeks to ensure self-reliance in defence manufacturing. Along with recommendations to streamline defence procurement, the policy sets several ambitious production targets, including an annual turnover of ₹1.75 trillion and exports of ₹35,000 crore in aerospace and defence goods and services by 2025.

In 2018-19, India’s total defence production was ₹80,558 crore and exports ₹8,320 crore. In other words, the government wants to double domestic production in defence and quadruple exports by 2025. It’s using the policy lever to give the Indian private sector a larger business landscape.

Indian companies, which have seen many a false dawn in the defence sector, are latching on to it, saying the right things, initiating plans and doing the odd deal. A report released this week by the auditor to the government serves as a counterpoint to this promise, and lays bare some of the pulls and pressures involved in taking a business-friendly approach in India’s defence sector and converting it into a sustainable business opportunity.

Imports dominate

As things stand, India is far from being self-reliant in its defence requirements, while only being a marginal player in exports. According to data from the Stockholm International Peace Research Institute (SIPRI), India’s arms imports declined by 32% in the five-year period from 2015-19, as compared to 2010-14. Yet, India remained the second-largest arms importer in the world in the period 2015-2019, 56% of which came from Russia alone. In terms of exports, India ranks 23rd, having merely 0.2% of the share of global exports (see Chart 1).

For India to reach anywhere close to the proposed 2025 targets will require a radical overhaul of the current defence production regime. While a bulk of defence production is still attributable to the twin government pillars of defence public sector undertakings (DPSUs) and ordnance factories, the emerging private sector will have a significant role to play if India aspires to ramp up its capabilities.

India has much ground to make up on the defence technology and production curve. As part of the Make in India umbrella, the government has been pushing for a greater role for the private sector. The database of one of these initiatives shows a majority of projects fall in the category of ammunitions (including rockets and bombs), and surveillance and tracking systems. According to the SIPRI database, however, a majority of India’s defence imports are in the category of fighter aircraft, helicopters, naval guns and anti-submarine missiles—which present a significantly greater technological and manufacturing challenge.

Since 2016-17, the earliest for which such data is available, there has been a gradual shift away from the public sector to the private sector. The share of the private sector in total defence production has risen from 19% in 2016-17 to 22% in 2018-19. In the same period, the share of the public sector (DPSU plus ordnance board) has decreased from 75% to 72% (see Chart 2).

Defence production in the public sector is helmed by the Department of Defence Production (DDP), which was set up in 1962 with the objective of developing a comprehensive production infrastructure to produce equipment required for defence. The DDP oversees the functioning of the Ordnance Factory Board (OFB) and nine defence PSUs, which include Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Bharat Dynamics and Mazagaon Dock.

While the purpose of the DPSUs and OFB was to accomplish self-sufficiency in arms production, their performance has come under considerable scrutiny over the past few years. An audit by the Comptroller and Auditor General of India (CAG) in 2016 stated that “defence PSUs failed in their objective of supplying critical weapons and equipment meant for modernisation of Army."

The CAG’s statement was based on the following findings. Of the capital contracts concluded with DPSUs during the XI Army Plan (2007-12), “inordinate delays" were observed in contracts worth ₹30,098 crore, or 63% of the total value.

According to CAG, the major reasons for inefficiencies were undue time taken in development, delays in successful evaluation of pilot, heavy dependence of DPSU on foreign vendors and ambiguity in contractual terms. In an unscheduled appearance at a ministry of defence (MoD) webinar last month, Prime Minister Narendra Modi chastised the ordnance factories for running like a “government department" and said that steps will be taken to corporatize them.

Policy fillips

For the longest time, defence production was strictly regulated, remaining within the domain of the public sector. In May 2001, the defence sector was opened up to 100% for Indian private sector participation, with foreign direct investment (FDI) up to 26%, but both were subject to licensing. In 2016, FDI under automatic route was allowed up to 49%, and above 49% where it was likely to result in access to modern technology. Earlier this month, the government relaxed the FDI limit under the automatic route to 74%, but it also inserted a ‘national security’ clause, retaining the right to review any deal.

The Defence Procurement Procedure (DPP) 2016 undertook several reforms that benefited the private sector. One significant provision in DPP 2016 was the Strategic Partnership Policy (SPP). This allowed selected Indian private sector companies to partner with foreign original equipment manufacturers (OEMs) to jointly manufacture fighter jets, helicopters, submarines and armoured vehicles. Global vendors wanting to tie-up with Indian private sector companies would receive formal assurances from the Indian government to get the necessary licenses. The government would, therefore, play a facilitating role. The controversial Rafale jet deal signed between France’s Dassault Aviation and Anil Ambani-led Reliance Aerospace in 2016 was executed as one such strategic partnership.

The 2020 policy has introduced a new category ‘Buy (Global-Manufacture in India)’ to encourage foreign OEMs to setup “manufacturing or maintenance entities through its subsidiary in India". The new guidelines encourage the manufacturing of the entire equipment rather than just components and spares. Additionally, domestically developed defence platforms must now have at least 60% Indian content.

Another policy to benefit domestic manufacturers, particularly private players, is the Defence Offset Policy proposed in DPP 2013. Under this policy, a foreign supplier of defence equipment compensates the ordering country in the form of placing a minimum percent of value addition in the ordering country. India had an offset requirement of 30% for defense contracts over ₹2,000 crore (now revoked from 1 Oct).

The Rafale deal, valued at €7.87 billion (about ₹59,000 crore), included a 50% offset obligation—the largest-ever offset contract in India. In this deal, the offset share of the Defence Research and Development Organisation (DRDO), a government entity, was 30%. The remaining 20% was allocated to the Dassault Reliance Aerospace Ltd (DRAL), Dassault’s joint venture with Anil Ambani’s Reliance Group.

These contracted offset obligations, which are valued around ₹30,000 crore, are to be discharged over a period of seven years, beginning in the fourth year—that is, from October 2019. The disposal of these offsets is, however, heavily loaded towards the last two years of the seven-year period. On 24 September, CAG tabled a report in parliament where it highlighted that the vendors, Dassault Aviation and weapons-supplier MBDA, had not yet made the transfer of technology to DRDO.

Irregularities in the offset policy, CAG added, were not restricted to the Rafale deal alone. Based on a scrutiny of several offset contracts between 2005 and 2018, the CAG report stated that offset contracts built into several defence deals have “not yielded the desired results".

Private sector still fringe

Several conglomerates entered the defence sector in the early part of this century. In 2004, a committee was set up by the government under the chairmanship of Vijay Kelkar to examine and recommend changes needed in defence acquisition procedures. The report, released in 2005, encouraged the involvement of the country’s best private firms.

In 2007, the Tata Group entered the defence manufacturing space with Tata Advanced Systems. Other prominent groups with a presence include the Mahindra group, Hinduja group, Kalyani group, L&T, both Ambani brother groups and, most recently, the Adani group.

Mahindra firms and Hinduja group-owned Ashok Leyland are supplying armoured vehicles to the Indian army. Kalyani Strategic Systems and Bharat Forge of the Pune-based Kalyani group are producing a range of defence equipment, including artillery systems, ammunition, missiles and air defence solutions and small arms.

But their numbers, at present, are not much to speak of. In 2018-19, the size of the entire private sector in the defence space was ₹17,350 crore—about one-third the quarterly turnover of Reliance Industries Ltd. Data in the public domain shows that Tata Advanced Systems had ₹341 crore revenues in 2017-18 and Kalyani Strategic Systems ₹119 crore revenues in 2019-20.

But the private sector is once again looking to make big moves. Take the example of the Adani Group. Earlier this month, an Adani subsidiary bought 51% in Gwalior-based PLR Systems, which makes small arms and in which 49% is owned by Israeli defence manufacturer IWI. The latest relaxation in FDI norms does open the door wider for more strategic alliances between foreign defence firms and Indian private companies.

The MoD seems increasingly keen to engage with private players. On 1 September, for instance, it inked a long-awaited ₹2,580 crore deal with L&T and Tata Aerospace and Defence to manufacture indigenous Pinaka multi-barrel rocket launchers for the Army. Defence PSU BEL was also a beneficiary of the deal and will be contracted to build trucks for the rocket launchers.

While the larger trend seems to be towards privatization and foreign investment, the public sector still remains the backbone of defence production in India, and therefore, needs proactive reforms. Earlier this month, Chief of Defence Staff General Bipin Rawat called for a revamping of India’s defence PSUs with a focus on improving their work culture and quality control.

He also called for rationalization of India’s defence expenditure, noting that in spite of being the world’s third-largest defence spender, India does not have the defence capabilities it desires. India’s armed forces, he added, were committed to winning wars with indigenous solutions and urged the private industry to invest in building long-term capabilities. If India is to indeed realise its ambition of being a significant player in the global defence scene, it would require a massive modernisation of its public defence set-up, along with an infusion of capital and technological expertise from private companies.

Arjun Srinivas is with www.howindialives.com, a database and search engine for public data

5.2. Labour reforms to help workers and industry

Bangalore Mirror Bureau, Oct. 09, 2020

A key element of the proposed Social Security Code is to clearly define migrant workers and also enlarge scope of the current scheme to cover the gig economy and those outside the organised sector, while recognising the emergence of online platforms and aggregators.

Earlier, the five-year gratuity payment was mandatory, which meant millions of workers used to forfeit their gratuity deposits, salary of 15 days for every year of work, if they resigned or lost jobs before the stipulated period.By Sanju Verma (Economist, National spokesperson of BJP & Author of “Truth & Dare — The Modi Dynamic”) The long due labour reforms passed by Parliament will ensure the well-being of our industrious workers and give a boost to economic growth,” said Prime Minister Narendra Modi recently. The Parliament in its just-concluded monsoon session passed three labour code bills: the Industrial Relations Code, Social Security Code and the Occupational Safety, Health and Working Conditions Code. The Wage Code Bill, 2019 was passed by Parliament last year. Key provisions like making all categories of workers eligible for minimum wages, as against only 30% of the workforce at present are path-breaking. Minimum wages would be extended to the entire services sector, domestic workers, unorganised workers and teachers among others. Modi has done what none before him could dare to attempt — India’s labour market reforms will herald the dawn of a new era in making businesses more efficient and competitive, and allowing flexibility in hiring and retrenchment, making industrial strikes difficult, removing multiple licensing and paper work and getting rid of disguised unemployment. Disguised unemployment is a scenario where employees are under utilised and underpaid.

India jumped up 14 places to the 63rd position in the ease of doing business (EODB) rankings last year and by 79 positions in five years (2014-19). The covid situation has made both the life of employer and employee difficult.Under these circumstances, these new (labour) codes are bound to make new enterprises investor-friendly, increase ease of doing business and make it attractive to invite foreign entities that want to exit China.

AGRICULTURE, FISHING & RURAL DEVELOPMENT

6.1. Govt. has set a target to increase the number of Janaushadhi Kendras to 10500 by the end of March 2025.

Press Information Bureau, Sep. 18, 2020

Union Minister for Chemicals & Fertilizers Shri D V Sadananda Gowda has said that with a vision to provide quality medicines at an affordable rates for the common man especially the poor, Govt. has set a target to increase the number of Pradhanmantri Janaushadhi Kendras PMBJK to 10500 by the of March 2025. As on 15th September 2020 the number of stores has increased to 6606.

With this all the districts in the country will have Janaushadhi Kendras. This will ensure easy reach of affordable medicine to the people in every nook and corner of the country.

In the month of March to June 2020, PMBJP had faced many challenges regarding shortage of API and other raw material of pharmaceuticals, disturbance in supply of medicines to Jan Aushadhi kendras from Central and Regional Warehouses due to non-availability of vehicles for transportation, etc. Keeping this in view, with the expansion plan establishment of an effective IT-enabled logistics and supply-chain system for ensuring real-time distribution of medicines at all outlets to avoid stock out situation is also being chalked out.

At present four warehouses of PMBJP (Janaushadhi) are functional at Gurugram, Chennai, Bengaluru & Guwahati. Further, it is planned to open two more warehouses in Western and Central India. In addition, appointment of Distributors in States/UTs is also being envisioned to strengthen the supply chain system.

PMBJP, the Scheme has been approved with a budget of Rs. 490 crores (US$ 66.56 million) for the period 2020-21 to 2024- 25.

Despite the COVID lockdown and testing times Janaushadhi Kendras achieved appreciable sales turnover of Rs. 146.59 crore (US$ 19.91 million) in the first quarter of 2020-21 compared to Rs. 75.48 crore (US$ 10.25 million) achieved in the first quarter of 2019-20. In the months of July to September 2020 (Till 15th September), the stores added a sale of Rs. 109.43 Cr (US$ 14.86 million). Now the total sales up to 15th September 2020 is Rs. 256.02 Cr (US$ 34.78 million).

PMBJP has drastically brought down the prices of quality medicines and making medicines available within the reach of large section of population, especially the poor.

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

6.2. Subsidy under Operation Greens a step towards Aatma Nirbhar Bharat

Press Information Bureau, Oct. 15, 2020

Shri Narendra Singh Tomar, Union Minister of Rural Development, Agriculture & Farmer Welfare, Panchayati Raj and Food Processing Industries has stated that the subsidy under Operation Greens TOP to TOTAL is a big step towards Aatma Nirbhar Bharat. He added that under the visionary leadership of the Prime Minister Shri Narendra Modi, the Ministry of Food Processing Industries has brought out various schemes for India’s farmers. Under Aatma Nirbhar Bharat Abhiyan, Operation Greens Scheme TOP to TOTAL provides 50% subsidy on transport and storage of notified fruits and vegetables if prices of such fruits or vegetables are below the trigger price. Now, in addition to direct submission of online claim to MoFPI, the transportation subsidy would also be available under Kisan Rail Scheme under a very simplified way. Any person, including farmers can transport any notified fruits and vegetable crops through Kisan Rails. Railways would charge only 50% of freight charges on these fruits and vegetables. Remaining 50% of the freight charges will be provided as subsidy under Operation Greens Scheme by MoFPI to the Indian Railways. The revised Scheme Guidelines has been uploaded on the Ministry’s website on 12.10.2020.

In relaxation of other conditions for Operation Greens – TOP to TOTAL Scheme for transportation through Kisan Rail Scheme, all consignments of notified fruits and vegetables irrespective of quantity and price would be eligible for 50% freight subsidy. At present Railways is operating three Kisan Rails between Devlali (Maharashtra) and Muzaffarpur (Bihar), Anantapur in Andhra Pradesh to Delhi, Bangalore to Delhi and plans to start fourth Kisan Rail from Nagpur and Warud Orange City in Maharashtra to Delhi.

Eligible Crops: –

Fruits (19) - Mango, Banana, Guava, Kiwi, Litchi, Mousambi, Orange, Kinnow, Lime, Lemon, Papaya, Pineapple, Pomegranate, Jackfruit, Apple, Aonla, Passion fruit and Pear;

Vegetables (14): - French beans, Bitter Gourd, Brinjal, Capsicum, Carrot, Cauliflower, Chillies (Green), Okra, Cucumber, Peas, Onion, Potato and Tomato.

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

7.1. Amazon India now allows booking train tickets, offers cashback for Prime members

IBEF, Oct. 08, 2020

To provide a facility for booking reserved train tickets on Amazon, Amazon India has collaborated with the Indian Railway Catering and Tourism Corporation (IRCTC). For their first train ticket booking, customers can earn a 10% cashback of up to Rs 100 (US$ 1.36) and Prime members will benefit from 12% cashback for these bookings up to Rs 120 (US$ 1.63). The offer is, however, only available for a limited time. Amazon.in has also waived service and payment gateway processing charges for the introductory period. Amazon India customers will now be able to book flights, buses, and train seats using Amazon Pay with the introduction of the new service.

Amazon.in will also include other railway-related services. Across all train classes on the Amazon app, customers will be able to verify seat and quota availability. The PNR status of a ticket booked on Amazon will also be reviewed by the customer. For the time being, the PNR status of tickets booked via other media cannot be reviewed on Amazon. The user can also download and cancel tickets that have been booked via Amazon. In the event of cancellations or booking errors, Amazon allows customers to pay using Amazon Pay Balance to get instant reimbursement.

The new feature is available on both Android and iOS with the Amazon application. By clicking the trains / travel category under the Amazon Pay tab, customers can book their tickets. They can choose the dates of their route / travel and get a list of all trains available. For testing, customers may use any digital payment form. If clients need to cancel a ticket, under the 'Your Orders' line, they can do so. They can also request 24x7 assistance over the phone and chat with an Amazon helpline.

Speaking on the launch, Mr Vikas Bansal, Director - Amazon Pay said, “We are excited to partner with IRCTC and move another step forward in making life easy and convenient for our customers. Last year, we launched flights, and bus ticket booking on Amazon. With the facility to book reserved train tickets on our platform, we are enabling travel across any mode preferred by customers. Over the course of time, the Amazon app has become the one stop destination for shopping and payment of several other use cases. Customers love the convenience we offer of shopping and paying - all in one single app."

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

7.2. Amazon India to host 'Handicrafts Mela' to support artisans, weavers

IBEF, Sep. 28, 2020

On Saturday, Amazon.in said it would host a virtual 'Handicrafts Mela' from September 26 to October 10, showcasing more than 270 types of art and craft from different parts of the world.

Amazon India said in a statement that more than eight lakh artisans and weavers affiliated with 1,500 Amazon Karigar sellers and 17 government emporiums like Tantuja, Harit Khadi, Tribes India and national-level artisan organisations such as Craftmark and Dastkari Haat Samiti will benefit from this mela.

The statement said that Amazon's Handicrafts Mela, which will showcase over 55,000 unique products, will help customers discover and buy products from artisans and weavers from various parts of the country by visiting specific sections such as the handloom zone, home dcor handicrafts, kitchen pieces, handmade toys, handcrafted festive collection and others.

Amazon India Director - MSME and Seller Experience Mr Pranav Bhasin said, "Exhibitions and melas have been the primary avenues through which karigars have been able to reach their customers. However, as these on ground events have been brought to a grinding halt, the online marketplace has emerged as an avenue that these sellers can leverage to reach customers across the country during the festive season".

Amazon India, through a virtual Handicrafts Mela, aims to generate market demand for arts and crafts that represent the country's cultural heritage, he added.

In July this year, the e-commerce giant also organised a 10-week 'Stand for Handmade' campaign to support the revival of the companies of these artisans and weavers.

Mr Bhasin further said, "Considering the success witnessed by sellers through previous sale events and initiatives we rolled out, we're optimistic about the positive impact that Handicrafts Mela will have in the lives of lakhs of artisans and weavers from across the country".

Amazon India had launched the Karigar programme in 2016 as part of its efforts to bring all forms of Indian crafts online. Since then, Amazon.in has onboarded more than 3,000 master weavers, co-operatives, artisans and government organisations under various ministries to help artisans sell online.

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

8.1. Parliament passes The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020

Press Information Bureau, Sep. 21, 2020

Parliament today passed two bills aimed at transforming agriculture in the country and raising farmers’ incomes. The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 which were passed by Lok Sabha on 17th September 2020, were passed by the Rajya Sabha also today. The Bills were introduced in Lok Sabha on 14th September 2020 by Union Minister of Agriculture & Farmers’ Welfare, Rural Development & Panchayati Raj, Shri Narendra Singh Tomar, to replace ordinances promulgated on 5th June 2020.

Speaking about the Bills, Shri Narendra Singh Tomar said that the Government under Prime Minister Shri Narendra Modi has taken several landmark decisions in last six years to ensure that farmers get remunerative prices for their produce, and for raising farmers’ incomes and livelihood status. He again clarified that the procurement at Minimum Support Price will continue, assurance for this has been given by Hon’ble Prime Minister himself, rate of MSP has been increased considerably during 2014-2020 and MSP for coming Rabi season will be announced in coming week. The Union Agriculture Minister said that full protection has been ensured to farmers in these legislations.

The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

Main provisions –

The new legislation will create an ecosystem where the farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce.
It will also promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.
The farmers will not be charged any cess or levy for sale of their produce and will not have to bear transport costs.
The Bill also proposes an electronic trading in transaction platform for ensuring a seamless trade electronically.
In addition to mandis, freedom to do trading at farmgate, cold storage, warehouse, processing units etc.
Farmers will be able to engage in direct marketing thereby eliminating intermediaries resulting in full realization of price.

Doubts –

Procurement at Minimum Support Price will stop
If farm produce is sold outside APMC mandis, these will stop functioning
What will be the future of government electronic trading portal like e-NAM?

Clarification –

Procurement at Minimum Support Price will continue, farmers can sell their produce at MSP rates, the MSP for Rabi season will be announced next week
Mandis will not stop functioning, trading will continue here as before. Under the new system, farmers will have the option to sell their produce at other places in addition to the mandis
The e-NAM trading system will also continue in the mandis
Trading in farm produce will increase on electronic platforms. It will result in greater transparency and time saving

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020

Main provisions –

The new legislation will empower farmers for engaging with processors, wholesalers, aggregators, wholesalers, large retailers, exporters etc., on a level playing field. Price assurance to farmers even before sowing of crops. In case of higher market price, farmers will be entitled to this price over and above the minimum price.
It will transfer the risk of market unpredictability from the farmer to the sponsor. Due to prior price determination, farmers will be shielded from the rise and fall of market prices.
It will also enable the farmer to access modern technology, better seed and other inputs.
It will reduce cost of marketing and improve income of farmers.
Effective dispute resolution mechanism has been provided for with clear timelines for redressal.
Impetus to research and new technology in agriculture sector.

Doubts –

Under contract farming, farmers will be under pressure and they will not be able to determine prices
How will small farmers be able to practice contract farming, sponsors will shy away from them
The new system will be a problem for farmers
In case of dispute, big companies will be at an advantage

Clarification –

The farmer will have full power in the contract to fix a sale price of his choice for the produce. They will receive payment within maximum 3 days.
10000 Farmer Producer organizations are being formed throughout the country. These FPOs will bring together small farmers and work to ensure remunerative pricing for farm produce
After signing contract, farmer will not have sought out traders. The purchasing consumer will pick up the produce directly from the farm
In case of dispute, there will be no need to go to court repeatedly. There will be local dispute redressal mechanism.

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

8.2. What India’s farm reforms aim to change, in three charts

Livemint, 08 Oct. 2020, Arjun Srinivas , howindialives.com

Wide disparities in agri-marketing regulations have resulted in fragmented markets across states. The new farm bills aim to change this but the jury is still out on whether it will have the intended impact.

On 26 September, government procurement of food crops commenced across the country, five days in advance, following the enactment of three contentious farm bills. Under the new policy regime, farmers need not sell their produce through designated markets, and can sell to whoever they want to.

The same week, reports emerged that farmers from Uttar Pradesh wanting to sell their produce in Karnal, Haryana, were stopped at the Haryana border. Later, the Haryana government clarified there was no law barring farmers from other states from selling their produce in Haryana, and they could do so after registering on a portal. This begs the question, why would farmers from one region want to sell their produce elsewhere?

Monthly data collected on wholesale prices across 122 centres by the ministry of consumer affairs, food and public distribution shows wide geographical disparity in prices. We studied this data for six key agricultural commodities in 2019, covering foodgrains, pulses and vegetables. Three commodities (rice, wheat and tur dal) were among the 23 for which the government sets a minimum support price (MSP). The other three (potato, onion and tomato) didn’t have MSP support. The largest price variation was seen for vegetables, where trade is mostly unregulated and there exists no government procurement.

So, what explains this wide geographical disparity in prices? Under the current policy regime, agricultural markets are the domain of state governments. All states that have notified the Agricultural Produce Marketing Committee (APMC) Act operate APMC mandis (markets) with specified geographical jurisdictions. Farmers are, therefore, required to sell their produce via auctions to licensed traders at the mandi in their region.

Most major states have implemented the APMC Act, with Kerala and Bihar being notable exceptions. However, there is large variation across states in terms of the scope and stringency of these APMC acts, wrote Sudha Narayanan, associate professor at the Indira Gandhi Institute of Development Research, in an article published by The India Forum. Such variations in APMC regulations have led to fragmented markets, and impeded the emergence of a single national market, according to Narayanan.

In rice, for instance, the monthly average price in 2019 ranged from ₹2,042 per quintal in Agra (Uttar Pradesh) to ₹5,102 in Gangtok (Sikkim). In vegetables, the variation is much greater. In tomatoes, for instance, the monthly average price in 2019 ranged from ₹985 per quintal in Udaipur (Rajasthan) to ₹7,605 in Mayabunder (Andaman & Nicobar Islands).

These prices offer an insight into the wide disparity in what farmers earn for their produce in different parts of the country. A quartile-wise distribution shows that in all six commodities, there are a sizeable number of centres where the wholesale prices vary sharply. In rice, for example, the average price in the bottom quartile (comprising 28 centers) was about 19% below the average for the 122 centers. In the top quartile, the average price was about 33% higher. This variance in vegetables is much higher.

To be sure, the difference in wholesale prices is also driven by transaction costs such as for transportation, and the relative demand and supply across regions. With agricultural production largely concentrated in the northern and western states, wholesale prices are relatively higher in other regions, which are net consumers of these products.

Yet, inter-state barriers do seem to play a role in driving up the price wedge across regions. An estimate by Shoumitro Chatterjee, a researcher at Princeton University, suggests that removal of inter-state barriers can increase prices accruing to farmers by up to 11%. The paper describes how restrictions on inter-state trade due to the APMC law undermine market power and, therefore, prices accruing to farmers. The author then models an alternative scenario where these restrictions don’t exist.

In an emailed response, Sudha Narayanan explained how geographical disparities in prices can indicate the presence of barriers to trade as well as high transaction costs that can aggravate these disparities. “In general, we would expect large disparities in prices to be arbitraged away by the free movement of produce to the point where any disparity is on account of just the transaction cost associated with moving the produce," she said.

Price variation is greatest in the case of vegetables, where government procurement is zero. The absence of MSP in vegetables means they lack a price floor. Since vegetables are mostly perishable, the lack of efficient storage and distribution networks inhibits long distance trade, and markets for vegetables remain largely localized. Their prices are therefore volatile, being prone to supply and demand shocks.

The full implication of the new farm policy regime is difficult to predict. In the absence of regulation, market forces will dictate that buyers will migrate to regions where prices are low. Farmers in regions that have a relative cost disadvantage might lose out. On the flip side, barrier-free trade and more supply chain investments can increase earnings for farmers. With the new farm bill, how this plays out will be keenly watched howindialives.com is a search engine for public data

9.1. Export of essential agri commodities for the period April-September 2020 increases by 43.4% as compared to the same period last year

Press Information Bureau, Oct. 12, 2020

The consistent and concerted efforts of the Government to boost agricultural exports are bearing fruit as despite of the on-going Covid-19 crisis, the export of essential agri commodities for the cumulative period of April-September, 2020 has increased by 43.4% to Rs 53626.6 crore (US$ 7.34 billion) as compared to Rs 37397.3 crore (US$ 5.12 billion) in the same period last year. Major commodity groups which have recorded positive export growth during April-Sept 2020-21 vis-à-vis April-Sept 2019-20 are Groundnut (35%), Refined Sugar (104%), wheat (206%), Basmati Rice (13%) and Non-Basmati Rice (105%) etc.

Furthermore, balance of trade during April-September 2020 has been significantly positive at Rs 9002 Crore (US$ 1.23 billion) as against trade deficit of Rs. 2133 (US$ 29.21) during the same period in 2019. On month to month basis (MoM), India’s agricultural export of essential agricultural commodities during September 2020 has been of Rs 9296 crore (US$ 1.27 billion) against export of Rs 5114 crore (US$ 700.39 million) during September 2019, showing an increase of 81.7%.

To boost agri exports, the Government announced Agriculture Export Policy, 2018 which inter-alia provides for cluster-based approach for export-centric farming of cash crops like fruits, vegetables, spices, etc. whereby clusters for specific agri products are identified across the country and focused interventions are carried out in these clusters.

Eight Export Promotion Forums have been set up under the aegis of APEDA to boost export of agriculture/ horticulture products. The EPFs are created on Banana, Grapes, Mango, Pomegranate, Onion, Dairy, Rice Basmati and Rice Non-Basmati. The EPF are making concerted efforts to identify, document of, and reach out to stakeholders across the entire production/ supply chain of export for increasing these exports significantly to the global market, through various interventions.

Recently, the Government has also announced Agri Infra Fund of Rs. 1 lakh crore (US$ 13.70 billion) to improve agri business environment which shall promote agri export in due course.

Besides, DAC&FW has also prepared a comprehensive action plan/strategy towards promotion of agri trade envisaging twofold approach viz. to boost Agri Export with emphasis on value addition and a detailed action plan for Import Substitution.

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

9.2. PepsiCo bullish on India, increases investment at snacks plant in UP to Rs 814 crore

IBEF, Oct. 12, 2020

Despite short-term headwinds due to pandemic disruptions and increased investment at its new greenfield snacks plant in Uttar Pradesh, PepsiCo is "highly positive" about the future of the Indian market despite short-term headwinds due to pandemic-related disruptions and increased investment to Rs 814 crore (US$ 111.48 million) to meet rising demand, according to its President of India, Mr Ahmed ElSheikh.

The company is committed to doubling its snack sector in India and increasing the potential of established food plants in Maharashtra and West Bengal. In addition, the establishment of a greenfield production facility in Assam has been suggested.

"While there have been some short-term headwinds due to COVID-19, we at PepsiCo are highly positive about the future and are committed to delivering the right food and beverage product range for customers," Mr ElSheikh told PTI.

In the 30 years since its establishment in India, PepsiCo India has emerged as one of the country's largest food and beverage companies and is looking to create more, he added.

"Looking ahead, we are committed to double our snacks business in India. In fact, we have increased our investment in our new greenfield snacks plant in Uttar Pradesh from Rs 500 crore (US$ 68.48 million) to nearly Rs 814 crore (US$ 111.48 million), generating 1,500 direct/indirect jobs and enabling a local sourcing ecosystem," Mr ElSheikh said.

India 's consumption history has just begun, and India will be the third-largest consumption market by 2025, he said, according to industry reports.

The company expects an increased demand from categories such as snacks, juices and other carbonated drinks as the festive season starts, powered by the feeling of celebration.

"From an FMCG point of view, the industry is seeing consumption revival, which we expect will only get better with further unlocking and the upcoming festive season," Mr ElSheikh said.

Mr ElSheikh said 'in-home use' is experiencing a substantial uptake, reflecting on market patterns, and customers are finding comfort along with value.

"As people adjust to the 'new normal', in-home consumption is witnessing a significant uptake. There is a growing demand for our larger packs as in-home occasions of togetherness have increased manifold. While the consumers are looking at in-home experiences and seeking convenience, they are also looking at value," Mr ElSheikh said.

He, however, said, "Today, affordability is key."

In its beverage portfolio, PepsiCo has launched 1.25-litre PET packages at a very reasonable price of Rs 50 (US$ 0.68) to target 'in-home consumption' and has launched various combo packs in the food portfolio. Although it has also strategized price points in the smaller packs to satisfy both rural and urban

"With the Indian FMCG industry slowly showing signs of revival in COVID impacted world, we have adapted quickly and re-strategised our price-pack programmes, enhanced consumer engagement initiatives and doubled down attention on both B2C and B2B distribution models to meet consumer demand," he said.

Its profit after tax in FY 2019-20 rose to Rs 329 crore (US$ 45.06 million) from Rs 36 crore (US$ 4.93 million) in FY 2018-19, according to a recent RoC (registrar of companies) filing by PepsiCo India.

While its revenue was down 15.87 percent to Rs 5,264 crore (US$ 720.94 million) compared to Rs 6,257 crore (US$ 856.93 million) in FY 2018-19 due to the refranchising to its bottling partner Varun Beverages Ltd of the remaining bottling operations in south and west India.

"PepsiCo India's transformation journey remains on track -- third successive year of profit in FY 2019-20 which has been all about building 'a faster, stronger, better company' in India," he said.

While its total volume of beverages increased during the 2019-20 fiscal year, its beverage revenue in the last quarter of March 2020 was lower due to refranchising and the effects of COVID-19. Due to strong growth in the Lays, Kurkure portfolio and Doritos, its food revenue rose.

"Focus on the core brands yielded results with growth across the portfolio namely Lay's & Kurkure portfolio, Lay's Maxx and Doritos. Similarly, Core brands drove beverage growth, led by Pepsi, Mountain Dew & Slice," Mr ElSheikh said.

In its global Q3 results last week, PepsiCo announced organic growth in sales in some international markets, including India.

"Within our international markets, developed market organic revenue growth increased 8 per cent and outpaced developing and emerging markets which increased 2 per cent," PepsiCo's chairman and CEO Mr Ramon Laguarta had said on October 1, 2020.

Double-digit organic sales growth in France, Australia and Brazil, high-single-digit growth in India and mid-single-digit growth in the UK, China and Russia are some notable highlights, he said.

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

10. India BPO Promotion Scheme spurs growth of Patna's Route Connect with 40% women workforce

ET Government, Oct. 14, 2020

As a part of this initiative, Route Connect Pvt Ltd, a subsidiary of Route Mobile Ltd has established a BPO/ITES center in Patna, Bihar under IBPS. The center has employed about 300 direct employees and has created a good number of indirect employment opportunities in the region. Notably, the center has recruited women in about 40% of the total jobs.

The company with an allocated 300-seat capacity for BPO/ITES center in Patna under IBPS had started operations in 2018. The IBPS scheme was notified by the MeitY under the Digital India Programme. Software Technology Parks of India (STPI) is the executing agency of the IBPS scheme.The India BPO Promotion Scheme (IBPS) launched by the Ministry of Electronics & Information Technology (MeitY), Government of India, has triggered the BPO/ITES operations in a number of small cities across the country and thus creating employment opportunities for local youths, especially women. As a part of this initiative, Route Connect Pvt Ltd, a subsidiary of Route Mobile Ltd has established a BPO/ITES center in Patna, Bihar under IBPS. The center has employed about 300 direct employees and has created a good number of indirect employment opportunities in the region. Notably, the center has recruited women in about 40% of the total jobs. The company with an allocated 300-seat capacity for BPO/ITES center in Patna under IBPS had started operations in 2018. The IBPS scheme was notified by the MeitY under the Digital India Programme. Software Technology Parks of India (STPI) is the executing agency of the IBPS scheme. The Patna centre of Route Connect Pvt Ltd provides end-to-end customer life cycle management, telemarketing and revenue optimization services. The center has witnessed a minimal attrition rate of merely 8%, which is much better than what is seen in bigger cities. Encouraged by the overwhelming response from this center, the company is now planning to establish more centers here within the next couple of years. It is new hope for many educated youths of Patna and surrounding areas, which are being benefited from the direct and indirect employment opportunity created by the centre.

Dr. Omkar Rai, Director General, STPI, in a statement said: "Bihar is among the fastest-growing states in India and recorded the highest per capita income growth in FY20. The availability of a talent pool, cost-effectiveness and low attrition rate of the workforce make tier 2 cities such as Patna an attractive proposition for corporates to establish their base here. Patna is well-connected to key metro cities of the country through rail, road and air. Government initiatives such as the setting up of BPOs under IBPS will further strengthen the IT/ITES ecosystem of the region and help in creating more job opportunities for the youth." "We always wanted to open our operations in the state of Bihar and IBPS has provided just the right motivation and financial incentive towards fulfilment of this goal. We would like to thank the government and STPI for providing comprehensive support and mentorship at every step. The creation of opportunities for the local population in their homeland has improved their confidence and motivation to perform well and positively impact the company's bottom line. This gives us enough confidence to expand our operations in Patna further in near future," said Rajeev Kumar Jha, Executive Vice President and Head, East and North Zone, Route Connect Pvt Ltd. The objective of the India BPO Promotion Scheme is to foster an IT ecosystem in tier 2 and 3 cities through the establishment of 48,300 seats in BPO/ITES operations across the country. The scheme provides financial assistance of up to 50% of the total admissible expenditure (capital/operational), with an upper ceiling of Rs 1 lakh per BPO/ITES seat. Special incentives are also offered to promote employment to women and specially-abled persons, the participation of local entrepreneurs, setting up operations at non-capital cities, etc.

Industry and Manufacture

11. India is one of the largest manufacturers and exporters of generic medicines across the world

Press Information Bureau, Oct. 16, 2020

Union Minister for Chemicals and Fertilizers Shri DV Sadananda Gowda has said India is one of the largest manufacturers and exporters of generic medicines across the world. During initial phase, he said, HCQ and Azithromycin was identified as one of medicines under treatment protocol for covid-19 in emergency cases. Referring to India supplying these medicines to more than 120 countries across the world; he underlined that India thereby earned the reputation of reliable supplier of medicines.

Shri Gowda informed that India is the only country with largest number of US-FDA compliant Pharma plants (more than 262 including APIs) outside of USA with exports $ 20 billion worth of pharma products to various countries including high standards complying countries like US and Europe.

Addressing the virtual Latin America & Caribbean session on ‘Reimagining Distances’, during LEADS 2020, organised by FICCI late last evening Shri Gowda said that Indian pharma sector can grow to $ 65 billion industry by 2024. "We have recently launched schemes for development of seven mega parks—three bulk drug parks and four medical devices parks across country. New manufacturers will be eligible for Production Linked Incentive (PLI) Scheme under which they will be eligible for financial incentives on basis of their sales for first 5-6 years," Shri Gowda said.

The Minister further emphasised that this is a very- very good time to invest and set up manufacturing base in India in pharma sector. "One can enter India market through Joint Ventures also. The advantage is that you can get access to big markets like domestic Indian market, US, Japan, EU and South East Asia through India as far as pharma sector is concerned. Anybody can contact my office if they are interested in Indian pharma sector, we will provide all possible facilitation and hand holding," he stressed.

Shri Gowda also said that the market size of Chemicals & Petrochemicals sector in India is around 165 billion dollars. The size is expected to grow up to 300 billion dollars by 2025. This presents a huge opportunity in Chemical sector India. For example, to meet the growing demand India will need 5 crackers by 2025 and additional 14 by 2040. These crackers alone will require cumulative investment of 65 billion dollar. To attract foreign participation, he said, Government of India is revisiting policies for chemical and petrochemical sector. "We are thinking to extend financial incentive based on sales like what is being extended in our pharmaceutical sector. We are also tweaking our policies to strengthen our chemical industrial cluster which we call as PCPIRs and plastic parks. Together, these supportive Government policies will offer one of the best environments to do business in India as far as chemicals & petrochemical sector is concerned," Shri Gowda said.

The Minister added that fertiliser sector is also an attractive sector in India. There is huge demand for fertilisers by our farmers every year. However, domestic production is itself is not enough to meet requirements of fertilisers. We are large importers of urea, & P & K fertilisers. For example, in 2018-19, India imported 7.5 million ton of urea, 6.6 million ton of DAP, 3 million ton of MOP and 0.5 million ton of NPK fertilizer.

"I am told that Latin American and Caribbean countries are also net importers of chemical fertilisers. Instead of competing in market as buyers, we should be cooperating for making supply chains more efficient so that adequate quantity can be sourced at competitive prices." he added

Shri Gowda stressed that there is a need for collaboration for development of alternative fertilisers for example nano fertilisers, which can reduce our requirement/ usage of fertilisers, and hence dependence on imports. I would welcome any feedback on my proposal for joint R & D collaboration for development of alternate fertilisers.

"We would welcome any proposal in these sectors and extend all possible handholding in India wherever it will be required, he assured," he added.

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

12.1. The missing middle aggravates India’s jobs conundrum

Livemint, 22 Sep. 2020, Vivek Kaul

Any country sees genuine progress when it creates jobs. This happens as small and mid-sized firms grow, and create jobs alongside. India, over the years, has faced the problem of the missing middle. There aren’t enough mid-sized firms operating in the country. Mint explores.

How are job creation and firms’ size related?

McKinsey Global Institute (MGI) in a recent report titled India’s turning point—An economic agenda to spur growth and jobs points out that India has around 600 large firms which earn a revenue of more than $500 million per year. The labour productivity of these firms is 11 times higher than that of the overall economy. These firms are also responsible for 40% of exports and employ 20% of the people in the direct formal workforce. But there aren’t enough such firms going around. India has fewer large firms relative to gross domestic product (GDP) than China, Malaysia, South Korea and Thailand.

Why does India have fewer large firms?

In 2018, the revenues of large Indian firms amounted to 48% of nominal GDP. The contribution made by large firms in other emerging economies like China, Malaysia and Thailand was 1.5 to 1.6 times that of India. There aren’t enough large firms in India because of India’s missing middle of mid-sized firms. It’s the mid-sized firms which grow into large firms, and create jobs and competition along the way. As MGI points out: “India’s 1,500 mid-sized firms per $1 trillion of GDP, with revenue between $40 million and $500 million, are only about half the number in peer emerging economies relative to their GDP."

Does slow corp growth have anything to do with this?

In 2012, the revenues of large firms in India amounted to around 58% of the GDP. By 2018, this fell to 48% of the GDP. This slow corporate growth led to slow economic growth and a situation where only 77 mid-sized firms became large between 2012 and 2018. In comparison, 93 mid-sized firms had become large firms between 2008 and 2012.

Why are the mid-sized firms unable to grow?

Largely, there are two reasons for it. The first one is India’s high cost of compliance. The small and mid-sized firms lack the “organizational resources to manage costly procedures... compared to larger firms", as highlighted by the MGI report. It takes 1,445 days to enforce a contract in India. In South Korea, it takes 290 days.

So, Indian firms don’t grow. Secondly, lack of access to low-cost capital stops firms from growing bigger. This problem can be tackled by deepening India’s capital markets.

What steps should be taken to tackle this?

India needs to triple the size of its large firms by 2030. This can happen if more than 1,000 mid-sized companies and 10,000 small companies are able to scale up, creating millions of jobs. This requires unlocking of land supply and allowing prices to fall by 20% to 25%, creation of flexible labour markets, privatizing the 30 largest PSU firms, efficient power distribution, improving ease of doing business and sector specific policies to improve productivity.

Vivek Kaul is the author of Bad Money.

12.2. Torrent Gas to invest Rs 8,000 cr in city gas business, set up 500 CNG pumps

IBEF, Oct. 07, 2020

On Tuesday, Torrent Gas Ltd said it will spend Rs 8,000 crore (US$ 1.1 billion) over the next five years to expand its urban gas operations with the aim of setting up 500 CNG dispensing pumps by March 2023.

Torrent Gas, the $3 billion Gujarat-based Torrent Group's city gas distribution arm, holds a city gas licence for the sale of compressed natural gas (CNG) vehicles and piped cooking gas (PNG) to factories and kitchens in 32 districts across seven states.

Torrent Gas set up 100 CNG pumps within 18 months of its operations, its owner, Mr Jinal Mehta, said at a virtual event organised to announce the commissioning of 42 CNG stations.

This commissioning, he said, brought the number of CNG stations to 100 under the Torrent fold.

Mr Mehta said, "Torrent Gas intends to make a total investment of Rs 8,000 crore ($1.1 billion) over the next 5 years towards the creation of CGD infrastructure in the country, of which Rs 1,050 crore (US$ 143.45 million) has already been invested".

Torrent Gas was able to set up 100 CNG stations within a reasonably short period of time, considering the constraints posed by the COVID-19 pandemic.

Mr Mehta said, "We are now working towards our near-term goal of setting up 200 CNG stations by March 2021 and medium-term goal of setting up 500 CNG stations by March 2023, apart from making PNG widely available to industries and residences in our authorised areas".

City gas distribution projects are crucial to achieving the vision of the government to increase the share of natural gas in the energy basket from the current 6.2 percent to 15 percent by 2030 to reduce carbon emissions.

Oil Minister Mr Dharmendra Pradhan, speaking on the occasion, said CNG pumps should look to become energy suppliers by also selling conventional fuels such as petrol and diesel alongside alternatives such as biogas and LNG.

He said the government wants to increase the country's number of CNG stations from about 2,300 at present to 10,000 over the next four to five years. The CNG stations commissioned on Tuesday are located across different states, including 14 in Uttar Pradesh, eight in Maharashtra, six in Gujarat, four in Punjab and five in Telangana and Rajasthan, respectively. In addition, City Gate Stations have also been commissioned in Uttar Pradesh, Maharashtra and Punjab.

Mr Mehta said Torrent plans to make CNG and PNG accessible in Chennai, the only metro city that has yet to be reached by CNG and PNG.

A crucial step towards energy sufficiency and meeting India 's commitment under the Paris Agreement to reduce its emissions is the availability of clean and economical CNG and PNG across the world.

A crucial step towards energy sufficiency and meeting India 's commitment under the Paris Agreement is the availability of clean and economical CNG and PNG across the country.

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

13.1. Garments hub to create 1 lakh jobs in UP

TNN, Sep. 23, 2020

The step towards making UP a garment manufacturing hub will see an investment of about Rs 900 crore and is expected to generate about one lakh jobs.

Singh said that PNC Infratech Ltd, Real Estate Development and Brij Textile have applied for Agra, JCL Infra Ltd led joint venture for in Meerut which could generate employment for as many as 20 lakh persons

Lucknow: The government has allocated 77.15 acre land under the Yamuna Expressway Industrial Development Area to 55 garment units under the Noida Apparel Export Cluster. The step towards making UP a garment manufacturing hub will see an investment of about Rs 900 crore and is expected to generate about one lakh jobs. Minister for textiles Sidharth Nath Singh said that recently expressions of interest had been invited for setting up integrated textile parks. The department has received proposals from six developers for projects in Agra, Meerut, Gautam Budh Nagar, Chandauli, Jhansi, Kanpur and Gorakhpur.

13.2. World Bank-funded skilling project to benefit apparel unit workers

TOI, Oct. 05, 2020

AEPC said that it has tied up with 77 apparel manufacturing units in Tamil Nadu for the skilling project titled Strengthening for Industrial Value Enhancement (STRIVE) funded by World Bank.

STRIVE is a World Bank funded project implemented by the ministry of skill development and entrepreneurship aimed at improving the productivity at MSMEs in various industrial clusters. Tirupur: Apparel Training and Design Centre (ATDC), the training wing of Apparel Export Promotion Council (AEPC), would be training workers from apparel manufacturing units under a World Bank project. AEPC said that it has tied up with 77 apparel manufacturing units in Tamil Nadu for the skilling project titled Strengthening for Industrial Value Enhancement (STRIVE) funded by World Bank. “We have received support letters from 77 factories based in Tirupur and Chennai apparel cluster for STRIVE project,” AEPC and ATDC chairman A Sakthivel said. ATDC will impart the three-month classroom training to 240 apprentices in five different courses followed by a 12-month on-the-job training under the apprenticeship scheme in the partner factories. “This is a win-win for both industry and workers. Courses were designed after consulting with the industry so that they can have an upgraded workforce. While the apprentices will earn a stipend of Rs 4,500 to Rs 9,000 per month during the 12-month training period, they also stand a good chance to get absorbed in the same factory,” Sakthivel said. STRIVE is a World Bank funded project implemented by the ministry of skill development and entrepreneurship aimed at improving the productivity at MSMEs in various industrial clusters. The project is expected to address the shortage of skilled workforce in various areas of apparel making sector while seeking to improve the livelihood of the workers who undertake the training by ensuring them better jobs. A statement from AEPC said that ATDC has further planned to establish Industry Apprenticeship Initiative Cell and expand the work of Training of Trainers (ToT) through Apparel Made-Up and Home Furnishing Sector Skill Council (AMH-SSC).

14.1. ITI will be able to produce 4G, 5G equipment in a few months: Tech Mahindra

IBEF, Sep. 29, 2020

IT company Tech Mahindra is in advance of sharing technology with ITI Limited, and in a few months, a senior official of the Mahindra group company said, the state-run electronics manufacturing organisation will be able to manufacture 4 G and 5 G equipment.

Tech Mahindra Network Services CEO Mr Manish Vyas told PTI that the country's ability to generate talent and software on a large scale, coupled with China's geo-political scenario, poses a wonderful opportunity for India to indigenize technologies.

In June, the company signed an agreement to develop 4 G and 5 G technologies with ITI Limited.

Mr Vyas said, "We are in the stages of exchanging design, starting to plan and also doing a couple of test runs and trials based on the technology that they are looking to manufacture. Pretty advanced stages, it's not something that will take years but months for them to start doing it and of course, it depends on how quickly they start winning business in this area".

He stated that the technology exchange partnership with ITI is in line with the strong desire of the government to bring the state-run business back to manufacturing high-end technology goods.

He further said, "We are going to be helping them with the reference design with the transfer of technology that will enable them to put together the process and the plans to start manufacturing the radio units which are very specific to both 4G and 5G going forward, to an architecture which is an open source, open radio access network-based architecture".

Under government law, ITI earns a certain quota to include equipment that can be installed in the BSNL and MTNL network of public sector telecom companies.

ITI has also secured a $7,796 crore contract for the Defence sector to develop communication networks.

Mr Vyas stated that it would be a great opportunity for them and other Indian producers to bring ITI back into high-end manufacturing.

He added, "This (India) market will require hundreds of thousands of radio units in the next few years globally. Millions I would say, and it will require a facility that people can trust, a country that people can trust, in terms of security from a data standpoint, I think it's a wonderful job. Our partnership is built around enabling them to be able to get back to manufacturing and to seize this moment and opportunity".

Tech Mahindra is already collaborating with Rakuten Mobile of Japan on 5 G technology development.

Mr Vyas stated that the organisation would not enter directly into the manufacture of telecom equipment but will assist companies worldwide in the growth of their network gears.

He said, "Tech Mahindra today works for every single major telecom firm outside China. Every single major service provider anywhere in the world, in every country that we care for, in the sense we operate in, in Africa and Latin America, in Europe and Australia, New Zealand, Southeast Asia, Japan, America, Canada. It gives us an opportunity to participate with 150 operators globally. The world of opportunity exists for us across the board".

He further stated that in most of the countries where Tech Mahindra operates, all the top three or four service providers are its clients.

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

14.2. Government clears 16 companies for product-linked incentive scheme

ET Bureau, Oct. 07, 2020

“The scheme will generate more than 2 lakh direct employment opportunities in next 5 years along with creation of additional indirect employment of nearly 3 times the direct employment,” MeitY said.

The selected manufacturers are expected to generate Rs 10.5 lakh crore worth of total production, of which 60% would be exported.NEW DELHI: The government, on Tuesday, approved applications of 16 electronics companies including 10 mobile phone manufacturers for reward under the product-linked incentive scheme for total disbursement of Rs 40,000 crore. The international mobile phone manufacturing companies that are approved to avail incentive for producing mobile phones with invoice value Rs 15,000 and above are Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron. Out of these, 3 companies namely Foxconn Hon Hai, Wistron and Pegatron are contract manufacturers for Apple iPhones. Apple (37%) and Samsung (22%) together account for nearly 60% of global sales revenue of mobile phones and this scheme is expected to increase their manufacturing base manifold in the country. Domestic mobile phone makers who have been approved by the ministry of electronics and IT (MeitY) are Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs and Optiemus Electronics who have proposed production output worth Rs 1.25 lakh crore over the next five years, the ministry said in a statement. Six companies are approved under the Specified Electronic Components Scheme which include AT&S, Ascent Circuits, Visicon, Walsin, Sahasra, and Neolync. The selected manufacturers are expected to generate Rs 10.5 lakh crore worth of total production, of which 60% would be exported. Out of total, production of Rs 9 lakh crore is expected from handset makers alone. Those under Specified Electronic Components segment have proposed a production of over INR 15,000 crore. The companies themselves will invest Rs 11,000 crore in Indian electronics manufacturing industry. “The scheme will generate more than 2 lakh direct employment opportunities in next 5 years along with creation of additional indirect employment of nearly 3 times the direct employment,” MeitY said. Domestic Value Addition is expected to grow from the current 15-20% to 35-40% in case of mobile phones and 45-50% for electronic components.

15. Telangana: Despite nod from health department, offices slow about increasing staff strength

TNN, Oct. 04, 2020, Amrita Didyala

“Both manufacturing and service companies and unlikely to start full operations soon. While many are still shut, those open in the manufacturing sector are running at about 60% capacity,” said T Muralidharan, chairman FICCI (Federation of Indian Chambers of Commerce and Industry) Telangana State Council.

Majority of the IT companies too have added every possible precautionary measure in the book, the latest being installation of sanitization chambers and tunnels.HYDERABAD: While state health authorities have given business entities the go-ahead to start full operations from offices, most companies are taking it slow. If many firms in the manufacturing sector have decided to continue to remain closed due to lack of demand, the Information Technology (IT) industry too is cautious about calling in additional staff. Currently, only 10% to 12% of the staff, engaged in critical operations, are working from IT offices. “Both manufacturing and service companies and unlikely to start full operations soon. While many are still shut, those open in the manufacturing sector are running at about 60% capacity,” said T Muralidharan, chairman FICCI (Federation of Indian Chambers of Commerce and Industry) Telangana State Council adding how most offices are following basic precautions like masks, gloves and sanitization. Majority of the IT companies too have added every possible precautionary measure in the book, the latest being installation of sanitization chambers and tunnels. Yet, companies are not keen on increasing the physical footprint at their premises at the moment.

“Almost all IT companies have already announced work from home up to June 2021 and are not willing to call employees to office until a vaccine is out and employees are vaccinated. As for the 10% to 12% employees who are handling critical operations and have been working from office, all measures had been put in place like sanitizers, masks, gloves, face shields, thermal checks and social distancing, for their safety. Awareness messages have been displayed prominently in several locations within offices,” said Sandeep Kumar Makthala, gOfficelobal president, Telangana Information Technology Association.

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

16.1. Salesforce to add 5.48 lakh direct jobs in India

PTI, Oct. 10, 2020

"I think the impact of my company in India alone is going to create billions of dollars in incremental GDP. We are going to create 1.3 million new jobs indirectly with our customer and partner ecosystem but directly we are going to add 548,000 new jobs in the near future," Afshar said.

In March, Salesforce CEO Marc Benioff said the company would not 'significantly' lay off people over a three-month period and would pay its hourly workers as the offices were closed.New Delhi: California-based IT company Salesforce plans to add 5.48 lakh direct jobs in India in near future and sees the country has potential to become the second largest in terms of GDP, a top official of the company said on Friday. Salesforce chief data evangelist Vala Afshar while speaking at the Raise summit said that indirectly the company will create 13 lakh jobs in India. "I think the impact of my company in India alone is going to create billions of dollars in incremental GDP. We are going to create 1.3 million new jobs indirectly with our customer and partner ecosystem but directly we are going to add 548,000 new jobs in the near future," Afshar said. Salesforce is estimated to have market capitalisation of around USD 240 billion. "In the next couple of years we are committed to training 250,000 students. Education is key to reducing digital divide," Afshar said at the summit. More than 79,000 stakeholders from academia, the research industry and government representatives from 147 countries participated in the summit that held during October 5-9, according to the Ministry of Electronics and Information technology. Afshar said that India will soon be the world's most advanced connected society.

He said that data is going to be key to the artificial intelligence economy which is the reason that India is poised to be a super power when it comes to AI. He said India has 60 crore unique users connected to the internet and has an opportunity in the next 5-6 years in the world to be USD 6 trillion consumer spend power in India. "Every 3 seconds a new person in India connects to the internet for the first time. What that means 600 million today will be over a billion unique users connected to the internet in perhaps just in the next five years. This also means that India is poised to be the second largest GDP in the world only behind China and ahead of the US," Afshar said. He said that the power of India is the fact that 80 per cent of the population will be under the age of 44, and it will be the most advanced connected society in the world. "One-sixth of humanity is in India. Data will fuel AI hub vision that you have in terms of expanding to the world," Afshar said.

16.2. Flipkart acquires 140-acre land at Rs 432 crore, to develop logistic park

ET Bureau, Oct. 08, 2020, Faizan Haidar

The development is expected to cost Rs 3,500 crore and will create over 12,000 jobs in the state. The first phase is likely to be operationalised by 2022. According to Rajesh Khullar, chairman, HSIIDC, the corporation has set up a warehousing hub in 285 acre in Manesar, in view of the increasing demand of warehousing from e-commerce companies.

NEW DELHI: Walmart-owned Flipkart has acquired 140-acre land to set up their largest fulfilling centre in Asia in Manesar in Gurgaon in a bid to scale up their fulfilment infrastructure to cater to increased demand post Covid. Flipkart already has 12 supply chain assets in Haryana, including supply chain infrastructure for large appliances, non-large (mobile, apparel), grocery and furniture. The executive empowered committee of Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) has approved the allotment at a cost of Rs 432 crore. Flipkart will set up a logistic park in the land parcel over the next 3-5 years, which has a potential of a total built up area of five million square feet and will be developed in 2-3 phases. The development is expected to cost Rs 3,500 crore and will create over 12,000 jobs in the state. The first phase is likely to be operationalised by 2022. According to Rajesh Khullar, chairman, HSIIDC, the corporation has set up a warehousing hub in 285 acre in Manesar, in view of the increasing demand of warehousing from e-commerce companies. “The land has been allotted at a bare shell cost of Rs 3.09 crore per acre and all the infrastructure will be laid by the Flipkart group,” Khullar said. HSIIDC, in a statement said that Flipkart shall be engaging closely with the sellers, MSMEs & kiranas in the state to on-board them and provide market opportunity. “Flipkart’s focused investments in its supply chain have been pivotal to customer experience offerings that have helped build trust in e-commerce. We will continue to strengthen this infrastructure and create market opportunities for lakhs of sellers and MSMEs from the state while creating new livelihood opportunities and jobs,” said Rajneesh Kumar, Chief Corporate Affairs Officer, Flipkart group. The company currently employs more than 10,000 people in Haryana across its supply chain and has created lakhs of indirect jobs in the state. The company has also partnered with the National Skill Development Corporation’s Logistics Skill Sector Council to provide training on the nuances of supply chain and delivery, to ensure skill development, career progression and growth for its employees. Property consultant Knight Frank were the advisors to Flipkart for this project.

Flipkart already has 12 supply chain assets in Haryana, including supply chain infrastructure for large appliances, non-large (mobile, apparel), grocery and furniture.

16.2. Cloud computing is betting on outer space

Livemint, 05 Oct. 2020, Leslie D'Monte

Global cloud computing giants are making a big foray into India. And space tech might play a key role
The space deals will add spice in India too. India’s cloud computing market is estimated at $2.5 billion. The govt has also decided to open up India’s space sector to private players

On 22 September, Microsoft CEO Satya Nadella announced the preview of Azure Orbital at Microsoft Ignite 2020 in New Orleans. According to Microsoft, Orbital is ‘Ground Station as a Service (GSaaS)’, which is aimed at helping its customers to communicate with, and analyse data from, their satellites or space crafts on a subscription basis.

The Redmond headquartered company however, has competition in the skies. Almost five months earlier, International Business Machines Corp. (IBM) had announced a beta of its Cloud Satellite service. But it is Amazon Web Services Inc. (AWS), the cloud computing arm of Amazon.com, which has a head start in space.

Around two years ago, it launched the AWS Ground Station to allow its customers to control their satellite communications, process data, and scale operations without having to build or manage their own ground station infrastructure. On 30 June, AWS said it was establishing a new space unit called the Aerospace and Satellite Solutions.

These are but a few cases in point to demonstrate that leading cloud computing service providers have begun flexing their muscles in space too. But why is there a sudden race to outer space?

According to the International Telecommunication Union (ITU), non-geostationary satellite orbits (NGSOs) such as medium earth orbits (MEO) and low earth orbits (LEO) are being increasingly used worldwide. NGSOs, unlike fixed or geostationary satellite orbits, move across the sky during their orbit around the earth. With space launches becoming more affordable and accessible, a slew of private companies are starting to rely on this new array of satellites.

They are used for applications like weather forecasting, surface imaging, communications, and video broadcasts. However, the data from these satellites need to be processed and analysed in data centres on the ground, which explains the term ‘ground stations’.

While the cost of the satellite itself is falling, building and running ground stations can cost up to $1 million or more, according to a recent blog post by Jeff Barr, chief evangelist for AWS. Complex data processing also requires a lot of computing power, and the huge data storage requirements only add to the cost.

Leading cloud computing service providers are now starting to offer satellite operators the option to use these ground stations on a ‘pay-per-use’ or subscription basis, thus, helping the latter save on capital expenditure costs by employing an operating expenditure model.

These ground stations, thus, can help satellite operators download high-resolution imagery faster, more regularly, and analyse the data with artificial intelligence (AI) tools—all of which results in faster and enhanced monitoring of changing climate patterns, forests and agriculture, among other things.

While Microsoft and IBM are testing their services, AWS Ground Station already has customers such as NASA’s Jet Propulsion Laboratory and satellite operators Iridium Communications and Spire Global. It also has private sector customers such as Lockheed Martin, Maxar Technologies and Capella Space.

Lucrative market

The worldwide cloud infrastructure services market continued to surge in the April-June quarter of this calendar year to touch $34.6 billion, according to research firm Canalys. The growth was attributed to the consumption of cloud-based services for online collaboration and remote working tools, e-commerce, remote learning, and content streaming which hit new records during the lockdown.

During this period, AWS was the leading cloud service provider, accounting for 31% share of the total spend. Microsoft Azure came second, followed by Google Cloud and Alibaba Cloud.

The revenue of the cloud unit of Amazon totalled $10.81 billion in the April-June quarter of this calendar year, accounting for 12% of its parent’s revenue.

Microsoft, on the other hand, said its “commercial cloud surpassed $50 billion in annual revenue for the first time" for the quarter ended June 30 (which is also its financial year ending). But it does not spell out what this ‘commercial cloud’ consists of.

Nevertheless, the space forays will only add to the revenue of all these companies.

Battle lines in India

Space deals will add spice in India too. India’s cloud computing market was estimated at $2.5 billion in 2018, dominated by infrastructure as a service (IaaS) and software as a service (SaaS), according to industry body Nasscom. It is forecast to touch over $7 Billion in 2022.

AWS, Microsoft and Google are leaders on the local turf too. Last August, for instance, Microsoft signed a deal with Reliance Jio Infocomm Limited (Jio)—a subsidiary of Mukesh Ambani-owned Reliance Industries Ltd (RIL). The agreement included deploying the Microsoft Azure cloud platform in Jio’s data centers in locations across India.

This January, Google Cloud signed a deal with Bharti Airtel to cater to small and medium enterprises (SMEs) in India. However, Google said this July that it was pumping in $4.5 billion into Airtel’s rival Jio Platforms in exchange for a 7.7% stake. Not surprisingly, a month later, Bharti Airtel announced a multi-year agreement with AWS to deliver cloud solutions to big companies and SMEs in India.

According to Alok Shende, Managing Director of Ascentius Insights, the “fusion of cloud computing with networking, linked by a satellite, is expected to shave off milliseconds in transferring data from source to destination. This is the holy grail in many applications, more specifically in finance and in mission-critical applications. There are many India-centric applications (like defence and in the stock markets) where this could play a powerful role."

He believes that “for Microsoft, particularly, this move opens a new avenue to entrench itself in the enterprise market where it has traditionally been a strong player on the application side but has lost the leadership position in terms of market share for cloud."

Jayanth Kolla, founder and partner of Convergence Catalyst points out that India has always been a strong player in the space sector with the Indian Space Research Organization (Isro) developing and launching satellites at a fraction of global costs. He believes that the Indian government’s decision to open up India’s space sector to private players is an encouraging sign.

“It has already resulted in Indian space tech startups such as Pixxel, Bellatrix Aerospace, Vesta Space and Agnikul raising over $20 million funding from venture capitalists (VCs) in the last six months. TV media, agriculture, telemedicine and logistics are a few sectors that can benefit from strong satellite communication and space technology development. The ground station services launch by Microsoft and AWS will only expedite this ecosystem development significantly in India," says Kolla.

Sanchit Vir Gogia, chief analyst and founder of Greyhound Research, concurs that the timing of this space move is right since many organizations are now beginning to try new use-cases by tapping into geospatial data (data related to a specific location on earth) that is omnipresent, given the proliferation of devices and edge computing devices.

“This space is increasingly getting busy with the likes of AWS and IBM investing money and resources to cater to this opportunity," notes Gogia. He cautions, however: “We believe the trick in making such an offering successful is to ensure that it is cheap to start with, since most of these projects are nothing more than trials and, hence, have an extremely high failure rate."

The distributed cloud

Space is just an additional frontier for the leading cloud services providers. It all began when companies, which traditionally used servers for their computing needs, realised that they could lower costs by accessing IT resources over the internet, and paying only for the services they needed, reducing capex—a trend we now know as cloud computing.

Many companies today use private clouds (on-premise), public clouds (on a network, typically the internet) and hybrid clouds (combining public and private). User companies, though, became wise and began adopting a ‘multi-cloud’ vendor approach to avoid being locked in by any single technology or cloud vendor.

With billions of devices getting connected to each other as part of the Internet of Things (IoT) trend, computing is now also getting done at the so-called “edge", which simply means near the source of the data.

General Electric Co. (GE), for instance, believes cloud computing is best suited to situations that demand actions such as significant computing power, management of huge data volumes from across plants, asset health monitoring and machine learning. Edge computing, on the other hand, makes sense in places like mines or offshore oil platforms that have bandwidth constraints, which make it impractical or very expensive to transmit data from machines to the cloud.

During his speech at the Ignite event, for instance, Nadella pointed out that Microsoft was “extending Azure from under the sea to outer space". He was referring to Project Natick that aims to serve customers in areas near large bodies of water. Natick uses AI to monitor signs of failure in its servers and other equipment.

Going forward, Microsoft says it will explore powering a Natick data center by “a co-located ocean-based green power system, such as offshore wind or tide, with no grid connection".

Similarly, other than deploying internet balloons in space to provide broadband services, Google also provides services to companies like Planet Labs Inc. The US-based aerospace and data analytics company uses Google Cloud platform to process all of its satellite images and Google Cloud storage to host its image archive.

These moves have given rise to a trend called ‘Distributed Cloud’, which research firm Gartner describes as “distribution of public cloud services to different physical locations".

By 2023, posits a 22 January note by Gartner, “the leading cloud service providers will have a distributed ATM-like presence to serve a subset of their services for low-latency application requirements... ‘Micro data centers’ will be located in areas where a high population of users congregates, while pop-up cloud service points will support temporary requirements like sporting events and concerts."

Greyhound Research believes offerings such as ground stations will be highly valuable in the next wave of investments in more distributed computing environments. “More than 7 in 10 of our end-user inquiries with global majors have confirmed that organizations, in the next 3-5 years, will use a large variety of computing environments and make them more contextual to the use-case," says Gogia. “This change is likely to be paced multiple times, given the investments in edge networks and 5G that allow remote sites in utilities, oil and gas, manufacturing, and many other scenarios," he adds.

The distributed cloud market is forecast to reach $3.9 billion by 2025, growing at a CAGR of 24.1% during the forecast period from 2020-2025, according to market research firm, IndustryARC. Security, though, remains a concern if proper protocols and policies are not adhered to in a distributed cloud.

For now, though, ground stations that cater to satellite companies will remain one big component of the distribution cloud. A race is clearly on and all the main players are looking up at the sky.

Leslie D’Monte is a consultant who writes on the intersection of science and technology

17.1. Smartphone imports fall, exports rise as local production ramps up

IBEF, Sep. 24, 2020

Government data showed that the local production of smartphones is edging closer to normalcy with exports recovering to pre-Covid levels and imports falling by around half from June highs.

As per data released by the Ministry of Commerce (MoC), smartphone exports in the month of August 2020 stood at Rs 1781.1 crore (US$ 242.04 million) by value, higher than March's Rs 976.3 crore (US$ 132.67 million). Imports stood at Rs 1050.1 crore (US$ 142.70 million), higher than March's Rs 13.4 crore (US$ 1.82 million).

The trend in imports, has been decreasing since June 2020 when the number hit a three year high of Rs 2225.2 crore (US$ 302.39 million). In fact, comparison on an annual basis with previous year’s festive season showed that imports of smartphones to India have aligned with the usual trend.

MoC data showed that the August 2019 recorded device imports of Rs 1984.7 crore (US$ 269.71 million) by value, like current figures.

Analysts stated that the local production in the industry has ramped up to 80-85% capacity which is optimal given the current demand. Imports for August continue to be high due to delay in stocking up of inventory for the festive season.

Mr Prachir Singh, research analyst at Counterpoint stated, “he worst is behind the smartphone manufacturing industry after facing a month-long shutdown, spread of Covid, customs scrutiny and labour shortage. Everything led to almost a quarter’s delay in building up festive season inventory when brands launch close to 30-40 models every year.”

He added that both demand and supply situations are falling back on track and thus the import is expected to continue falling as brands ramp up capacity further.

Pre-covid, 95% of the devices sold in India were assembled locally. To meet the increasing demand for smartphones beginning May-June when the economy started opening post lockdown, most handset companies had to import completely-built up units from China, given the limitations on local production owing to Covid rules.

As per various industry estimates, September 2020 sales of smartphones are expected to be >15 million, at par with previous year’s sales. For the whole year, 2020 sales are estimated to be at 130-135 million against 154 million in 2019.

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

17.2. Homegrown e-commerce giant Flipkart onboards 13,000 kiranas in eastern region

PTI, Sep. 26, 2020

"Flipkart's team initiated contactless onboarding of kiranas through online application. This enabled seamless onboarding without them having to step out during COVID-19 times," a company statement said.

This also includes Flipkart Wholesale, a digital B2B marketplace with an aim to connect local manufacturers and MSMEs with retailers and other businesses, the statement said.Kolkata: Homegrown e-commerce giant Flipkart on Friday said it has onboarded over 13,000 kiranas in the eastern region to make faster deliveries to customers ahead of the festive season. The company also said this is part of a programme to onboard 50,000 kiranas across the country to provide a faster and personalised e-commerce experience to its consumers. "Flipkart's team initiated contactless onboarding of kiranas through online application. This enabled seamless onboarding without them having to step out during COVID-19 times," a company statement said. The expansion of the company's kirana programme across cities in the eastern states includes Kolkata, Guwahati, Silchar and Shillong, making e-commerce more inclusive by connecting small retailers and consumers to the digital commerce, it said. The programme is part of the company's efforts to drive growth for millions of small retailers across the country. This also includes Flipkart Wholesale, a digital B2B marketplace with an aim to connect local manufacturers and MSMEs with retailers and other businesses, it added.

18.1. TCS to see better second quarter but Infosys set to maintain lead

Livemint, 07 Oct. 2020, Clifford Alvares

TCS and Infosys are likely to report 2.5 to 3% q-o-q growth in Q2 in constant currency terms
But, thanks to the lead Infosys had in previous quarters, TCS may lag Infosys on a y-o-y basis

Technology stocks have staged a recovery lately on expectations that the second quarter could show improvement. On that count, the numbers may not disappoint. Better deal wins and demand recovery across verticals could well aid revenue growth for tier-1 firms. Still, the recent 16% run-up in the Nifty IT Index compared to Nifty 50’s 3% gains may be already pricing in the second-quarter recovery.

Both Tata Consultancy Services Ltd (TCS) and Infosys Ltd are likely to report decent 2.5% to 3% sequential growth in Q2 in constant currency terms, on the back of revenue accretion from recent large deals.

But thanks to the lead Infosys has taken in previous quarters, TCS is expected to lag Infosys on a year-on-year (y-o-y) basis. Kotak Institutional Equities analysts estimate 4% y-o-y decline in dollar revenues at TCS, as compared to a 1% y-o-y increase in the case of Infosys.

Besides headwinds for certain clients in some sectors, TCS also faced higher supply-side issues, which affected performance in Q1.

Now that these are resolved, growth is expected to be better on a sequential basis. “Covid-19 has acted as a catalyst for acceleration in IT spends. We believe that global outsourcing spending will accelerate from 4-5% pre-covid level numbers," said Kotak Institutional Equities analysts in a client note.

“The deal pipeline continues to be strong, led by traction in client engagement, which is up three times versus pre-covid levels. Further, TCS announced 10 deals in Q2 FY21 which should help sustain the overall momentum on deal wins similar to prior quarters," said Nomura Financial Advisory Services Ltd analysts in a client note.

Meanwhile, HCL Technologies Ltd could pip the two and show better revenue growth. Importantly, investors will also be watching the guidance for the full year.

“We expect Infosys to raise its revenue growth guidance for FY21 to 1-3% (vs 0-2% earlier) in constant currency terms (CC)," said the Nomura report.

IT companies are also expected to post stable margins, thanks to better utilization and lower operating costs.

Cost savings can further drive improvement in operating leverage. Continuing travel restrictions and better utilization of staff is likely to reflect on improving margins. These are important tailwinds for the sector. TCS could be the leader with the biggest margin expansion sequentially, followed by Tech Mahindra Ltd.

Even so, the sector already reflects the higher expectations. The Nifty IT Index’s valuation has jumped from 19 times last year to 26 times trailing earnings now, data from Bloomberg showed. While this seems to have limited room to expand, better guidance for the rest of the year may support valuations.

18.2. Artificial intelligence can play critical role in fraud detection in banking

Livemint, 06 Oct. 2020, Abhijit Ahaskar

RBI recently proposed the Positive Pay System for cheque truncation system to prevent frauds in high value cheques
Dilip Asbe, MD, CEO, NPCI, said that many banks in India have already launched fraud detection robo advisory services for investments

New Delhi: Artificial intelligence (AI) can play a critical role in fraud detection in the finance and banking industry, especially as digital banking is seeing major adoption in India due to the covid-19 pandemic.

With more users now banking online, the risk of being duped by fraudsters is higher than before. A May survey by ACI Worldwide and YouGov found that 32% Indians were using digital payments more, while 31% were recently targeted by a card or digital payments fraud or know someone who was.

According to a 2019 RBI report, losses due to banking frauds have grown by 73.8%.

Dilip Asbe, MD, CEO, National payments Corporation of India (NPCI), said that many banks in India have already launched fraud detection robo advisory services for investments. Asbe was speaking at the global AI summit RAISE (Responsible AI for social Empowerment), being held online from October 5-9.

Also, speaking at the summit, T Rabi Shankar, executive director at the Reserve Bank of India (RBI), agreed that AI backed robo advisory services have a lot of potential.

RBI recently proposed the Positive Pay System for cheque truncation system to prevent frauds in high value cheques.

“As the software develops more it will be easy to identify misuse of the cheque system and at some point of time it may minimize instances of check frauds significantly. Similarly in fighting money laundering AI and data can help substantially in identifying trends in movement of money and prevent money laundering," said Shankar.

RBI has also put in place a central information registry. Once enough data is collected over a period of time, it will enable prevention, detection and reduction of fraudulent transactions in the financial system, added Shankar.

He further added that AI will be key in online dispute resolution and reducing dependence on human intervention.

According to NPCI’s Asbe, while adoption of AI in finance and banking in India has been growing, most of the applications are still support related and not meant for decision making, unlike countries like China where many of the critical tasks like loan sanctions are now being handled by AI.

“Industry has started using AI in a fairly good amount. But most institutions in the financial services are still using AI for support and not for decision making," said Asbe.

Citing the example of China, Asbe pointed out that AI is being used for many of the lending decisions by financial institutions in China which allows them to process loans in 30 seconds.

“However, in China the law of the land is fairly strong which allows them to deal with the defaulters in a different way than we can in India," Asbe added.

19.1. Conde Nast launches technology lab in Bengaluru

IBEF, Oct. 01, 2020

The opening of a technology lab here was revealed on Wednesday by Conde Nast, a media group based in New York and London. To design and create the next generation of digital content channels and experiences across its media brand portfolio, including Vogue, GQ and Architectural Digest, the company will recruit a new team of 60 people this year and over 300 by 2021.

The laboratory was set up to meet the growing product, design, engineering and technology requirements of organisations and to facilitate the development of world-class digital customer experiences, the company said in a statement.

According to the statement, from digital marketing channels and customer interactions to enterprise applications and cloud computing, the Conde Nast Technology Lab will collaborate with established Conde Nast teams worldwide across the entire product and technology spectrum.

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

19.2. IBM to set up centre of excellence for AI in partnership with GeM

IBEF, Oct. 06, 2020

In collaboration with Government e-Marketplace, IBM will set up a centre of excellence for artificial intelligence (AI) in India, a top official of the firm said.

IBM CEO Mr Arvind Krishna said at RAISE 2020 summit, "I am happy to announce we are creating an AI centre of excellence in partnership with Government e-marketplace (GeM). Our goal is to apply the power of AI to improve usability and transparency and drive efficiency in cost saving in public procurement".

According to studies conducted by Accenture, AI can increase India's annual growth rate by 1.3 percentage points and add USD 957 billion to India's economy by 2035.

More than 38,700 stakeholders from academia, the science industry and government representatives from 125 countries have registered to participate in RAISE 2020, according to official data.

The National Artificial Intelligence Strategy (NSAI) highlighted the ability of AI to increase India's annual growth rate by 1.3 percentage points by 2035 and established priority sectors funded by the government for the implementation of AI.

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

20. Best time to invest in Pharma & Medical device sector in India; likely to grow to 65-billion-dollar industry by 2024: Shri Gowda

Press Information Bureau, Oct. 05, 2020

Union minister For Chemicals and Fertilizers, Shri Gowda has said that this is the best time to invest in Pharma & Medical device sector in India as It is likely to grow in to 65-billion-dollar industry by 2024 to 120 billion dollars by 2030.

Shri Gowda was addressing the Inaugural Session of “CII Life Science Conclave 2020”, in new Delhi yesterday.

He said business friendly reforms carried out by Government have helped India to emerge as one of the best investment destinations among emerging economies. Implementation of policies to promote financial inclusion and to check corruption and easing of compliance of labour laws & regulations has made India the best destination for investment. In 2018-19, India attracted FDI inflows of 73 billion dollars, up 18 % from previous year. Especially mentioning the pharma and medical device sector, he said, this is the most opportune time to invest in this sector in India as it is likely to grow in to 65-billion-dollar industry by 2024 to 120 billion dollars by 2030.

Union minister said Indian pharma and medical device sector have immense potential to contribute towards making India a 5 trillion-dollar economy in next 4-5 year. The Medical Devices industry in India has the potential to grow at 28% per annum to reach US $ 50 Billion by 2025.In this backdrop, Indian Government is supporting development of three Bulk Drug and four Medical Device Parks with State of Art Infrastructure and world class Centres of Excellence across the country. Government will also provide Production Linked Incentives (PLI) to eligible new manufacturing units to ensure level playing field to domestic manufacturers.

Highlighting the contribution of pharma industry during this testing time of covid-19 crisis he said that Indian pharma and medical devices industry were able to rise to the occasion. The crisis is being turned into opportunities by supporting development of mega bulk drug and medical device park through mix of right policies. Prime Minister Shri Narendra Modi ji himself has been personally involved in this, right from initial stage of conception. It is expected that these schemes of Union Government for development of bulk drug & medical device park will attract cumulative investment of Rs 78000 crore (US$ 10.60 billion) and can generate about 2.5 lakh employment.

He said, it is a matter of great pride for millions of Indians that from being a net importer, India became second largest producer of PPE Kits in the world with daily production capacity surpassing more than 5 lakh per day. Similarly, within a very short span of time, indigenous production capacity of ventilators has increased to 3 lakhs per annum. We have also achieved self-sufficiency in production of N-95 masks

Shri Gowda said that there is need for pharma industry to focus on R & D activities to remain as one of the leading global suppliers of medicines. The full potential of growth cannot be fully tapped unless we come up with discovery of new drug or repurposing in India. He expressed hope that Indian pharma sector will be among the first one to develop and supply low cost vaccines for covid-19.

He appreciated the efforts of CII Life Sciences conclave for providing the necessary platform for stakeholders across the world to converge and embed their ideas to help usher in a new era of competitiveness of the Indian pharma segment in the post COVID-19 world.

Shri P D Vaghela ji, outgoing Secretary & new TRAI Chairman, Dr. Renu Swarup, Secretary, D/o Biotechnology, Dr V G Somani, Drugs Controller General of India, Ms Samina Hamied, Executive Vice Chairperson, CIPLA Ltd, Dr Rajesh Jain, Chairman, CII Biotechnology Committee, Shri G V Prasad, Chairman, CII Committee on Pharma, Shri Vivek Kamath, Vice Chairman, CII Committee on Pharma and Captains of Industry were present on this occasion.

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

INDIA AND THE WORLD

21. Real estate gold mine in railway stations

Livemint, 08 Oct. 2020, Anto T. Joseph

With 50 stations on the block, private investment will be the flavour of the season. But there are concerns too
The user charge is a political hot potato in the making. The plan is to levy a nominal charge as part of the fare at all busy stations. This will be ploughed back into the redevelopment

MUMBAI: There was a virtual scramble at the 25 September pre-bid meeting that discussed the proposed revamp of Mumbai’s iconic Chhatrapati Shivaji Maharaj Terminus (CSMT). The 132-year-old station, formerly known as Victoria Terminus, is up for a historic overhaul. A large number of prospective corporate bidders, consultants and architects attended the online video call that stretched beyond the stipulated time as the authorities answered each query and tried to allay concerns.

Here are a few takeaways from the meeting: as it is a Unesco World Heritage site, the old structure cannot be touched. The plan is to restore the station to its pre-1930 glory by demolishing the nearby buildings that housed administration offices, an eyesore by any standard. The refurbished station will function like a city-centre mall complete with retail outlets, eateries, entertainment facilities, hotels and souvenir shops, among others.

Since CSMT caters to over one million commuters daily during normal operations, arrival and departure need to be segregated. The core operations such as train and parcel movement, signaling and ticketing will continue to remain with the railways. The project will try to integrate various modes such as the proposed fast track of Harbour Line that connects the island city to Navi Mumbai, and the metro line, to make it a transport hub.

Two weeks earlier, a similar pre-bid meeting was called for New Delhi Railway Station (NDLS), which caters to 450,000 passengers daily. As many as 20 potential bidders attended the meeting. The project with an expected capital expenditure of around ₹6,500 crore proposes a multimodal hub with state-of-the-art amenities like an elevated concourse, restaurants, shopping malls and multi-level car parking, among others.

There’s more. Indian Railway Station Development Corporation (IRSDC), which is driving the bidding process, has taken up eight more stations, including Patna, Gwalior, Surat and Guwahati. “In total, we are working on 123 stations. Our target is to complete the bidding process for 50 stations in one year," S.K. Lohia, managing director of IRSDC, told Mint.

Railway station privatization is expected to be the flavour of the season for private investment. The pre-bid meeting in Mumbai drew 43 companies apart from half-a-dozen consultants. The big names included Adani Group, Larsen & Toubro, Tata Projects, GMR Group, Essel Group and Kalpataru Power. For New Delhi, around 20 companies including Adani Group, GMR Group, Société Nationale des Chemins de Fer (SNCF), JKB Infra and Anchorage Infrastructure have shown interest.

“The game has just begun," said the representative of a leading infrastructure player. Speaking on condition of anonymity, he added that the company was keen to take the plunge and that the few stations that have been privatised thus far were too small. Two stations—Habibganj and Gandhi Nagar—that were handed over to private parties a couple of years ago are finally getting ready to open to the public.

Clearly, Asia’s oldest rail network is now frantically seeking private capital for the upgrade and upkeep of stations, a desperate cry for decades. What’s on display is a transition of an organization, one of the largest employers in the world, from being a social concern to a commercial enterprise. The government wants to raise funds by monetising the prime real estate lying unused at most stations, which in any case face the brunt of constant encroachment.

Just like in the case of airport privatization, the prime real estate held in cities alongside the railway stations will be the gilded carrot. A new bidding model entailing a long lease of land and a system of upfront-cum-annual concession fee is broadly in place, supported by a potentially controversial user-charge system that the government is likely to notify soon.

For the Mumbai project, IRSDC has pegged the redevelopment cost at ₹1,642 crore. The successful private bidder will get to develop 2.5 million sq. ft of built-up area on leasehold basis for 60 years for commercial development and up to 99 years for residential development on selected plots at CSMT, Wadi Bunder and Byculla. The cost of real estate around the station is fixed at ₹1,433 crore. The successful bidder will rebuild the station under DBFOT (Design, Build, Finance, Operate and Transfer) model, and operate and maintain the station for 60 years.

Of course, at a time when companies are battling a crisis of confidence due to the uncertainty caused by covid-19, the hurried bidding has raised several eyebrows.

A top official from a potential bidder for Mumbai is worried about the huge capital expenditure. “A lot of money is at stake. As the country faces a serious economic slowdown, several companies may decide to go slow on their investment plans. When nearby shopping malls in Mumbai are struggling to get tenants, can they run a giant shopping arcade inside CSMT?" he asked.

User-charge conundrum

Make no mistake: the user charge is a political hot potato in the making. The plan is to levy a nominal charge on the passenger, which will be collected as part of the fare at all busy stations. This will be ploughed back into the redevelopment and upkeep of the facilities.

Amitabh Kant, CEO of the government think tank NITI Aayog and chairman of the five-member committee overseeing privatization of railway stations and train operations, knows the subject is politically sensitive. “We are taking everybody along. We are working in partnership with every constituent," he told Mint. “It is going to the (Union) Cabinet. Final bidding will happen only after fixing the user charge, which will be notified in a month," added Kant, stressing that big station redevelopment projects won’t work well without a user fee.

IRSDC’s Lohia says bidders have been told about the introduction of a user charge and how it will be indexed, along with the escalation. “The formula will be stated upfront," he said. While unions and passenger associations are opposing the move, claiming that it will substantially hike fares, senior Indian railway officials insist that the user charge will be very reasonable and will easily outweigh the potential benefits.

Rajaji Meshram, partner, strategy and transaction services, EY India, believes that user charges provide a steady and predictable revenue flow while other revenue streams such as commercial rentals depend on real estate market conditions. “It makes the project more bankable. From passengers’ perspective, the cost of travel might go up marginally, but generally, there is willingness to pay when better facilities are provided, as can be seen in privately-developed airports," he said.

Shiva Gopal Mishra, general secretary of All India Railwaymen’s Federation (AIRF), flags the big difference between rail and air passengers, saying the railways is the cheapest mode of transport in India. “During normal operations, around 22,000 trains carry over 2.5 crore passengers daily, which is equivalent to the entire population of Australia and New Zealand. Nobody is against the development of the railways because it’s the lifeline of the country. The issue is that the railway is confused as to whether it’s a commercial enterprise or a social concern," he said.

According to Mishra, the railways cater to the common people, mostly economically backward travellers who come to the big city stations that will attract a user fee from faraway villages. “We are opposing (the) user charge because it will put a burden on the poor," he said, adding that his union is not against commercial exploitation of the railway land that is unlikely to be put to use in the near future.

The bidding models

Though IRSDC, an equal joint venture company between Rail Land Development Authority (RLDA) and Ircon International Ltd, both under the ministry of railways, was set up on 12 April 2012, it gathered momentum only in 2015. The first model came up after Suresh Prabhu, the former railway minister, insisted on enhancing non-fare avenues and the plan provided a win-win situation for the railways.

The first public-private-partnership (PPP) was flagged off on 1 March 2017 when the management of Habibganj station (Madhya Pradesh) was handed over to the Bhopal-based Bansal Group. Apart from the upfront payment, the model did not insist on an annual revenue share, despite the Bansal Group having been given the land on lease for 45 years. The private party has built all the facilities such as food stalls, platform maintenance, parking and restrooms.

“The success of the Habibganj project has instilled adequate confidence among companies," said Lohia. IRSDC says nearly 98% civil work has been completed as on 30 June and the station is likely to be opened by the year-end. The ₹450-crore project (the station redevelopment cost of ₹100 crore and the estimated cost of commercial development of ₹350 crore) flaunts a swanky commercial hub, shops and eateries.

The other redevelopment project at Gandhi Nagar (Gujarat), which has a five-star hotel in its precinct, is also progressing well. IRSDC says around 93% of its civil work has been completed.

Like in any other PPP model for infrastructure development, the railway station redevelopment projects have also gone through a process of evolution. “After the first bid for Habibganj, the parameters for station redevelopment bidding have undergone multiple changes. The ministry tried its hand with the Swiss Challenge method (inviting a bid and publishing it, before inviting competing counter proposals to improve the initial bid). However, this method did not work very well given the inherent challenges," said Meshram of EY India.

Apart from a couple of successful cases of privatization, the previous models failed to make it a grand success. For instance, three attempts to privatize the Chandigarh station hit a dead-end recently as companies failed to show up with financial bids. The station had put on offer 2.5 million sq. ft of real estate for commercial development, with the lease extending to 99 years.

As per IRSDC, the latest bidding, including Mumbai and Delhi, will be based on an annual concession fee, along with a fixed upfront premium. “It is not universal for all stations," said Lohia. In some cases, the upfront premium may be kept variable and in others fixed, all depending on the size of the project. | Estrada do Zambujal, N. 38-A, Alfragide | 2610-294 Amadora | Portugal | Tel. +351 21 301 9926 |

“In the case of Mumbai and New Delhi, the successful bidder has to spend a lot of money because these are big projects. If we ask for a huge upfront payment, they become cash-flow negative for a long time," he explained.

In conclusion

The mega plan of creating world-class facilities at railway stations integrates with the privatization of rail routes which has already been announced by the railways. This comes at a time when railway’s finances are running thin. After freight revenue slipped in 2019-20 in line with the economic slowdown, due to a drop in coal, ore and cement traffic, the outbreak of the pandemic earlier this year has thrown the Indian Railway’s operations into disarray.

With regular operations having been severely disrupted, the traffic earnings have declined by over 42% to ₹41,844.3 crore during April-August over the same period last year, minister of railways Piyush Goyal told the Parliament on 17 September.

“While IR is investing adequately on safety measures, it is facing a cash crunch for upgrades and modernisation, which is the need of the hour," said Rajendra B. Aklekar, author of several books on railways, including The Great Indian Railway Romance. All the mega plans of high-speed trains and track upgrades are difficult to be implemented without additional money, he says.

And then there are other issues. Can the existing monopoly operator Indian Railways afford to leave the sector completely unregulated for private players? “No. You have to have a regulator because there will be issues which will crop up. The existing Rail Development Authority (RDA) will be converted to a regulator. We are working on it," said Kant.

Is the railway ready for the transition to a commercial establishment which can cater to users who are ready to pay for the service? “Yes. It has to become a business enterprise," added Kant.

Anto T. Joseph is a senior journalist.

22. Digital manufacturing could be the next big opportunity for India

ET Bureau, Oct. 07, 2020, Priyanka Sangani

“India needs to look at digital manufacturing and go beyond industry 4.0 – it needs accelerated manufacturing, but needs to create jobs as well,” said Manjeet Kriplani, executive director, Gateway House. She said Indian software firms and startups would have an important role to play in helping domestic enterprises make this transition.

“Adopting sustainable supply chain practices is another factor that would help enterprises attract global customers as they look at reducing the supply chain dependence on China,” said Ankush Patel, CEO, Treeni.PUNE: India has the potential to become a global manufacturing hub if it speeds up the adoption of technology on the shopfloor, according to a new paper by foreign policy think-tank Gateway House. The country could be a beneficiary of the global decoupling from China as companies start to move their manufacturing operations out and need a new supply chain partner, it said. “India needs to look at digital manufacturing and go beyond industry 4.0 – it needs accelerated manufacturing, but needs to create jobs as well,” said Manjeet Kriplani, executive director, Gateway House. She said Indian software firms and startups would have an important role to play in helping domestic enterprises make this transition. Digital manufacturing goes beyond just Industry 4.0, blending manufacturing with IT, including artificial intelligence, virtual reality and the Internet of Things. Already, the United States and Japan have called to move manufacturing out of China, primarily on security concerns. In July, the Japanese government said it would pay companies to move their manufacturing operations out of China, putting aside over $500 million for this. Indian enterprises need to build strong digital manufacturing capabilities in order to take advantage of this situation, the think-tank said. This can be a great opportunity for India, but things are moving slowly because of the Covid-19 pandemic, said Rajan Navani, managing director, Jetline Group. “We are a source of tech talent to the world and can make the most of this opportunity. But Indian industry needs to invest much more than what they currently are,” said Navani, who is also Chairman of CII’s India @75 initiative. Most of the automation and tech initiatives in India are driven by multinationals, and by the time Indian companies do invest, it is more about playing catch up. The pandemic is driving faster adoption of digital technologies in India, said Ashish Gaikwad, managing director, Honeywell Automation India. With changing customer demands, quality parameters, and environment and safety regulations, the manufacturing sector will adopt automation and Industry 4.0 much faster, he said. “As we slowly embrace a ‘new normal’, we are ready to serve our customers’ needs to help provide a safe, secure, and productive work environment with our mobility solutions. Across our businesses, we have a suite of products and solutions that enable remote operations, worker safety, and rapid adjustment to the post-Covid-19 world,” said Gaikwad. The company is currently implementing various solutions in pharma companies to provide complete visibility of essential manufacturing processes and help speed up time to market. Chizel, a startup that offers manufacturing as a service, has seen a sharp spike in international inquiries after the early days of the pandemic. “There is demand from European and Australian companies that were earlier sourcing parts from China. These are mainly heavy engineering companies and equipment manufacturers,” said Yash Rane, founder, Chizel, which provides an online platform for customers to upload their drawings. Chizel then manufactures them through its network of job shops. The challenge, said Rane, is convincing them of the quality of the end-product. Several of these companies have worked with Indian companies before and have concerns over quality even though it is a cost competitive option. Small and medium businesses, often an important part of the supply chain, are also realising the importance of technology. A recent study by Cloud firm Digital Ocean found that demand for digital services by SMEs in India far outpaces demand in the United States. Respondents in India (in businesses with under 1,000 employees) reported greater spending on IT security and the cloud, and higher demand for cloud services in the next 3-6 months. Indian businesses also need to increase focus on sustainability. Treeni Sustainability Solutions provides enterprises sustainable supply chain management solutions. “Adopting sustainable supply chain practices is another factor that would help enterprises attract global customers as they look at reducing the supply chain dependence on China,” said Ankush Patel, CEO, Treeni. Even as some Indian businesses are making the transition and adopting more digital manufacturing practices, experts pointed out that it needs to happen at a wider scale for the country to truly benefit.

23. Reliance Jio partners with 22 foreign airlines for inflight internet connectivity

IBEF, Sep. 25, 2020

On 22 flights on international routes, Reliance Jio has begun offering mobile services, with plans starting at Rs 499 (US$ 6.76) per day.

The company's airlines partner includes Cathay Pacific, Singapore Airlines, Emirates, Etihad Airways, Euro Wings, Lufthansa, Malindo Air, Biman Bangladesh Airlines, and Alitalia.

This has made Jio the second Indian telecommunications firm to provide in-flight services. Tata group subsidiary Nelco has started to provide Vistara airlines on the London route with in-flight mobile services.

Three international roaming packs priced at Rs 499 (US$ 6.76), Rs 699 (US$ 9.48) and Rs 999 (US$ 13.54) with one-day validity for international travellers from India were announced by the company.

While all plans provide 100 minutes of outgoing voice calls and 100 SMS, 250 megabytes (MB) of mobile data is provided by the Rs 499 (US$ 6.76) plan, Rs 699 (US$ 9.48) provides 500 MB and 1 GB of data is provided by the Rs 999 (US$ 13.54) plan.

According to information available on the Jio website, none of the plans will allow for incoming calls, though incoming SMS is secure.

According to the details on the website, first-time users of in-flight mobile services would need to enable plans on the Jio network, and international roaming services will not operate on the Jio Phone and Jio Wi-Fi systems.

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

24. The reality behind Reliance’s retail rush

Livemint, 28 Sep. 2020, Mihir Dalal

Flush with funds, Reliance Retail has trained its sights on the Flipkart-Amazon duopoly. How will it fare?
Reliance will find it tough to break the dominance of Amazon and Flipkart, similar to how Walmart is struggling to challenge Amazon in digital sales in the US even as its stores continue to prosper

BENGALURU: Last month, Nimit Jain, an entrepreneur, ordered biscuits, shampoo, toothpaste and other items for his family in Kota. He used JioMart—the new online shopping app by Mukesh Ambani’s Reliance Industries Limited—lured by its low prices and freebies.

JioMart was to deliver the order within two days, but Jain’s family didn’t receive the items on time and JioMart didn’t inform Jain about the delay. The delivery was done four days after he had placed the order, a few hours after Jain had complained to the firm via email and Twitter.

A few products were missing, Jain’s parents informed him. It took time to figure out the missing items because the details of the order weren’t available on the app. Jain had paid online and asked JioMart for a partial refund. Instead of receiving an acknowledgement for his refund request, he received a response for his previous email about the delay in delivery. Five days later, Jain got a refund.

Mumbai-based Jain, a computer science graduate from the Indian Institute of Technology, Madras, usually orders groceries from BigBasket and sometimes from Dunzo. He said that he doesn’t plan to use JioMart again.

“A couple of my friends and relatives (in Mumbai and Kota) have also had similarly bad experiences. It doesn’t look like JioMart is ready for online groceries. Their operations and customer care teams weren’t in sync," Jain said.

Since JioMart expanded to more than 200 cities this summer, scores of customers like Jain have complained about missing products, delayed deliveries and generally poor service. Still, industry executives say that while its service levels have been inconsistent, JioMart is registering similar order volumes to BigBasket, the largest e-grocer, on the back of aggressive marketing and discounts.

These volumes still comprise a small fraction of the overall business of Amazon India and Walmart-owned Flipkart, the two dominant online retailers. But that’s because JioMart is only selling groceries now; it plans to sell other products like fashion and electronics soon. It’s clear that after many years of talk and hype, Reliance, which owns India’s largest offline retail chain, is finally becoming a serious challenger to Amazon and Flipkart, as well as BigBasket and Grofers.

Still, industry executives, logistics firms, consultants and analysts that Mint spoke with said that Reliance will find it tough to break the dominance of Amazon-Flipkart in e-commerce, similar to how Walmart is struggling to challenge Amazon in digital sales in the US even as its stores continue to prosper. Amazon and Flipkart both have deep pockets, proven expertise in e-commerce, popular brands and good knowledge of the Indian market.

“Reliance has the financial muscle, but Walmart (Flipkart) and Amazon are no pushovers," said Harminder Sahni, managing director, Wazir Advisors, a consultancy. “Today, most people who want to shop online are happy with Flipkart and Amazon. These companies have achieved significant scale and have very few weaknesses. As a latecomer, it will be very difficult for Reliance to make a big dent in the market."

Reliance did not respond to an emailed questionnaire seeking comment.

Local internet powerhouse

During the pandemic, Reliance has not only moved fast to make inroads into the e-commerce market, it has also consolidated its leadership in organized offline retail. Last month, Reliance bought most of the businesses of Future Group for about $3.4 billion in a deal that will take its retail footprint to nearly 14,000 stores—by far, the largest in India.

In the past six months, Reliance has raised more than $21 billion for its digital unit Jio Platforms. This month, Reliance kickstarted a separate fund-raising spree for its retail unit, Reliance Retail, bagging about $1.8 billion from private equity firms Silver Lake and KKR, two of the investors in Jio. Several more investment firms, including other shareholders in Jio, are expected to join them.

These moves are part of Reliance’s efforts to transform itself into a 21stcentury digital behemoth. It is positioning itself as India’s answer to Amazon, Facebook, Google, Alibaba and other world-class digital giants, and unlike local startups like Flipkart, Ola and Paytm that have or had similar ambitions, Reliance enjoys some unparalleled advantages.

It is now accepted wisdom among politicians and regulators that India needs a ‘local’ internet powerhouse to counter the dominance of America’s Big Tech and the growing influence of Chinese firms, partly because of sovereignty concerns. Reliance’s mastery in lobbying and its political clout makes the firm best-placed to exploit this urgent establishment need to find a domestic internet powerhouse.

Amazon, Flipkart, Facebook and others face many policy-related restrictions that not only serve as obstacles to them but pave the way for domestic firms led by Reliance to enter the fray. For instance, foreign investment rules prevent Amazon and Flipkart from owning inventory or selling private labels (though critics say that these firms do it anyway using clever legal workarounds), while Reliance has no such constraints. Apart from a supportive policy environment and huge capital resources, on the business front, too, Reliance has an enviable digital distribution network and reservoir of customer data on account of Jio.

But despite these formidable advantages, Reliance has yet to prove that it has the chops to realise its ambitious vision.

The war among Reliance and Flipkart and Amazon and other internet firms is also not restricted to retail, but will extend to other sectors like financial services, content and business-to-business commerce. The technology-centric nature of the battle is more suited to the internet companies than to Reliance. There’s little doubt that Reliance will be a major player in the digital business, but the jury’s out on how much value the firm can corner. Its foray in e-commerce and B2B will provide early answers to this question.

Retail battle

After JioMart began testing its service late last year, media reports said that the company would deliver products to customers from local kirana stores. After Facebook invested in Jio in April in a deal that included a business partnership between JioMart and WhatsApp, Ambani said that JioMart would soon connect some 3 crore kirana stores with their neighbourhood customers.

Many analysts, too, expect the partnership with WhatsApp, the most popular app in India, to be a game-changer. In July, Goldman Sachs estimated that Reliance’s entry will help expand the online grocery market by 20 times to about $29 billion by 2024. Reliance’s partnership with Facebook could help the firm become the leader in e-grocery and garner a market share of more than 50% by 2024, Goldman said.

But Mint learns that Reliance is sourcing a majority of orders on JioMart in many cities through Reliance Retail’s supply chain; only a small number of orders are served through kirana stores. JioMart is signing up a few thousand kirana stores every month, but its expansion is happening at a slower rate than many analysts expect. Two industry executives said that JioMart’s average order value is lower than that of other e-grocers, which means that Reliance is losing larger amounts of money on every order.

According to one e-commerce executive, for BigBasket and Grofers, the delivery cost is about 3-4% of the average order value, which exceeds ₹1000. For Reliance, the delivery cost is presently much higher because its order value is below ₹800. The lower order value is partly because most of JioMart’s 200 city-markets are non-metros. BigBasket and others generate an overwhelming majority of their business from the metros. Reliance is betting on expanding the e-grocery market rather, than taking market share from incumbents, which generate an overwhelming majority of their sales from 10-15 cities. But while Reliance may be able to attract customers in smaller cities initially with discounts, profitability will be tough.

“The economics of serving metros are very different from the rest of India. In the mass market, bill values are much, much lower. Right now, Reliance’s main focus is to scale JioMart, so they aren’t worried about the delivery cost," the executive cited above said. “But eventually, reality will catch up, and they will have to increase basket sizes because this model isn’t sustainable. Grocery has very thin margins to start with. "

Private label push

One obvious way for Reliance to boost margins is by selling more private label products. In the grocery category, Reliance Retail already generates 14% of its revenues from private labels. People familiar with Reliance’s plans said that the company wants to push its private label products to kirana stores. While there are hundreds of well-known brands in FMCG, the grocery category (products like rice, pulses and flour) is largely unstructured. Reliance plans to sell its private label products both in grocery and FMCG.

Apart from retail, Reliance is also rapidly expanding its B2B business. Its private label products form a key component of its retail and wholesale business plans, the people cited above said.

The private label push, however, is making large FMCG companies like Hindustan Unilever, Marico and Dabur, which sell competing products, wary of working with Reliance’s B2B arm.

Like Flipkart and Amazon, which are also expanding their B2B businesses, Reliance’s grand vision over time is to have an integrated ecosystem of wholesale and retail in which it connects consumer goods makers with kirana stores and retailers, supplies a large number of private label products across many categories to retailers and end-customers, and becomes the biggest omnichannel retail firm in the country. But realising this vision will require Reliance to work seamlessly with millions of kirana stores, thousands of brands, modern retailers (all of which will see the firm as a rival to an extent)—and provide exceptional service in a profitable manner to retail customers.

Analysts and industry executives said that Reliance has a higher probability of finding success in categories like fashion (in which it already runs a portal called Ajio) and grocery that are mostly unorganised and have a shortage of established brands. In these categories, Reliance faces fewer barriers from existing players and has a better chance of pushing its private labels in both the wholesale and retail markets. But in categories like electronics and FMCG, which are dominated by entrenched brands, kirana stores and e-commerce firms, Reliance may struggle to scale as fast.

For instance, Flipkart and Amazon dominate online sales of electronics and fashion, which together comprise more than 75% of all e-commerce. To win significant share in electronics, Reliance will have to spend enormous amounts on discounts, marketing and offering favourable terms to brands . But, in fashion, Reliance can tap its low-priced private labels to lure customers without resorting to value destruction.

“The market is too varied for one player to be big in all categories," an investment banker said. “Reliance will have to carefully choose its battles. There’s a risk that it may spread itself too thin, so it’s wise for them to have started with grocery."

Meanwhile, while Google and Facebook have together invested more than $10 billion in Reliance, both companies are continuing to expand their own businesses in India. Google and Facebook have ambitions to enter e-commerce and expand in other sectors like payments and content. What this means is that while Google and Facebook will end up collaborating with Reliance in some areas, they will also compete with the firm in others, joining Flipkart and Amazon in the war of the digital conglomerates.

Flipkart and Amazon have already stepped up their lobbying efforts with the emergence of Reliance as a threat. Because of the pandemic that has made e-commerce indispensable, there has been a thaw in the government’s attitude towards the US e-commerce firms. A more antagonistic attitude may return when the pandemic passes.

Eventually, though, the war will be decided by customers. Here, experts are divided on whether Reliance will emerge as the winner. “Reliance still has to do a lot more on getting the customer experience in place, but given the strides they’ve made, it is well-placed to compete in the digital space," said Devangshu Dutta, head of retail consultancy firm Third Eyesight.

25. Can India replace China as the world’s factory?

Livemint, 05 Oct 2020, Nikita Kwatra

India needs to embrace global value chains and remove regulatory barriers to take on China’s mantle as the factory of the world

Chinese aggression in recent years has given new life to the Quadrilateral Security Dialogue or “Quad"--a multilateral group comprising India, the US, Japan and Australia. The four nations, which resumed dialogue after a decade-long hiatus in November 2017, have stepped up their efforts to counter Chinese dominance in the Indo-pacific region.

The group is an important counterbalance to China’s growing aggression in the region, and is perhaps a strategic necessity for India. But its capacity to provide an alternative to China in trade is rather limited at the moment.

China continues to be the most important hub of global value chains. Japan, the US, Australia are all dependent on supplies from China to manufacture products that they export.

India’s own dependence on China is significant. Over one-fourth of the value added in Indian exports is contributed by China alone. This was not the case at the turn of the century. India’s reliance on China has increased manifold over the past two decades.

This dependence hasn’t eased even in recent months. Even as Indian troops have been engaged in a tense confrontation with China since April, the share of Chinese imports in India’s trade basket has only gone up, despite the rhetoric of ‘self-reliance’. Imports from China accounted for 14% of Indian imports in the fiscal year ending March 2020. So far this year, the same share has gone up to 19%. Data on the share of Chinese value-add in Indian exports are not yet available for the current year. Dependence on Chinese pharmaceuticals and safety kits to battle the pandemic has meant that other quad members too have been heavily dependent on Chinese imports this year.

“The quad cannot offer an economic alternative to the mighty Chinese economy as yet," said Happymon Jacob, associate professor of disarmament studies at Jawaharlal Nehru University (JNU). “These countries will have to continue to engage China economically even while seeking to balance Chinese military power, and it is going to be a tough balancing act."

With covid-19 disrupting global supply chains, many multinational companies have been considering shifting parts of their production platforms not away from China. But while there are benefits to diversification, it is neither easy nor cheap. The covid recession has starved companies of cash, and not many may be able to invest in other countries immediately.

We might see some relocation but that relocation may not be a large-scale one, said Amita Batra, a trade economist at JNU. With wages increasing in China, some companies had started looking for alternatives in other markets, even before the pandemic disrupted supply chains. But those companies have moved elsewhere, not to India, Batra pointed out. To capitalize on the opportunity, India needs to improve ease of doing business, and undertake reforms relating to land, labour, and taxes, said Batra.

In the short run, it will be difficult for India, or any large economy, to decouple from China, economists said. But over the long run, India has the potential to give China a run for its money. There is a growing recognition, at least among the quad countries, on the need to economically decouple from China, and India may stand to gain from such decoupling over time, said Jacob.

“China’s unique selling proposition is that it has the capacity to produce at a big scale at low costs," said Biswajit Dhar, another trade economist at JNU. “The only country other than China, that can produce at that kind of scale and at similar prices, is India. We are still a low cost production centre."

Apart from the unease of doing business here, India’s deficits in physical and social infrastructure pose a major challenge to realize such ambitions of being the next factory of the world.

South Asia can become the next manufacturing powerhouse if it improves business climate, links domestic firms to global value chains, and improves capabilities of workers and managers, a 2017 World Bank report said.

Participation in global supply chains has two aspects: how much value a country contributes in the making of foreign exports (forward participation) and how much it depends on foreign input for production of its domestic exports (backward participation). While India has a relatively higher backward participation due to high import dependence in many industries, its forward linkages are much lower.

Source: OECD

An analysis of data from the UNCTAD-EORA GVC database shows that not only has India’s participation in global production declined since 2008, its gains from integration have also declined. India is now using more high value inputs from abroad to produce its exports and adding less value to the exports of other countries.

Efforts to reduce trade barriers, enhance infrastructure, and improve access to finance can aid further integration with value chains. Some of the recent policies such as industrial corridors, de-licensing, and the Make in India initiative, are steps in the right direction but have fallen short in impact. Other policies such as the rise in tariff walls may have been counterproductive since they ultimately end up hurting Indian industries by raising input costs.

Another challenge is the lack of enough lead firms, wrote Saon Ray and Smita Miglani in an ICRIER working paper earlier this year. Lead firms, typically transnational corporations, create networks by breaking down the production chain into distinct functions and locating them wherever they can be carried out most effectively.

Source: ICRIER

Tata Motors in the automobile sector and Reliance in the petrochemicals sector, for instance, play key roles in transferring technology, establishing supply chains, and attracting foreign investment, according to Ray and Miglani. But India, in general, has very few such sectoral lead firms. Skill shortage, lack of access to finance, regulatory uncertainties all prevent lead firms from developing in India.

Deeper domestic policy reforms with focused attention on ease of doing business, efficient logistics and infrastructure will be needed to make Indian firms more competitive before they can start producing for the world.

This is the concluding part of a two-part series on trade and cross-border flows in the post-covid world. The first part examined the implications of India’s restrictions on Chinese tech firms.

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Monday 19 October 2020

NEWSLETTER, 20-X-2020

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NEWSLETTER, 20-X-2020

– GENERAL POLICY, INFRASTRUCTURES, COUNTRY FINANCES, ETC.

AGRICULTURE, FISHING & RURAL DEVELOPMENT

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

INDIA AND THE WORLD