AAPI: February 2023

DELHI, February 2023

Index of this Newsletter

INDIA

INDIA & THE WORLD

21.1. Working on 200 Projects in India: US Trade Agency
21.2. As India hobnobs with the West to tame China, the West hopes to wean India off Russia. Will it work?
22. India Assures IMF; Sri Lanka Close to Securing $2.9b Bailout
23. Mauritius IFC and GIFT City can complement each other: Mauritius’ financial services minister Seeruttun
24. Kerala govt mulls Singapore-model business hub around Vizhinjam Port, Infra News
25.1. Between Development & Deep Blue See (Great Nicobar Island)
25.2. India wants to become the manufacturing hub. What it can learn from China, Taiwan, and South Korea

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DELHI, FEBRUARY 2023

NEWSLETTER, FEBRUARY 2023

INDIA

– GENERAL POLICY, INFRASTRUCTURES, COUNTRY FINANCES, ETC.

1.1. Tax Incentives to Give a Leg Up to Coop Sector

ET, 2 Feb. 2023

To support an inclusive growth model and incentivise the bottom of the pyramid, the finance minister unveiled new tax benefits for cooperative bodies, and investments in their technology infrastructure.

PTI Union finance minister Nirmala Sitharaman
To support an inclusive growth model and incentivise the bottom of the pyramid, the finance minister unveiled new tax benefits for cooperative bodies, and investments in their technology infrastructure. The budget announcement comes weeks after the Cabinet relaxed rules for cooperatives to participate in India's growth story.

Nirmala Sitharaman announced that new cooperatives that commence manufacturing activities till March 31, 2024 would be taxed at a flat 15% — the low rate available to new manufacturing companies — from the current rate of up to 30% plus surcharge. Sugar cooperatives will be able to claim as expenditure their payments to sugarcane farmers for the period prior to assessment year 2016–17. “This is expected to provide them with nearly ₹10,000 crore in relief,” Sitharaman said.

The budget also proposes to cap the limit at ₹2 lakh per member for cash deposits and loans in cash by primary agricultural cooperative societies (PACS), and primary cooperative agriculture and rural development banks. Cooperative societies have been provided a higher limit of ₹3 crore for tax deducted at source on cash withdrawals, against ₹1 crore now.

The government has already initiated computerisation of 63,000 PACS with an investment of ₹2,516 crore, in addition to setting up a national cooperative database and preparing a country-wide map of cooperative societies. Also, model by-laws have been formulated for such cooperatives to become multipurpose PACS.

The finance minister’s measures come three weeks after the Cabinet approved the setting up of a national-level multi-state cooperative organic society under the Multi-State Cooperative Societies Act, 2002.

1.2. Tata Group Set to Record Highest Growth in History
ET 13 Feb. 2023

Tata Group is set to record the highest growth in its history, with both unlisted and listed entities growing upwards of 20%. Importantly, both traditional and new businesses have lined up large capex plans. The traditional businesses will fund their own growth through internal accruals.

Tata Group is set to record the highest growth in its history, with both unlisted and listed entities growing upwards of 20%. Importantly, both traditional and new businesses have lined up large capex plans. The traditional businesses will fund their own growth through internal accruals.

“Tata Group companies are recording robust growth across the board and its overall annual growth is expected to be roughly 20% in 2022-23, which is significant for a group of our size. While our portfolio of businesses have their own cycles, the group’s combined profit and cash flows are very strong. We are also happy that the group has achieved its stated goals — each of the traditional businesses will fund its own growth through internal accruals,” Tata Sons chairman N Chandrasekaran said in an exclusive interview at Tata Group headquarters, Bombay House.

Tata Power and Tata Steel are investing upwards of $10 billion (₹82,500 crore) each while Tata Motors and Jaguar Land Rover will together invest $25 billion (₹2.06 lakh crore) over a period of five years. There will be substantial investments in Air India which will house the group’s combined airlines. In all, the Tata Group has lined up an investment of $90 billion (₹7.42 lakh crore) over the next five years across its existing and new businesses.

The new businesses include electric vehicles (EVs), batteries, renewables, 5G, precision electronics and possibly semiconductors. The group will also soon take a decision on the future of its loss-making UK steel unit.

“Tata Sons is only offering moral support with additional funds if sought,” he said. “I expect Tata Steel and Tata Motors to match Tata Consultancy Services (TCS)soon, answering the long-standing criticism about the group’s dependency on the IT company,” he added.

TCS has a market cap of ₹12.94 lakh crore. The combined market cap of Tata Steel (₹1.32 lakh crore) and Tata Motors (₹1.60 lakh crore) is less than that of TCS. Whereas the revenues of both the companies are higher than that of the IT company.

Revenue of Tata Motors, Tata Steel and TCS stand at ₹3.01 lakh crore ($38 billion), ₹2.45 lakh crore ($32 billion) and ₹1.96 lakh crore ($26 billion), respectively.

“Tata Sons is now firing on all cylinders with regard to the transformation of Air India which is expected to operate as one merged entity combining AirAsia, Vistara, Air India Express and Air India by March 2024,” Chandrasekaran said. “We are working on a completely new organisational culture including human resources, technology, engineering, customer service, flight operations, ground handling, modernisation and fleet expansion,” he said.

It has also set up an entity to implement EV battery plans and is identifying sites to start production. “We are ready and will be starting our India plan soon. It will also address the requirement of Tata Motors. We are also evaluating an international site but that will take some more time,” said Chandrasekaran.

The group is also making significant investments in its new growth businesses which include Air India, Tata Neu SuperApp, batteries, Tata Electronics and 5G. Tata Sons is currently evaluating the proposed venture into semiconductors. “We are still evaluating the semiconductor business plans. It is a very tough business which has to be well understood and precisely executed,” Tata Sons chairman said.

Chandrasekaran had taken charge as the first non-Tata chairman in 2017 and his term was renewed for another five years in February 2022.

Tata Digital has also been working on ensuring better consumer experience with its SuperApp, Tata Neu, he said. “Soon after launch, the app got a lot of attention with a high number of downloads. However, the customer experience was not up to mark and there were glitches that needed fixing. In the last six months many of these issues have been addressed. Now Tata Neu is seeing good progress across various parameters. The app ratings have now improved to 4+ in iOS and Android. Monthly visit frequency of customers and monthly transacting customers etc have been consistently rising. Customers are also increasingly transacting across multiple categories.”

Chandrasekaran also ruled out any blip in consumer demand or stress in consumer sentiment. “All our businesses are growing, whether it is consumer, electronics, retail, hotels, power, passenger vehicles or IT. There is clearly a growth momentum that our companies are noting. So, I can only see growth and don’t see any stress or blip in demand. All our businesses including steel, cars, Westside, Zudio, Titan, Indian Hotels, Croma, Tata Consumer have shown good growth,” he said.

The Tata Group’s growth plans are backed by its synergies focused on strengthening the core, transforming and creating future businesses, he said. The balance sheets of group companies were capitalised in the first five years of Chandrasekaran’s tenure by Tata Sons to focus on fitness and performance. The group now has 30 companies across 10 business verticals technology, steel, automotive, consumer and retail, infrastructure, financial services, aerospace and defence, tourism and travel, telecom and media, and trading and investments.

2.1 Green Hydrogen Mission can power India’s clean-energy future. But scale will be key to mass adoption
ET, 25 Jan. 2023

The cabinet approval for Green Hydrogen Mission earlier this month is an important milestone in India’s ambitious journey towards low carbon transition. Setting up an end-to-end integrated ecosystem, forming strategic technology tie-ups for innovation, and lower manufacturing cost of electrolysers will enable domestic players to put India on the green-hydrogen map.

The government’s Green Hydrogen Mission has generated a lot of interest, with major industry players eyeing a chunk of the INR19,744 crore initial investment outlay to produce 5 million metric tonnes (MMT) per annum of clean fuel by 2030. Experts believe that the financial commitment from the government will encourage companies and help accelerate private investments in the sector going forward.

Meanwhile, big players in the sector such as Adani New Industries Ltd (ANIL), L&T, Reliance Industries, NTPC Renewable Energy, and Indian Oil Corporation (IOC) have already announced strategic partnerships for research and technology development in the sector.

According to Kapil Maheshwari, president - renewable energy and green hydrogen development, Reliance Industries, the Green Hydrogen Mission, released in 2022, has set a roadmap that can turn India into a net exporter of energy for the first time.

“We are getting an opportunity to lead the world rather than saying we will catch the bus later, which we have seen in renewables already. All possible geographies are looking at doing some small pilots to prove technologies. Some big Indian conglomerates have announced their plans (in green hydrogen) and key government-owned entities such as NTPC and IOC have also announced their initiatives on all possible green-hydrogen projects,” he says.

ANIL, a subsidiary of Adani Enterprises, has announced an investment of up to USD50 billion (INR4lakh crore) over the next decade in the green-hydrogen ecosystem to produce up to 3MMT of fuel annually. It aims to cut the cost of green hydrogen by a third from USD6/kg and bring it at par with grey hydrogen. A sizable share of Adani Enterprises’ INR20,000 crore follow-on public offering (FPO) is expected to fuel its ambition to become a major global player in green hydrogen as the company looks to leverage its facilities at Mundra special economic zone to set up the ecosystem.

According to industry experts, the government has made its intent to go big in the sector clear with the allocation of funds for the mission. “I think the direction and intent are right while policy challenges are being addressed. This new mission will help in channeling more investments because when the government puts in some money, it becomes less risky,” says Vibhuti Garg, energy economist and lead - India, Institute for Energy Economics and Financial Analysis (IEEFA).

The mission roadmap
Some of the pilot projects that India is looking to explore include hydrogen highways with fuelling stations for trucks and interstate buses, steel plants powered by green hydrogen-blended fuels, hydrogen hubs for pooling resources to scale up production, hydrogen-fuelled ships for transportation of fuel by state-owned oil-and-gas companies, and green-ammonia bunkers at ports.

Now, let’s take a look at the salient features of the Green Hydrogen Mission.

#1. Cumulative investments of INR8 lakh crore are expected in green-hydrogen projects by 2030.
#2. The mission will create six lakh jobs.
#3. Carbon dioxide emission is likely to be brought down by 50MMT/annum.
#4. Green hydrogen output of 5MMT by 2030, scalable to 10MMT depending on demand and infrastructure.
#5. Targets to meet 10% of the global demand for green hydrogen.

To achieve these goals, the mission calls for a phased approach. The first phase (2022-23 to 2025-26) will see the deployment of green hydrogen in sectors that are already using hydrogen. Further, an ecosystem will be built for research and development, regulations, and pilot projects. The second phase (2026-27 to 2029-30) will involve building on this foundation and undertaking green hydrogen initiatives in new sectors of the economy.

As per a policy document by the Ministry of New and Renewable Energy (MNRE), the nodal ministry for the mission, the focus will be across three key verticals, namely, demand creation through domestic consumption and making green hydrogen produced in India competitive for exports, addressing supply-side constraints through an incentive framework, and building an enabling ecosystem to support scaling and development.

To make green hydrogen a feasible alternative to grey hydrogen (produced using fossil fuels), the MNRE is aiming to bring down the cost of renewable energy for electrolyser-based projects, scale up production, and explore mechanisms for dollar-denominated bids for green hydrogen/ammonia, besides setting up decentralised power generation facilities such as rooftop-solar and small/micro-hydel plants.

The mission proposes pilot projects for replacing fossil fuel-based feedstock with green hydrogen and its derivatives for hard-to-abate sectors such as steel, long-range heavy-duty mobility, energy storage, and shipping. For the implementation of the mission, an empowered group chaired by the cabinet secretary will be set up.

The document also calls for demand creation. A legal provision for ensuring the enforceability of consumption targets for green hydrogen and its derivatives will be established, which will empower the Centre to specify the minimum share of energy and feedstock consumption from non-fossil fuel-based sources that the industry must ensure.

"Corporates with hard-to-abate sectors are banking on green hydrogen’s take-off. Global carbon-tax regimes, which are probably one-two years away, are going to drive taxation based on carbon intensity."

— Bose Varghese, senior director - environmental, social and governance, Cyril Amarchand Mangaldas.

The amended energy conservation act, which was passed recently, also gives the government the power to impose green-hydrogen purchase obligations such as mandating a certain proportion in blended fuels.

“Both the national hydrogen policy and the national hydrogen mission have significantly addressed the issues of higher renewable energy tariffs as well as lowering electrolyser costs through incentive schemes. The mission has also clearly stated the capital outlay for each of the sub-segments along with research and development to encourage indigenous manufacturing,” Adani Enterprises said in its RHP for the FPO filed last week with the Securities and Exchange Board of India.

But being in the nascent stage of its development, green hydrogen comes with its own risks.

The challenges ahead
Industry players point out that electrolysers and renewable energy are the two major cost components in the production of green hydrogen, which is extracted using renewable sources to break down water molecules. On the other hand, grey hydrogen is produced using natural gas by steam methane reforming, which translates into a substantially lower cost of production. To bridge this gap, the government should dole out more incentives, say experts.

Highlighting the financial and market risks, the MNRE document lists out challenges including demand creation, cost of renewable energy and electrolysers, capital expenditure, and access to credit.

RIL’s Maheshwari says the green hydrogen policy, released in February 2022, talks about a waiver of interstate transmission charges for a period of 25 years, renewable power banking for up to 30 days (not available anywhere in the world), and streamlining of clearance procedures for projects.

“What was missing was demand creation and issues related to charges on renewable power transportation as the Centre and states can both make policies since electricity is on the concurrent list. We would expect Green Hydrogen Purchase Obligations on the lines of renewable power now available in the hard-to-abate sectors,” he adds.

As per rating agency Crisil’s estimates, the cost of producing renewable hydrogen in India currently varies from USD3/kg to USD6/ kg, compared with USD1/kg to USD2.5/kg for the natural gas-based process. About 5MMT of grey hydrogen is consumed annually in India and nearly 99% of this is utilised in petroleum refining and manufacturing of ammonia for fertilisers.

Among the concerns raised by the Adani Group include incentives for green hydrogen producers in electrolyser procurements or direct subsidies on the cost of production along the lines of the US tax-credit system, setting up a mandatory share of green hydrogen targets for demand creation, and state incentives on open access charges for transporting renewable energy.

Meanwhile, higher transportation cost of green hydrogen is another concern as low-cost renewable energy resources are located away from potential demand centres. A Niti Aayog paper on green hydrogen, published in June 2022, says transportation impact-cost economics and pipelines will become cost-effective once hydrogen demand exceeds tens of tonnes per day.

“As such, near-term development for large-scale industrial consumption could be located closer to production to minimize transportation and storage costs. Transportation through compressed hydrogen trucks looks to be the mainstay during the early phase of hydrogen development,” it said.

Adani Enterprises’ RHP also points out that the renewables-rich states such as Gujarat, Maharashtra, Karnataka, and Tamil Nadu are in the western region while heavy industries for steel etc., are in the eastern region which requires players to choose between transporting renewable energy or hydrogen.

“Transporting hydrogen is expensive and comes with safety concerns. Hence, in the near-to-medium term, we believe players will prefer to set up hydrogen plants closer to demand centres and source renewable energy, which will drive up landed tariffs for renewable energy,” it added.

To address some of these challenges, several players have signed agreements with domestic and international companies in the sector. Some major joint ventures include the RIL-Stiesdal Fuel agreement for technology development and manufacturing of Stiesdal’s hydrogen electrolysers and the IOC-L&T-Renew Energy undertaking to develop the green-hydrogen sector in India besides manufacturing and selling electrolysers.

Garg of IEEFA says collaborations can help companies to continue with their primary business, but at the same time decarbonise and shift towards clean energy.

Currently, major players are focusing on the export of green hydrogen while keeping in mind its economic viability in the domestic market.

The export market
In India, the scale-up of green hydrogen by the end of 2025-26 is expected to drive down costs, allowing for greater and wider deployment in the second phase when the potential for taking up commercial-scale projects in steel manufacturing, mobility, and shipping will be explored. Pilot projects in other potential sectors such as railways and aviation will kick off in the second phase.

“At this moment, India is a net importer of green ammonia and we foot a bill of USD2.5 billion [annually]. Now, can I produce green ammonia here using green hydrogen and use it within the country for which I am paying that kind of bill? At the same time, is it viable to use green hydrogen over grey hydrogen for industries such as refineries, fertilisers, and steel?,” says Maheshwari, adding that the domestic market will play a role in the cost of green hydrogen can be brought down to that of grey hydrogen.

According to Garg, the next couple of years will be crucial for exports. But until India builds manufacturing capacity for electrolysers and produces more renewable energy, it will not be possible to bring down the cost of green hydrogen.

“Green hydrogen is expensive and not commercially viable [for domestic use]. Unless the scale picks up, the cost will not go down. So, I think the idea is to let the scale build up, even if it’s for exports to begin with because you can’t keep waiting. Domestic demand is going to be limited at present and that's why the obligation is very minimal in the recently passed energy conservation bill,” she adds.

The bottom line
Law experts expect the new carbon taxation regimes worldwide to drive the export demand for green hydrogen, especially in the metallurgy sector, which is going to impact Indian industries including steel, iron, and aluminum.

“Corporates with hard-to-abate sectors are banking on green hydrogen’s take-off. Global carbon-tax regimes, which are probably one-two years away, are going to drive taxation based on carbon intensity, says Bose Varghese, senior director - environmental, social and governance at Mumbai-based law firm Cyril Amarchand Mangaldas.

Varghese points out that the carbon-intense industries will be forced to look for alternative energy sources. “And hydrogen is the best available bet today,” he adds.

2.2. Skill the Youth to Become Talent Basket of the World
ET, 26 Jan. 2023

Panellists at the ET CEO Roundtable discussed ways to make the most of India’s demographic dividend through skilling, ensuring women get their rightful place in India Inc and stepping up capital expenditure to unleash animal spirits and maintain the economy’s world-beating growth.

Mr Kant, I want to come straight to you and start off by asking about the much-talked-about demographic dividend… technically, close to 70 crore are eligible young people. Will their survival instincts alone create enough momentum for the GDP to grow?

AMITABH KANT: To benefit from the demographic dividend is to grow at high rates. We’re growing at about 7%, which is the fastest among large countries of the world. But India needs to grow at about 9-10% year after year, for three decades or more. That can only happen on the back of two-three things. First, the huge digital transformation that India has done. We do 11x more payments than what the US and Europe do together. We do 3.5x more than what China does. We need to do the same thing for going green, because going green is going to attract value, attract capital. Next, we need to really drive capital expenditure. The higher the growth, the greater your per capita income. You may be $3 trillion, you may be the fastest growing large economy, but your per capita income is still just $2,100. We need to take that to $15,000 for every single Indian individual.

The demographic dividend of the young and the restless that we keep talking about… How can technology help harness this restless energy?

ARUNDHATI BHATTACHARYA: It is actually technology that’s going to help us solve this enormous problem that cannot be solved in any other way. If you look at, for instance, the financial inclusion drive that we started at the public sector banks and subsequent riding on that, the way we have been able to leverage the India Stack, based on Aadhaar, based on the bank accounts that were opened, it shows that technology can take care of problems which cannot be taken care of in any other manner. Having said that, I don’t think industry is up to speed. Industry in India is still in the laggard quadrant, but if you’re looking at the population, it isn’t. We can really unleash the power of demography by ensuring the right kind of skilling. I think there is a gap there too, and that’s where we really need to work.

Mr Subramanian, we are talking of subsidising semiconductors. But as per our own education ministry’s assessment, dropout rates at the primary level have doubled. Are we somewhat missing the wood for the trees?

K SUBRAMANIAN: Today, in an environment where all the advanced economies are having 2.5-4x inflation along with recession or maybe very-very low growth, India registering 7% growth together with inflation that is 70% of its historical average is something we have to note first. On the one hand (we have) manufacturing (for) which PLI (production-linked incentive scheme) is an enabler… (and on the other hand, we have) human capital. Both are extremely important... Human capital for the services sector. And if we really need to provide jobs for all the youth, we do need the manufacturing sector. I think we have to certainly enable manufacturing sector growth. If you look at the numbers, it is growing, but there is a lot of potential (left) to tap. We need to focus on all the five elements — each of which actually add to costs — which are capital, labour, logistics, power, and the economies of scale, and really make it competitive for our firms. PLI is something that is actually a stopgap, but eventually these (manufacturing companies) have to be really enabled. At the same time, on the human capital front, education and healthcare, digitisation — that is happening … That is what will enable a lot of service sector growth because when manufacturing grows, services will follow.

Right. Mr Bikhchandani, do we need to invest and focus much more on human capital than what we are doing now?

SANJEEV BIKHCHANDANI: We do need to invest much more. But what we are seeing right now, the regression is perhaps an impact of two years of Covid. Where will we be five years from now, is the question. There is enough cognizance by the central government, there is enough cognizance of the importance of human capital and education, and I think that NEP (National Education Policy) is a step forward. Mr Damodaran, would I be wrong to say that no country has actually grown without education and, secondly, increased participation of women in the workforce? M DAMODARAN: There is absolutely no doubt that you need increased participation of women in the workforce. I think we have not done enough. I believe in the next few years, we will do much more than we have done in the past several years. Education is important. Healthcare is important. What is most important is what we have neglected for a very long time, which is skill development. You use the expression demographic dividend. It will be a dividend only if you can skill that part of the population, otherwise, it will be a liability. So, skilling ought to be given very high priority, if that does not happen, nothing else will. One last thing we need to do, I know I might be stealing from Haigreve’s book, we need to make our legal systems far-far simpler than they are at this point of time. Now we are all trapped in the process, we will never get to see justice at the end of it unless we discard these outdated processes. We have two prominent women professionals on the panel. Ms Bhattacharya, it seems that Indian boards do not have enough women members. Is it that difficult to get top women leaders to populate our boards?

ARUNDHATI BHATTACHARYA: It is absolutely not true. And in fact, I have recommended various very capable ladies to boards and very often the leaders of the boards, the chairmen of the boards have come back and told me that these are not C-suite people, they may be just below the C-suite and all the rest of my board members are C-suite people and therefore, you know, either the women may feel out of place or the other board members may not be accepting of it. Now the fact of the matter remains that it is the truth that there are not that many women in the C-suite. Does that mean that till they get to the C-suite, they do not get a seat on the board? I have known, for instance, one other lady of similar sort and I somehow or the other managed to convince this conglomerate to put her on one of the boards. Today I know that she is on three of their companx2y boards. When I asked them how come this happened, he said that she is the best prepared and brings the best inputs to the board. Now we have to get past this mentality. Today there are various initiatives being taken by various nongovernmental agencies to actually prepare women for boards but the current board members need to have that openness to be able to accept non-Csuite, ex-C-suite people into their boards in order to improve that number. It is not difficult to come by extremely competent women for boards. Correct. Preetha, it is not just the board or the C-suite, the participation of women in the workforce in India has gone further down post-pandemic. So how do we get them back to the offices and if you have, what are your top three points?

PREETHA REDDY: On the boards part, I have to say that in our company even if you exclude four of us who are on the board, we have two very competent independent lady members and all of us are on the board, so people are available, number one. Getting women back to the workplace has been a challenge because women have also understood that they can work from home and do very well and be productive. So in terms of company policy, we might have to rethink ourselves. We might have to reinvent and say that may be work from home or work different hours.

Do lawyers need to come to work?
HAIGREVE KHAITAN: So many of the lawyers actually can work digitally and if the courts have also gone digital, obviously, you know, it becomes very easy.

K SUBRAMANIAN: I just want to make a factual correction here. I think what you quoted on the decline in the female labour force is from the CMIE data. If you look at the official PLFS data that is put up by NSSO, the facts are actually different, so just a factual correction on the macro numbers.

PREETHA REDDY: I just want to make one point here that during Covid, it was the women workforce who were your frontline workers, so you need to give them credit for that.

HAIGREVE KHAITAN: Also, for lawyers, I would add that the pandemic has gotten more women lawyers back to the workforce because they can actually work from home and be as effective and productive.

M DAMODARAN: When you talk in terms of the number of women on boards, the real problem is no one is looking hard enough. The universe on which they focus is existing women directors. Outside that number, there are a whole lot of other people who are fit but if you do not look in that direction, you will never find them.

NVENKATRAM: There are 400 million people who are below the age of 30, 50% women. Even if we say you get 100 million women into the workforce, we have done our jobs and you are looking at a period of growth for the economy. In a period of growth, you will have a lot more employment and all of us as organisations have to make sure that you at least take 50% (women) into the workforce. I think we are at a point where we as India can set the path for the rest of the world. I do not think we should say that the highlight of one’s career is only being on a board.

HARSH MARIWALA: It is not really the women’s issues. The quality of boards in India is not good at all. The board is a source of competitive advantage and unless the quality of boards improves, the way boards function, it will have a huge impact.

What is the story in Serum in terms of women in the factories?

ADAR POONAWALLA: Certain sectors are very suited for women (to work from home). We have actually made a lot of strides to bring women in and stop this working from home. I know there are a lot of diverse views on it. I hope a lot of my competitors encourage working from home because then I will become a monopoly. Yes, during Covid, it was fine (to work from home) in certain areas. But I mean, how can you really work from home, your children will come running through the door on a Zoom call and interrupt. It looks very unprofessional. And, you know, you want to be able to be creative, you want to be able to interact with your colleagues at work.

Mr Subramanian, should India be leveraging low growth which would also lead to low commodity prices? Is this not the time to break away from the shackles of fiscal deficit targets and use domestic borrowings to invest in physical and social infrastructure to spur domestic consumption and growth?

K SUBRAMANIAN: Absolutely! You would recall that in the 2021 Economic Survey, there was a chapter that debt sustainability is all about the difference between the nominal rate of borrowing and the nominal rate of growth. If we take this year, for instance, the nominal rate of growth is 15.4%. If you take 10-year borrowing, it is about 7.3%. Even looking forward, over the next 10 years, India should be able to grow between 11% and 12% at least, and if the bond index inclusion and other things happen, the cost of borrowing should be 7% or maybe lower. So, the difference is clearly 5%. Therefore, rather than going by norms that actually have no grounds in economics, things like the Maastricht Treaty, which (advocated) 3% fiscal deficit and 66% debt-to-GDP by the way I must mention that the Maastricht Treaty was not an economic document but a political one to bring the EU together we have to think for ourselves. And I completely agree, it (spending) should not be for revenue expenditure. It should be for capital expenditure, as has been done in the last three-four years because capital expenditure essentially creates assets and when you have assets in the economy, supply increases, that also means that you don’t have as much inflation. In fact, in 2020, our debt-to-GDP ratio was in excess of 90% and at that time we have done the projections that the debt-to-GDP ratio will go down because of this growth R minus G differential, the nominal rate of borrowing versus the normal rate of growth. If you look at 2022, it is

Correct. Mr Kant, are we too obsessed about rating agencies? Is that why we get trapped into this fiscal deficit debate?

AMITABH KANT: India as a country needs to be fiscally responsible. There are 75 countries in the world which are facing a global debt crisis. It is also important to say that the government debt-toGDP ratio is high in India but the private debt-toGDP ratio is extremely low. Therefore, if you compare, India’s private debt-to-GDP ratio is at 56 or 57, in America it is 256, in China it is 226. So what we need to do is to get the animal spirits of the private sector back to drive India’s growth and this would require a huge technological leapfrogging.It would require them to get into completely new sunrise areas of growth — electric mobility, battery storage, green hydrogen, mobile manufacturing… these are the areas which are going to give you 10x more growth than the normal areas of manufacturing

Correct. What is holding India Inc back?

SANJIV MEHTA: Capex depends on a few things. One is, of course, the capacity utilisation and there was a period when it was below 70% but now it is inching up. The second important thing, we often forget there were a lot of dormant assets which were locked in NCLT (bankruptcy). They are equivalent to something like `. 8.5 lakh crore of capex. Capacity has now been released so you need to add that before you come to a conclusion that private capex is not happening. I do not think the animal spirits in the private sector have gone down. I do not think the risk-taking ability of Indian entrepreneurs is low. At the opportune moment, you will see the capacity building happening. We should not be building capacities which will significantly bring down your return on capital assets because that makes you uncompetitive

N VENKATRAM: I would tend to agree. Today, the inflection point is how do we bring more investment in and from a company perspective, from what we see, everybody has their investment plans in place. It is just a question of time. Because of the Covid-19 pandemic, people did slow down. I agree completely with Mr Kant that we should look at the new sunrise areas but then again you have to look at the gestation period. In addition to what he said, we can also add space, drones and satellites. We have to look at the potential of 5G. Look at financial inclusion. Look at the fact that the point where India will manufacture $100 phones is not very far away. Our own research says that we can come up with a $99 smartphone. Somebody has got to put their hand up and say I want to make the investment. So I will just leave it with another point, not really core to what you are asking me, and that is the question of trust. We should not forget that India has built a lot of trust over the last few years. We have become far more credible than what we were perceived to be. We have also been good ambassadors, whether it is on technology, not only for the ubiquity of technology, but also sharing it with the rest of the world. We also shared our pharma with the rest of the world. We have become much more credible in terms of legislation… if I look at the decriminalisation of laws, the intent of the government is to say that we will make it easier for you to do business. So I certainly think the conversation now is to move more into how do we get more money in for business… certainly the banks have loosened on credit.

Ms Bhattacharya, some say there is concentration of powers within just a few business groups. Is that part of capitalism or is there something deeper here?

ARUNDHATI BHATTACHARYA: …the fact of the matter is that at certain times, there may be concentration in certain areas but you will see competition come up. I do not think concentration in any industry is going to last long in any hands because better solutions will come up, better different ways of doing the same things might come into being. You have seen the number of people that are getting employed by startups.

But they are also losing jobs by the thousands.

ARUNDHATI BHATTACHARYA: Every company goes through reshaping, reorganisation, and every time they go through that, they actually work out stronger. The fact of the matter is people might be getting laid off but they are also getting recruited at the same time. India will be the talent basket of the world. In the next decade, 25% of the skills required globally will come from India… we have 67% of our population in the working age space.

Mr Mehta, if there is real income growth happening in rural India… what should we do to sustain this?

SANJIV MEHTA: The important bit is that it is not that the headline growth is not happening in rural areas. It is there, albeit at a much lower level than what we would all like it to be. The second is the inflation in commodities has been unprecedented. In a business like ours you have a net material inflation of over 20%. This is not something I have seen in my 30-year career with Unilever. Despite this rise, the industry has taken a price increase of about 12%. The consumers in rural areas are still spending more. Understandably, they have cut back on volumes to manage their wallets, which is again very intuitive. I believe that once the commodity prices start tapering, the volumes will also come back. The rural per capita consumption is one-third of that of urban areas. So, rural consumption should be growing faster than urban consumption for years to come. It is at a very low base today and India’s per capita (consumption) of FMCG is about $45, which when you compare, forget with developed countries, with developing countries, say, Indonesia, it is 2x, the Philippines is 4x. What India needs is inclusive growth, more money in the hands of more people, and the consumption story of India will be the consumption story of the world, not just for the decade, but beyond.

Can a country really prosper if social tensions prevail?

ADAR POONAWALLA: No. The quality of life that everyone experiences is very important. What we are doing in our country is very important and the change in reforms that are coming about, even socially. But corporates can also do a lot more when it comes to the environment, skill building, and training. For example, we process half of Pune’s waste. Economic growth is of no value if the quality of life is low, and whether it is gender equality, social equality, financial equality, all that is taken into account

Is the FMCG industry ready to recycle plastics and address a very critical aspect of climate change?

HARSH MARIWALA: You are absolutely right, 60% of plastics are used by the FMCG industry and we can be accused of harming the environment. But the problem is actually, as Adar was saying, the recyclability and creating the circular economy, how the waste is collected, and how it is sorted out. If the whole civil society, the government, the private sector… if we all pay attention to this, this can improve substantially.

SANJIV MEHTA: We have been collecting more plastic from the streets of India than we use in our packaging, which is about 125,000 tonnes. So just to give you a perspective, hamare desh mein newspaper ki raddi kabhi litter nahi hoti hai(in our country, newspapers are never a part of garbage) because you have got an economic model around it. Our job as manufacturers is to ensure that our plastic is recyclable, reusable or compostable, then we have to, together with the civic administration, create an ecosystem whereby the plastic remains outside the environment but within the loop of the business. Plastic has become, unfortunately, public enemy number one. But that is the wrong way to look at it, because without plastics neither our planes would fly nor our healthcare would be taken care of.

Preetha, what are companies like Apollo doing to make healthcare affordable for the wider mass?

PREETHA REDDY: There are two things — one is affordability. We have to understand the fact that healthcare in India, whatever we do, is at one-tenth the cost. One of the biggest answers to the problem is insurance. I think a lot of states have their own state insurance which is doing very well. PM-JAY is picking up momentum. Even in the western economies, it is the insurer that pays for healthcare. It is very expensive but people are insured. So it is a culture shift and makes it more accessible to people. The other is that, however much we build healthcare infrastructure, it is not going to be enough unless we take care of the problem of the non-communicable diseases. Covid taught us a huge lesson but we must remember that whether it is cancer, diabetes, heart issues, it is still a big problem. Within our organisation, we have said that the whole focus is to keep people out of hospitals and all healthcare providers — whether it is public sector or private — should shift focus.

Adar, as a country, do we invest enough on frontier technologies, biotech, vaccines?

ADAR POONAWALLA: No, we could do a lot more. Look, the government has announced very good PLI schemes. But beyond that, it is reforms in permissions and licences that reduce the duration of being able to develop a vaccine or a new drug an also the costs that go along with it. Now, in Covid times, we did it in one year. Earlier today, I launched the HPV vaccine, the first cervical cancer vaccine made in India, but that took us five to six years to develop. The funding is limited — the investors today and the capital usually go to the disruptors, the entrepreneurs but if that capital comes to the pharmaceutical sector, we can do more. Of course, the government is playing a very critical role in this and is very attentive and realises the power of what this industry can grow into and most importantly, innovate. The Indian pharmaceutical industry up till today is mainly focussed on manufacturing but now with self-reliance, take for example, the vaccine industry hardly depends on imports from China. The pharmaceutical industry now needs to follow that route and make its raw materials and supply chain in India as well to be truly self-reliant. So capital in supply chains, raw material and innovation has to happen. The pandemic has prompted this industry to make these investments and decisions and the government has been very supportive and so you are going to see a major change in the next three to five years.

Haigreve, several MNCs are exiting India. Is that a worrying trend?

HAIGREVE KHAITAN: If you dig deep into why they are exiting, you will see they are not exiting for India reasons but for global reasons, global strategy. And a lot of those who exited are coming back in a different way

One aspect that keeps recurring: MNC CEOs complain that the most pedigreed Indian corporate, even if they have an arbitration clause and dispute settlement, if they lose, they say that this arbitration order is not recognised in India.

HAIGREVE KHAITAN: Well, this is truly unfortunate. And in spite of, you know, several amendments having been made to our law, giving finality to arbitration awards and recognising international awards as being final and binding, I think that there has been some sort of interpretational loophole by which awards have been challenged. But the government is very cognisant of this. And the good part is that every time a loophole like this is identified, there is an amendment which proposes to fix it. The law commission is already aware and is looking at it to see how the judicial process can be made more efficient.

Mr Mehta, companies are globalising and many of them are shifting their R&D bases to India. Therefore, do you think royalties are or will be needed to be justified going ahead?

SANJIV MEHTA: You have to understand the business models. The first important bit is India should be open in a manner that we can access the best possible R&D and technology. We have to go up the innovation ladder. Now there are some business models where you set up an R&D centre like we have — 700 scientists, 200 PhDs, they are working on cutting edge research where we do not absorb the cost. The cost is absorbed by the centre. So, it comes back to us as technology fees. There is nothing wrong in it. So before we jump to a conclusion that royalty is good or bad or not in the interest, we should understand what the details of the transaction is rather than coming to a conclusion based on just hearsay

But Mr Damodaran, companies are increasingly becoming more homegrown, buying brands, localising, so the dependence on the parent MNCs is reducing. So many would argue that royalties are not justified because it is anti-minority shareholders.

M DAMODARAN: No. I think Sanjiv explained why they exist because when you do business, you need to protect the interest of all your stakeholders. If you focus exclusively on minority shareholders and ignore the interests of the others, clearly you do not get the game going. What is needed for minority shareholders is more investor education so that they make informed investment decisions. Here is where the securities regulator comes in-…if your regulations are complex, if your regulations are outdated, events have overtaken you, if your regulations do not keep pace with the needs of all categories of investors and you start looking at the interest of one set of stakeholders to the exclusion of the interest of the other set of stakeholders, clearly then you have a problem.

Mr Bikhchandani, one sector that should have gained with China cracking down on its tech companies is our consumer internet companies. But clearly our Unicorns seem to also have broken horns if you look at the last one-and-a-half years. A lot of money could have flowed into India and the Indian VC space if China is no longer a safe place to invest.

SANJEEV BIKHCHANDANI: That has happened to some extent. Having said that, entrepreneurship is down again, startups are down again, many will fail, some will succeed and we are seeing that play out now as the tech market, tech valuations… public markets have corrected in the US and now in India. But those that will succeed will become huge. I think one of the best things this government has done is Startup India and that will pay off well over the next 20, 30, 40 years.

But do you feel that nobody is really talking about building institutions?

SANJEEV BIKHCHANDANI: "Wo hota hai" (that happens) when there is abundant capital, that is the nature of markets. But the ones that will succeed and thrive will not be following that model. They will be building real value, getting customers, getting revenue, making profit and making things happen

Do you feel the next evolution of the information age will generate new models which instead of focussing on individual consumers will apply digital tech to industry, serving say healthcare, biotech, and manufacturing?

SANJEEV BIKHCHANDANI: Look, it will all happen. It is not either or, both will happen and they are already happening. We have invested over the last 15 years in close to 60 or 65 startups and we are seeing all sorts of deals. We meet a thousand startups a quarter and invest in three or four

ARUNDHATI BHATTACHARYA: One of the biggest advantages that India has is the digital stack provided by the public sector, that is the government. And on the basis of that India stack, so many companies are innovating and this is going to extend to healthcare, to education, to all kinds of social welfare activities… this is a huge opportunity which no other country in the world has provided. The other is financial inclusion. Financial inclusion in turn allows many more companies or many more people to leverage their ability to actually launch these startups. That is why we have a huge opportunity that very few other countries can even hope to have.

3. 'Womaniya' enabled over 1.44 lakh MSEs on GeM fulfill over 14 lakh orders worth Rs 21265 crore: Ministry
ET Gov. 16 Jan. 2023

Womaniya seamlessly aligns with the government’s initiative to set aside a target of three percent in public procurement for women-owned and led MSEs.

GeM has taken a series of steps to develop and roll-out new business processes and functionalities for the promotion of 'Womaniya' on the portal.

Government eMarketplace (GeM) organised an event to celebrate the success of 'Womaniya' on Saturday at Constitution Club in New Delhi. Launched in 2019, the 'Womaniya' initiative has sought to encourage the participation of women entrepreneurs and self-help groups (SHG) from the informal sector on the GeM portal and facilitate the sale of their products directly to various government buyers, sans intermediaries. Generic product categories were created for listing of handicrafts and handloom, accessories, jute and coir products, bamboo products, organic foods, spices, home décor and office furnishings to facilitate ease in product catalogue listing and procurement from women entrepreneurs, the ministry said.

Presently, over 1.44 lakh Udyam-verified women micro, small enterprises (MSE) known as 'Womaniya' are registered as sellers and service-providers on the GeM portal and have fulfilled more than 14.76 lakh orders worth Rs 21,265 crore in Gross Merchandise Value (GMV). The ratio of the order value is 74 percent in products to 26 percent in service categories.

Top five product categories in which women have registered their presence include Desktop Computers, Smart Phone-IS:13252, Special Purpose Telephones (Smart Phone For ICDS), Smart Phone and Hopper Tipper Dumper, and top five service categories include Manpower Outsourcing Services - Minimum Wage, Custom Bid for Services, Human Resource Outsourcing Service, Monthly Basis Cab & Taxi Hiring Services, and Manpower Outsourcing Services - Fixed Remuneration.

The ministry in a statement said, "The objective of 'Womaniya' is to develop women entrepreneurship on the margins of society who face challenges in accessing public procurement markets, and work towards achieving gender inclusive economic growth of under-served seller groups such as such as women-owned and led MSEs, tribal entrepreneurs, Divyangjan, startups, SHGs, artisan and weavers. Womaniya seamlessly aligns with the government’s initiative to set aside a target of three percent in public procurement for women-owned and led MSEs."

Speaking at the event, Savitri Singh, Deputy Chief Executive, NCUI emphasized the contribution of women as entrepreneurs in the society and shared the initiatives of NCUI Cooperative Education Field Projects tailored towards the socio-economic growth of women through advocacy, outreach, mobilization and capacity-building of women from SHGs to cooperative societies in North East and underdeveloped areas of India. Other speakers including RK Singh and Ishita Ganguli Tripathi briefed the attendees about the various government schemes available through SIDBI and the Ministry of MSME for the benefit of women entrepreneurs.

ACEO & CFO, YK Pathak, highlighted social inclusion as the core value at GeM and complimented all women entrepreneurs on the stellar success of the 'Womaniya' initiative with government buyers. He thanked members of the business community, emerging and aspiring entrepreneurs, especially, women, tribal and SC/ST MSEs, SHGs, artisans and weavers, and startups,

4.1. No, AI won’t reduce jobs. Here’s how platforms such as ChatGPT will create new jobs — for humans

ET, 20 Jan. 2023

The fears that artificial intelligence will take away jobs are exaggerated. Yes, AI will raise the bar for entry-level positions, but AI will mostly work as a productivity tool for humans and rather create millions of new jobs. Data being the raw material for AI, most of the jobs will evolve around managing it.

‘Will artificial intelligence (AI) take away my job? If so, what do I do?’

Questions such as these have bothered humans ever since machines became advanced enough to handle some of the jobs that humans do (such as ATMs taking over tasks of a bank teller, or chatbots managing call centres). With technology making giant strides, such concerns have only increased: okay, I’m in the middle of my career, but what will I or my child do if ChatGPT can do everything?

The biggest tech buzz in town and AI’s most popular avatar, ChatGPT, can ‘think’ and people are going gaga over its ‘intelligence’. In fact, no other AI tool has generated as much excitement as ChatGPT, launched by San Francisco-based OpenAI, an AI-research lab founded by entrepreneurs Sam Altman, Elon Musk, and others.

ChatGPT can compose business e-mails, write creative fiction and code, answer queries, and do more, much to the amazement of its more than one million users worldwide. So, if ChatGPT and other AI platforms can perform tasks that people do, what will humans do?

For sure, AI will lower the entry barrier for non-professionals in fields such as coding and content writing. But it will also raise the ceiling for skilled professionals.

Wider adoption, more hands
Mahesh Makhija, technology consulting leader at professional-services company EY India, says, “AI is used a lot by Big Tech companies [such as Google, Meta, Apple, Amazon, Microsoft, and IBM]. As it gets democratised and becomes more mainstream, there will be wider adoption of AI across enterprises. This will lead to an exponential growth in demand for professionals who can curate data, label data, create recommendation models, and so on.” While he doesn’t give a specific number, he expects “millions of new jobs” to be created as more companies start using AI.

Figures from industry body Nasscom show that the shortfall of AI/ML professionals stands at 200,000. Rituparna Chakraborty, executive director of staffing company TeamLease Services, says, “There will be a lot of demand for professionals who can use AI platforms to improve, say, hiring, create impactful marketing campaigns, and so on. Prior to the tech slowdown, demand for AI professionals was growing between 8% and 10% annually.”

Humans behind AI
Data being the raw material for AI, most of the jobs will evolve around managing it. For starters, there will be demand for data labelling professionals. For example, an insurance company wants to build a fraud-detection platform to see whether claims are genuine. It has historical data on transactions that are ‘fraud’ and ‘not fraud’. Humans will label this data in either of these categories, feed it to the algorithm, and create the fraud- detection platform.

Data annotation will be another big task. For example, in autonomous driving, the car cameras capture images in real time and take immediate decisions. Companies need to annotate the entire data and label accordingly, such as a man crossing a street, or a lamppost. That annotated data is fed into the learning algorithm. Thus, a larger industry around data labelling and annotation will emerge.

Humans will also create models for AI to work on. Let’s say a customer relationship management (CRM) platform generates a lot of leads on customers who might be seeking loans from a bank. Some of these leads will get converted while others won’t. Who’s going to build that recommendation algorithm? Many companies will have to create their own models to meet their unique requirements, creating demand for data-science experts who can develop those models.

Companies will hire prompt experts as well. These are professionals who develop the prompts or queries for models to produce answers. Each model behaves differently, depending on the prompt. All these roles — for labelling, annotations, prompts, and creating models — are played by humans and, therefore, these jobs will increase.

Moreover, platforms like ChatGPT can’t actually give the right answers without human help. They work on RLHF (reinforcement learning with human feedback), which fine-tunes the choices or answers. So, if there are four answers to a query, the human-trained RLHF that goes into improving the preference model will pick the best answer.

As a result, AI platforms will actually improve outcomes for professionals and assist them, rather than replace them. More people will benefit from AI and more jobs will be created.

"Wider adoption of AI across enterprises will lead to an exponential growth in demand for professionals who can curate data, label data, create recommendation models, and so on."

— Mahesh Makhija, technology consulting leader, EY India

Makhija says, “In the past, it was thought that tools like Photoshop or PowerPoint will take away a lot of editing and consulting jobs. They actually created more jobs and worked as assistants to photo editors and consultants.”

Google and Facebook depend a lot on AI/ML tools to improve search and ads, and have armies of data professionals doing various tasks that improve the algorithms. As the use of AI spreads, more companies will hire data professionals to improve their business outcomes.

A new industry will be born
Much like the IT-services boom, which created a USD250 billion industry employing around four million engineers, the AI boom will lead to more startups building businesses around ChatGPT, giving birth to a new industry. Some startups could offer parts of AI, like data labelling or annotation or the entire AI stack as an outsourced service, building new businesses.

If the past use of tech is any indication, jobs will actually increase. Japan and South Korea, where robot use is among the highest in the world, have the lowest unemployment rates. A study done by Yale University looking at Japanese manufacturing between 1978 and 2017 found that use of one robot per 1,000 workers boosts employment by 2.2% overall.

AI’s increased use across companies will raise the bar for professionals. It will work as a smart assistant and create more jobs rather than reduce them.

4.2. 'India set for a quantum jump in Quantum Technology, to come up practical solutions for world's pressing problems'
ET Gov. 23 Jan 2023

Unlocking of Space Sector, liberalization of drone technologies, approval for geospatial guidelines and the recent green hydrogen mission worth Rs 20,000 crore have opened new vistas for India’s rapid developmental march.

Digitalisation backed by govt policy under Digital India to propel data center capacity to 250 MW this year: Report

Considering the rapid rise in internet usage and the advent of 5G, the Internet of Things and Artificial Intelligence, India's data centre market is poised for rapid expansion.

The Indian data center market is witnessing robust growth, led by the growing rate of digitalisation backed by a strong government policy impetus under the Digital India initiative.

Considering the rapid rise in internet usage and the advent of 5G, the Internet of Things and Artificial Intelligence, India's data centre market is poised for rapid expansion, said property consulting firm Savills India on Thursday.

A data center is typically a large group of networked servers used by organizations for the remote storage or distribution of large amounts of data.

"Given the country's rich network connectivity, cost advantage, stable government, availability of skilled labour and low climate risk, India is well-positioned to serve as a regional data center hub in Asia," said Niraj Karale, Director and Head, of Data Centre Services of Savills India.

Savills expects the Indian market to surpass one-gigawatt capacity in 2023. Around 250 megawatts of additional data center capacity is expected to come online, taking the total co-location capacity in India to 1.15 gigawatts.

In 2022, India, the consulting firm said, saw an increase in data center colocation capacity of more than 150 megawatts, with a large share of it in Mumbai and Chennai.

"Data suggests that two million sq. ft. will be added towards data center growth. Many states such as Karnataka, Tamil Nadu, Uttar Pradesh, Odisha, Telangana and West Bengal have announced data centre policies in the last two years to facilitate investments, realising the growth potential," Savills said in a statement on Thursday.

Environmental, social and governance (ESG) measures are in general at the top agenda of data centre operators with new projects delivered with improved specifications and high-quality environmental, health, and safety (EHS) standards.

"Going forward the data centre industry's focus will shift towards being as close as possible to the customer base, including those in tier-2 cities like Jaipur, Lucknow, Kochi, Coimbatore, etc. This trend will drive demand for real estate in tier-2 as well as tier-3 cities in some regions," Karale added.

5. Centre & States to Scrap 900,000 Vehicles
ET, 31 Jan. 2023

More than 900,000 vehicles older than 15 years, owned by the Centre and states, will be scrapped as the government pushes ahead with decarbonising the road transport sector, said road transport and highways minister Nitin Gadkari.

Speaking at a session on future of mobility, organised by the Federation of Indian Chambers of Commerce & Industry (FICCI), he said the Centre is pushing towards decarbonising the road transport sector with scrapping of old vehicles, adoption of electric vehicles (EVs) and retrofitting fossil fuel run vehicles on the agenda.

“We have abundant solar energy that we can convert to electricity for EVs. This will ensure a zero carbon energy cycle,” Gadkari said, adding that the municipal corporations and state transport undertakings are procuring and operating electric vehicles for their intercity and interstate fleets.

The Centre is also pushing for scrapping older vehicles in a bid to move them off the road. “We have now approved the scrapping of more than 9 lakh vehicles that are more than 15 years old,” said Gadkari.

Old and polluting cars and buses will go off the road and new vehicles with alternative fuels will replace them, the minister said. “This will further reduce air pollution to a great extent,” he said.

He said liquefied natural gas (LNG) as a fuel for long run trucks and buses is economically viable.

“I have recently inaugurated LNG trucks that can go up to 1,400 kilometres in a single fill of the tank. This can transport the goods in the country with minimal pollution,” Gadkari said, adding that the cost of conversion of diesel truck into LNG is just ₹10 lakh, which can be recovered in a year.

- Agriculture, Fishing and Rural Development

6.1. India is among the few nations evolving food systems for farmer-allied SMEs: Study
IBEF, Jan. 17, 2023

As per a new World Economic Forum (WEF) Report, which has been prepared in collaboration with Bain and Company, India is among the few countries that have been able to evolve their food systems for a broader set of outcomes by unlocking the potential of small and medium-sized enterprises (SMEs). It further said that the countries tackling the food crisis can boost jobs, health, and nature and help meet the net zero goals better. The report listed India, Ghana, and Vietnam as the countries that have evolved their food systems by unlocking the potential of SMEs, particularly those that are farmer-allied and operating in local food chains.

The report stated that some of the world’s toughest problem, from climate change to resilient livelihood can be solved through transformed food systems. Furthermore, it said that in India, a multi-decade programme is established in order to support the smallholder farmers and dairy enterprises, has helped transform dairy into the country’s largest agricultural commodity, accounting for roughly one-third of rural incomes and 10% of the total calorie intake in 2019. This transformation began with public programmes supporting the formation of village-level cooperatives, extension services and credit, it said.

In India, dairy is the single largest agricultural commodity in India and accounts for around 5% of the gross domestic product (GDP). India is now the world's largest milk producer and 70% of its milk is produced by its 80 million smallholder farmers with herds of fewer than 10 animals. The sector's value addition has doubled to US$ 15 billion in 2020, between the period 2002-2021.

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

6.2. Millet-based Foods: Soon You will be Spoilt for Choice
ET, 7 Feb. 2023

From packaged foods to breweries to restaurants, large companies including Nestlé, ITC, Britannia, HUL, Tata Consumer, Bira 91 and Slurrp Farm are putting up ambitious plans to introduce millet-based packaged foods, beers and restaurant menus or boost their existing millet portfolios, tying in with the Centre’s recent announcements on making India a global hub for millets.

From packaged foods to breweries to restaurants, large companies including Nestlé, ITC, Britannia, HUL, Tata Consumer, Bira 91 and Slurrp Farm are putting up ambitious plans to introduce millet-based packaged foods, beers and restaurant menus or boost their existing millet portfolios, tying in with the Centre’s recent announcements on making India a global hub for millets.

“We are innovating on functional ingredients by incorporating more of super grains, seeds, nuts and fruits with whole grains in our foods, actively engaging with partners and also looking for appropriate opportunities in this evolving space,” said Sudhir Nema, chief development and quality officer at India’s largest biscuits maker Britannia.

Nema said Britannia, which already makes packaged foods with millets, oats, seeds and herbs fortified products under its flagship NutriChoice biscuits brand, is doing backward integration with farming communities, millers and government institutions to escalate the millets association.

Millets will be promoted in a mission-mode this year, which has been declared the International Year of Millets, Union minister for agriculture Narendra Singh Tomar said recently.

Executives said the rush to integrate millets in their foods is to leverage first-mover advantage with consumers, despite challenges such as limited sowing capacity, hard-to-process grains and limited shelf life.

“We recently brewed a Bajra Brut India Pale Ale; the beer used local bajra (pearl millet),” said Ankur Jain, chief executive at beer maker Bira 91. “We are now brewing a Ragi Red Ale (using local ragi from Karnataka), which gives the beer a unique complexity.”

He said the company launched a millet beer in its Taprooms starting last month, adding that the use of millets also allows Bira 91 to make its beers gluten-free.

India’s largest packaged foods maker Nestlé, which makes Maggi noodles and KitKat chocolate, has already inked a tie-up to integrate super grains in its foods. A Nestlé R&D Centre India spokesperson said a memorandum of understanding (MoU) has been signed between millets incubator startup Nutrihub, ICAR-Institute of Millets Research and Nestlé’s R&D Centre, a subsidiary of the Swiss foods maker’s parent company Nestlé SA.

“We are collaborating in science and technology to process millets, inculcate health benefits of millets in different product applications, build consumer awareness, and sustainability of millets by developing regenerative agriculture practices,” the spokesperson said.

In April 2018, millets were re-branded as nutri cereals and the government declared it the National Year of Millets, while the year 2023 has been declared as the International Year of Millets by the United Nations General Assembly, with the Indian government announcing that it wants to make India the global hub for millets.

Zorawar Kalra, managing director at Massive Restaurants, which runs multiple restaurant brands including Masala Library and Farzi Cafe, said its menu across brands includes assorted millets in salads and main courses now. “We are sourcing from different states, and have faced no such challenges. We are using assorted pearl millets, quinoa, dehydrated lentils and blueberry; and have also tried to make the underrated khichadi with millets,” he said.

HUL has signed an MoU with Indian Institute of Millets Research (IIMR), which has been named as a Centre of Excellence by finance minister Nirmala Sitharaman in her budget speech on February 1, to make millet-based drinks under its Horlicks brand, executives aware of the developments said.

“Apart from being packed with nutrition and low glycemic index, millets require very less water, they can be grown in drought-prone areas. We are seeing a lot of interest from large companies as well as startups for association with millets,” said CV Ratnavathi, director at IIMR.

6.2. Punjab's agriculture policy needs a digital push to make farming preferred occupation for youth
ET Gov. 31 Jan. 2023

The Punjab agriculture policy should aim to transform agriculture with a digital push, repurposed and focused subsidies and marketing reforms, making it a preferred occupation for the youth, who will be the next generation of farmers.

The Government of Punjab has constituted expert groups to formulate its agriculture policy. Punjab is an agriculturally prosperous state but it did not have an agriculture policy. Even though agriculture is a state subject, it was being guided and driven by the Government of India. It may be a conscious effort to ensure national food security. The Government of India (GoI) chose Punjab, Haryana, and Western Uttar Pradesh for the green revolution (GR) because these areas had quality land, adequate water, and dynamic human resource (the farmers).

The wheel of agriculture policy in Punjab has been spinning for a long time, but the state government preferred not to fix it as it required commitment of resources and reforms on their part. It was left to the Government of India, making agriculture a subject of provincial politics.

The state government did not approve the policy drafts prepared in 2014 and 2018. These sought course corrections and commitment to reforms, but the political executives evaded responsibility consigning these to records. Public debate on critical issues stressing agriculture, which the draft policies highlighted, was put off, fearing political backlash.

In pursuit of the objectives of GR/Food Security, subsidised inputs, seeds, chemicals, fertilisers, water, energy, credit, and purchase of produce at the MSP, were assured to the farmers. It is nearly impossible now to breach this widely accepted system in Punjab. On the other hand, the changes may make food unaffordable and expensive, primarily for most of our people who are poor and vulnerable.

The issues in the agriculture sector in Punjab are too critical to ignore. The State Government should not hesitate to resolve these, whether themselves or through the Government of India, or both together. The agricultural practices and operations in Punjab were not sustainable. The wheat-paddy monoculture is not only damaging the natural resources, land, and water but is causing a substantial loss of biodiversity and reduced crop diversity that had prevailed in the past. The groundwater has diminished substantially. The productivity and real incomes of farmers have stagnated. Land holdings are becoming smaller, and the financial stress of the farmers has increased due to rising input costs and non-commensurate market prices. Social extravaganza is also rampant.

Economists oppose food subsidies, but these are nearly global and justified by governments to keep food prices affordable. However, some freebies are not need-based. Free of cost water and electricity for all farmers merits correction. The subsidies incurred in procurement of food grains at the MSP are another contentious issue. These are not non-rivalrous, non-interfering, or non-discriminatory. The Central and State governments should enable farmers to access new markets without adding much cost to them. They should be empowered and incentivized to trade in markets, regulating the trading margins and preventing the profiteering by big sharks in agri-marketing. It may help to reduce the burden of subsidies emanating from the MSP regime.

Diversification of agriculture remained a distant dream due to the lack of market innovations and excessive dependence on government purchases at the MSP. The government of India expected the new farm laws to stimulate trading in agricultural produce. The farmers opposed these, apprehending greater market risk, and these were, thus, withdrawn.

The use of digital technology to develop new seeds, conserve soil and water, access distant markets, improve logistics, and save labour is still not being pursued as vigorously as they should be. Next-generation extension reforms are also waiting for a big push with the latest technologies. Pre- and post-harvest mechanisation requires further improvement and digitization.

Most development initiatives on agriculture development of the government and the PAU focus on food grain production, and as a result, Punjab is a net importer of fruit and vegetables. The area under cultivation of horticulture crops has remained constant for a long time. Food processing and blockchain technologies are sparse.

Since it is unlikely for the State to come out of grain-based agriculture due to imperatives of national food security, it will be more appropriate that the State finds solutions for the present issues in agriculture through research and innovations. Digital technology should target better and new varieties of grains, which are less water-consuming, and more tolerant of climate change effects and recurrent pests and insects. New fertilisers leading to nano-fertilisation, intelligent irrigation instead of flood irrigation, and AI-based logistics should help to reduce costs of the farmers.

The change from extractive practices to precision and conservation agriculture will require more attention to make agriculture sustainable and remunerative. The provision of market-linked incentives and the development of food processing industries and global value chains fully inclusive of small and marginal farmers should also receive priority attention. Farm-based insurance deserves more thought and consideration. The existing crop insurance schemes, though suitable for less developed areas, have not benefited the farmers of GR areas.

Enhanced investment in research and development should fine-tune the existing input-output functions to make these more sustainable and durable. The technologies to convert waste to wealth will enable farmers to raise more revenues from agricultural residue.

The capacity building of farmers, making them more adept in the new technology-driven agricultural practices, should become a regular activity with new and updated training institutions and mechanisms. A greater focus on skilling rural youth in agriculture and allied occupations will help retain them on farms and modernise agricultural operations and new avenues for farmgate food processing and businesses.

The Punjab agriculture policy should aim to transform agriculture with a digital push, repurposed and focused subsidies and marketing reforms, making it a preferred occupation of the youth, who will be the next generation of farmers. It should envisage structural changes, ensuring one-stop contact of farmers with the government for all program assistance, extension, and redressal of grievances. The new structures should ensure the effective participation of farmers not only in matters concerning agriculture policy and programs but also in financial budgeting for the farmers. Else, the policy spin will continue with a widening gap between the farmers and the government, and persistent unrest.
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(The author is a retired IAS officer, ex-Chief Principal Secretary to the Chief Minister of Punjab; views are personal.)

7.. India ranks first, contributes 24% of global milk production: Govt to LS
IBEF, Feb. 8, 2023

Union Minister of Fisheries, Animal Husbandry and Dairying Mr. Parshottam Rupala said that according to Food and Agriculture Organization Corporate Statistical Database (FAOSTAT) in 2021-22, India was the largest milk producer in the world, contributing 24% in the global milk production. Additionally, India has registered an increase of 221.1 million tonnes i.e., a 51% rise, from 2014-15 to 2021-22, with a further increase of 22 crore tonnes in 2021-22. In 2021–2022, the value of milk production was over US$ 112.73 billion (Rs. 9.32 lakh crore), surpassing both the value of paddy and wheat taken together and agricultural output. From 78.48 billion in 2014–15 to 129.53 billion in 2021–22, the nation’s egg production rose by 8% every year.

The National Programme for Dairy Development (NPDD) was launched in 2014 and aims to enhance the quality of milk and its products, rising the share of organised procurement, processing, value addition, and marketing. It was formed by merging 3 existing schemes- Intensive Dairy Development Programme, Strengthening Infrastructure for Quality and Clean Milk Production, and Assistance to Cooperatives.

Moreover, the department had been implementing many more schemes like the Rashtriya Gokul Mission (RGM), National Programme for Dairy Development (NPDD), Dairy Processing and Infrastructure Development Fund (DIDF), Supporting Dairy Cooperatives and Farmer Producer Organizations engaged in dairy activities (SDCFPO), National Livestock Mission (NLM), Animal Husbandry Infrastructure Development Fund (AHIDF), Livestock Health and Disease Control Programme (LH and DCP) (wherein erstwhile Livestock Health and Disease Control Scheme and National Animal Disease Control Programme were merged with effect from 2021-22) and Livestock Census and Integrated Sample Survey (LC and ISS).

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

8. Two-wheeler electric vehicle sales in India to reach 22 million by 2030: Report
IBEF, Feb. 2, 2023

A report by Redseer Strategy Consultants has shown that the electric two-wheeler sales volume in the country is likely to reach 22 million by 2030 as the electric vehicle (EV) adoption has increased in India. As per the report, the electric two-wheeler market is expected to be over 80% of the overall two-wheeler market by 2030.

With the demand for affordable transportation and the focus on reducing carbon emissions, electric vehicles will play a vital role in India's step towards a sustainable future. It has been reported that consumers are increasingly choosing EVs and understanding that the total cost of ownership (TCO) is more favourable than that of their petrol counterparts. The electric two-wheelers (E2W) win when it comes to running costs as compared to their Internal Combustion Engine (ICE) counterparts.

The report stated that one of the important drivers of growth is the rise in the brands in the electric two-wheelers sector, like Ather, Ola, Hero Electric, Bajaj, etc.

The E2W ecosystem must work on '4As' to achieve more than 80% electrification by 2030, where the '4As' are adaptability, awareness, availability, and affordability, said the report.

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

9.1. Over 40900 hi-tech hubs established across states to support farm mechanization: Union Minister Tomar
ET Gov. 6 Feb. 2023

In case of harvesting and threshing, the mechanization levels in rice and wheat crops are more than 60 percent and very less in cotton crop.

The farm mechanization levels assessed by Indian Council of Agricultural Research (ICAR) for major cereals, pulses, oil-seeds, millets and cash crops indicates that the seedbed preparation operation is highly mechanized (more than 70%) for major crops whereas harvesting and threshing operation is the least mechanized (lower than 32%) for major crops except for rice and wheat crops. This information was given by the Union Minister of Agriculture and Farmers Welfare Narendra Singh Tomar in a written reply in Rajya Sabha on Saturday.

Stating that the adoption of mechanization by the farmers depends on various factors such as socioeconomic conditions, geographical conditions, crops grown, irrigation facilities, etc, the minister said in seedbed preparation, mechanization level is higher in rice and wheat crops as compared to other crops. However, mechanization level for sowing operation is the highest for wheat crop (65%). The mechanization levels in planting/transplanting operation for sugarcane and rice crops are 20 percent and 30 percent respectively. In case of harvesting and threshing, the mechanization levels in rice and wheat crops are more than 60 percent and very less in cotton crop, he revealed.

The government has not carried out assessment of the number of farmers that have access to the mechanized tools and equipment. However, the emphasis of the government is always to promote mechanization for all section of the society with the aim of increasing the reach of farm mechanization to small and marginal farmers and to the regions where availability of farm power is low and promoting ‘custom hiring centers’ to offset the adverse economies of scale arising due to small landholding and high cost of individual ownership.

For promotion of agricultural mechanization in the country, a centrally sponsored scheme ‘sub-mission on agricultural mechanization’ (SMAM) is being implemented through the state governments since 2014-15. Under this scheme, financial assistance @ 40-50 percent of the cost of machines depending on the categories of farmers, is provided for purchase of agricultural machines, the minister informed.

Financial assistance @ 40 percent of the project cost is also provided to rural youth and farmer as an entrepreneur, cooperative societies of farmers, registered farmers societies, farmer producer organizations (FPOs) and Panchayats for establishment of custom hiring centers (CHCs) and hi-tech hubs of high value agricultural machines, he said.

Financial assistance @ 80 percent of the project cost for the projects costing upto Rs 10 lakhs is provided to the cooperative societies, registered farmer societies, FPOs and Panchayats for setting up of village level farm machinery banks (FMBs). The rate of financial assistance for the North Eastern states for establishment of FMBs is @ 95 percent of the project cost for the projects costing up to Rs 10 lakhs. The major focus of the scheme is towards expanding the network for Custom Hiring Services of agricultural machines and equipments to increase utilization of farm power and ensuring availability of farm equipment and machines for small farms. Since inception of the scheme, more than 40,900 CHCs/hi-tech hubs/FMBs have been established in various states, he added.

The major focus of the scheme is towards expanding the network for CHCs of agricultural machines and equipment to increase utilization of farm power and ensuring availability of farm equipment and machines for small farms. Since inception of the scheme, more than 40,900 CHCs/hi-tech hubs/FMBs have been established in various states, the minister informed.

10.1. A USD3 billion puzzle: what Mamaearth's IPO says about India’s skin-care market
ET, 20 Jan. 2023

Mamaearth, one of India’s few homegrown mass-premium skin-care brands, has been in the limelight over valuation ahead of its IPO. While the startup has carved a niche for itself in a highly competitive market, can it build on this foundation and sustain growth?

Ever since Mamaearth’s parent Honasa Consumer Ltd filed its draft red-herring prospectus (DRHP) with the Securities and Exchange Board of India for an initial public offering (IPO), there has been a barrage of commentary over the New Age beauty and personal-care startup’s valuation. From industry experts to social-media commentators and market experts to Mamaearth’s peers, many have raised concerns over the direct-to-consumer (D2C) brand’s ambitious USD3 billion valuation.

Indeed, valuation is one of the most important aspects for an IPO-bound startup — especially at a time when several tech-led companies have witnessed a steady slide in their shares after listing. But the question here is one beyond valuation: Has Mamaearth managed to change the consumption behaviour of Indians?

In a market like India, where beauty needs used to begin with a face wash and end with a moisturiser, inculcating a detailed and sustainable skin-care routine is a herculean task. Historically, Indians have one of the lowest expenditures on skin care and cosmetics.

But that’s changing.

Shifting consumer preference
Until the birth of New Age D2C brands which started pushing content to increase awareness about skin care, most Indians were using only face wash and moisturisers on a regular basis. Only people who were more serious about skin care added a toner between face wash and the moisturiser in their beauty regimen.

However, with the rise of D2C brands in the skin-care market, over the last five to seven years, there has been a change in the mindset of consumers. Most of these consumers are millennials nearing 30 years of age and Gen Z who are always looking forward to consuming new content on social media.

The Korean skin-care regime is about following 10 steps every night before sleep. However, rarely do Indian consumers follow all the 10 steps. More often than not, the basic CTM (cleansing, toning, and moisturising) regime is what majority of the consumers stick to.

Mamaearth, with its natural ingredients, has slowly emerged as a brand with a growing customer base. Better awareness about skin-care, a wider choice, and higher disposable income have triggered a major shift in preference among millennials in favour of chemical-free products.

The average Indian consumer’s choice is no longer limited to Lakmé, Lotus, or Emami. And that’s great news for New Age D2C beauty brands. Can Mamaearth make the most out of this shift in consumer preferences?

The key ingredient: pricing
While some of the biggest global players, such as Estée Lauder, L’Oréal, Amorepacific, Beiersdorf, and Shiseido (Japanese), are listed, none of them is limited to the skin-care segment. Mamaearth seems to have taken a leaf out of this strategy book.

Most listed companies in the skin-care business internationally are in the mass-premium to premium price segment with a presence across multiple categories, including colour cosmetics. Colour cosmetics or make-up is a category that eventually every skin-care brand dives into, once established.

Shankar Prasad, founder of vegan beauty brand Plum Goodness, says, “From a listing perspective, category does not matter so much as the size of business. If the total addressable market has potential and the company is targeting it, there will be growth. Once you are in the INR1,000 crore category, you are very nicely placed. Smaller skin-care brands eventually have expanded into other categories after going public.”

In India, 80%-85% of beauty and personal-care sales are through the offline-retail channel. While online is growing, it’s still far from the halfway mark. Given the headroom, it becomes important for D2C brands to scale beyond offline retail.

Mamaearth’s offline sales had jumped to 35.39% of the total sales as on September 30, 2022, from 9.06% in FY20 — nearly a four-fold growth in just six months — according to the startup’s DRHP.

“In terms of the market’s evolution, we are perhaps still half-a-decade away from creating a mini Shiseido Skin, which will be in the prestige segment. We are at the beginning of that journey. It will most definitely happen. But it will take some time,” adds Prasad.

Even as many New Age D2C brands continue to struggle to reach the INR200 crore revenue run rate, Mamaearth posted a revenue of INR964 crore in FY22, with a profit of INR14.4 crore. However, despite generating revenues close to INR1,000 crore while keeping its pricing mass-premium, Mamaearth’s valuation is still debatable.

A quick glance at Mumbai-headquartered omnichannel beauty and personal care retailer Nykaa’s portfolio shows that creams with “anti-ageing” properties cost INR350 or more, for a 50ml bottle or 50g tube. While Olay’s product range starts from INR800, a few Indian brands such as Himalaya and Lakmé, are priced at INR400 and below. Mamaearth and its peers are targetting the sweet spot of the mass-premium segment.

They also made sure that they expanded their category presence across cosmetics and ingredient-based product lines – in case this rings a bell, yes, this is very similar to the UK-based The Body Shop.

A maturing market
Founded in 2016, Mamaearth started its journey with a focus on toxin- and chemical-free products. “A brand built by a parent, for the parent,” the investor page of the Gurugram-based startup says.

India is not new to skin-care products with natural ingredients. In fact, it’s a tried-and-tested product proposition that has always worked. However, the premium skin-care range, especially with specific ingredients such as retinol, hyaluronic acid, and alpha and beta-hydroxy acids, among others, became popular over the last five to eight years in India. These products also introduced the country to premium skin care.

Still, Indians lag their counterparts in developed nations in terms of spending on beauty and personal care. While a per capita comparison might not be fair, considering the large population base of India, according to market-research company Euromonitor International, as of 2022, the per-capita spend on beauty and skin care in India stood at USD2 per person annually as against USD34 in China, USD133 in South Korea, USD72 in the US, and USD62 in the UK.

“The last two to three years have been phenomenal for Indian consumers in their skin-care journey. For example, a category which did not exist prior to the pandemic is one of the fastest growing now — face serums. It is also one of the most intensely competed products,” says Plum’s Prasad, pointing out that the segment now figures among the top five SKUs (stock-keeping units).

“We have ascorbic acid serum, which was launched in 2021 and continues to be one of our most-sold products. Similarly, hyaluronic acid, glycolic acid, niacinamide, and more. This is not a fad, this is a permanent shift. There is an uptick of scientific skin care and people are becoming friendly with the terminologies. Prior to this, the market was heavily driven by ayurvedic and herbal tags — this shift is seismic in nature,” he adds.

From the perspective of pricing, as consumers are looking for a completely new form of product, one can’t buy serums at a price range of INR80 per jar since these products are expensive.This is one of the factors driving premiumisation in the skin-care industry while also driving innovation in newer categories such as essences and serums.

In short, Indian consumers are at a stage of consumption wherein almost every consumer-product category is going through some amount of premiumsation and additional consumption.

“I have seen my mother use two products as part of her skin-care regimen. A face wash and a moisturiser that doubles as a day-and-night cream. She is in her late fifties. I use five products daily — a face wash, toner, sunscreen, day cream, and a moisturiser. The brands, however, unlike my mum’s, change a lot as I tend to experiment based on Instagram content and friends’ recommendations,” says a 30-year-old Bengaluru-based professional, who didn’t want to be named.

The younger population of the country is not only experimental but also more aware. One of major factors behind this drastic change is the pandemic. As people were forced to stay indoors, they started focusing more on healthier lifestyles, which brought about a change in their consumption habits as well. This translated into unprecedented growth of the Indian skin-care market and the momentum has continued even after the pandemic.

Industry sources confirm that on average, the basket size for skin-care brands has expanded 20%-30% over the last three years. A 10%-15% growth annually in an inflationary environment shows consumer willingness to spend. Repeat purchase is a common occurrence. If 50%-55% of new consumers return within a year, it’s really good in skin care.

In addition to rising per capita spend, premium skin care is also expected to grow. The contribution of premium skin care has been less than the mass segment in most developed economies, barring South Korea.

Maturity in skin care in any market is driven by two factors. First is the choice of premium products over the mass ones, wherein consumers pay more for a higher-quality product. Second, is the share of skin care and its contribution to the total beauty and personal-care market.

South Korea, known for its obsession with beauty and clear skin, is among the most matured markets in the world. In 2022, nearly 50% of the country’s total beauty and personal care revenue came from skin care, of which 62% was from the premium segment.

The bottom line
Over the last three years, the beauty and personal-care market has become a funding favourite within the consumer category. And Mamaearth’s IPO is coming at a time when the market is marching towards maturity.

"From a listing perspective, category does not matter so much as the size of business. If the total addressable market has potential and the company is targetting it, there will be growth. Once you are in the INR1,000 crore category, you are very nicely placed. Smaller skin-care brands eventually have expanded into other categories after going public."

— Shankar Prasad, founder, Plum Goodness

In addition to its valuation, Mamaearth’s promotional expenditure (at INR390 crore in FY22 or nearly 42% of its revenue) is under scrutiny from industry and market experts.

While the jury is still out on Mamaearth’s valuation and post-listing performance, the company has undoubtedly set an example for many D2C skin-care businesses on how to start from zero and zoom through the INR1,000 crore revenue milestone to enter the public market — all in a little over half a decade.

10.2. Coke may Take Thums Up, Maaza to Global Markets
ET, 9 Feb. 2023

Beverage maker Coca-Cola is exploring the possibility of taking two of its biggest India-made brands Thums Up and Maaza to global markets, said Henrique Braun, the company’s president, international development.

Beverage maker Coca-Cola is exploring the possibility of taking two of its biggest India-made brands Thums Up and Maaza to global markets, said Henrique Braun, the company’s president, international development. India is seeing high growth momentum across all sectors aided by government's investments on infrastructure and digitisation, he said in an interview at the company's country headquarters in Gurugram.

While homegrown cola brand Thums Up has crossed $1 billion in sales in India, Maaza juice is expected to enter the billion-dollar club by 2024.

“What we are doing on global platforms is looking at possibilities to import or export brands to the rest of the world,” said Braun, who took over the job last month and is in charge of Asia-Pacific, Middle East, Eurasia, Africa and Latin America operations. Speaking on two other India-created flavours, Maaza Aam Panna and Fanta Apple Delite, Braun said, “We are being very open-minded about local brands and flavours — a unique idea that can fly here, can fly in other markets. So the point is, we are looking at opportunities to leverage brands to markets with different innovation and flavours.”

The world’s largest beverage maker sees India as a ‘big bet,’ where it will continue to invest for accelerated growth.

“India is showing high growth demand momentum across all sectors,” he said. “What the government has been doing in terms of investing in infrastructure and also bringing up an open network on digital platforms, all put together is a very good environment for growth… You can get ahead of the game when the momentum continues to be good for investment.”

The maker of Coca-Cola, Thums Up and Sprite carbonated drinks, Minute Maid juices, Georgia coffee and Schweppes soda, has allocated $1 billion for India manufacturing to accelerate growth in brands and broaden the portfolio to include more hydration categories, including juices, tea and coffee, sports drinks and glucose-infused drinks.

Hailing India as a market that is “booming in terms of acceleration of digitisation,” Braun said the beverage maker is betting on accretive growth from digital channels.

“The number of startups you have in India allows connections in a very unique way,” he said. “The way India is integrating the platforms on digital is a best practice we are taking to global markets.”

India could be in the top three or four markets “in the near future,” he said. Coca-Cola India reported 2.5 billion transactions in the September quarter. In the Asia-Pacific region, it reported unit case volume growth of 9%, driven by strong growth in India and China.

- Industry and Manufacture

11.1. Siemens Signs €3 bn Deal to Supply, Service Freight Trains
ET, 17 Jan. 2023

Siemens has signed a 3 billion euro ($3.25 billion) contract to supply and service freight trains in India, the German engineering company said on Monday, the biggest locomotive deal in its history.

Siemens has signed a 3 billion euro ($3.25 billion) contract to supply and service freight trains in India, the German engineering company said on Monday, the biggest locomotive deal in its history.

Siemens will deliver 1,200 electric locomotives and provide servicing for 35 years under the agreement, also its biggest ever in India.

The Siemens-designed, 1,200-horsepower trains, with a top speed of 120 km (75 miles)/hr, will be assembled in the Indian Railways Factory in Gujarat state over the next 11 years, with deliveries starting in 24 months.

"These new locomotives ... can replace between 500,000 to 800,000 trucks over their lifecycle," said Siemens Mobility CEO Michael Peter.

The order was a big step for Siemens in India, Peter told Reuters, saying the company had previously been very strong in North America and central Europe in rolling stock but mainly provided components and infrastructure in India.

"India is looking for technology, better efficiency, and longer lifespan for its trains," he said in an interview. "In the past India built their own trains, but they want to increase reliability and average speeds."

The deal is the latest bumper contract won by Siemens after it signed a 900 million euro deal for a new metro line in Sydney, Australia in December.

Peter was confident about reaching Siemens's goal of increasing revenue at the mobility business by 6-9% this year, although this contract would mainly appear as orders in 2023.

He said Siemens was also looking at other train contracts in India, the world's largest rail market with 24 million passengers travelling daily on more than 22,000 trains.

The government wants to increase the rail network' share of freight transport to 40-45% from the current 27%, said Siemens, whose first contact in India - a London to Calcutta telegraph line - dates back to 1867.

11.2. Volvo’s New Global EV Plant Could be in India, says CEO
ET, 6 Feb. 2023

With sales of electric vehicles expected to accelerate in the coming year on back of development of charging infrastructure and price parity with internal combustion engine vehicles, Swedish luxury carmaker Volvo Cars is examining possibilities to set up a new manufacturing facility in Asia, outside of China.

With sales of electric vehicles expected to accelerate in the coming year on back of development of charging infrastructure and price parity with internal combustion engine vehicles, Swedish luxury carmaker Volvo Cars is examining possibilities to set up a new manufacturing facility in Asia, outside of China.

Volvo Cars Global Chief Executive Officer Jim Rowan said while a final decision on the location of the new manufacturing unit for electric cars is yet to be taken, India and Southeast Asian countries are among the contenders. The facility being considered will be utilized to meet domestic requirements as well as ship vehicles to other markets globally.

“We need to make sure that we can feed other countries other than just India from that location. And then, therefore, we need to look at the logistics of that. And also the cost benefits”, explained Rowan, adding, “But (we are looking) in Asia, that's something that we're looking at the moment.” Volvo Cars — which has firmed up plans to go all electric by the end of the decade — is also open to collaborating with a partner in the region for contract manufacturing.

Last year, Volvo Cars announced plans to set up a new manufacturing facility in Slovakia to meet increased demand for its electric vehicles in Europe and the US.

Rowan said the company believes that internal combustion engine and electric vehicles will be at price parity by 2025. This will make electric vehicles affordable for a larger number of customers. “We've announced that we will release one brand new electric car every year for the next few year”, Rowan said.

Volvo Cars currently sells the XC40 Recharge in India, priced at ₹56.90 lakh (ex-showroom), which has received a strong response.

(The writer was in Sweden on an invitation from Volvo Cars)

12.1. The logistics market glows like a 'supernova' with the entry of the global largest companies
IBEF, January 16, 2023

The Indian industrial and logistics spaces in the country has a total stock of about 350 million square feet (msf), and most of the world’s largest logistics players and private equity fund managers are looking to invest anywhere between US$ 500 - US$ 1 billion in the new ventures in the next couple of years, as per some industry experts.

According to sources, Prologis, the largest warehouse owner in the world, has drawn up huge plans for the Indian market and plans to build large warehouses near major industrial and commercial centres of the county. Alta Capital is also gauging two or three platform-level deals in the industrial and warehousing space. It previously did a platform deal last year worth US$ 50 million with Pragati, a warehousing developer and is looking to deploy US$ 150 million more. Mr. Siddhartha Gupta, Founder and Managing Partner of Alta Capital, said that India has a stock of Grade A and B of about 350 msf in the top eight cities of the world. Whereas, Savills India, a property consultant said that the overall industrial and warehousing space stock in tier I cities stood at 300 msf at the end of 2022 and is expected to reach 342 msf in 2023.

Mr. Sandeep Chanda, Managing Director of Panattoni India, one of the world’s largest industrial property developers, said that the market drivers of greater supply chain efficiency, rapid e-commerce growth, and consolidation among third-party logistics providers, help India in sharing the market with its counterparts in the US and Europe. He added that Panattoni India’s focus is to grow in the top eight Indian cities, and they are aiming to launch our first 2-3 projects by the end of 2023, involving an initial investment of US$ 200 million.

The Managing Director of Anarock Capital stated that due to an increase in demand, Grade A warehousing assets will witness an annual growth between 15-20% over the next three to four years. Adding to it, he said that post-Covid-19, the Indian warehousing industry has gone from being a sunrise sector to a full-blown supernova. The tremendous growth potential in the future is rapidly increasing demand from third-party logistics and e-commerce companies, across sectors like retail, fast-moving consumer goods, manufacturing, and electronics.

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

12.2. EVs to flex-fuel to safety: How car making is fast shifting gears at Maruti, Hyundai, Tata, M&M
ET, 7 Feb. 2023

As consumer preference changes, the Indian auto industry is going through a rapid transformation. Companies that are heavily investing in this change will remain relevant. ET Prime examines the preparedness of top four carmakers in the country in terms of electrification, new technology adoption, features, et al.

On January 26, as India was celebrating its 74th Republic Day, the Japanese parent of the country’s largest carmaker, Maruti Suzuki, outlined its growth strategy for 2030. What surprised many was Suzuki Motor Corporation’s (SMC) decision to prepone its electric vehicle (EV) debut in India by a year to 2024. As a precursor, it had displayed its concept electric SUV, the eVX, at Auto Expo 2023.

“We plan to bring it to market by 2025,” SMC representative director and president Toshihiro Suzuki said while unveiling the model. He added, addressing global warming is a priority for the Suzuki group, which plans to achieve carbon neutrality in India by 2070.

Suzuki plans to introduce the battery EV (BEV) SUV in India in FY24. To be powered by a 60kWh battery pack, the electric SUV will deliver up to 550km range on a single charge. Suzuki will also launch six models by FY30 with a BEV ratio of 15%. Along with BEVs, Suzuki will also provide carbon-neutral internal combustion engine (ICE) vehicles that use CNG, biogas, and ethanol-mixed fuels (flex-fuel).

So, what has prompted Suzuki to redo its EV road map?

“They have got to capture the [EV] opportunity. Maruti Suzuki’s focus has been CNG vehicles but in the last one year, CNG prices have also gone up. So, Suzuki has realised that EVs have a long-term future and decided to catch up with other automakers like Tata Motors,” says Barnik Chitran Maitra, managing partner at management-consultancy firm Arthur D’Little. In the next three-four years, competition in the EV market will heat up even more.

Tata Motors is aggressively building its EV portfolio and has already tasted success. The acceptability of EVs is rising among buyers in India. The government is also incentivising them. “Suzuki is well aware that it will lose its leadership position in India if its future strategy does not revolve around EVs,” says Puneet Gupta, director-automotive at S&P Global Mobility. He pegs the current total electric passenger vehicle market at 1.5%-2% of the market, with Tata Motors having a domination of close to 80%.

The possible timing of Suzuki’s BEV entry into India could be between April 2024 and March 2025, according to Kwan Wongwetsawat, senior analyst, LMC Automotive, a GlobalData company.

In this second part of a series on how the top four carmakers are placed against each other, we examine their preparedness in terms of new technology adoption and new products/refreshes.

Maruti Suzuki India: Focusing on powertrain tech, emission, safety
Last May, Suzuki had announced plans to invest INR10,440 crore to manufacture EVs and batteries in Gujarat. Of this, INR3,100 crore is to be used to increase EV manufacturing capacity at Suzuki Motor Gujarat by 2025, while INR7,300 crore is for setting up a plant for battery manufacturing for EVs in 2026.

The interim focus of the Japanese carmaker will remain on petrol and CNG after exiting diesel. Upping its hybrid portfolio before going fully electric will also be a focus area. At Auto Expo 2023, the carmaker had displayed its flex-fuel WagonR, which can run on a blend of 15% gasoline and 85% ethanol.

CV Raman, chief technology officer at Maruti Suzuki, says besides powertrain technologies in flex-fuel, CNG, and hybrid, the company is working on new infotainment systems, surround-view camera, advanced heads-up display, and the option of having six airbags in the car. “These are some of the features that you are seeing on our vehicles starting with the Baleno. All these technologies have been integrated into the vehicles, and of course we are moving more towards LED lamps, both on the headlamp side and also on the rear combination, making them sleeker and thinner. This improves the front fascia and rear design of the vehicle.”

Raman says Maruti Suzuki is on track to meet the real driving emission (RDE) norms, which will come into force from April 2023 and “most of our vehicles have been homologated”. This involves tweaking the powertrain to dual VVT (Variable Valve Timing) and the dual-injection system. The vehicles have also been calibrated for it. In addition, hardware improvements have been made along with fuel-efficiency enhancements to meet RDE norms. “We have done some of this work as a set so that we don't have any issues. CAFE (Corporate Average Fuel Economy) norms have already come in from April 2022 and we have improved our fuel efficiency for all our vehicles,” Raman elaborates.

He clarifies that Maruti is not doing any development work for BEVs. Only localisation work will be done here. “We are going to do the battery manufacturing here. And are working on localising some other aggregates,” he adds.

For the new five-door Jimny, changes have been made in the wheelbase of the SUV. The new models Fronx and Jimny will be made in Gujarat. Raman says all the vehicles were made E20-compliant by carrying out changes in the fuel hoses in the flex-fuel engines. These engines can be used once the ethanol-blended fuel is made available by the government.

Gupta of S&P Global Mobility highlights that while M&M and Tata are R&D-strong Indian companies, Maruti depends more on parent Suzuki for new technologies.

In early January this year, Suzuki Global announced the joint development of a two-speed EV transmission with Inmotive, a Canadian company. This shows that Suzuki is preparing for the in-house development of technology as well, Wongwetsawat LMC Automotive points out. It looks interesting that Suzuki will use the two-speed transmission with an EV motor in its future BEV models, while other players still do not use the transmission with BEVs. The benefit is it will increase the power and range capabilities. It will also help Suzuki reduce the sizes of the motor and the battery while offering the same capability.

Hyundai Motor India: EVs, new technologies take pole position
The Korean carmaker has stepped on the gas when it comes to EVs. Tarun Garg, chief operating officer-sales, marketing, service and product strategy at Hyundai Motor India says the Ioniq5, which was unveiled during the Auto Expo 2023, has received a good response due to the transformation that is happening in electrification. The South Korean carmaker is investing INR4,000 crore for EV development and will bring six EVs to India by 2028.

Hyundai is also looking at three launches this year, including new models and refreshes. “More than 45% of our cars are above INR10 lakh,” says Garg. This means the customer has moved up the value chain because of demand for SUVs, automatics, diesel, new features, and technologies.

Like the Ioniq5, most of Hyundai cars come with the Blue Link connectivity features, safety, and autonomous driver-assistance systems (ADAS), surround view monitor, advanced head-up display, level 2 autonomous driving technology (Ioniq5) since it is popular globally.

"All [top] four companies are investing in new technologies such as electric and hybrid vehicles, connected car technology, and advanced safety features. However, Tata Motors has been leading in terms of sales and launches of EVs."

— Mohit Arora, partner, Mondriaan group

Gupta of S&P Global Mobility says among the top four, Hyundai came up with new technologies first — like ventilated seats in the Verna. So, it ranks top in new technology adoption. Similarly, in its SUVs, along with sister Kia, Hyundai is able to offer better technology or new innovative features.

Tata Motors: Electrification + flex-fuel engines
Shailesh Chandra, managing director -passenger vehicles and passenger electric mobility, Tata Motors, believes new technologies are being driven by the new regulations.

He says Tata Motors is working on the E20 or flex-fuel engines, as every car manufacturer has to be ready with them. “After that, we will start the work on the flex-fuel (engine) compliant to 20% to 85% ethanol.” As the deadline to meet E20 norms is 2025, the carmakers have to upgrade the components by then. The number "20" in "E20" refers to the percentage of ethanol in the gasoline blend. You can read more about E20 or flex-fuel here.

Chandra says while the passenger-vehicle business is not working on hydrogen fuel cell technology, Tata’s commercial-vehicle business is keenly involved in it.

Tata Motors has already announced that it plans to launch 10 EVs by 2025, half of which will be pure electric and the rest modified ICE derivatives. Tata Motors has the Tiago EV at the lower end of its electric portfolio. Last year it unveiled the Avinya concept to be rolled out in 2025. The Tata Sierra electric will go into production in 2025. The Harrier electric is coming in 2024.

Tata Motors also has two CNG models planned for this year – the Punch and the Altroz. The Cuurv in ICE and EV avatars will roll out in 2024. In between, there will be model refreshes/editions of the Harrier and Safari along with a new Tiago electric.

While the next two years are set to see a barrage of new ICE and EV models from the Tata stable, what is the company doing to keep production cost of EVs low?

Chandra says the technology costs of EVs will be coming down in comparison to what is going to happen to ICE vehicles. The technologies for the latter will keep on getting more expensive with new emission regulations and higher taxation, as the government is committed to net-zero carbon emissions by 2070. Policy interventions; incentives like the PLI (production linked incentive) scheme; decreasing battery prices, which have come down from USD1,000 per kilowatt-hour to USD120 per kilowatt-hour at present; and further localisation of power electronics with economies of scale will expedite a downward trend in terms of EV costs.

“We, as a company, are going for deeper localisation that will give us the cost benefit. We are investing as a group in most of these components,” says Chandra. He hints at an investment in battery cells saying that Tata will be controlling a lot of the value chain which will help it bring down the cost.

“All [top] four companies are investing in new technologies such as electric and hybrid vehicles, connected car technology, and advanced safety features. However, Tata Motors has been leading in terms of sales and launches of EVs. In terms of new model introductions, all four companies frequently introduce new models and updates to existing models to stay competitive,” says Mohit Arora, partner, Mondriaan group, a private investment company focused on automotive and allied industries.

Mahindra & Mahindra: Expanding the XUV brand with born electric
Last August, M&M had shown five EV concepts at its design studio in the UK under the sub-brands of XUV and BE or born electric. “The five electric SUVs provide a powerful glimpse of our strategic direction towards e-mobility,” says Veejay Nakra, president, automotive division, M&M.

This January, Mahindra rolled out the first EV model from the XUV range, the XUV 400, which has received bookings of 10,000 in the Republic Day weekend. Now Mahindra is set to show its concept models at Hyderabad on February 10. By 2027, a quarter of Mahindra’s SUVs will be electric, the company says.

The bottom line
In terms of product line-up, experts are of the view that Tata Motors’ portfolio is very fresh, as the company has had a host of launches in the last four-five years. Maruti and Mahindra have more than a decade old workhorses still running on the roads such as the Alto, Scorpio, Bolero though in their new avatars. Hyundai has phased out older models though some of the earlier nameplates do carry over in a changed form.

Tata Motors is as aggressive as Hyundai in terms of new features, followed by Mahindra. But Maruti, because of its cost-conscious customer base, is a bit constrained in this area, believes Gupta of S&P Global Mobility. Maruti has to look at factors like low cost of maintenance and high resale value. However, its newer premium models come strapped with a host of new-technology features.

Maitra of Arthur D’Little clubs Hyundai and Mahindra (especially because of XUV700 and Scorpio N) at the top in terms of new technologies such as connected features, ADAS and smartphone technology. Maruti and Tata are fast catching up, too. While Maruti is still lagging in the EV space, it is the strongest in CNG, hybrid, and flex-fuel technology.

Going forward, pace of electrification, adoption of new technologies and innovative features will decide the winner.

13.1. A former sailor, a ‘boat in a box’: This Pune startup is shaping India’s autonomous maritime vigil
ET, 17 Jan. 2023

From a humble beginning at a 120 sq ft office and an INR2.4 crore initial investment, Sagar Defence Engineering is today taking India’s defence sector by storm with its unmanned maritime systems. It has a variety of products including autonomous ocean robots and multicopters drones. Its key customers are the Navy, Coast Guard, the Army, the Air Force, and paramilitary forces.

When was the last time that you heard a story of a master mariner leaving his romance with sailing to chase an entrepreneurial dream? Probably never.

Captain Nikunj Parashar sailed for 14 years and even commanded a few vessels. But in the end, it was the calling of maritime engineering and entrepreneurship that prodded him to quit. The 42-year-old is now a proud founder and CEO of Sagar Defence Engineering, a startup that builds unmanned maritime systems.

Parashar did take a bit of detour before starting on his own. After quitting sailing, he first took up a job with Maersk tankers in Denmark. But he did not quite enjoy it and returned to India. He then joined his father's business which was a ship-repair company. But again he did not like it. Finally, he started his own startup in 2015.

“My expertise and my strength come from maritime. I can understand maritime in all aspects, whether it is aviation, surface or underwater”, Parashar tells ET Prime.

So, what makes Sagar Defence Engineering (SDE) special?

In short, its continuous innovation and highly competitive products.

Unleashing the power of robotics
SDE has already been noticed in the maritime-engineering space. The startup won the National Startup Award 2021 (launched by The Department for Promotion of Industry and Internal Trade) under the robotics category.

SDE’s unmanned maritime systems facilitate real-time data collection in extreme conditions and environments. This helps save time, money, and human lives. The Pune-based company is engaged in manufacturing air and underwater drones with its own special hardware and software. SDE also does research and development and engineering-related work for the defence industry.

In its seven-year journey, it has developed a variety of products. In the maritime domain, SDE introduced Unmanned Marine Surface Vehicles (UMSV). These are unmanned weaponised boats, or autonomous ocean robots, capable of collecting and communicating ocean data in the real time even in unpredictable conditions. It connects subsea data and communicates the same to satellites and land, creating an ocean network. This ocean network connects billions of sensors, manned and unmanned systems, and satellites.

SDE also has Autonomous Underwater Vehicles or Autonomous Underwater Swarm Drones, which are being tested. These drones are capable of operating at a distance of 8km from the native platform and can be used for surveillance. They are indigenously developed by SDE in association with Mazagoan Dock and iDEX-DIO.

Recently, SDE signed a contract for 10 Multicopters Drones (having vertical take-off and landing - VTOL capability) with the Indian Coast Guard (ICG). These drones are capable of flying up to 20km. They can take off and land from ships moving at a speed of 30 kmph and withstand wind of up to 45 kmph. Multicopters Drones was one of the technologies by SDE showcased during Swavlamban in July 2022. ICG planned to induct 100 additional drones by 2025.

Generally, drones land and take off from a stable platform. But on the sea, the biggest challenge for using drones is landing on moving platforms or taking off from them. This was a key problem statement given to SDE by the Indian Navy.

SDE took up the challenge and signed a contract with the Indian Navy. It delivered 30 Multicopters Drones in early 2021 that are now inducted into the Navy. ICG also came up with a contract, which SDE bagged by bidding against other drone manufacturers such as IdeaForge, Raphe mPhibir, Aerosense Technologies, Endureair Systems, and Indigenous Robotic Unmanned Systems.

Last year, SDE was the talk of the town after introducing a heavy-lift utility drone. Named Varuna, it was India’s first autonomous human-carrying platform and also the country’s first fully electric craft. These naval drones will soon be inducted into the Indian Navy. Varuna can be controlled remotely or flown automatically on predetermined routes with a range of 25km. The drone can carry a 130kg payload and has 25-33 minutes of flight time. These drones have been completely designed and built indigenously for serving the needs of the armed forces and citizens globally.

In addition, SDE makes Unexploded Ordnance Handling Robots (UXOR) for which the company got into a technology-transfer agreement with the Defense Research and Development Organisation. UXOR is capable of handling, diffusing and detecting Unexploded Ordnance (UXO) – bombs and missiles up to 1,000kg — remotely.

Journey of a defence startup and its tech backbone
Behind all the products mentioned above, there is one indigenous technology that SDE has developed: Boat in a box - Genesis. The tech gives users a new set of virtual experiences of being at the steering wheel of a marine vehicle or an aviation platform without being there. It is a platform-agnostic autonomous command-control system. It is a technology (both hardware and software) that can turn a boat or drone or an underwater vehicle into an unmanned platform and bring in capability for autonomy at different levels.

“As the name Sagar Defense Engineering suggests, we are a core engineering company. We believe and core it into research and development in electronics, mechanical and software. You cannot call SDE only a drone company or maritime company,” says Parashar.

The startup has come a long way after its humble beginning. Parashar initially invested around INR2.4 crore. But because of the long gestation period in the defence sector, he soon started facing a financial crunch. For some time, he kept building products but there were no projects coming in. His wife Shilpa pitched in and supported him financially. In 2015, two more co-founders Mridul Babbar and Lakshay Dang, both NASA award winners for innovation, came into the picture and invested in the business. And that's when SDE took baby steps into the world of autonomous shipping.

According to the company's financial statements, SDE was incorporated on June 16, 2015, with an INR10 lakh share capital.

In 2018, ONGC came on board as a strategic equity investor with an INR4.5 crore investment. This changed the whole game for SDE, and people started noticing it. After ONGC, the leadership of Sagar Defence got financial aid from the Maharashtra Aerospace Defence Fund. The founders never looked back after that.

SDE is also shortlisted by the Ministry of Civil Aviation under the Production Linked Incentive (PLI) scheme for drones and drone components.

“Currently, we have an order book of close to USD5 million-USD6 million, which includes orders from the Indian defence [sector] at around 87% and the rest is exports”, Parashar says. The company's key customers are the Indian Navy, Indian Coast Guard, the Indian Army, the Air Force, and para-military forces.

SDE has grown from a 120 sq ft office to one of Asia’s leading maritime engineering companies with a 25,000 sq ft unmanned facility in Chakan, Pune.

But how tough has it been for the startup in terms of profitably?
‘I would say with experience that it is really tough. But I think if you gain customer trust, it is very much possible. It depends on how you are building your product. If your product is failing, are you ready to go and assist your customer? If you're able to do these things by giving the right service or by giving the customer the right reasons, or looking at their needs and solving the problems, then I think it's one of the easiest markets to connect”, Parashar elaborates.

The international play
According to IMARC, a market-research firm, the global unmanned marine-vehicles market size reached USD3.51 billion in 2021. IMARC expects the market to touch USD6.89 billion by 2027, clocking a CAGR of 11.30% during 2022-2027.

SDE has an international presence with a Dutch subsidiary called Oceanos. The company has been exporting to Europe.

“We do not look at the Indian competition but the competition in the international market. We look at deep tech in the European and the US market. And then a peer-to-peer comparison is what we bring to the table. That's what we discuss with our investors. While we are talking today (January 11, 2023), we have signed and raised a USD5 million investment from our existing investors. And then we have certain investors, which we don't want to disclose,” Parashar says.

Stressing on indigenous technology, Parashar applauds the government for supporting the startups but says there has to be a policy change and we need to look at “how foreign collaborations are coming in.” He says the country needs to make sure that the Make In India route doesn't get transformed into assembly in India. “If we look at the current request for proposals (RFPs) that have come from the Indian Army, the minimum turnover requested is INR70 crore for drones. Any Indian drone startup except only a few large manufactures doesn’t have this much turnover. So, they're compelled to go and partner with some big company to bag those contracts. On the other hand, if the government eases the norms and [if] financing is available, then possibly a young startup could also compete in the biggest contract without having any financial constraints”, he highlights.

"The country needs to make sure that the Make In India route doesn't get transformed into assembly in India."

— Nikunj Parashar, founder and CEO, Sagar Defence Engineering

The road ahead
Talking about growth, Parashar says, ‘We are growing at 5X in terms of revenue right now. We are growing in numbers. Possibly by the end of August, we should be close to 150 people-plus as a team.”

Any plans for an IPO?

“We would not like to go for an IPO at least in the next three years, because this is the time when the company is growing and scaling up. So we would like to work towards growing the company. IPO is something we should not just rush for just because there is an opportunity,” Parashar says.

Parashar is trying to create a company that can go on a long voyage. He wants to build an organisation which will sustain itself “for the next 50-100 years”. Where does Sagar Defence Engineering go from here and whether it will sail through in the highly competitive ocean of maritime business will be a story for another day.

13.2. Export of automobiles registers a growth of 35.9% from 2020-21 to 2021-22
Press Information Bureau, Feb. 6, 2023

The export of the total number of automobiles increased from 41,34,047 in 2020-21 to 56,17,246 in 2021-22, registering a growth of 35.9%. Out of this, the export of passenger vehicles including cars increased from 4,04,397 in 2020-21 to 5,77,875 in 2021-22, registering a growth of 42.9% and commercial vehicle increased from 50,334 in 2020-21 to 92,297 in 2021-22, registering a growth of 83.36%, the Minister of State in the Ministry of Commerce and Industry, Ms. Anupriya Patel said in reply.

It has been reported that about 9.89% of motor vehicles/cars were exported from Haryana in the total export of vehicles during 2021-22.

The Government is taking various measures to promote India’s export like the Foreign Trade Policy (2015-20) has been extended up to March 31, 2023, assistance is also being provided through several schemes to promote exports, namely, Trade Infrastructure for Export Scheme (TIES), and Market Access Initiatives (MAI) Scheme, Common Digital Platform for Certificate of Origin has been launched to facilitate trade and increase Free Trade Agreement (FTA) utilization by exporters. In addition to it, Districts as Export Hubs have been launched to identify products with export potential in each district, and the active role of Indian missions abroad towards promoting India’s trade, tourism, technology, and investment goals has been enhanced.

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

14.1. Govt may Bump up Allocation for Existing PLI Schemes in Budget
ET, 18 Jan. 2023

India is likely to substantially top up the allocation for ongoing Production-Linked Incentive (PLI) schemes in the February 1 budget after seeing good results, said people with knowledge of the matter.

India is likely to substantially top up the allocation for ongoing Production-Linked Incentive (PLI) schemes in the February 1 budget after seeing good results, said people with knowledge of the matter. Some new sectors may be included in the programme that seeks to reignite manufacturing in India and boost exports, along with other measures to spur investments.

Allocations for sectors that have seen a high impact on the ground under active PLI schemes such as electronic manufacturing and IT hardware could be raised, people familiar with the deliberations told ET. Finance minister Nirmala Sitharaman had in the FY22 budget announced ₹1.97 lakh crore for PLI schemes that now cover 14 key sectors. This incentive amount, which is for the five-year period beginning FY22, may be raised in the budget.

“Overall allocation under PLI could be enhanced… It is a scheme that is seen to be making an impact on the ground,” said one of the persons cited above. There may be an increase of 20-30% in the upcoming budget, another person said.

India is keen to send strong signals to global manufacturers eyeing supply chain diversification under their China+1 strategy about its intent to offer an attractive factory ecosystem.
The budget may also extend the lower corporate tax rate of 15% available for new manufacturing investments for a few more years.

“Measures to encourage private investment will be one of the areas in focus,” said the person cited above, adding that expanding PLIs is one such measure being actively considered. This would be complemented by easing compliances in multiple areas, the person said.

Experts said the government should look at building upon the success of the programme.

“In a short span of time PLI schemes have evinced good interest from businesses and investors,” said Vikas Vasal, national managing partner, tax, Grant Thornton Bharat. “There is a need to increase the coverage by adding more sectors to boost manufacturing and exports, besides increasing the outlay in some of the existing sectors.”

Additional funding won’t have a big impact on finances.

“Given the backloaded nature of payouts, it is unlikely to create a big hit to the fiscal math,” said Rahul Bajoria of Barclays, agreeing with the need to build on the initial success.

14.2. Chinese Suppliers to Apple Get Nod to Make in India Via JV Route
ET, 19 Jan. 2023

The government has given preliminary clearances to several of Apple’s Chinese suppliers, allowing them to form joint ventures with Indian companies to set up facilities here, as it seeks to expand the local value chain in iPhone and electronics manufacturing.

The government has given preliminary clearances to several of Apple’s Chinese suppliers, allowing them to form joint ventures with Indian companies to set up facilities here, as it seeks to expand the local value chain in iPhone and electronics manufacturing.

Fourteen companies from a list of 17 Chinese suppliers that had approached the government have received the initial clearance, officials aware of the matter said. These companies, which include Luxshare, Sunny Optical, Han’s Laser Technology, YUTO Packaging Technology, Strong, Salcomp and Boson, supply components to other smartphone and electronics brands as well.

The government has clearly stated that these Chinese firms would not be allowed to set up their wholly owned entities in India and that they must form JVs with local companies, the officials said. The final approvals to start manufacturing will be given at a later stage, after the JVs are formed.

Apple did not respond to an email seeking comment about the Indian government’s decision.

“We want Indian champions to emerge in the supply chain and that will happen when Chinese majors partner with local firms. Full due diligence will be done while giving approval so that the interest of India is not hurt,” a government official told ET.

The main reason for the government to make this decision was the realisation that local value addition must rise for self-sufficiency in electronics manufacturing, the official said.

Without the participation of Chinese companies, it would be extremely difficult and time-consuming to develop a manufacturing ecosystem for Apple products in India. “The importance of expertise is necessary, and China is the main link in the global electronics manufacturing ecosystem,” said a second official. “China has been Apple’s mother factory and if the success can be replicated here, the suppliers have to come.”

The local value addition in iPhone manufacturing is currently around 18%, and with the partners coming in, that could likely go up to 50%, an industry executive told ET.

For example, Luxshare Precision is one of the top contract manufacturers for the US company and makes Apple Watches, AirPods and iPhones. Sunny Optical makes camera lenses for iPhones. In May 2020, Luxshare had signed a deal with the Tamil Nadu government to take over the shuttered Motorola phone manufacturing unit in the state and invest around Rs 750 crore. The central government has yet to clear the proposal. ET reported in its October 28 edition that the Tamil Nadu government was urging the Centre to hasten the approval.

An industry executive said the Chinese suppliers were already scouting for partners in India and were in initial talks with as many as 50 local companies, including the likes of the Tata Group, Lava International and TI India. On October 22, ET reported Lava was in advanced talks for a joint venture with Shanghai-based Huaqin Technology, the world's largest original design manufacturer for mobiles and tablets.

In the past, the government had rejected proposals from several Chinese component suppliers, primarily of smartphone maker Vivo, that wanted to enter India with a 100% stake.

Apple currently assembles iPhones in India through three Taiwanese contract manufacturers: Foxconn, Wistron and Pegatron. All three have approvals under the government's production-linked incentive scheme for smartphones.

15. Meesho’s recipe for a no-frills supply chain: small sellers, big volume, cost innovation to taste
ET, 20 Jan. 2023

Meesho is trying to reduce the logistics cost for small sellers spread across big cities and small towns. For Meesho sellers, logistics cost now ranges from 15% to 20% of the order value. Meesho wants to reduce it to 8%-10% in the next 12 to 18 months. Can Meesho, with over 2.5 million orders a day, walk the talk?

Small-seller marketplace Meesho, which sells everything from vegetable cutters to soap dishes to apparels, doesn’t sell matchboxes yet. “If you can sell a one-rupee matchbox online at a profit, you have cracked it. That will in fact be the most cost-efficient supply chain in the country,” says Sourabh Pandey, CXO, fulfilment and experience, Meesho.

While cracking a matchbox supply chain is still a tall order, Meesho, still early in its journey, is trying to reduce the cost of logistics for the small sellers spread across big cities and far-flung small towns.

Meesho’s rise has been meteoric, to say the least. It is touted to be the next big thing in Indian e-commerce after Flipkart and Amazon and is valued at around USD4.9 billion in its last funding round in September 2021. Meesho ships upwards of 2.5 million orders a day and has become the largest customer for a bunch of specialised e-commerce logistics players – Delhivery, Ecom Express, Xpressbees, and Shadowfax. It is also tying up with LoadShare Networks and ElasticRun.

For the SoftBank-backed company, revenue in FY22 jumped 4.5 times to INR3,232 crore from INR792 crore in FY21. However, losses widened 7.5x to INR3,247 crore. Order volumes in the last one year grew exponentially and Meesho clocked 910 million orders, a 135% growth from a year ago, Meesho’s logistics and fulfilment costs also shot up 4.4 times to INR2,829 crore in FY22 from INR632 crore in FY21.

Why is Meesho looking to cut supply-chain costs?
The major USP of Meesho over other marketplaces such as Flipkart and Amazon is its lowest cost proposition for customers, and the key to achieving this is to reduce logistics costs.

The math is simple. For small sellers (the mainstay of the Meesho platform), logistics is the engine that drives sales. But given low order values compared to big brands, they need to have the cheapest logistics service. The average selling price of products sold on Meesho is in the range of INR300 to INR350, which is 30%-40% lower than bigger marketplaces. Of this, sub-INR200 goods form about 10% of the orders. INR200-INR300 is a large chunk, or about 40%-50%, of the orders. INR300-plus makes up for the remaining orders. Sellers feel the pinch when they have to incur INR60-INR70 for shipping, say, an INR200 T-shirt.

On a daily basis, close to 15 to 20,000 sellers are active on the Meesho platform and on an average, a seller sells 15 to 18 products per day.

When the e-commerce story started out, the supply chain was designed to handle all sorts of products including high-value branded products such as mobile phones. Now, Meesho sellers are trying to pass an INR400 saree or an INR500 shoe through the same supply chain.

“There are places where 3PL (third-party logistics) players have built out networks looking at the future. There are networks that have made the logistics services expensive. For small sellers, some of these frills that add to logistics costs need to be removed,” says Pandey.

Can Meesho achieve a no-frills logistics service that makes sense for small sellers?
To its credit, the company has been trying to push costs down. A year ago, logistics costs for Meesho sellers used to be upwards of 30% of the average order value. Now it ranges anywhere between 15% and 20% of the order value. The company wants to reduce it further to 8% to 10% in the next 12 to 18 months, at least for a large portion of its supply.

Will it be able to do that? The answer is hidden in Meesho’s humongous volumes.
"There are networks that have made the logistics services expensive. For small sellers, some of these frills that add to logistics costs need to be removed."

— Sourabh Pandey, CXO, fulfilment and experience, Meesho

The volume game
Meesho does more than 2.5 million shipments a day. This huge volume can give it the muscle to work closely with third-party logistics players. Meesho recorded 33.4 million orders during the five-day festive sale season in September last year, with nearly 60% of the orders coming from tier-IV plus cities. “Post-pandemic, a big change has been Meesho coming in, growing exponentially in terms of volumes,” says Dipanjan Banerjee, chief business officer at Ecom Express.

This year, Meesho expects to double down on the number of sellers and order volumes on the platform. A lion’s share of sales on Meesho is from the fashion and lifestyle segment. The platform is seeing fast growth in home-improvement products, stationary, beauty and personal care, kids’ products and men’s fashion and footwear and electronic accessories.

The e-commerce market today does about 9 million to 9.5 million shipments a day. Of this, about 4 million to 4.5 million shipments are from Flipkart and Amazon. At about 2 million orders a day, completely outsourced to logistics players, Meesho accounts for about 21% of the market. The remaining is split between shipments from Reliance Group, Nykaa, Tata Group, etc., followed by a set of 30 to 50 reasonably big direct-to-consumer brands.

Amazon India and Flipkart insource about 90% and 85% of their shipment volumes, respectively, to their internal logistics arms ATS and EKart. This roughly translates to Flipkart’s outsourced volume at about 500,000 shipments and Amazon’s about 100,000 shipments a day. Meesho’s share in the overall outsourced logistics market is roughly 40%-45%, which is a huge number for 3PL players.

There are multiple factors that play in e-commerce logistics costs. The entire billing for e-commerce logistics relies on volumetric weight, distance, and complexity of operations. Higher volumetric weight means higher logistics costs. Costs are also decided zone-wise. So, if you are in zone 1 and sending a shipment to zone 4, then a particular billing would apply. Pick-up and delivery within, say, the North zone would have a certain cost slab. Pick-up and delivery from the North to South zone would have another cost slab.

Costs also vary as per region. For example, it is slightly expensive to deliver to certain areas in the northeast. The typical industry standard is weight slabs of 500gm each. So, 0gm to 500gm is charged at INR30 to INR40 per packet. A 500gm to 1,000gm packet would be charged at INR30 to INR40 plus an additional charge of INR10-INR15. For Meesho, every packet that a seller ships out is weighed separately and billed as per the weight slab.

Meesho doesn’t not charge its sellers any commission or fees. Sellers incorporate the shipping cost in the price of the product. The shipping cost is deducted by Meesho and paid to the logistics service provider.

The Meesho way of cutting logistic costs
As per Meesho, while not much can be done for the core cost of operations, the overall network costs can be brought down by pumping in huge volumes. Since it has the scale advantage, it is in a position to negotiate costs and pricing with the 3PL players.

Sourabh Pandey, CXO, fulfillment and experience, Meesho;image credit: Sourabh Pandey via Linkedin.

Volumes also mean better asset utilisation. “We are the biggest contributors towards asset utilisation for the 3PL players as of today,” says Pandey.

A Meesho customer does not typically need shipment at the same speed as an iPhone customer. So, Meesho deliveries do not work on constructs such as 7am or 9am delivery or a one-day delivery or a two-day delivery. “We don’t create artificial urgency mechanisms in the supply chain which drive up costs,” says Pandey. “Often that means running vehicles at low capacity to meet timelines.” It is important to ensure that vehicle utilisation is 80%-plus at the cut-off time (time for the vehicle to leave the hub).

Meesho also tries to improve utilisation of fixed infrastructure such as sorting machines that 3PL players have invested in. As per Pandey, in a marketplace setup, the typical run time of a sorter is 8 to 10 hours. For the remaining 12 hours, it is sitting idle which is a cost in the system. Meesho has worked with its partners to increase the runtime to 14 to 16 hours by driving more efficiency from the supplier side, ensuring that the load is spread out.

Pandey says Meesho works very closely with 3PL companies to reduce costs like RTO (return to origin), which is a very big cost in the ecosystem. It has also built technology to resolve the address problem in tier-II and tier-III cities to improve the delivery percentage. Reducing leakages such as frivolous orders and returns, fake delivery attempts is a big part of reducing costs. Since cash on delivery is the primary mode of transaction on Meesho, it entails extra cash-handling charges by 3PL partners. This can only be brought down as the customer base matures and shifts to digital payment modes.

A very important point is to ensure the success of orders and optimisation of the backend. Meesho’s technology backend works as a translator of sorts, scanning all nodes within a 3PL company’s network, figuring out constraints at any point of time and ensuring that a seller’s shipment is processed by the best 3PL both in terms of cost and service quality. “In terms of comparative cost of operations between 3PL players, the delta is not very large at an overall level. But when you get into a lane-level discussion, there are lanes wherein the cost delta exists,” Pandey elaborates. For example, at one point of time, Delhi-Lucknow was treated as a national lane by a certain 3PL company and as a zonal lane by another player. For a national lane, the rate card is higher than for a zonal lane.

The best part of working with 3PL players is their strong tech backend and the depth of their network right from tier-I cities down to tier-II and tier-III cities. Also, the way 3PL players have built their last-mile reach from a customer’s perspective. This capability can be flipped and used from a seller’s perspective. So, a last-mile node can function as a first-mile node for the sellers.

Meesho does not invest in warehousing infrastructure which is a significant cost in the supply chain and builds into the product costs. Since it is dealing with small order volumes, sellers are able to manage inventory at their end. Logistics companies pick packets directly from the sellers and deliver to customers.

However, there is a lot of scope for improvement. The small-seller ecosystem has a lot of trust issues right now. One of the things that the 3PL ecosystem needs to do is to build trust a lot more. “If you look at it, there are 63 million registered SMEs. Of these, people who are online are only 2 million to 3 million. There is so much more that can happen with trust building,” says Pandey. Any supply chain has leakages, leading to shipments getting lost or misplaced. Every time that happens, the seller needs the comfort that he will be compensated, and the loss covered. That is an area that needs to be further solved.

Cost optimisation with innovation
The fundamentals of pick-up and delivery remain the same for all small sellers — the delivery person collects the shipment, which goes to the nearest hub, dispatch centre, then another city’s dispatch centre, customer hub and so on.

Whether a 3PL player can optimise costs depends on multiple factors. If it already has operations in a particular lane and these smaller packets mean incremental load, then it can deliver it at a low cost. But if the company has to run a lane particularly for a use case, then the cost of operations can be high.

“The core thing is that a low-cost supply chain is a solvable problem. It requires innovation in developing mechanisms to deliver both high-order and low-order value items and managing the speed of delivery as per customer’s requirements,” says an insider at a 3PL company.

Logistics companies can optimise mid-mile and last-mile costs. However, there is no particular way of doing it. Optimising the middle-mile is how you create the right network — which order should go via air, and which one should go via road or rail. Within road, a lot of network planning is involved. “It is just like designing a rail network. So, while a Shatabdi runs non-stop between Delhi and Bengaluru, there are other trains as well which stop at different cities, taking longer time to reach Bengaluru,” says the person quoted above.

So, shipments that need quicker delivery need to go via a direct connection. But if there is more time at hand, the 3PL company can design the network so as to cover Mumbai and Nagpur as well on route to Bengaluru, picking and dropping loads on the way. That will save a lot of line haul or trucking costs. Similarly, last-mile costs can be optimised by creating better routes and clubbing orders in a better manner.

Most 3PL players ET Prime spoke to, say while the cost sensitivity of Meesho sellers is significantly high, they are okay stretching delivery by a day or two in most cases.

“The 3PL supply chain is built to efficiently ship all types of products. However, with low-ticket items, the standards of inspection and quality control, warehousing and hub infrastructure, security, handling, quality of trucks and speed can be optimised, thereby reducing the logistics costs.” says Raghuram Talluri, CEO at LoadShare Networks, which works with Meesho. “However, at the end of the day you have to get the balance right between cost and service levels,” he adds.

There are other innovations that can also be done. Volumetric weight can go down by cutting the size of the packaging. This will in turn bring down the logistics costs.

Meesho is working on other models — like people who are not a part of the supply chain can chip in. It is testing whether it can ask the suppliers to drop off at the first-mile hub. That is one cost in the supply chain that can be eliminated. On the other hand, customers instead of getting doorstep deliveries, can walk 500 meters to pick up the product and get a discount on the product as an incentive.

Optimisation is a continuous process. It has been seen in developed e-commerce markets that as the industry matures, the efficiency and predictability in the network improves and the cost of logistics comes down.

Industry insiders believe there is a scope for many more specialised 3PL players as e-commerce logistics is poised to grow at 30% to 35% year-on-year at least for the next decade. “Delhivery, Ecom Express and Xpresssbees may still be the largest players 10 years down the line, yet 10 times bigger than the size they are today,” says Pandey.

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

16.1. Lessor Says Air India to Order around 500 Jets
ET, 17 Jan. 2023

Air India is set to order around 500 planes as an airline industry recovery takes hold following the pandemic, one of the world's leading aircraft lessors said on Monday.

Air India is set to order around 500 planes as an airline industry recovery takes hold following the pandemic, one of the world's leading aircraft lessors said on Monday.

"As a result of this recovery, there is now more momentum for large orders from airlines who have sort of sat back and watched the movie, and now they're seeing there's going to be a positive trend," Steven Udvar-Hazy, executive chairman of AirLease Corp, told the Airline Economics conference.

"We have this 500-aircraft order coming out of India, which is going to be about 400 narrow-body aircraft, probably a mix of (Airbus) A320neos, A321neos and (Boeing) 737 MAXs, and 100 wide-bodies which will include (Boeing) 787s, 777X, potentially some 777 freighters and (Airbus) A350s."

The comments are the first public indication of the scale of the planned order after Reuters reported in December that Air India was close to ordering as many as 500 jets as it carves out a renaissance under the Tata Group conglomerate.

Industry sources say finalising the proposed deal depends on ongoing negotiations with engine makers.

Air India did not immediately respond to a request for comment. Airbus and Boeing had no immediate comment.

United Airlines recently ordered 200 large and small aircraft. China last year placed a block order for Airbus jets.

"We do expect a number of airlines will place large orders and again most of these orders will be for replacement," Udvar-Hazy said.

He predicted airlines would increasingly turn back towards medium-sized wide-body jets after significant delays in the development of Boeing's largest new model, the 400-seat 777X - currently running at five years and potentially rising further.

"We expect that both OEMs will be under pressure in the next couple of years to increase production rates, not necessarily back to the levels they were in 2018, but certainly well above current production."

(Reporting by Tim Hepher, Padraic Halpin, Aditi Shah; editing by Jason Neely)

16.2. Govt nudging Boeing, Airbus to set up assembly lines here
TOI, 17 Jan. 2023, Saurabh Sinha and Sidhartha

NEW DELHI: The Modi government has sounded out aerospace majors Airbus and Boeing to set up final assembly lines in the country as these two are likely to get orders for nearly 2,000 aircraft from Indian airlines over the next decade or so.

In contemporary times, IndiGo was so far the only Indian carrier placing mega aircraft deals and inducting those planes — with its last 2019 firm order for 300 A320neo family aircraft taking the budget carrier’s total number of A320 family aircraft orders to 730. In the next few weeks, the Tata Group is going to place a big order for hundreds of narrow and wide body Boeing and Airbus for its in-the-works new Air India and low-cost AI Express.

India is going to be among the top aviation markets globally thanks to a growing aspirational middle class for whom air travel is no longer a luxury but a necessity. International travellers have been filling up neighbouring hubs of foreign airlines for decades. The acquisition of AI and AI Express by the Tatas and the pre-existing eminent position of IndiGo means India will have its own mega carriers that will place mega orders. Then there are several smaller airlines too. “We cannot be happy with the aircraft makers just buying components from India, whether with or without offset requirements. It is time Airbus, Boeing and engine majors set up final assembly lines here,” people in the know told TOI.

Comments were sought on the issue from both the aircraft majors and awaited till the time of going to press. Sources in these companies say they are being increasingly nudged in that direction from the government.

Last month, the commerce department had sounded an alarm at the surge in import of aircraft. The import of unladen aircraft (not loaded with goods or passengers) weighing 15,000 kg, valued at over $200 million, had increased 56.5% in April-September 2022 over the same period last year. Imports of certain turbo jets had increased 34% and helicopters of an unladen weight of more than 2,000 kg jumped by 42%, the commerce department had pointed out.

Following this, the aviation ministry had sought steps that could be taken to develop a strategy to bring down the trade deficit.

To be sure, having a final assembly line (FAL) in India means having the entire supply chain ecosystem in the vicinity— right from aircraft body, wings, assembled engines, seats and everything imaginable. For instance, a leading engine major had last year replied that “we need to be close to aircraft FAL” in Toulouse and the US when asked if it planned to have a FAL in India.

“The process will take some years but it must be started now to have the same in place in the next 3-4 years. Otherwise it will remain a chicken-and-egg story,” said people in the know.

The government is of the view that now is the time to take the next step and make commercial aircraft in India too.

Airbus has four A320 family assembly facilities around the world — Toulouse (France); Hamburg (Germany); Tianjin (China) and Mobile (US). The China FAL had commenced operations in 2008 and last November it had commissioned its first A321, something Airbus had described that as deepening “collaboration with China’s aviation industry, and demonstrates Airbus’ commitment to enhance its long-term strategic partnership with China.” India’s IndiGo is the world’s largest customer of the A321neo family of aircraft.

Boeing has all its FALs in the US. It opened a completion centre in China where aircraft assembled in the US are flown to. Fitting of seats and aircraft painting is done in China, hence the name.

People in the know say the critical things while deciding setting up a FAL in a country are the size of its market. “Infrastructure including reliable power, hangars and availability of skilled manpower certified by Federal Aviation Administration (FAA) as every person touching an aircraft needs to be certified. An aircraft has millions of parts so supply chain processes and raw material availability need to be in place,” they say.

Finally, aircraft manufacturers worry if customer orders do not specifically seek guarantees that planes not be made in some places. For instance when Boeing opened its second B787 FAL and delivery facility in South Carolina’s Charleston about 15 years ago, some airline specifically said they wanted their Dreamliners to be from the Seattle FAL. Some years later when airlines realised that the B787s from both the FALs are exactly the same quality-wise, then they dropped this pre-conditions, say people in the know.

Last October, the Tatas and Airbus had announced they will jointly make the C-295 transport aircraft for the Indian Air Force in Gujarat. The defence ministry had at that time described this as “the first project of its kind in which a military aircraft will be manufactured in India by a private company.” Till now, only state-owned Hindustan Aeronautics makes aircraft for the armed forces.

17.1. OPPO India partners with Common Services Centres under MeitY to train 10000 rural women as 'Cyber Sanginis'
ET Gov. 25 Jan. 2023

The Cyber Sangini program aims to raise awareness among citizens to stay safe in an online world on the widespread use of social media and the rapid adoption of digital payments.

Mobile phone brand OPPO India has partnered with CSC Academy, the Education & CSR wing of Common Services Centres (CSC) under the Ministry of Electronics & IT (MeitY), for the Cyber Sangini program to empower women in rural and semi-urban areas by training them in the fundamentals of cybersecurity and cyber wellness.

Under this project, OPPO will support the training of 10,000 women all over India who will be known as 'Cyber Sanginis' and act as Cyber Security Ambassadors in their area. After completing a specially designed course over 45 days, these women will be provided with a certificate from CDAC or NIELIT, making them eligible for suitable employment opportunities or to start earning livelihood in their locality.

With the advent of 5G, the number of broadband and mobile users in rural areas will increase exponentially. Information technology has opened the door to a new world of networking, e-banking, and the Internet and emerged as a solution to cut costs and transform complex economic matters into simpler, faster, more efficient, and time-saving methods of transactions. At the same time, cyber crimes, especially against women, have risen. Numerous criminals, including hackers and crackers, have discovered ways to tamper with online accounts and have been effective in getting illegal access to users’ computers and stealing important data.

The Cyber Sanginis will be trained in the existing laws and frameworks available to every citizen to protect them from such cyber incidents, according to a press release by CSC.

These women shall be allowed to collect a nominal fee from the citizens for their support in addressing cybersecurity and cyber wellness issues to make them self-sufficient. Sharing the values of MeitY’s Stay Safe Online campaign, the Cyber Sangini program aims to raise awareness among citizens to stay safe in an online world on the widespread use of social media and the rapid adoption of digital payments. It will cover the precautions which need to be taken by every internet user, reporting any incident of cyberattack, cyberbullying, stealing data and loss of business/reputation, the academy said.

On the commencement of the initiative, Sanjay Kumar Rakesh, MD & CEO, CSC SPV, said, "Since there is lack of awareness about cybersecurity among citizens, there is a need to promote local-level support systems in villages for the general population, especially among vulnerable sections such as women, students, the old and uneducated, to enable digital safety and security of these users. The threats from the internet are endless and constantly evolving. Our partnership with OPPO will create Cyber Security Ambassadors who are continuously trained and supported and be one of the most effective ways to address such challenges.”

Commenting on the association, Vivek Vasishtha, Vice-President, Public Affairs, OPPO India, said, “As India is making significant efforts towards becoming a trillion-dollar digital economy, OPPO is proud to partner with CSC Academy on a campaign which focuses on sensitizing users of all ages, especially women, about online risk & safety measures and promoting cyber hygiene, thereby reinforcing the cyber safety of citizens. Through this initiative, we can help build a Digital India with enhanced public participation in the Digital Economy and realise the Prime Minister’s vision of achieving inclusive social and economic growth led by digital transformation.”

CSC Academy, the Education & CSR wing of CSC, provides access to professional learning for learners of diverse backgrounds and educational needs. CSC has planned to set up 7,000 CSC Academy centres (one in every block) across the country with the main aim of providing education and skills.

17.2. IT rules ensure open, safe, trusted and accountable internet for citizens: Rajeev Chandrasekhar
ET Gov. 10 Feb. 2023

The Union government issued directives to block as many as 6,775 web links in the year 2022.

Clearing aspersions around the operations of social media platforms in India, Union MoS for IT Rajeev Chandrasekhar said that the Centre has no intentions to control social media intermediaries. According to Chandrasekhar, new IT rules ensure an open, safe, trusted and accountable internet for citizens.

The Union minister in a written reply to the Lok Sabha said that the IT Rules, 2021, outline specific obligations on the intermediaries that no intermediary will be allowed to violate the rights accorded to citizens under the constitution.

“The government does not interfere or control social media intermediaries and also does not cast any fetters on freedom of expression on their users. The IT Rules, 2021, casts specific obligations on the intermediaries that no intermediaries shall not violate the rights accorded to citizens under the Constitution,” the minister said.

The comments in the lower house of the Parliament come following a question on whether the government proposes to appoint an officer to hold the accountability of social media.

The Union minister maintained that Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, known as IT Rules, 2021, cast a specific obligation on intermediaries around the kind of information to be hosted, displayed, uploaded, published, transmitted, stored or shared.

Under the new IT rules, intermediaries are required to remove any content violative of any law for the time being in force as and when brought to their knowledge either through a court order or through a notice by the appropriate government or its authorised agency.

“In case of failure to follow diligence as provided in the IT Rules, 2021, by intermediaries, they shall lose their exemption from liability under section 79 of the IT Act and shall be liable for consequential action as provided in such law,” the minister said.

The Union government issued directives to block as many as 6,775 web links in the year 2022, which include URLs (Uniform Resource Locators) for webpages, websites and content and accounts on social media platforms.

18.1. NITI Backs Central Board for Vocational Education
ET, 8 Feb. 2023

The NITI Aayog has proposed setting up a separate central board for recognition of vocational education, on the lines of an education board such as Central Board of Secondary Education.
The NITI Aayog has proposed setting up a separate central board for recognition of vocational education, on the lines of an education board such as Central Board of Secondary Education. It also suggested conducting national centralised examinations for admission to Industrial Training Institute (ITIs) to streamline the system and ensure transparency.

The suggestions are part of a report in which the Aayog proposed a seven-pronged strategy to transform more than 15,000 ITIs in India.

It said there is a need for a centrally sponsored scheme for uplifting poor performing ITIs, a comprehensive continuous monitoring process for concurrent review of their functioning and operations, and providing trainee instructors (on the lines of the BEd system) to improve the quality of future trainers while addressing the shortage of human resource at ITIs.

“In order to garner better credibility and recognition for vocational education, it is suggested to extend the current role of National Council for Vocational Education and Training as a National Board for Skill Development which can be a vocational education counterpart of CBSE (Central Board of Secondary Education),” said the Aayog.

It said the vocational board can be empowered to conduct examinations and award degrees to ITI students which will be equivalent to academic degrees awarded by education boards such as the CBSE.

“This will facilitate permeability between the domains of general education and vocational education and will make vocational education aspirational for the masses,” said the report.

The Aayog suggested that admissions to ITIs be done through a national level centralised portal, following the pattern of the Joint Seat Allocation Authority used for engineering admissions, similar to the model that exists for Joint Entrance Examination (JEE) and National Eligibility Cum Entrance Test (NEET).

18.2. Creating new generation teachers and industry ready students: Hari Balachandran, CEO, ICT Academy Tamil Nadu
ET Gov. 15 Feb. 2023

ICT Academy bridges the gap in the skills and talents requirements of the industry and what the students acquire in the higher education institutions.

An initiative of the Government of India, in collaboration with the state governments and private companies, the ICT Academy is a not-for-profit society dedicated to imparting training in latest ICT technologies to teachers and education teachers. The mission of the ICT Academy is to develop the next generation teachers and industry ready students. Hari Balachandran, CEO, ICT Academy, Government of Tamil Nadu, spoke to ET Government’s Anoop Verma about the systems that the ICT Academy uses to impart industry-relevant teaching to the students.

How is the ICT Academy of Tamil Nadu bridging the gap between academia and the industry?

ICT Academy bridges the gap in the skills and talents requirements of the industry and what the students acquire in the higher education institutions. We supplement the academic learning of the students with a certain amount of requirements that are there in the industry. Our work is especially relevant in the areas where there is technology requirement in the industry. We provide the students training in emerging technologies—by emerging technologies I mean technologies like cloud infrastructure, artificial intelligence, and data analytics. Our teaching is oriented towards the latest technologies. We don’t teach the students accounting or finance; we give them the technological skills that will help them secure a job in a world where everything is technology driven. We bridge the gap between what the higher education institutions teach and what the industry requires—when our students leave the institute after finishing their course, they are ready for working in advanced companies.

The field of ICT is constantly evolving. How does the ICT Academy keep its training manual and curriculum updated with the emerging IT technologies?

We have a very active board of governors and board of studies which are constantly advising us about the new trends in technology. This is one source of information that we utilize to keep our training manuals and curriculum updated. We have periodic meetings to exchange knowledge and information on new technological trends. The second thing we do is develop partnerships with major technology companies like Microsoft, Tally, Salesforce, and several others, and also with the smaller technology companies. We pick up ideas from these companies about the emerging technologies in the ICT space. The third thing we do is pick up information from the market by attending seminars and events on trending technologies. After picking up ideas from the market, we partner with technology companies to run our training programmes.

Is the ICT Academy conducting any exercise to train its employees, most importantly its teachers, in emerging IT technologies to ensure that the technological transition is smooth for everyone?

This is the most important thing. When the teacher is well informed in the emerging technologies, he will be in a position to provide the kind of training that will enable the students to be ready for taking jobs in the industry. One of the pillars of the ICT Academy is the Faculty Development Programme. In the last 12 years we have trained about 70,000 teachers in programmes that are related to emerging technologies and the way in which we utilize these technologies in our own life and in the industrial space. We ensure that our teachers have practical exposure to the technology companies and they know how the industry makes use of technologies for creating its products and services. We run masterclasses and workshops to expose our teachers to the industry. Our Faculty Development Programme is fairly comprehensive—we not only give them the instruction, we also help them get practical experience.

What steps are being taken to promote digital literacy in Tamil Nadu and the rest of the country?

That’s a big drive that the central and the state governments are taking to promote digital literacy in the country. Lot of citizens in the country are now using digital systems for procuring services and benefits from the government. The Tamil Nadu government has the e-Seva Kendras, where more than 130 services are available. We have a process by which we can certify the citizens for being digitally literate so that they can avail these services. This is a major ongoing drive to encourage the people to use the digital systems instead of the offline systems to avail services and benefits from the government.

In what ways is the ICT Academy promoting collaboration and cooperation between the industry and academia?

We achieve collaboration between academia and industry through our system of partnership between the two. Our students update their biodata on our portal—this biodata is accessible to the technology companies that are our partners. The companies use this biodata to hire the students. We also have a model in which the industry shares with us the information on the kind of skills that they need. We have developed a Hire-Train-Deploy model. In this model the industry representatives come to the campus and hire students in the pre-final year, and then we train the students during the final year, so that they are job-ready on day-one when they join their company. This model has become very popular in the past few years and a lot of companies are coming forward to partner with us, so that they have enough time to get their potential employees trained in the area in which they want to employ them.

Another model that we have is called Industry on Campus. Not all companies are capable of putting up units inside the campus—but there are some companies which are willing to put-up small units inside the campus to enable the students to work in the units during their off-time and acquire practical skills. This model gives the industry the opportunity to intensely evaluate the students. Sometimes we employ industry professionals to come to the institutions and redesign the curriculum and to give training to the teachers. When the teachers incorporate the industry relevant practices in their teaching, the students reap the benefit.

19.1. Advanced unmanned air traffic management system ‘Skye UTM’ unveiled in New Delhi; to handle 4000 flights/hour
ET Gov. 9 Feb. 2023

The UTM is a cloud-based traffic management system that connects and communicates with all types of drones, from survey drones to delivery drones to aerial taxis.

The UTM is a cloud-based traffic management system that connects and communicates with all types of drones, from survey drones to delivery drones to aerial taxis.

An unmanned traffic management system called Skye UTM was launched in New Delhi on Wednesday. The system or software comes with special, ground-breaking features, including the Skye tunnel. On the sidelines of the Skye UTM launch, Union Minister for Road and Highways, Nitin Gadkari emphasized deploying new technologies in the construction, infra, and highway sector. He said it is a time for Indian drone start-ups to lead the industry like software.

Drone Technology
The drone is a futuristic technology, and its potential is beyond imagination. Drones make activities extremely efficient and cost-effective. Drones are going to be used across sectors, from construction, agriculture, healthcare, defence, infrastructure, surveying, real estate, and transport. Drone companies will even monitor highways and road construction. There is a lot of research happening that will certainly help scale its usage, and we wish Skye Air the best of luck in taking this futuristic technology even further. added Gadkari. He further commented that his ministry will soon invite participation from drone start-ups to be deployed for real-time monitoring and speed up highway constructions and also keep a check on fatal road accidents. A tender will be floated very soon by the ministry to execute the operation.

Skye UTM
Skye UTM is a cloud-based aerial traffic management system that stitches unmanned air traffic with manned aviation airspace. It is the most advanced and indigenized Aerial traffic management platform that has been built towards providing situational awareness, autonomous navigation, risk assessment, and traffic management to all drone/other aerial mobility operators across the airspace.

Commenting on the needs and the USP of the Aerial traffic management system, Ankit Kumar, CEO of Skye Air said, “With the higher adoption of drones and other aerial vehicles by various end users, the number of drones in the sky is increasing massively. The requirement for situational awareness has become a necessity, the drone pilots, regulators, and controllers need real-time information about the drones in the sky. Skye UTM is a game changer in this regard providing situational awareness to both regulators and pilots, by digitally establishing communication with the drones and connecting traffic across the airspace. The nature of its Autonomy helps to have real-time tracking and awareness."

Skye UTM has already supported 300+ successful BVLOS (Beyond Visual Line of Sight) drone flights till now. The Skye UTM captures more than 255+ parameters of UAV movements and stores them in its ‘Blackbox’ which is a published systematic description of the entire flight. The platform offers the first 3-Dimensional view of the drone airspace along with operations and regulations mapping servers which offer the latest airspace status, verified paths, and display real-time UAV movements.

The UTM is a cloud-based traffic management system that connects and communicates with all types of drones, from survey drones to delivery drones to aerial taxis. Skye UTM boasts of its super accessible pop-up UTM feature, used for non-recurring activities which allow the user to access the platform and its feature without any complicated integrations. This serves various applications such as aerial filming, single region survey, etc.

Further giving insight on the platform, Ankit Kumar said, "The drone industry is growing multi-fold and the need for UTM is now more than ever to ensure safer skies. Skye UTM offers tons of features enabling situational awareness, handling more than 4000 flights per hour, Pop-up UTM, and many others. I believe our proprietary tunnel-based navigation is going to be a game changer for enabling a higher degree of automation in navigation.”

The real-time aviation system can connect to any model of drone and is supported by an extremely detailed pre-and post-flight reporting system. The UTM is more technologically advanced, faster, and safer for the drone revolution.

Skye UTM organizes drone airspace into zones that are designated for high-speed operations, deliveries, big drones, and passenger aircraft. Each of these boundaries allows the airspace to be optimized for the needs of UAVs. Through its cloud architecture and real-time communication APIs, Skye UTM integrates with ANSPs, heli-drones, and all other manned aviation systems to coordinate movements and further strengthen the integrity of the airspace.

The platform offers Regulatory access to Air Traffic Controllers and other regulatory authorities allowing them to have real-time drone traffic movement information, pilot information, and other necessary data for evaluation and coordination.

With the system's successful commercial debut in India, Skye UTM is now accessible to everyone. The traffic management system will also be introduced globally in the coming days. India is soon anticipated to become the drone capital of the world. With the drone revolution and last-mile connectivity, there will be a surge in drone start-ups foraying in the sector, and as a result, manufacturing will also scale up. In such a scenario, Skye UTM will help take the baton forward by providing a platform that will weave in the much-needed safety measures as drones will be used across industries not just in India but also for drone operations on a worldwide scale.

Skye Air Mobility
Skye Air Mobility is India’s leading drone delivery company with operations across 10 states. The company is focused on streamlining drone deliveries as a mainstream logistics solution for healthcare, e-commerce, quick commerce, Agri-commodity, and other industries. The mission of the company is to enable faster, sustainable, cost-effective, and efficient deliveries across verticals and bring in the rightful impact to reduce TAT (turn-around-time) for its clients and their consumers. The company currently offers Drone-as-a-Service and UTM-as-a-service to all its customers.

19.2. Indian Institute of Science collaborates with Samsung to boost semicon R&D
ET Gov. 9 Feb. 2023

The partnership aims to build cutting-edge ESD device solutions to protect ultra-high-speed serial interfaces in advanced Integrated Circuits (ICs) and system-on-chip (SoC) products.

Samsung Semiconductor India Research (SSIR) has announced a new partnership with the Indian Institute of Science (IISc) to promote research and development in the field of on-chip Electrostatic Discharge (ESD) protection. The research agreement was exchanged by Balajee Sowrirajan, CVP and MD at Samsung Semiconductor India Research, Bengaluru, and Govindan Rangarajan, Director, Indian Institute of Science (IISc), in Bengaluru on Wednesday.

The partnership aims to build cutting-edge ESD device solutions to protect ultra-high-speed serial interfaces in advanced Integrated Circuits (ICs) and system-on-chip (SoC) products. The related research will be carried out by Prof. Mayank Shrivastava’s group at the Department of Electronic Systems Engineering (DESE), IISc. Solutions arising from this research will be deployed in Samsung’s advanced process nodes, according to a press release.

ICs and SoCs are essential for practically any system, from small to big, that we see around us, but they are very sensitive to ESD failures, especially those developed using advanced nanoscale CMOS (Complementary Metal Oxide Semiconductor) technologies. A majority of IC chip failures and field returns are attributed to ESD failures. This is also rare expertise and industries holding the art of designing ESD protection devices and interface concepts lead the market. Thus, R&D in ESD technology for highly reliable interfaces and SoCs that operate at low power and high speed is an integral part of the semiconductor innovation effort. IISc is one of the few institutes in the world leading ESD device research, the release said.

“We are glad to partner with IISc to boost semiconductor innovation and envisage developing ESD knowledge along with expertise available in IISc. Our goal is also to increase capacity building through training programs at the postgraduate level, opening up opportunities for students to pursue industry internships, and encourage entrepreneurial ventures by young researchers,” said Balajee Sowrirajan.

Govindan Rangarajan, the Director, IISc, said, “We are excited to collaborate with Samsung Semiconductor India Research in the crucial area of advanced nanoelectronics device research. The partnership reinforces our commitment to strengthen industry-academia engagements that can make a significant impact in the coming years.”

“We have been collaborating extensively with semiconductor industries worldwide on advanced nanoelectronics technologies, including solutions to ESD reliability threats to advanced SoCs. We have carried out both fundamental and applied research on ESD protection devices, with a strong emphasis on creating practical solutions for the semiconductor industry in a range of technology nodes,” said Prof. Mayank Shrivastava, who heads the MSDLab, and will be leading this collaborative effort.

Samsung Semiconductor India Research, a subsidiary of Samsung Electronics, is the technology hub enabling innovative growth in both hardware development as well as software powered solutions in semiconductor technologies. IISc is India’s top academic institution offering world-class education to train future leaders in science and engineering. Working towards a collective goal, partnerships like these will unlock the true potential of semiconductor innovation to power the next generation of hyperintelligent devices.

20.1. A Jain College unicorn, US listing, and a VC firm: these BCA grads prove alma mater doesn’t matter

ET, 10 Feb. 2023

India’s startup boom will be truly impactful when it transcends elite engineering colleges. The professed goal of democratised entrepreneurship is achieved when thousands of founders emerge from ordinary circumstances.

A Bachelor’s in Computer Applications (BCA) from Jain College, Bengaluru, in the curriculum vitae is not something that excites venture capitalists (VCs) when it comes to putting their money. Forget VCs such as Sequoia Capital, Accel Partners, and Tiger Global — back in 2008-09, even IT giants like TCS and Infosys would not hire BCA graduates as trainee software engineers.

But five students from the 2008 and 2009 BCA batches of Jain College banded together and built a profitable tech business. In 2017, their eight-year-old bulk-messaging service, Solutions Infini, earned INR140 crore in annual revenue and recorded a net profit of INR4 crore.

In the same year, the company was merged with an Italian firm. Though the founding team did not reveal the price at which they sold their stake, it is quite likely that they were handsomely rewarded for their hustle outside the luscious venture capital world.

If one were to hazard a guess, a price that is 5x the company’s annual revenue must have fetched USD100 million, shared among the five partners based on the equity they held. The valuation could have been anywhere between 2x and 7x of the annual revenue. It remains a guess.

The merged entity, rechristened Kaleyra Inc, got listed on the New York Stock Exchange in 2019 with a market capitalisation of USD440 million.

Being bestowed with millions of dollars in your early 30s is beyond any middle-class dream.

What did they do with it?

Hunting for winners
Three of the founding team pooled in money to launch a micro VC firm. Upsparks Capital, launched by Vinay Jain, Mohammed Faraz, and Shivam Prasad, has deployed their proprietary capital into some 50 startups over the last three years. They wrote cheques of different sizes, ranging from USD25,000 to USD150,000, aggregating USD4 million approximately.

And they do have some impressive wins.

Upspark’s portfolio firm Pixis, an AI-based marketing intelligence SaaS (Software as a Service) startup, recently raised USD100 million in Series C round from SoftBank Vision Fund and General Atlantic. Savings startup Jar, another investee firm, raised subsequent rounds from Tiger Global, Rocketship.vc, and others at a valuation of USD330 million. Most of the companies got follow-on funding. According to Upsparks’ partners, their multiple on invested capital (MOIC) is already 5x.

With a small corpus and an unfancied background, how does Upsparks pick such winners amid the scramble for seed deals?

According to Crunchbase, a funding information database, 257 firms are involved in seed-stage startup investments in India. Faraz, partner, Upsparks Capital, says that relationships built over the years with several top executives at leading startups during Solutions Infini days have earned them goodwill and network. Their previous company was a vendor to major consumer Internet startups. “We meet or speak with seven new startups every week,” he says.

Constant engagement with founders, frequent calls with deal-sniffing VC giants, and funding talks on a daily basis — Jain College alumni’s micro-fund has broken into the buzzing startup ecosystem which has an inherent bias towards educational pedigree.

The micro-VC avatar founded by Faraz, Jain, and Prasad is only one part of the story.

Designing web, destiny
Aniketh Jain and Ashish Agarwal, the CEO and chief technology officer who held a larger stake in Solutions Infini, chose to continue and remain a part of the IPO process of the merged entity Kaleyra Inc.

Last year, they launched Fyno, a B2B SaaS platform for customer engagement.

When a degree in computer applications from a mid-tier college does not necessarily get one beyond the gates of a decent IT services firm, how did these five build a profitable INR100 crore-plus revenue company and earn a multi-million fortune?

Perhaps, dim job prospects were a motivation to start their own business. Jain says BCA graduates back then used to mostly land in data entry-type jobs. The 2008 global recession meant that even such jobs were hard to come by. Some of the Solutions Infini founding members got offer letters, but were not hired.

This forced them to start “something small”. They started by designing and launching websites for a living. “We didn’t call ourselves a startup. We were just a small software services business. There were dozens of such companies in Koramangala during that time,” says Vinay Jain who is now a partner at Upsparks.

In a year, they got into messaging service. SMS used to be the key customer communication channel back then and it was growing. India’s consumer Internet was beginning to take shape in the early 2010s.

The Flipkarts and Olas of the world were aggressively acquiring customers. Solutions Infini became their messaging service partner. To some extent, they grew with India’s e-commerce boom.

Ten years of running a business-to-business (B2B) messaging service has brought them not only financial success but also experience in operations, team building, partnership creation, and networking too. That indeed helped them confidently step into the world of VCs as well as build businesses for the second time.

Solution Infini is not the only example of entrepreneurial success achieved by the Jain College alumni. Abhay Hanjura, founder of meat-selling unicorn Licious is a Bachelor of Business Management (BBM) from the same college.

Kunal Shah, founder of fintech startup Cred, has a BA in Philosophy from Wilson College, Mumbai. Ajay Gore, former group CTO of ride-hailing and delivery service company Gojek, who is currently an operating partner at Sequoia Capital advising its portfolio companies on technology function, is a B.Com from Allahabad.

With the Indian startups ecosystem achieving breadth and depth (estimates peg the total number of startups at 100,000) it is not unusual to find people with diverse backgrounds making it big in New Age businesses.

Yet, they are an exception rather than the rule. More than 90% of unicorn startups are run by IIT-IIM graduates, according to a study. This may not be very different when it comes to the rest of the VC-backed startups.

The real deal
It is only natural that in tech startups where supreme skills for blitzscaling are in high demand, elite engineering and management degrees carry considerable weight. Solutions Infini, like many others, prove that isn’t always the case.

And the latest entrant to that list is perhaps D2C fashion brand Snitch, which got an ‘all shark-deal’ in startup reality show Shark Tank just last week. All judges (high-profile startup founders) together invested INR1.5 crore for a 1.5% stake in the Bengaluru-based startup founded by Siddharth Dungarwar, a B.Com graduate from St Joseph’s College in the city.

Snitch’s chief marketing officer and founding member, Chetan Siyal, is also from Jain College.

India’s startup story will become truly impactful and achieve its professed goal of democratised entrepreneurship when several such successful startups, not necessarily unicorns, come out of every nook and corner of the country.

We currently have 100 unicorns. Approximately 100,000 startups have together raised nearly USD100 billion of private capital. It is a phenomenal story and has created a million jobs. It can still be seen as an elite club with a high entry barrier. The real deal is when thousands of founders emerge from ordinary circumstances.
(Originally published on Feb 10, 2023, 04:15 AM IST)

20.2. How Rajendra Badwe is making cancer treatment affordable by repurposing easily available drugs
ET, 13 Feb.2023

Badwe, director of Mumbai’s Tata Memorial Centre, has reset the rules to revolutionise treatment standards. His views on disease management and research protocols count not just in India but also at world’s leading institutions. Last September, in one such instance, Badwe and his team of doctors made revelations which provide a new direction of treatment for breast-cancer patients.

On a pleasant December morning, Ernest Borges Road in Mumbai’s Parel area is a hive of activity. Running along the Tata Memorial Centre hospital, it is chock-a-block with vendors and honking cabs even as countless cancer patients try to find their way through the melee.

Inside the hospital, the colossal hallway and waiting area of the Homi Bhabha Building is bursting at its seams. Hordes of patients and caregivers briskly saunter clutching their case files and radiology reports. The day has just begun, but the crowds have already swelled to the brim.

The hospital and research centre treats thousands of patients every year not just from the city, but places as far as Guwahati, and neighbouring countries like Bangladesh and Nepal. For millions, Tata Memorial Centre has attained a towering stature as a beacon of hope. For the medical community, it is the byword for commitment, diligence, and excellence in cancer care.

A calm mind sets a doctor apart
Unmoved by the crushing workload, Rajendra Achyut Badwe, director of the Tata Memorial Centre, keeps an unbelievable poise. As he enters his cabin after the daily rounds, an eagerly waiting staff hands him a case file, telling him about a patient who has high fever. Badwe sifts through the file and names a medicine. The room can barely muffle the incessant sound of ambulance sirens and ringing phones, but Badwe maintains a calm baritone amid the commotion.

It is also a reflection of the cancer specialist’s decades of experience, because of which he has come to be revered as much as the institution he helms. Many of his patients endorse this, saying that just a glimpse of the doctor has a healing effect.

"The way the industry sees is to butcher the competitor. I say, please look at the patient first. There cannot be a price tag to saving lives… If only 5% of my people can afford a drug, what’s the point of showing efficacy? It is good only for the books."

— Rajendra Achyut Badwe, director, Tata Memorial Centre

Badwe has reset the rules to revolutionise treatment standards. His views on disease management and research protocols count not just in India but also at world’s leading institutions such as Memorial Sloan Kettering Cancer Center in New York, German Cancer Research Center at Heidelberg, Mayo Clinic, and Cleveland Clinic.

According to the Padma Shri awardee, several global standards of treatment need to be re-examined. Last September, in one such instance, Badwe and his team of doctors made revelations which provided a new direction of care for breast-cancer patients.

Breaking old barriers with old drugs
The venue was Paris, and the event was the European Society of Medical Oncology, a highly rated annual gathering of oncologists. Badwe presented results of a landmark study involving 1,600 women from 11 centres across India over a decade.

The women had early-stage breast cancer and were planning to be treated with surgeries. The study showed that an intervention using lignocaine, a low-cost and widely available local anaesthesia agent given just before the surgery, can cut the risk of death and recurrence by 29%. The enthusiasm of Badwe, for whom making a significant breakthrough at an affordable cost is the true north, was evident as he narrated the feat.

“This is the first study of its kind globally that has shown a sizeable benefit by single intervention prior to surgery. If implemented across the world, it [the finding of the study] has the capability to save over 100,000 lives annually,” he said in a press release.

Frugality is at the heart of Badwe’s research efforts – to see how existing drugs can be repurposed and used optimally for significantly better outcomes. The research he presented at Paris can potentially alter patient’s lives especially in poor-income settings.

For ET Prime readers, Badwe gave a lucid explanation of how a simple surgery at peri-operative level can result in a big difference. Before the start of a surgery in breast cancer, the patient is on anaesthesia and the tumour has normal blood supply. At that stage, a biopsy is done to find what the tumour shows. Then, he adds, the first stage of surgery gets rid of the blood supply on 50% of the tumour surface.

“I make the cuts to remove the tumour, and 50% surface of the tumour is denuded of its blood supply. I do a second biopsy to see whether the tumour has changed at all, and at the third stage, I have the whole tumour in my hand. So, in the first biopsy, everything is fine or on expected lines, in the second, half the blood supply is cut off, and in the third, the tumour is left with no oxygen or nutrition and is technically dead. All these tumour responses are in gaps of five to 15 minutes,” he says.

When a tumour fights back
The three steps and how the tumour responds, Badwe adds, is based on a simple hypothesis, in which the tumour is represented by a person walking at Mumbai’s Marine Lines. The person won’t have to keep survival instincts up, as everything appears fine. “So my expression profile will be at the minimum, like what we saw in the first biopsy.”

But suddenly, if some goons appear on the scene, the person’s natural instincts will be fright, fight, and flight. This is akin to the tumour’s response to the second biopsy.

In the third scenario, the goons overpower the person, who stops reacting and just surrenders.

Until now the understanding of cancer biology has been based on the first and last biopsy samples. Nobody had studied the tumour response in the second biopsy sample. That’s where Badwe and his team found the big change. Between the first and the last biopsies, 30 to 40 genes were different, but the surprise was in the middle sample. Some 800 genes were upending.

“This showed that the tumour was quickly trying to dissolve the surroundings or replicate and produce cells to step up its fight. It also had some cells that had improved motility, signifying they just wanted to run away, like a situation when the goons were overpowering the person. The tumour developed that kind of agility within five minutes, and these were about a billion cells that got stimulated just by introduction of an anaesthesia injection. This is how our study progressed,” Badwe explains.

Essentially, the local anaesthesia administered just five to 10 minutes prior to the surgery prevents the activation of pathways that may proliferate the cancer cells.

Lignocaine is an injection known to have inhibitory effects on cancer cell division and requires no additional expertise. More importantly, it is inexpensive, Badwe said in the press statement.

This treatment is used for early-stage cancer surgery before the cells metastasize. It added that the benefits are substantial and were achieved at the cost of less than INR100 per patient. For comparison, targeted drugs that cost more than INR10 lakh per patient have achieved benefits of far lesser magnitude in early breast-cancer patients.

As a practising surgeon, and an avid researcher, Badwe is upbeat about the impact of the findings. He is looking to explore the next step — identifying newer molecules (medicines) with better efficacy than lignocaine. He is also exhorting scientists to explore if the experiment can be replicated in other widely prevalent cancers such as those of the lungs or pancreas. The idea is to find novel solutions where a tumour can be put to sleep early, but such treatments must also be affordable.

More breakthroughs
In December, Badwe and his team found untapped value in yet another molecule, carboplatin, an old and widely used chemotherapy drug. “… carboplatin increased the cure rate and survival of a very aggressive type of breast cancer, called triple-negative breast cancer (TNBC), especially among young women,” a press release said. “Until the results of this study, there was no conclusive evidence that this drug should be routinely used as part of the treatment of this disease.”

The results were hailed by oncologists worldwide as “practice defining”.

“Given that TNBC constitutes about 30% of breast cancers in India and about 45% of breast cancers in women younger than 50 years, the implications of this result are very important,” the press release added.

But the most remarkable part is that the use of this drug gels with Badwe’s principles — carboplatin costs less than INR1,000 for a month’s treatment and almost anyone can afford it at that price. “We are teaching a new trick to an old dog. This makes the treatment easily implementable and affordable,” says Badwe.

Seeking new paths of research
Using a set of old and conventional norms, Badwe seeks to bring a new thought process on existing drugs. He says before the pharmaceutical industry tests a new drug, it looks at its toxicity at the maximum dose level. But the bigger question to ask: Is it the same as getting maximum efficacy?

“What we did was to first cut the dose to half and see if at that level, the same efficacy was found, and the point was why take it to the maximum level to assess its toxicity. Repurposing of the dose and repurposing of an old molecule are the two main components of our research,” says Badwe.

He brings in the cost angle here, since getting an equal efficacy level at half the dose simultaneously cuts the cost for patients.

Corporate greed and the rich-poor asymmetry
To further build on that point and highlight an ironical contrast vis-à-vis rich countries, Badwe says some of the new drugs launched by western companies cost as high as INR70 lakh. “Such drugs may be made at INR30 lakh, but even at that rate, are they affordable? Then, we need to cut down the cost even further. By the time we study these drugs, the generics also help reduce the prices.”

On the rising wave of global research in the promising area of CAR-T cell therapies, Badwe says that at current levels, such treatments cost half a million dollars in the US. The price for India, he says, is expected to be INR30 lakh. “INR30 lakh and INR4 crore is a huge difference, but even at less than a tenth, can Indian patients afford these therapies?” he asks.

The price tag is also a result of the vectors, which help in cell generation, and are needed for such therapies. “Indian scientists should see if this treatment is possible at INR15 lakh. Can we manufacture the vector at INR5,000? My view is the product should be easily available to everybody and that is where generics and biosimilars have a crucial role to play,” he says.

“The way the industry sees, is to butcher the competitor. I say, please look at the patient first. There cannot be a price tag to saving lives. For companies, shareholders should be the “by the way” factor and this can’t be seen the other way. At present, patients are “by the way” and shareholders are a priority. If only 5% of my people can afford a drug, what’s the point of showing efficacy? It is good only for the books,” he says.

Badwe says his hospital makes cancer drugs available to patients at less than 80% of the MRP, adding the hospital keeps a close guard on preventing misuse by using electronic prescriptions. “Even as a director, I cannot write a prescription for a patient where the drug is not indicated,” he says, making the point on stringent tracking and compliance standards.

On the two new studies highlighted earlier, Badwe says many like Heidelberg University in Germany or the British Association of Surgical Oncologists are planning to implement the new treatments. However, he says it is disappointing that the industry is not pushing these, and surgeons are taking it upon themselves to bring these into mainstream treatments.

A career decided by a coin toss
For someone whose name figures among the world’s most renowned oncologists, Badwe’s decision to pursue medicine as a career was decided by a coin toss.

In 1974, he says, he stood first in Mumbai University in mathematics. Everybody in the family wanted him to go into engineering, but he was in a dilemma, as many in his family were in the medical profession.

“I thought it was best decided by a coin toss, and medicine won,” he says with a smile. Asked if as an engineer, he would have made an impact on as many lives as he has as a doctor, Badwe’s humility comes across. “Well, somebody else would have done all this,” he replies.

He credits his team for his accomplishments, saying they are so efficient that he always remains grateful to them for everything. In his practice, he adds, he has learned that the way to stay motivated is to feel abundance within oneself. “Only when you have abundance that you can share with others,” he says. “Our motto is [that] nobody who enters the doors of the hospital should be denied treatment because they can’t pay. That [providing treatment] is not negotiable.”

When drugs meet a doctor’s empathy
Cancer is a dreaded word, but Badwe says that is also what tests a doctor’s ability to handle patients. Some failure is unavoidable in this field, he adds. “If you are successful, more people come to you. That is expected. But when caregivers and relatives of past patients come to you for their next big problem even though there was a failure in an earlier case, that’s the measure of your success.”

For doctors, Badwe has a gentle advice: It is vital that caring about the comfort and emotions of a patient is as important as prescribing them evidence-based medicines. The happiness that can provide is immeasurable, he says. “With so much of economic measurables today, the immeasurable has vanished.”

Moreover, he adds, government officials should not look upon government hospitals as a provider of ordinary services to the poor man. They should work at building a good image for such units.

Every year, Indian villages report an average of 40 to 45 cancer cases per 100,000 population. In mid-sized towns, that figure goes up to 65, and in cities such as Mumbai, it jumps to 100. In the US, that ratio is 350 cases. The critical statistic, says Badwe, is that the 100 per 100,000 ratio has not changed in the last 15 years, which is a positive factor. But the inevitable part is, every 10 years, 7% to 10% of the population moves from rural to semi-urban, and semi-urban to cities. “In our new hospital at Varanasi, we treated 16,000 patients in the first year. But our numbers from places around Varanasi — about 3,500 patients — remained the same,” Badwe adds.

It is insights such as these, which go beyond clinical outcomes and reveal Badwe’s humane facet, that make his work shine even brighter. It also makes him an exceptional doctor.

India and the World

21.1. Working on 200 Projects in India: US Trade Agency
ET, 19 Jan. 2023

The US Trade and Development Agency (USTDA) Wednesday said it is working on around 200 projects that will unlock investments worth $37 billion in India. “There are 200 activities in India across clean energy transportation, digital infrastructure, and health care.

The US Trade and Development Agency (USTDA) Wednesday said it is working on around 200 projects that will unlock investments worth $37 billion in India. “There are 200 activities in India across clean energy transportation, digital infrastructure, and health care. We estimate that portfolio will unlock $37 billion in financing if these projects are implemented,” Enoh T Ebong, the Director of the agency, told reporters here.

Ebong, who is in Delhi on a visit, has been reviewing infra projects that are being developed under the various partnerships between India and the US. She said the focus of this visit has been on renewable energy, and spreading broadband connectivity in 16 states.

Commenting on the projects that are being developed in the country, she said that they can be financed by private, public sector, and multilateral banks.

21.2. As India hobnobs with the West to tame China, the West hopes to wean India off Russia. Will it work?
ET, 9 Feb. 2023

In a big tactical push, India and the US have elevated their strategic partnership in critical technology. With a hawk eye on China, NSAs of the two countries termed their cooperation in critical and emerging technologies as significant. The West wants to decouple from China, and also doesn’t like India-Russia bonhomie. Can it kill two birds with one stone?

Three big developments in the past week seem to be setting the stage for India’s critical-technology cooperation in the strategic sector with three of its western allies.

First, it was the maiden meeting of national security advisers (NSA) of India and the United States on January 31 concerning the Initiative on Critical and Emerging Information Technology (iCET).

Second, was the NSA-level strategic dialogue between India and the United Kingdom on trade, defence, and science and technology. In a special gesture, British Prime Minister Rishi Sunak joined the meeting as part of the dialogue between Indian NSA Ajit Doval and his counterpart Tim Barrow on February 4.

Third, is the recently announced India-EU Trade and Technology Council, which aims to deepen collaboration between India and the European Union to tackle strategic challenges at the nexus of trade, trusted technology and security.

Even though there is no explicit reference of China in either the iCET document, the India-EU Trade and Technology Council announcement, or the India-UK dialogue, strategic-affairs experts believe India’s western allies such as the US, UK, and the EU see technology advancements through the prism of China’s hegemonic ambitions in the sector.

“It’s a major milestone in technology cooperation between the oldest and largest democracies of the world,” lieutenant general (retired) Rajesh Pant, India’s national cybersecurity coordinator at the National Security Council Secretariat, told ET Prime, commenting on iCET.

Pant, who played a key role in blocking Chinese apps’ access to India after the Galwan clash and blocking Chinese flagship Huawei’s access to India’s 5G bid, is seen as the NSA’s top man to corner China’s hegemonic technological ambitions in India.

Some experts also believe that at a time when the US-China quagmire is getting extensive under Biden, the US is hoping to lock in India’s critical support as part of its Indo-Pacific strategy to “friendshore” democracies like India to encircle China.

India’s partnership to contain China in the strategic tech sector is not limited to the US. New Delhi also believes the US is India’s key partner in the Indo-Pacific strategy and Quad grouping. India and Australia already have the Australia-India Cyber and Critical Technology Partnership to advance shared interest on frameworks, standards, and critical technologies.

Following on from the May 2022 bilateral talks in Tokyo on the sidelines of the Quad summit, the US and India launched iCET at its maiden meeting last week in Washington.

This meeting was spearheaded by both countries’ National Security Councils. iCET’s focus is on technologies that aim to drive global growth and protect shared national-security interests. Taking a veiled dig at China, the US’s NSA, Jake Sullivan, said that iCET will accelerate America’s strategic technology partnership with India and advance the two countries' shared democratic values.

Sullivan said, “iCET is about much more than technology cooperation. It’s a platform to accelerate our strategic convergence and policy alignment.”

Highlighting the work ahead for both governments, Sullivan added that the US and Indian governments “want to establish a list of firsts in removing barriers on both sides to enable greater ambition”.

“The US-India defence and artificial intelligence dialogue is a multi-layered approach, and China is one of the dimensions, as it is a major challenge to New Delhi and the world,” a senior administration official in Washington told reporters.

Sources say that one of the sessions during the iCET executive round table held by US-India Business Council (USIBC) discussed microchips as critical technology and the importance of US-India partnership in building a semiconductor supply chain.

“Both governments convening the iCET, with such a strong industry presence at the US Chamber of Commerce, demonstrates that business plays an essential role in bolstering security and prosperity of both nations,” ambassador Atul Keshap, president, USIBC said.

These events come against the backdrop of the West, especially the US, trying to decouple from China in the strategic-technology segment, including semiconductors.

In October 2022, Washington announced tight export controls to make it impossible for companies to sell chips, equipment, and software containing US tech to China.

Alongside, the West is hoping India will move away from Russia in the strategic-technology and defence sectors.

Michael Kugelman, deputy director of the Asia programme at Washington-based think tank Wilson Center, calls out China and Russia as key players. “To be sure, from Washington’s perspective, part of the rationale behind iCET is to show that the US and India are diversifying their partnership and can cooperate on issues beyond pure security and strategic issues. But let’s be clear: China and Russia are major factors in this story. Washington hopes that by helping supply New Delhi with better military technology, it will help India strengthen its capacity to deter China — and also reduce New Delhi's reliance on military equipment from Russia.”

Foreign diplomatic sources close to Russia and India’s strategic collaboration say that the US-India tech collaboration began much before the Ukraine crisis. The India-Russia tech cooperation is 90% focused on defence, the add.

Further, they believe India is now looking to “diversify” — find alternatives to Russian suppliers in defence — pointing to fighter jets and helicopters.

As competition between the Indo-Pacific powers heats up, with China also venturing into strategic tech, the US aims to build a democratic ecosystem for high technology with countries like India.

The backdrop of geopolitical competition with China has been a key feature of the US-India relationship for more than a decade. The latest event in which an alleged Chinese spy balloon sparked tension with the US, is an example of how Beijing can use sophisticated high-altitude surveillance technology to collect data.

The United States has been waging a tech war with China in the semiconductor segment. Washington also supports India’s National Semiconductor Mission, as it will help the US diversify its supply chains away from China.

“The broad goal of iCET is for the US and India to co-develop and co-produce different forms of technology. To be sure, this isn’t new, but the hope is that with the two NSCs leading the charge, there will be more forward movement than in the past when bureaucratic inertia militated against better progress,” Kugelman says.

India’s NSA Ajit Doval and India’s ambassador to the US, Taranjit Singh Sandhu, highlighted India’s remarkable capacity for technology development and absorption and emphasised its use of technology not only as an enabler of economic growth but as an instrument of social inclusion.

Here are some achievements of the first iCET collaboration between India and US:

While answering why the US is sharing critical tech with India now, Kugelman has a word of caution.

“Because of the growth in relations and the proliferation of new defence technology accords in recent years, there’s less mistrust than in the past, which will make Washington less reluctant to provide critical tech to New Delhi. Still, there are regulatory barriers and policy concerns, such as those related to date localisation, that could cause problems,” Kugelman says.

Here are some initiatives taken by India and the US towards building resilient semiconductor supply chains:

“It is promising to see the US and India prioritise discussions and investments that will enable greater semiconductor leadership within and among partner economies,” says Sanjay Mehrotra, president and CEO of Micron Technology, an American producer of computer memory devices.

India and the US are also collaborating on science, technology, engineering and math (STEM) talent. Under this, a new joint task force of the Association of American Universities and leading Indian educational institutions, including Indian Institutes of Technology, will make recommendations for research and university partnerships.

The two sides are also advancing cooperation on research and development in 5G and 6G, facilitating deployment and adoption of OpenRAN in India, and fostering global economies of scale within the sector.

Rajan Mittal, vice chairman and managing director, Bharti Enterprises, says, “iCET successfully deliberated on the deployment of OpenRAN technology for 5G to create trusted sources, trusted networks, and trusted partners.”

Kugelman adds, “The stakes are quite high. It’s not just that expectations are high because the NSCs are now overseeing tech collaboration. Modi and Biden will be meeting several times in the coming months, with the possibility of a state visit for Modi in Washington this summer. The two sides will be under pressure to achieve some type of major success so that the two leaders will have something to announce when they meet.

“There’s also a limited window: both countries have elections next year, and so there will be pressure to get something done before the two capitals go into election mode and have less policy bandwidth for iCET.”

On expected lines, iCET drew a sharp reaction from Beijing.

Liu Zongyi from Shanghai Institutes for International Studies was quoted by Chinese newspaper Global Times as saying that the initiative is part of US’s “wishful thinking”, as it is unlikely to bear fruit because New Delhi may not follow the US’s playbook.

Close on the heels of iCET, the India-EU Trade and Technology Council’s announcement is also set to put New Delhi in an elite club and allow access to advanced technologies, besides allowing the two sides to set standards in crucial areas such as 5G and artificial intelligence.

The bottom line
The western world is clearly trying to kill two birds with one stone.

One, pushing India to decouple from Russia in strategic space.

At the same time, the West is keen to “friendshore” India as part of its technology war with China. As the US is looking at build allies in Asia for AI and compete with China, New Delhi will be a critical peg.

Given it is India’s G20 presidency year, New Delhi will be looking at the support of all P5 members (which include the US, China, and Russia) to make its term successful. New Delhi’s position of ‘alignment with all’ allies will come in handy.

However, with iCET, it seems India’s strategic technology decoupling with Russia has begun.

22. India Assures IMF; Sri Lanka Close to Securing $2.9b Bailout
ET, 20 Jan. 2023

India has formally given an assurance to the International Monetary Fund to help Sri Lanka secure a $2.9 billion bailout, the Ministry of External Affairs has said.

India has formally given an assurance to the International Monetary Fund to help Sri Lanka secure a $2.9 billion bailout, the Ministry of External Affairs has said. MEA spokesperson Arindam Bagchi’s statement at a media briefing in New Delhi on Thursday came on a day when foreign minister S Jaishankar landed in Colombo to finalise a debt restructuring plan to help Lanka to come out of its worst economic crisis.

“We would like to be supportive; we have been supportive bilaterally in assistance. There is an important element now of having a sustainable debt framework and structure for Sri Lanka. The IMF is leading that and as part of that they wanted financing assurances from other creditors. We have done that. We have formally sent it to the IMF,” Bagchi said in response to a question. “We are hopeful that this and the conversations with the IMF would help close this deal and make a change on how the debt is restructured, additional financing comes in and Sri Lanka is able to move to a path of more sustainable fiscal management,” he said.

India and Sri Lanka are expected to finalise projects, including in strategically located Trincomalee, during Jaishankar’s trip. IMF has made assurances from China, Japan and India, Sri Lanka’s major creditors, a prerequisite for Colombo to secure $2.9billion.

President Ranil Wickremesinghe had on Tuesday announced in parliament about success in talks with India: “We are working to get our economy on the right track. Now we have to get India and China to consent to the debt restructuring. We are continuing discussions... I am pleased to announce to this House that the discussions are successful.”

“Japan and the Paris Club, two of our major creditors, have expressed willingness to assist. We have already begun talks with India and China. According to discussions with China Exim Bank recently, we’re currently debating on how to restructure our debt. The Chinese have agreed to move quickly,” Wickremesinghe had told a group of businessmen last week. Similar sentiments were expressed by minister Shehan Semasinghe who said there will be “good news from India and China.”

Jaishankar’s visit is expected to see some additional announcements. Talks are expected on the Trincomalee development project and the cross-strait transmission line that would allow Sri Lanka access to India’s plans for an energy grid along with Nepal, Bhutan and Bangladesh. Lanka was also hopeful of a package from the Asian Development Bank.

“We discussed with China’s Exim Bank... We are proceeding with these activities gradually,” the Lankan president had said to a separate group of trade union representatives, indicating the visit by Japanese minister of the cabinet office Satoshi Fujimaru. Vice Minister of the International Department of the Communist Party of China Central Committee, Chen Zhou, is also in Colombo at the moment.

23. Mauritius IFC and GIFT City can complement each other: Mauritius’ financial services minister Seeruttun
ET, 27 Jan. 2023

Mahen Kumar Seeruttun says that the island country is poised to be a strategic partner for India in building the Africa-India corridor as Africa draws more investments. Seeruttun spoke to ET Prime on a range of issues concerning both India and Mauritius.

A strategic ally in the Indian Ocean, Mauritius has been the primary gateway for foreign investments coming into India for several decades. Over the last few years though, this relationship has evolved with key changes in the framework governing the taxation aspects and the emergence of competing jurisdictions such as Singapore and GIFT City.

Unfazed, the island nation has added several new products and innovated in the legislative framework to keep itself relevant for global investors. It has also reinvented itself as a gateway for investments into Africa.

Mauritius Minister of Financial Services and Good Governance Mahen Kumar Seeruttun will be leading a delegation to India next month to meet with key stakeholders. Also on the table is a memorandum of understanding with GIFT City, the dream project of prime minister Narendra Modi.

In a free-wheeling chat, Mahen Sreeruttun speaks to N Sundaresha Subramanian about the opportunities and challenges in the unique relationship between India and Mauritius.

Here are some edited excerpts:

Mauritius has been a major contributor to India's foreign investments. It has been five years since the review of DTAA with India. How have the changes impacted the Mauritius financial services sector?
The India-Mauritius DTAA (Double Taxation Avoidance Agreement) came into force in Mauritius on July 1, 1983. Article 13 of DTAA provided that the capital gains on shares of an Indian company held by a company resident in Mauritius are only taxable in the residence country.

Capital gains tax is at the rate of 0% in Mauritius and this was very attractive to investors setting up a Global Business Company (GBC) in Mauritius. Many investors from the US, the UK or other countries investing in India benefited from this treaty accordingly. As per latest figures of the Department for Promotion of Industry and Internal Trade (DPIIT), Mauritius is still the main contributor to India’s FDI to the tune of USD161 billion for the period of April 2000 to September 2022.

Though, I must admit that lately we have noted a notable increase in the flow from the US and Singapore into India. This capital gains protocol was changed with effect from April 2017. Capital gains arising from the sale of equity that was acquired by GBCs after March 31, 2017 are now taxable by the Indian revenue authority. A transitional period is provisioned in the changes such that tax on capital gains will be levied only at a half rate until March 31, 2019.

Mauritius is an attractive jurisdiction not only because of the tax planning aspects and Global Business Funds are still predominantly targeting India for business representing around 70% of the total schemes.
The number of GBCs targetting business in India has stagnated at around the same magnitude for the last five years. In relative terms, by the end of December 2022 India-focused GBCs represented around 32% of total GBCs compared to 40% five years earlier.
Since 2019, for the first time in its history, the Global Business Sector of Mauritius consists of more companies which are targeting Africa for investment than those targeting India representing around 45% of total GBCs as at end December 2022. Number of Africa-focused GBCs grew on average by 7% while India-focused GBCs contracted by 1% for the five-year period that ended December 2022.
It is also worth mentioning that with the revision of the DTAA, there has also been a loss in terms of the certainty which was initially provided to the investors. Certainty and predictability are key for investors. It was agreed that the grandfathering will apply to the investments made prior to 2017, however, we have noted that the Revenue Authority is still raising assessments for such investments.
In my humble opinion, providing this comfort to investors would have driven more investment into the Indian market.

With tax element no longer there, what are the products/strategies Mauritius is banking on to deliver growth?
The Mauritius International Finance Centre (IFC) boasts a three decades track record in cross-border investment, finance, and offers an unparalleled well-regulated and transparent platform. The operating model of our IFC was not solely reliant on the tax aspect.

The IFC offers a palette of products and services to its clients and has introduced various licenses and new products to enhance its product offering.

Today, with the Global Minimum Tax being the buzz word across the globe, it will not be wise for any government to make tax incentive the only pull factor of its IFC. Mauritius is today focusing more on bringing substance to its jurisdiction, we are offering the opportunities for young professionals to work, live and play in Mauritius.

Being put on the FATF grey list had affected perceptions. But you managed to become compliant in a quick time. How was the experience?
Mauritius was placed on the FATF grey list in February 2020 and being an international financial centre, we had to diligently manage the perception of our stakeholders to maintain the reputation of our jurisdiction. To this end, a strategy and a detailed work plan to address the strategic deficiencies were elaborated which focused on ensuring that the requisite resources, infrastructure and expertise were available for the timely and effective implementation of the action items under the FATF Action Plan.

My ministry coordinated the effective implementation of each milestone within the set deadlines. The progress, along with any challenges, were escalated to the National Committee on AML/CFT/CPF and Core Group for AML/CFT. This exercise was fully supported by the Honourable Prime Minister himself, who chaired the Inter-Ministerial Committee to closely monitor the progress.

I must admit that it was not an easy journey but an enriching one, especially with the challenges posed by the Covid-19 pandemic. At no time, did we jeopardise the quality of the work being undertaken. We prioritised our resources as well as explored alternative methods in implementing an array of measures to address the strategic deficiencies.

The journey from being listed in FATF grey list to being compliant or largely compliant with all the 40 FATF recommendations has been a rewarding experience. Throughout this process, Mauritius demonstrated its unflinching commitment to ensure the sustainability and effectiveness of the efforts to combat money laundering, terrorism financing and proliferation financing.

This achievement is the result of the efforts and undaunted support of my officers as well as all the stakeholders.

Do you think you have suffered disproportionately compared to other jurisdictions because of the negative connotation attached to Mauritius in Indian political discourse and media?
Mauritius and India have been sharing very strong historical and political ties since time immemorial. In fact, India and Mauritius have played important roles in the growth of each jurisdiction. I humbly believe that at the political level, both governments are aware of the importance of this relationship.

Unfortunately, our biggest challenges lie at a technical level with some institutions and the media where we are not given a fair treatment compared to the privilege which other jurisdictions competing with Mauritius are benefitting from. We have observed that there is a complete misunderstanding of the model of Mauritius IFC. It seems that excessive focus has been laid on the DTAA between Mauritius and India, which has outshined the other benefits of the Mauritius IFC.

Let me take the example of our recently introduced product, the Variable Capital Company which was designed to be an improved version of the one offered by the likes of Singapore. However, it has not even been mentioned once in any Indian press. We noted this omission with regret and sadness.

This is a glaring example of how Mauritius in spite of its developed and robust financial services ecosystem, certain media is still oblivious to our effort and insist in portraying a negative image of IFC.

ESG and sustainable finance are buzzwords in the corporate and financial worlds these days. Can Mauritius become a hub for green finance?
Yes, today sustainability is no longer a choice, it has become a must for all countries. Mauritius has already embarked on the sustainability journey across several sectors including the financial services sector. Since 2019, the Financial Services Commission has signed the Marrakech Pledge which has resulted in the implementation of a green bond framework for private issuers in 2021. In fact, the first project which was financed through the green bond pertained to the introduction of low-cost electric cars in Mauritius. Furthermore, the Bank of Mauritius has also issued its sustainable bond framework during the same year for sovereign bonds.

Around November 2022, I participated in a two day conference organised by Vistra in Johannesburg and Cape Town which was dedicated to sustainable finance and the role which Mauritius can play in being a platform for impactful investment into Africa.

As per the capital economics study which was conducted in 2021, the African continent needs around USD350 billion to unlock sustainable projects on the continent.

This is the reason why Mauritius is in the process of creating a dedicated Environmental Social and Governance Framework for Africa. The framework is designed to be a document for Africa by Africa i.e. whilst taking into account the specificity of African countries, it will also provide the comfort to the investors or Development Finance Institutions (DFIs) that the project is being properly monitored.

Start-ups, especially in the fintech and e-commerce sectors, have made Singapore their base. Do you see an opportunity here?
First and foremost, I would like to underscore the fact that fintech and e-commerce are not new for Mauritius, we have been amongst the first African countries to get into this space especially in the financial services sector. In fact, for many years, India has been an instrumental partner in driving the fintech agenda for Mauritius.

An innovative legislative framework with provisions such as regulatory sandbox licence, digital custodian licence, attractive schemes focused on start-ups and access to the African region make Mauritius an attractive destination for start-ups.

There is a race among global players investing in Africa. What role can Mauritius play?
Today, Africa is the new destination for investors, but since the 2000s Mauritius has been playing an important role in driving impactful investment into mainland Africa. Today, all the DFIs in the world, such as British Investment International, KfW, European Investment Bank, to name a few, have a special agenda to invest into Africa. However, each of them has a specific mandate to invest in impactful projects which will yield growth in Africa.

A recent study conducted in 2021 demonstrated that Mauritius has contributed to 9% of Africa’s Gross Domestic Product to the tune of USD92 billion as of 2021. Mauritius can play an instrumental role not only in being the financial centre which can host investment structures into Africa but also monitor and ensure that the projects, into which investments have been made, are meeting their objectives.

Furthermore, the Africa Continental Free Trade Agreement (AfCFTA) is hailed as a game changer for African countries. It has an objective to enhance intra-African trade and open up market and investment opportunities for African companies. In order to take full advantage of the agreement, countries must buttress its implementation with complementary measures. It is estimated that Africa will have a combined consumer and business spending of USD6.7 trillion by 2030 and USD16.12 trillion by 2050.

The Mauritius IFC is a core part of the Mauritian economy. Its strategic location between Africa and Asia, and established network of treaties and double tax agreements with India and African countries has made Mauritius a gateway to fund investment in those areas.

Investment in India was predominant but increasingly our Mauritius IFC is being used to set up structures and investment funds for cross-border investments in Africa. At the AU-EU Summit, the EU has committed some EUR150 billion in Africa by 2030.

Indian government has been pushing GIFT City as India's own financial centre. Is it an opportunity or threat? Can both co-exist?
Definitely an opportunity. The diplomatic and political collaboration between Mauritius and India has proved to be a success for so long. I am certain that a collaboration on the financial services front will also be beneficial to both IFCs.

This year Mauritius is celebrating its 30 years as an International Financial Centre. We have been through a lot of challenges especially with the norm setters. GIFT City is still a budding IFC, as it has much skills and knowledge, Mauritius is willing to be a partner to share our experience on the African market.

I see GIFT City more as a complementary jurisdiction rather than a competitor if we get the right approach. In fact, we are in the process of signing an MoU between our two jurisdictions to collaborate in that space.

It is a bit unusual to have a ministry dedicated to good governance. What are the key focus areas for this department?
It is unusual, maybe, but we firmly believe that it is necessary. The Ministry of Financial Services and Good Governance was established in December 2014 with a view to give a new impetus to the financial services sector which is a key sector of our economy and has a huge potential for growth.

Besides the promotion of financial services, this Ministry provides guidance and support for the enforcement of good governance practices in order to restore the national values in Mauritius through the eradication of fraud, corruption, malpractices and irregularities in all aspects of public life. There are two main bodies which cover the implementation of good governance namely the Office of Public Sector Governance which has the mandate of ensuring that good governance standards are implemented in the public sector and the National Committee on Corporate Governance which issues corporate governance standards for the private sector.

Where do you want to see the Mauritian financial sector in the next five years and what role do you see for India in this journey?
On a domestic front, we have the objective to increase the importance of the financial services sector as a key pillar of the economy. The Mauritius IFC fulfils all the necessary requirements to be a regional financial hub for the African region and to drive impactful investment for the growth of Africa.

In this endeavour, Mauritius is well poised to be a strategic partner for India in building the Africa-India corridor.

This is the reason for which I will be leading a delegation, consisting of representatives from the public-private sector, in India from February 6, 2023 to February 15, 2023 to reconnect with our stakeholders and partners. India is also looking towards Africa and together we can fillip the growth for both jurisdictions.

24. Kerala govt mulls Singapore-model business hub around Vizhinjam Port, Infra News
ET Infra, 8 feb. 2023

The Kerala government is planning to develop a major business hub based on the model of those in Singapore or Shanghai, in the areas around Vizhinjam International Port, one of the largest transhipment container ports in the world, being constructed by Adani group.

THIRUVANANTHAPURAM: The Kerala government is planning to develop a major business hub based on the model of those in Singapore or Shanghai, in the areas around Vizhinjam International Port, one of the largest transhipment container ports in the world, being constructed by Adani group.

Noting that Vizhinjam port is the most important gateway for the transhipment of cargo for our country and neighbouring countries, state Finance Minister K N Balagopal said on Tuesday that the most important cities and industrial centres in the world have been developed adjacent to such ports.

Highlighting the Pinarayi Vijayan-led government's plan, Balagopal told PTI, "examples of port-cities including Dubai, Singapore and Shanghai are before us" and the areas around Vizhinjam port could also be developed like that."

He said in the budget presented for the Year 2023-24 a vision about the development plans, comprising government, private entrepreneurs and property owners, have been unveiled.

In his budget speech, the Finance Minister had said that the Vizhinjam International Port is the most important chapter in the developmental horizon of Kerala and by utilizing the possibilities of Vizhinjam, the government prepares for massive development projects modelled on major international ports. Balagopal said Vizhinjam can become one of the largest transhipment container ports in the world as it is located on a busy sea route where 70 per cent of cargo transportation takes place.

The Finance Minister further said it has been decided to construct a Ring Road consisting the 63 km long reach from Vizhinjam to Navaikulam via Thekkada in NH 66 and 12 km from Thekkada to Mangalapuram, as part of development of the surrounding areas of Vizhinjam Harbour into an extensive centre of industry and commerce.

"This will become the most important industrial corridor of the state. A Township chain of Industrial Institutions, Commercial Centres and extensive accommodation facilities will emerge", Balagopal said. He said an amount of Rs 1000 crore is earmarked through KIIFB for land acquisition of this industrial corridor with an estimate of Rs 5000 crore.

The state government will take initiatives to develop industrial parks, logistics centres and residential areas with the involvement of the people living on either side of the Industrial Corridor.

In the budget, it has been said that development plans worth Rs 60,000 crore is expected to be implemented in the first phase by making use of land pooling system and PPP development methods.

The government unveiled its plans for Vizhinjam months after the area witnessed nearly five month long protest by fisherfolk against the under-construction port, alleging unscientific construction, affecting their livelihood.

The Latin Church-led protest was called in the first week of December after discussions between the leaders of the stir and Kerala Chief Minister Pinarayi Vijayan. They had alleged that the unscientific construction of groynes, the artificial sea walls as part of the upcoming port, was one of the reasons for the increasing coastal erosion. The protesters had attacked Vizhinjam police station on the night of November 27, injuring several policemen.

25.1. Between Development & Deep Blue See (Great Nicobar Island)
ET, 22 Jan. 2023

The Centre’s mega plan to develop Great Nicobar is underway. What does it mean for the island and India?

The 50-year-old man standing by his patch of paddy field in Campbell Bay exudes none of the calmness of the blue sea surrounding the Great Nicobar, the southernmost island of the Andaman & Nicobar archipelago. Sunil Kumar recalls the time his father, an ex-serviceman, left what is now Uttarakhand to settle down in the island in the 1970s. “It took him years to adjust to Nicobar, far from the hills of his home, and he struggled to cultivate his farm here,” recalls Kumar, who has taken over farming their land from his ailing father.

In the late 1960s and ’70s, ex-servicemen from the mainland were given land deeds by the Indira Gandhi government to settle on the isolated island, inhabited only by indigenous people belonging to the Shompen and Nicobarese tribes and facing threats from neighbouring countries and poachers. About 330 families were settled as part of the drive. “Then poachers from Indonesia and Malaysia, which is just 40 nautical miles away, would reach the shores and hunt the endangered wildlife,” says Tarun Karthick, editor of the news portal Nicobar Times.

To make a living, Kumar also works as a driver for tourists and officials visiting the island. The southernmost point of India, the Indira Point, lies at the tip of Great Nicobar. “However, very few people come here due to lack of commercial flights,” he adds.

All this might change soon. The Ministry of Environment & Forests (MoEF) has approved a mega project, worth ₹72,000 crore, for the “holistic development” of Great Nicobar. To be implemented over the next 30 years, the project involves developing an International Container Transshipment Terminal (ICTT), a greenfield international airport, a township and a power plant. These would be spread across 166 sq km of the 910 sq km island. The project — conceptualised by NITI Aayog, and overseen by the Home Ministry as it involves a Union territory — will change the remote, secluded island to a global tourism and shipping hub.

It fails to enthuse Kumar, though . “Our lives will not be the same. If we are shifted from Shastri Nagar, which is part of the proposed airport site, we will have to start from scratch. People are saying our earnings and land rates will increase manifold. But the very thought of shifting is making me nervous,” he says.

The 2004 tsunami had devastated the island and the people had to rebuild their lives and livelihoods. Less than two decades later, do they have to do it all over again, he asks. Before the tsunami, the islanders used to cultivate quite a bit of paddy. “After the tsunami, many shifted to cultivating coconuts, fruits and vegetables that, again, took time. If we are asked to vacate our land for the airport, we will have to start again,” says Kumar.

THE ISLANDERS
According to Census 2011, 8,367 people inhabited the island, including about 200 Shompens and around 1,000 Nicobarese. “The current population, however, must be around 4,500 due to large-scale migration to either Port Blair, which is over 500 km away, or the mainland. People don’t get good prices for their produce. Poor earnings and lack of industry and jobs are forcing people to move,” says Karthick, whose maternal grandfather came from Varanasi as part of the 1970s settlement drive. “Now many people are hopeful that with this huge project, their lives might change for the better,” he adds. The project is expected to create 2.6 lakh jobs over the next 30 years.

Connectivity is key to the development of the island. To reach Great Nicobar, tourists have to now go on a more than 24-hour sea voyage from Port Blair or hop on one of the few helicopters. An international airport will improve connectivity and open the island up to tourism. It will also complement the first naval air station in the Nicobar group, INS Baaz, meant for aerial surveillance.

As per the detailed report on environmental clearance, of the four projects, the shipping terminal and power plant would require no resettlement as there are no residents on the proposed site. The greenfield airport site would need relocating 84 people and the township would require very little rehabilitation. “Overall, some 379 families will be directly or indirectly affected by the project,” says a senior MoEF official involved in the project.

Great Nicobar has a huge biosphere reserve and is home to rare flora and fauna, including leatherback sea turtles, chicken-like birds called megapodes, the Nicobar macaque and saltwater crocodiles. Swathed in rainforest, the island has two national parks — the Campbell Bay National Park in the north and the Galathea National Park in the south. While the proposed project is outside the national parks, the site is frequented by Shompens who move seasonally in search of food. “No project activities are envisaged in areas where aboriginal tribes reside. Their lives would not be affected,” adds the MoEF official. While the Shompens are primarily fishers and hunter-gatherers, the Nicobarese depend on fishing, poultry and horticulture for their livelihood. Some also work as daily wagers.

MoEF has roped in the Wildlife Institute of India (WII), Zoological Survey of India (ZSI) and the Salim Ali Centre for Ornithology and Natural History (SACON) to advise it on the restoration of rainforests and the relocation of corals, leatherback turtles, saltwater crocodiles and megapodes. The ministry’s Expert AppraisalCommittee (EAC) has also directed the setting up of three independent panels to oversee pollution-related matters, biodiversity and welfare and issues related to the Shompen and Nicobarese tribes.

Environmentalists have raised strong objections to the developmental project, pointing to the possible impact it can have on turtles, megapodes, coral reefs and other flora and fauna. “This project is likely to impact turtles’ and megapodes’ nesting sites and coral reefs. The utmost care must be taken for their preservation,” says an environmentalist who has worked on the Andaman & Nicobar Islands.

However, the MoEF official says this gigantic project is the perfect example “to show that development and environmental safe guards can go hand in hand”.

Says Dhriti Banerjee, director, ZSI: “We have done an extensive study of the islands. Alternative sites for turtles and corals have been found and they can be translocated, if needed. Coral transplantation is a worldwide solution that could be easily executed on Great Nicobar Island. In the Gulf of Kutch, we have successfully translocated corals.”

“Some of the proposed area is part of the habitat of saltwater crocodiles. If this is classified as Crocodile Conservation Zone, efforts will be made to exclude it from the project. An action plan has been prepared for the mitigation of man-crocodile conflict,” says SP Yadav, director, WII.

The project will involve felling trees in 130 sq km of forest land, which is about 15% of the island’s forest cover. The compensatory afforestation will happen far away in Haryana, it is learnt. “The tree cutting-to-forestation ratio is 1:30,” says the MoEF official.

PORT OF CALL
The ₹35,000 crore transshipment port, which is a key component of the project, could make India part of the global shipping trade and maritime economy, thanks to its proximity to the east-west international shipping route. The tip of the island is hardly 40 nautical miles from a major international sea route in the Great Channel that carries 35% of the global oil supplies and a quarter of the global sea trade. With no large con- tainer transshipment port in India, all international cargo goes to Colombo, Singapore or Port Klang in Malaysia. Great Nicobar is strategically located as it is equidistant from these three hubs.

“Currently mainline vessels are not coming to India as the draught of (existing) Indian ports is less. Mainline vessels go to Singapore or Malaysia. Owing to its strategic location, the Nicobar port will reduce logistics costs, help in the transshipment of cargo and generate revenues,” says PL Haranadh, chairman, Syama Prasad Mookerjee Port, Kolkata. He cites the example of Singapore that was once a fishing village and is now the world’s busiest container transshipment port. “Singapore handles 65 million TEUs (twenty-foot equivalent units) of transshipment annually and of this 95% is from other countries.” The Great Nicobar port would have a capacity of 14.2 million TEUs.

CHINA CHALLENGE
More than anything, experts say, the island is of strategic importance as it allows India to monitor sea lanes in the Indian Ocean and the Pacific. It could be part of India’s answer to China’s String of Pearls strategy.

Great Nicobar is about 90 km from the tip of Indonesia’s Sumatra island and is strategically located near the Strait of Malacca, a narrow and busy shipping lane that connects Andaman Sea to South China Sea and Indian Ocean to Pacific Ocean. Great Nicobar can be developed as a gateway to Malacca Strait. This makes the shipping terminal project important from the point of view of defence and national security.

According to defence experts, the Indian Ocean Region (IOR) is important for China for several reasons like energy requirement, trade routes as well as for keeping a check on India. “80% of oil for China comes from IOR. To any Chinese escalation that happens in Galwan, India can give a befitting reply in IOR,” says Srikanth Kondapalli, dean of the School of International Studies & professor of China Studies, JNU. Great Nicobar may become a docking site for aircraft carriers, sources say.

Experts say the development of Great Nicobar from the perspective of national security is a late awakening for India but can hardly be overemphasised. Growing Chinese assertion in the Indo-Pacific region has given great urgency to this initiative. “We are clearly outnumbered by the Chinese in terms of warships or underwater unmanned systems. China is expanding aggressively in the region hence we need to monitor their activities closely. Though it is a late realisation by India, the mega investment plan is a welcome move,” says Rajiv Nayan, senior research associate, Manohar Parrikar Institute for Defence Studies and Analyses, Delhi.

Even as concerns related to ecology, biodiversity and lives of indigenous communities remain, there is no denying the importance of the project due to its strategic location.

“Over 300 Chinese vessels pass through the IOR every day. China has been surveilling India through its ships in the region. We can’t leave such a strategic place as a mere fishing village. That’s why developing the island is crucial above all other concerns,” says Kondapalli.

25.2. India wants to become the manufacturing hub. What it can learn from China, Taiwan, and South Korea
ET, 9 Feb. 2023

Dedicated economic zones, making local players competitive at international level, and focusing on export-led growth have been the key takeaways in the manufacturing journeys of Asian powers like Taiwan, South Korea, and China. India plans to be the next exporting hub. It can take some lessons and chart its own path.
The last week was eventful. While the Adani Group companies grappled with a short-seller’s report, we also had a Union budget with a huge outlay for infrastructure and manufacturing. India has lacked in this space for the last many years. But things are moving. Since April 2020, the BSE Manufacturing Index has given a return of 108% while the Sensex has returned 114% for the same period. While there is an underperformance, the movement is in the right direction.

The Adani Group has become one of the big business groups for building ports, airports, energy and even getting into agriculture and commodities. In a way, India is following a model that many South Asian countries have imbibed where they helped certain business groups by cutting imports and at the same time maintained healthy competition. While their focus was exports and manufacturing, India is concentrated on exports of services.

What can we learn from these countries?

The first export processing zone (EPZ) in India started in 1965 in Kandla -- same time as Kaohsiung EPZ in Taiwan. But while India had a good start, clearly China, Taiwan and South Korea decided to go for exports in a big way. Today, the world largest semi-conductor foundry is in Taiwan. China and South Korea are big exporters in hi-tech and automobiles.

They got their strategies, and more importantly, their scale right. For example, the Kandla SEZ and the Andheri SEEZ were 2.8 sq km and 0.4 sq km, respectively, in size. The Shenzen SEZ in China at the start had size of 327 sq km. As these countries built policies to protect their industries to some extent, they also maintained healthy competition. Their export profiles changed from textiles to hi-tech goods. However, while they kept improving on the export front, they were clearly focused on adult education and creation of female workforce.

All these countries had to face challenges. South Korea started with a disadvantage after they parted with North Korea as 90% of the electricity-generation capacity and most of the heavy industry was based in North Korea. Then Park Chung-hee came along and changed the country’s fortunes. During his regime banks were nationalised but exports got incentivised. Exporters got loans at lower interest rates. Chung-hee was also responsible for the rise of the Korean cheabols like Samsung and Hyundai. But South Korea also focused on results than simply making friends with large industrial groups. In the later part, the country focused heavily on education.

Similar is the case with China where the government gave freedom to enterprise and growth through exports was sought. Again, there was an EZP. In 1980s, China was exporting textile but by 2002 it had replaced Japan and Europe to become the largest hi-tech goods supplier. All these countries used tariffs to discourage foreign goods in their market.

India got its services right when it came to exports. Now, the country wants to be a manufacturing hub. What can we learn from Asian countries that have been successful in this area?

Let’s take a deep dive.

The pharma dependency
We do not want to experience a Covid-19-like situation again. Of the many remedies used, sometimes after much debate on efficacy, there was wide use of azithromycin to treat Covid-19. Without getting into that debate of whether it was useful or not, what would your reaction be if I said that India is dependent almost completely on China for the active pharmaceutical ingredient (API) for azithromycin, a common antibiotic that finds its way into many prescriptions? Not only this medicine but multiple others like digoxin for cardiovascular disease and metformin for diabetes have a high dependence on China.

Why so? The reasons can be traced to around 40 years ago in the case of China. You will probably be surprised to know that India’s GDP was very similar and the per-capita income levels in China were 25% lesser than those of India in 1980, around the time they executed reforms in 1978. As of 2021, China’s GDP and per-capita income are 5.5x of India’s. China leapfrogged past India. It planned for dominance in multiple areas and had good success too.

Why should we look at the past now?

India is going through its own push towards manufacturing. One reads about an announcement here and a policy change there. History rhymes even if it does not repeat. What is the big picture for India?

One of the government initiatives in the past few years is the production-linked incentive (PLI) scheme. There are various targeted sectors including medical devices, auto components and batteries for electric vehicles. India is attempting to claw back. One PLI scheme has also been rolled out for key starting materials (KSM), drug intermediates and API. The reasons are simple. India is a leading formulations supplier to the world but heavily dependent on China.

To understand the scale of China’s dominance and what India would like to wrest away bit by bit, see the graphic below.

India’s bulk drug imports from China were minimal in 1990 and these had grown to almost half of India’s bulk drug imports by 2020. How did this happen?

Methods adopted by China included massive state support like better infrastructure, capital support, and lax environmental monitoring. The Chinese state supported penicillin fermenters. A key cost item in fermentation processes for antibiotics is power and utilities cost. Benefits were given. The cost differential across China and India was just too much for the latter. These led to hollowing out of capacities of competitors like India and increased its dependence on China (greater than 80% of India’s requirement in many antibiotics from China, for example). Drug prices would be dropped in a predatory manner to kill competition and once eliminated, prices would go back to reasonable levels.

Icentives for production are only part of the picture though. There are more variables at play.

China is not the only example. There are other Asian countries that did it well. These nations charted their own paths towards growth and escaped the poverty trap. The starting variables were different in each case respectively – education levels, initial per-capita income, level of industrialisation, forms of government, and competitive advantages among others. Geography even. The paths chosen were also different but there are similarities, across different points of time, which are useful when we try to study India today.

In the previous article we covered how India has generally missed the bus on the manufacturing front. In this article, I intend to take you through key things that stand out as relevant in the manufacturing journeys of three nations – Taiwan, South Korea, and China, and compare them to where we stand today. We will take a tour across tools and policies used like differential tariffs, incentives, infrastructure, industry-sector focus, labour-intensive to value-added work and more.

Taiwan – one of the four Asian Tigers
Starting in the 1950s, the country initially went down the path of import substitution, tight controls on capital, and arbitrary import and export interventions in the first decade of the new nation’s existence. In hindsight, it has been read by a few as a sign of the government’s insecurity about competing in a global market. The path upward started with a fascinating set of interactions between a couple of economists, Tsiang and Liu, and government officials. There was an attempt to be competitive at an international level and earn through exports rather than focusing only on saving foreign exchange via import substitution. The government moved ahead with economists’ suggestions and gradually took steps, including:
1. Working with a more realistic exchange rate.
2. Positive real rates of interest that led to savings growth, which in turn helped investments (real rate is nominal rate less inflation).
3. Reduced interventions in the import-export sphere.

There was agreement on letting the private sector, and not the public sector, take the lead. A key element, protection for businesses, was incrementally reduced over the years. They wanted to foster a culture where businesses would increase productivity and earn their fair share in the global market. Production moved away from basic agro-commodities to more labour-intensive industries including textiles and electronics assembly. Export-oriented industrialisation of the economy took place.

Over the past couple of decades, Indians became familiar with special export zones. The Taiwanese have to their credit one of the early EPZs in Asia. It was set up in Kaohsiung in 1966. Key features of this zone were – zero import duties on plant and machinery, and intermediate goods on which further value addition was to be done in the zone, time-limited tax holiday, low-cost electricity and other utilities, good rail and road connectivity, warehousing, and port infrastructure. Today, these are deemed as basic requirements for such zones.

Geopolitics helped. The US looked at Taiwan favourably against China. It pitched in with aid and investments in businesses.

Money is important but so is the process maturity and managerial talent. This is under-rated because it is beyond hard numbers. These skills and know-how are not present initially in most countries. Technological know-how and better processes came in through the foreign investments in the EPZ. Subsequently, this helped the economy as talent and skills moved from the EPZ to non-EPZ domestic-focused industries.

The “behind-the-scenes” social development of a country is very important. What stands out in Taiwan’s case is the high involvement of females in the workforce. By around 1980, 90% of the workforce in the Kaohsiung EPZ was female.

How did Taiwan fare with all of this? Industrialisation firmly kicked in. From 1960 to 1996, the share of agriculture came down from 29% to 3% while the share of industry grew to 38% from 24%.

Taiwan experienced handsome growth rates of almost 10% CAGR for two decades (1961-80) – a truly enviable feat.

The country eventually made its mark in the hi-tech industry. Today, the world’s largest semiconductor foundry owned by TSMC is in Taiwan. It is a rich country with a GDP per capita of ~USD36,800 as of 2021.

South Korea – birth of a nation
With 90% of the electricity-generation capacity and most of the heavy industries lying with North Korea post-partition, South Korea had to rebuild its basic industries.

After the Korean War in 1953, the country followed import substitution for the first eight years, similar to Taiwan. Its GDP grew at a slow pace and there was not much to show for development.

What followed over the next 18 years was defined by the rule of Park-Chung-hee. His name is inseparable from South Korea’s rapid rise. He was a General who seized power through a coup in 1961 and was eventually shot dead by the head of the nation’s intelligence agency in 1979. His rule has been controversial for having restricted freedoms and captured institutions but simultaneously delivering record growth and bringing the country out of poverty.

Multiple changes took place under his leadership:

1. Banks were nationalised so that the state had a bigger say in the economy.
2. The currency went through devaluation to make it align more with the kerb rate.
3. The government was aware of its own inadequacies. It co-opted industrial groups that could deliver better, into the sectors that the state chose.
4. The government looked outward for growth through exports.
5. This is similar to how Taiwan progressed but there was comparatively heavy state involvement in directing capital and efforts.

A key element of the policy was differential tariffs for promoting industries focused toward exports. The effective rate of protection using import tariffs for industries, where the government desired to see competition, was at an average of 92% and it stood as low as -10% for non-competing industries (effectively a grant for importing). A similar picture was seen for capital goods for industries as they were made duty-free. This will probably ring a bell for most readers when we connect this to the present direction of industrial policy in India. Think of recent export duty on steel for example. If the government has decided to promote auto components through PLI, is there some utility in also assisting with a benign environment on the raw materials front?

A very interesting feature of South Korea’s policies was differing interest rates for export businesses against regular businesses. Interest rates on general loans were 18% from 1961 to 1965. In the same period, it was 9% for export loans. Rates on general loans increased further to 23% between 1966 and 1972 and interest rates for export loans remarkably dropped to 6%. There could not have been a clearer sign to any entrepreneur for where they should be looking to grow.

The South Koreans also established free export zones (FEZ), similar to Taiwan’s EPZ concept. Five years after Kaohsiung EPZ was started in Taiwan, it opened Masan in 1971. By 1980, the contribution of Masan to the country’s exports was 18%. It was one more country that benefited with dedicated zones.

Capitalism, consumerism, and chaebols

Consider how the mix of exports changed. The most important items in goods exports in 1960 were primary products including ores, rice, crude animal and vegetable products, fish, and seaweed. It is astonishing to see that in a decade, clothing products were 25% of exports, plywood and textile fabrics together were greater than 20% and electronics was about 5% of exports.

Import substitution focus gave way to focusing on exports and how! The graphic below plots direct contribution of efforts towards import substitution and export expansion to manufactured output.

A prominent feature of South Korea’s growth was the rise of the chaebols. Prominent names of today like Samsung, Hyundai, and LG (earlier called Lucky Chemical Company) with businesses that span across many sectors, have their roots in the Park Chung-hee era.

Sectors like steel were focused on at the start with an eye on building downstream industries later. These included machinery, shipbuilding, chemicals, and automobiles. They were “handed” over to chaebols. Former RBI governor Raghuram Rajan spoke about crony capitalism in developing economies in his book, Fault Lines, where he says that it could be also termed as “managed capitalism” where the government gives firms protection from foreign competition and special privileges so that they grow, while maintaining some incentives for them to be efficient. A word of caution when one tries to extrapolate through experiences that are success stories.

Crony capitalism is not a sure-shot way out of a middling existence. It is indeed seen in multiple countries in their early stages of development, but there are many countries whose progress was derailed by corruption that was out of control.

In South Korea, the government was focused on results even if it had co-opted industrial groups. It was more than happy to wrest business away from one group and have another take over, with execution being foremost in mind.

An important starting factor that helped the nation was a comparatively better level of social development. In 1961, South Korea already had the highest rate of school enrollment within the set of countries that had a comparable GDP per capita.

Geopolitics helped South Korea too. The US was liberal with its financial aid in 1950s, mostly food-related. This helped the country in its first tumultuous years after the exit of Japan, the colonial power, and the subsequent partition.

Much like Taiwan, South Korea’s share of agriculture reduced, and manufacturing increased rapidly. From 1956 to 1986, the share of agriculture declined from 44% to 13.5%, while manufacturing increased from 12% to 30%.

Akey takeaway from experiences of both these countries stress on making local players competitive at an international level, forcing them to be world-class, and focusing on export-led growth through industrialisation. The era, however, was that of a much less globalised world, making a fresh start after the horrors of World War II.

China – the dragon
China is an outlier. The country’s high growth rates are unmatched to any other nation at this scale for this long in recent decades. But it was not like this at the start.

China had deep problems, and the progress in the 1950s-1970s was tepid. It had a communist rule with central planning. Under Mao there were severe failures that even led to disasters like the Great Chinese Famine in 1959-61.

The country’s annual growth rate in per-capita income was 2.34% from 1952 to 1978. Sluggish development forced its hand. This was the year when China woke up from its slumber, a couple of decades after South Korea and Taiwan had started their sharp upward journey.

The Chinese leadership concluded that “the Maoist version of the centrally planned economy had failed to produce efficient economic growth and had caused China to fall far behind not only the industrialised nations of the West but also the new industrial powers of Asia: Japan, the Republic of Korea, Singapore, Taiwan, and Hong Kong.” (December 1978, National Party Congress’ Eleventh Central Committee). Deng Xiaoping, the ruling premier at that time, was credited for spearheading reforms. Though like in most cases, part of the reasons for reforms was pure compulsion.

Multiple changes took place during his tenure:

1. Initially, agri-reforms were carried out to strengthen the role of the individual farmer rather than subsuming their identity to the collective like in the past. This improved agri-productivity.
2. As in the previous cases covered above, the currency went through a planned devaluation, followed by a dual system (internal and for external-facing use) until they were finally combined into one currency unit.
3. The government had realised the inadequacy of a command economy. It gave greater freedom to enterprises at the town and village level. These were the initial entrepreneurial hotbeds of activity.
4. The role of state-owned enterprises (SOEs) in the economy was reduced over time.
5. Again, growth through exports was sought.

As described for two other countries, social development is important during the progress of a nation.Life expectancy for China stood at 65 years in 1977 while for India it was 53 years, while India had a higher per-capita income level as mentioned above. Adult literacy rate in China was 69% in 1980. In India, in contrast, this level of 69% was achieved in 2011.

Like South Korea and Taiwan, China implemented an export zone policy. They had a few geographical advantages. Their neighbours like Hong Kong, then under British rule, and Taiwan, were already ahead of them in terms of availability of skills, technology, and capital. There were cultural ties between the populations across the borders.

In 1980, China created four Special Economic Zones (SEZs) in Shenzhen, Zhuhai, Shantou and Xiamen. The first three were located in Guangdong province. The first two SEZs were literally across the border between China and Hong Kong. Xiamen was across the Taiwan Straits. There were advantages provided to businesses located in the zones.

They attracted capital and technology. Labour came from the hinterland. The success of the export-oriented policy can be seen from the fact that around 42% of the foreign direct investment (FDI) by 1990 was in one province Guangdong, which contributed to 20% of China’s GDP that year. In the late 1990s, the 10 coastal provinces and municipalities had 10% of the population but generated about half of China’s GDP.

In 1984, the nation focused on zones for another 14 coastal cities in addition to the initial four SEZs. The role of SEZs in the growth story of China cannot be emphasised enough.

Labour-intensive manufacturing was the route adopted, like was the case with Taiwan and South Korea.Light manufacturing in four areas, textiles, apparel, footwear, and toys rose from USD4.3 billion to USD53.5 billion from 1980 to 1998. It grabbed a significant market share at a global level.

Chinese exports rose by an average 5.7% per annum in the 1980s and an even more impressive 12.4% in the 1990s. As was the case with the others before, they moved subsequently into higher value-added manufacturing.

A common factor across the three nations was the use of tariffs. You could even say that there was the heavy hand of the government as it applied it to discourage the entry of foreign goods and allow domestic businesses to flourish. Intermediate goods imports were supported through rebates if they fed into goods for exports. You will see this same pattern emerging in India now.

In 1993, the Chinese government adopted a resolution that spoke of separation of government and enterprises that met the requirement of a market economy and socialist large-scale production. You will appreciate the phrasing “large scale production” when you think about the penicillin example at the start of this article. There are enough anecdotes one could give for other sectors and how China systematically achieved dominance.

In early 2000s, China formally joined the WTO after which it continued to grow rapidly. In a nutshell, China was able to bring large sections of its population out of poverty. Today, its per-capita income stands at levels that would have been tough to imagine 43 years ago. Between 1979 and 2021 the GNP per capital income moved from USD184 to USD12,556.

India- where we stand
A common thread across all countries described above were resolute steps taken early on by their governments. They realised the limitations of looking inward. Once a certain level of development was attempted and achieved with import substitution, they attempted to grow by exporting to richer countries.

In hindsight, it is easy to forge a narrative and see a “grand plan”. Each example tells us that actions were not linear, mistakes were made, and novel actions were attempted.

One difference between today and then was that you objectively saw global trade as a percentage of global GDP rising. The last decade has seen this trend slow down. This is something that works against India today compared to others before us.

A key difference between these countries and India is that we fared better on the tertiary industry (services) front. The composition of GDP of an economy can be broken down into primary (agriculture, forestry, fisheries and the like), secondary (manufacturing, both light and heavy) and tertiary (services including health, communication and financial). India lagged in manufacturing.

SEZ experience in India
Most would be surprised to know that the first export processing zone in India started in 1965 in Kandla, at the same time as Kaohsiung EPZ, Taiwan! The next one, SEEPZ, started in Mumbai in what is now firmly Andheri (the S in SEEPZ was Santacruz, a suburb some distance away actually).

Unlike some countries where labour laws were made more flexible within SEZs, India did not go down that path. This may have been one reason why labour-intensive industries at scale did not pick up well.

We have had very healthy growth in services undoubtedly, and not as much in manufacturing. Around 58% of operational SEZs in India as of 2018 were focused on IT/ITeS, electronics and telecom hardware.

However, there are dangers from an imbalance in growth in any one export sector. Consider Bangladesh, albeit a very lopsided case study. 84% of its export earnings came from readymade garments. There was a huge volatility in end-demand of garments over the last two years and this has led to forex pressures on the nation. The learning is that diversification is healthy. There must be timely upgradation of capability up the value chain and over a wider span of sectors.

The approach towards SEZs in India has evolved over time. The SEZ policy was announced in 2000. At that time, Murasoli Maran spoke of his visit to China and of the impression it left on him. The intent was to focus on SEZs for exports with some learnings from other countries that did well. Multiple EPZs from the past were subsumed and converted to SEZs. There was the promulgation of the SEZ ACT, 2005. There was a rapid increase in the notified SEZs in the next few years. There were problems too.

There was a scathing CAG report in 2014 that highlighted multiple problems. Key points from this report are as follows:
1. Diversion of land – 23% of lands were de-notified until 2012-13.Commercial benefits from land use change on what was land acquired for “public purposes” could have accrued to certain players.
2. There was a 93% shortfall in employment compared to projections at the time of filings, in the sample of 117 SEZ units chosen by auditors.
3. Similarly, there was a 58% shortfall in investments in the sample set.
4. More importantly, there was a 75% gap between exports achieved and projections made.
5. Significant tax revenue had been foregone by the government for objectives set out under the Act and benefits were not commensurate.
6. The CAG saw evidence of weak monitoring overall across multiple dimensions.

In 2018, a committee led by Baba Kalyani, chairman and managing director of Bharat Forge, was set up for re-evaluating the SEZ policy. They released a report that makes for an interesting read on possible directions that may be taken in the next leg of reforms on SEZs.

Its key recommendations that stood out was an overarching redefining of purpose – targeting domestic demand in addition to exports unlike only exports in the past. In fact, there is a proposal to rename SEZs as Employment and Economic Enclaves (3Es). Notice the de-emphasis on the word “exports” in the proposed acronym. This could be read in line with the present Aatmanirbhar thought process. We will revisit this point.

Other key proposals and the author’s comments are described below:
1. Utilisation of vacant space within existing SEZs. This appears useful when you consider the proliferation of SEZs and the potential under-utilization in the past 20 years.
2. Fine-tuning recommendations for manufacturing and services sectors respectively. The under-development of manufacturing vis-à-vis services merits this approach surely.
3. Various taxation related suggestions, proposals for reduction of bottlenecks in processes and logistics.
4. Flexibility in utilising non-processing area (SEZ NPA) - Allegations against SEZs have been made in the past on being a vehicle primarily for land value. There is a case for building integrated townships even in SEZs NPA from the perspective of employees needing accommodation and amenities. Considering criticism of incorrect land use in the past, this aspect will need greater control if these recommendations find their way into the law.

Until we get the SEZ reforms, there are actions possible even today. Even as late as 2019 and 2020, one sees SEZs lesser than 5 acres in size getting notified. In the past there were questions of whether one of the main benefits for enterprises setting up within an SEZ was the tax holiday. At small sizes, there is a chance that the SEZ did not even influence the set-up decision. One could even argue that the business would have got set up even outside the SEZ anyway. In future, there will need to be greater control to ensure that goals are met at the right scale.

One very interesting recommendation in the Baba Kalyani report is the creation of a limited number of large enclaves (not more than five) across the country with heavy government investment to back them (greater than USD1 billion). With scale difference across countries enumerated above, decisions on this front are keenly awaited, because one is reminded of the mega-SEZs of China which had the right infrastructure to support businesses.

Production-linked incentive scheme
The outlay towards the PLI schemes is often misunderstood by many to be a fresh allocation made by the government. The Merchandise Exports India Scheme (MEIS) existed from 2014-15 onwards. It faced challenges at the WTO that necessitated a termination of the scheme. There were also concerns that the while the MEIS outlay doubled from the initial INR20,000 crore to INR45,000 crore in FY21, there was not much increase in the exports figure in the same period.

In FY21, the allocation for PLI was essentially the same amount as that in MEIS. However, the key difference being avoidance of any linkage to exports only. Maybe this is why we are seeing the usage of the word “Aatmanirbhar”. There is nothing that stops exports in such PLI-supported facilities though. The reader can make their interpretations about how things are different between a few decades ago and now, and how we are having to navigate this new international landscape.

Another difference between MEIS and PLI in implementation is a greater concentration of capital in government-chosen areas. This reminds one of the South Korean models where the government decided which sectors should be favoured for growth. In industries, where the PLI is directed, time-bound targets for investment and incremental production need to be met for receiving the incentive. Participants have to put down their contributions first and the government will share incentives later. The outlay for the government is greater than INR2.5 lakh crore over the next 5-6 years.

We will not dwell on the PLI schemes in general but rather see them through the lens of intended goals. There are some sectors focused on what clearly appears to be import substitution. For example, the APIs for medicines. Remember the azithromycin example that we started with. There are other sectors focused on like mobile manufacturing where the target is exports too.

One could ask why the country is looking inward at all. Why not only outward? In my view it is a bit of both. The Asian countries mentioned in this article shifted towards exports with vigour but in a different era with a different base. We do not have the same starting conditions now.

Import substitution
We shall delve into a sector where space is being reclaimed – import substitution in toys. The import of toys to India has decreased from USD332 million in FY15 to USD110 million in FY22. Export of toys has increased from USD96 million to USD327 million in the same period. In 2022, a dedicated toys manufacturing cluster has started operations in Karnataka. A tool to check imports of toys has been the use of Quality Control Orders (QCO). In January 2023, there has been muscular action to implement norms where uncertified toys (mostly imported) have been seized across major toy retail stores.

Certain sectors are under the lens and are generally seeing greater control over imports.

If we go back in time, the same toys products category was reserved for MSMEs. Between 1997 and 2001, the process of de-reservation started -- 39 products including toys and readymade garments were de-reserved. In the preceding 2-3 decades, when Asian competitors were operating at large-scale in these critical labour-intensive sectors, there was a simultaneous restriction on scale in some manner in India. Is it not natural that production at scale did not happen easily, ceteris paribus?

There is higher protectionism now. Average tariffs have increased from 13% to 18% over 2013 to 2020. This has an impact on inflation across goods in the wholesale and consumer categories. We will most probably see higher price increases in goods output from targeted sectors, until scale develops. It will also mean a consumer economy in transition as purchasing power may be in flux until you see a clear trend. Job growth may take time to kick in and there may be higher prices that flow through in the interim. This is a political economy choice that has a bearing on those of us in the investment management space as we navigate the markets.

Labour-intensive export sectors: why not seize the day?
Toys manufacturing is a small sector. What about a large sector like textiles and apparel (T&A)? T&A add up to around 10% of total exports for India. In the recent PLI scheme announcements, the government outlay towards man-made fibres and technical textiles was around INR10,000 crore. This is not a lot when you compare it to the total outlay across all PLI schemes.

In my view, the labour-intensive sectors are where one hopes to see more from the government. As per research by Shoumitro Chatterjee and Arvind Subramanian, we have a large pool of unskilled labour that is heavily underutilised. As of 2020, the potential production in the key low-skill textiles and clothing sector, that is “missing”, amounts to USD140 billion or 5% of GDP. They arrive at this by comparing the gap between potential (when compared to other low-income countries like us) and production. The corresponding figure for missing exports is estimated at USD60 billion.

Our overall exports figures are not bad in themselves. They stood around 20% of GDP for the last decade or so. There is a strong correlation between GDP growth and exports growth. We should not be ignoring low-hanging fruit that will help in GDP growth.

The data above was only for textiles. There are other sectors beyond this.

Again, the duo has shown that the share of low-skill intensive exports (manufacturing) in India declined from 34% to 20% from 1995 to 2018. Skill-based exports (manufacturing and services) rose from 42% to 65%.

This raises more questions even from a social perspective. Can India afford to leave one segment of the population behind?

There is additional data depicting case for focusing on the labour-intensive industries. A big competitor is potentially vacating some space as it moves up the value-chain. Consider that for a category like footwear, China lost around 7.5% of global market share post- global financial crisis (2008) until 2020. What did India gain relatively? A meagre 0.1%. Vietnam while being a much smaller country but an export powerhouse, took 5.9%. In apparel, 5.8% was lost by China. Vietnam and Bangladesh took around 2.8-2.9% each. India took home only 0.2%.

There are numerous examples of a K-shaped recovery amongst different income segments of our population. Problems may be exacerbated if inequality increases.

Social reforms that bring more women into the labour force are essential. Our labour force participation rate for females is low. Literacy levels and educational outcomes need to get better. Better healthcare access is needed for reducing chronic malnutrition and infant mortality.

One hopes that the next set of reforms will focus on these industries that are usual suspects in the trajectories of other countries before us respectively. Maybe the “enclaves” that the Kalyani report talks about hold some promise? Time will tell.

Free trade agreements
In the past few years India has taken a more guarded stance in free trade agreements. India walked back from the Regional Comprehensive Economic Partnership (RCEP). There appears to be a greater tendency to sign bilateral agreements with individual countries rather than with blocs. There are worries that imbalances between imports and exports may grow. The question remains as to how benefits of exports may be availed of using the FTA route, else we risk getting excluded from global supply chains. It is worth noting that on the export front, it is a tougher environment to navigate compared to the 1960-2000 period.

Today, the WTO mechanisms are used more actively against exporting nations than before.

The outlook
Through this article I have attempted to cover a few key dimensions, mostly to do with manufacturing, in the journey of economies.

There are more factors at play that are not covered here in as much detail - labour laws in India (attempts being made to simplify further in favour of industries), and infrastructure (sorely underdeveloped but improving).

South Korea and China had an authoritarian rule in at least parts of their journey, if not more. It would be lazy thinking to wish for the same for India. Just because we have seen a few success stories in countries run by strongmen does not change the fact that there are more examples of failures under their rule across the world than successes.

Democracy is slower generally, but it has other benefits. The same China that delivered a growth miracle, also had a famine in which one of the causes was a campaign to eliminate sparrows saying that they consumed too much grain. Citizens followed exhortations and killed sparrows in thousands. The following year, the natural predators of insects and locusts were no more. The predators had a free run and they contributed to more crop destruction than what sparrows alone may have eaten.

A big plus point today is that geopolitics is favourable. Corporations want greater control of their supply chains. Moving away incrementally from China is real. It gives India a great chance to compete and win some of this business. It will be lazy thinking again to say assume that we are the only game in town for China + 1. It is China + n and we are one of the many contenders.

There will be steps taken by the government and we should accept that some mistakes will also be made. It was not any different in other case studies. It is important for timely course corrections to happen and for holistic reforms to be carried out. One wishes for inclusive growth that leads to improvement of social development parameters and rise in per-capita income, and progress for the nation.

And lastly, one wishes that if we have the need to take any medicine in the years to come, the raw materials for the pill are made in India!

(The author is principal officer and head - PMS at Tata Asset Management. Opinions expressed are personal.)

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AAPI

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Saturday 18 February 2023

Newsletter, February 2023

– GENERAL POLICY, INFRASTRUCTURES, COUNTRY FINANCES, ETC.

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NEWSLETTER, FEBRUARY 2023

– GENERAL POLICY, INFRASTRUCTURES, COUNTRY FINANCES, ETC.

- Agriculture, Fishing and Rural Development

- Industry and Manufacture

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