India newsletter 08 2014

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Published by the Embassy of India, Vienna Year 4 • Issue 44 • August 2014

FEATURED INDUSTRY INDIAN EDUCATION AND TRAINING SECTOR

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NEWS FLASHES

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The market potential for cloud services in India is expected to be around US$ 4 billion till 2017.n

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Six QIPs launched in India during AprilJune 2014 raised Rs 12,151 crore (US$ 2.02 billion) compared with Rs 1,222 crore (US$ 203.53 million) raised in the same quarter in 2013.n

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F o r e i g n institutional investors (FIIs) have invested US$ 10.34 billion in India equities so far in 2014.n

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India Inc's revenues are expected to grow 9-11 per cent in the quarter ended June 30, 2014, as compared to 4.3 per cent in the same period last year.n

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India's foreign exchange (Forex) reserves grew by US$ 857 million in the week to June 27, 2014 to US$ 315.78 billion.n

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The area of sowing of kharif crops in India has crossed 18.24 million hectares.n

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India has recorded an increase of 5,871 sq km in its forest cover over the past two years.n 2 • India Newsletter

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India has emerged as the world’s largest public-private partnership (PPP) market with more than 900 projects in various stages of development.n Steel production in India grew at a compound annual growth rate (CAGR) of 7.9 per cent over the past five years.n

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Sugar production in India for the 201415 season starting October 2014 is projected to be 4 per cent higher at 25.3 million tonnes (MT).n

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The market size of deodorants in India have grown from Rs 500 crore (US$ 83.08 million) to Rs 2,300 crore (US$ 382.18 million) during 2009-14.n

The Indian wristwatch market is currently valued at US$ 898 million and is expected to reach US$ 2.7 billion by 2020.n Indian cement companies are expected to undertake fresh capacity addition of 31 million tonnes per annum (MTPA) over next two fiscals.n

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The export of ayurveda, homeopathy, naturopathy and holistic treatment products from India touched Rs 2,267.5 crore (US$ 376.92 million) in 2013-14.n

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The hiring rate in the Indian IT sector is expected to grow at 6 per cent in 2014-15.n

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Cotton production in India is estimated to be 39.5 million bales in 2013-14.n The export of engineering goods from India rose over 21 per cent to touch US$ 5.4 billion in June 2014.n

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Aggregate net office space absorption in India's top eight cities increased by 16 per cent year-on-year during January to June 2014.n

The total value of dairy product shipments from India were estimated at over Rs 3,318 crore (US$ 551.36 million) during 2013-14.n India’s forex reserves rose by US$ 813.2 million during the week ended July 18 to reach US$ 317.85 billion.n

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Indirect tax collections in India grew at a rate of 13.5 per cent year-on-year in the month of June 2014 to reach Rs 44,356 crore (US$ 7.37 billion). n

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NEWS ARTICLES IMF retains India's growth target at 5.4%; all emerging economies see cut

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ndia is the only big emerging economy to escape a cut in the International Monetary Fund's update of its World Economic Outlook that says the global economy seems to have tripped on an unexpected contraction in the US economy in the first quarter.

IMF has retained its forecast of 5.4% growth in Indian economy in 2015 and a stronger 6.4% growth next year.

"In India, growth appears to have bottomed out, and activity is projected to pick up gradually after the post-election recovery in business sentiment, offsetting the effect of an unfavourable monsoon on agricultural growth," the IMF said.

In fact, out of the BRICS countries Brazil, Russia, India, China and South Africa - only India avoided an IMF ratings downgrade, as business sentiment recovers after the country's election.

Global economy is now projected to grow only 3.4% in 2014, down 0.3 percentage point from the earlier forecast. "The recovery continues, but it remains a weak recovery, indeed a bit weaker than we forecast in April," Olivier Blanchard, Economic counsellor, IMF, said in a statement attributing the downward revision largely to the developments in the US. "In retrospect, it (first quarter contraction in the US) seems to be largely due to one-off factors, ranging from an inventory correction to unusually bad weather.

Looking forward, US growth for the rest of the year is still forecast to be 3.25% and 3% in 2015," he said. IMF has retained its 2015 forecast at 4%, but warned that geopolitical risks have risen.

"Global growth could be weaker for longer, given the lack of robust

momentum in advanced economies despite very low interest rates and the easing of other brakes to the recovery," the IMF said in its outlook warning geopolitical risks could lead to sharply higher prices.

The emerging economies faced "the negative growth effects of supply-side constraints and the tightening of financial conditions over the past year could be more protracted," the IMF said but added that leading indicators suggested global recovery regaining strength in the second quarter of 2014.

Barring India, all other BRICS members saw their forecast cut in the review, with Russia taking the biggest knock — its likely growth is now pegged at 0.2% compared with 1.3% earlier and, for 2015, at 1% instead of 2.3% earlier. "This reflects mainly a deterioration of business confidence, which has been aggravated by geopolitical tensions. The result has led to large capital outflows, and a near freeze in investment decisions," Blanchard said.n

India has the Second Fastest Growing Services Sector with Compound Annual Growth Rate at 9 Per Cent

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ndia has the second fastest growing services sector with its Compound Annual Growth Rate at 9.0 per cent, just below China’s 10.9 per cent, during 2001 to 2012.

Also, India ranked 12th in terms of services Gross Domestic Product (GDP) in 2012 among the world’s top 15 countries in terms of GDP. While services share in World GDP was 65.9 per cent and in employment was only 44 per cent in 2012, in India, they were 56.9 per cent and 28.1 per cent respectively.

GDP Services constitute a 57 per cent share in GDP at factor cost (at current prices) in 2013-14, an increase of

6 percentage points over 200001. Despite deceleration, services GDP growth at 6.8 per cent was above the 4.7 per cent overall GDP in 2013-14. The growth rate of the combined category of trade, hotels, restaurants, transport, storage, and communications decelerated to 3.0 per cent while financing, insurance, real estate, and business services grew robustly at 12.9 per cent.

FDI In 2013-14, FDI inflows to the services sector (top five sectors including construction) declined sharply by 37.6 per cent to US$ 6.4 billion compared to an overall growth in FDI inflows at 6.1 per cent resulting in the share of the top five services in total FDI falling to nearly one-sixth.

■■ Exports India’s increase in share in world services exports from 0.6 per cent in 1990 to 3.3 per cent in 2013 was faster than in merchandise exports.

Exports of software services, accounting for 46 per cent of India’s total services exports, decelerated to 5.4 per cent in 2013-14, travel, accounting for a nearly 12 per cent share, witnessed negative growth of 0.4 per cent.n

Exports continue to grow at double-digit rate in June

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erchandise exports grew 10.22 per cent to $26.4 billion in June from $24.02 billion in the same month last year, driven by strong demand for engineering goods, ready-made garments and petroleum products. This was even as the export number for June 2013 was revised upwards from $23.78 billion, thereby increasing the base.

This was a second straight month of double-digit growth in exports, with the rate in May higher at 12.40 per cent, official data released showed.

After contracting for almost 13 months, imports grew 8.33 per cent India Newsletter • 3

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to $38.24 billion in June from $35.3 billion in the same month last year.

The figure for imports in June 2013 was revised from $36.03 billion.

The June trade deficit widened to a 13-month high of $11.76 billion from $11.24 billion in May 2014.

Exports during the April-June quarter stood at $80.11 billion, up 9.31 per cent from $73.28 billion in the corresponding period last year.

However, imports during April-June 2014 contracted 6.92 per cent to $113.19 billion from $121.61 billion during the same period last year.

In June, oil imports soared by 10.90 per cent to $13.34 billion, compared with $12.03 billion in the same month a year ago. Oil imports during April-June also grew by four per cent to $40.78 billion from $39.20 billion.

Non-oil imports during the month were up seven per cent to $24.9 billion. Non-oil imports during AprilJune reached $72.41 billion, down 12.1 per cent from $82.40 billion in the same period last year.

Gold imports were up 65.13 per cent to $3.12 billion in June from $1.88 billion in the same month last year, due to a partial easing of import restrictions and a lower base.

According to credit rating agency CRISIL, since large private gold importers were allowed to resume purchases and nominated banks were permitted to offer gold loans to jewellery manufacturers from May, gold imports doubled in June from $1.7 billion in April 2014.

Non-oil, non-gold imports, an indicator for domestic demand and industrial growth, rose 1.42 per cent to $21.78 billion in June. In May, these imports were up for the first time in 10 months, at a lower rate of 0.5 per cent. This shows industrial production is on its way to a slow recovery. According to experts, outbound shipments are slowly seeing a turnaround on account of an improved global economy, coupled with a low base effect.

Exports in June 2013 contracted 4.5 per cent.

Exports were driven by a 21.57 per cent rise in engineering goods, 38.37 4 • India Newsletter

per cent in petroleum products and 14.39 per cent in ready-made garments. “We are getting a good number of orders from the US. Our domestic manufacturing infrastructure is not able to support these,� said Anupam Shah, chairman of the Engineering Export Promotion Council.

Aditi Nayar, an economist with rating agency Icra, said the doubledigit growth of exports was not expected to continue as the base effect waned and also because of the relative stability in the exchange rate. She added an unfavourable monsoon would also impact farm exports.

Improving global economies had kept export growth buoyant, the only silver lining as the trade deficit widened, said a note by Anand Rathi Research.

The trade deficit rose just 6.66 per cent in April-June 2014 to $70.3 billion from $65.87 billion in the corresponding period of the previous year.n

Export Mission to Be Set Up, 24x7 Customs Clearance

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he government will set up an Export Promotion Mission and extend 24x7 customs clearance facility to 13 more airports to boost overall exports of the country.

While presenting Budget 2014-15, Finance Minister Arun Jaitley said exports cannot be exponentially increased unless the states play an active role in export promotion by providing good infrastructure and full facilitation.

"It will be our endeavour to engage with the states to take India's exports to a higher growth trajectory. It is proposed to establish an Export promotion Mission to bring all stakeholders under one umbrella," he said.

To reduce transaction costs, improves business competitiveness and fasten the clearance of import and export cargo, he said, measures are being initiated to extend the existing 24x7 customs clearance

facility to 13 more airports in respect of all export goods.

This facility would also be extended to 14 more sea ports in respect of specified import and export items.

The minister also proposed to implement an 'Indian Customs Single Window Project' to facilitate trade.

Under this, importers and exporters would lodge their clearance documents at a single point only.

Required permissions, if any, from other regulatory agencies would be obtained online without the trader having to approach these agencies.

"This would reduce interface with governmental agencies, dwell time and the cost of doing business," he said.

Reacting to the Budget, Federation of Indian Export Organisations (FIEO) President M Rafeeque Ahmed said that the Steps announced in the budget would help in increasing exports and improving ease of doing business in India.

"Once implemented, the infrastructure improvement would significantly compress the delivery schedule of exports. Engagement of states in exports is a long due step as all factors of productions are within the ambit of state. Active dialogue with states will help in removing their apprehension that exports is a drain on their exchequer," Ahmed said.

He added that the Export Promotion Mission would provide an effective resolution to the issues within minimum time frame.

India's exports in the last three years have been hovering around USD 300 billion. India's exports in 201314 fall short of the USD 325 billion target and managed to reach USD 312.35 billion. The country's exports stood at USD 300.4 billion in 201213 and USD 307 billion in 2011-12.

Infrastructural bottlenecks and cumbersome customs procedures increases transactions cost of exporters.

According to industry experts, the

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quantum of transaction cost is 7-10 per cent of the total value of Indian exports. This amounts to a significant about USD 15 billion.n

Water Management Company Wabag to Shift Operations from Austria to India

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A Tech Wabag, a water and wastewater management company, will increasingly operate its overseas businesses out of India to take advantage of lower costs and higher margins, according to Rajiv Mittal, Managing Director of the Chennai-based multinational.

Earlier, its international businesses were run out of Austria, the base of its erstwhile parent company, which it acquired in 2007.

But now, new subsidiaries fully handled out of India have emerged as better paying verticals, says Mittal.

In 2013-14, the overseas businesses contributed over 60 per cent of the company’s revenue of about ₹2,230 crore.

The business in Egypt, Tanzania, the Philippines, Nepal and Oman are directly under Indian team support, on the basis of financials, technology and manpower. Even the large markets in Latin America are supported from India.

“We believe the margins from this vertical are closer to those in India, by about 10-12 per cent, rather than that those of international markets with margins of around four-five per cent,” he said.

The company takes advantage of the global reach of the 90-year-old Wabag brand with lower costs and comparable expertise available in India. This gives it an edge over international competition, he said.

The company has strengthened its operations in South-East Asia, West Asia – with focus on Qatar, Oman and Saudi Arabia – and entered Africa last year, he said.

Also, common functions like human resource management,

finance, treasury, MIS (Management Information System) reporting are being brought to India for better control and done at one-fifth the cost the company will have to pay in Europe. “This is helping us rationalise costs. We are not reducing but shifting people,” Mittal said.

Markets handled out of Austria cover Central and Eastern Europe, including Turkey, and North Africa, part of West Asia. It is also slowly moving into some CIS countries.

Over the last three years, VA Tech Wabag achieved its annual guidance targets for revenue and order intake.

For 2014-15, its revenue guidance is pegged between ₹2,600 crore and ₹2,700 crore and an order intake of ₹3,200 crore-3,400 crore. As of now, its order book stands at ₹5,354 crore.

About VA TECH WABAG Founded in 1996, VA Tech Wabag Ltd., India, quickly developed into the leader in the Indian water technology market and currently holds a market share of around 50 per cent. Company is headquartered in Chennai along the nation’s east coast in State of Tamil Nadu. Wabag India also disposes over locations in Delhi, Kolkata (Calcutta), Pune and Vadodara, as well as on the Philippines, in Oman and Spain, and at present has a workforce of more than 800.

Wabag India offers the entire Wabag Group portfolio in the areas of municipal and industrial water and wastewater treatment. Also, the company has consolidated its’ specialist reputation through a number of innovative and pathbreaking projects in the fields of water treatment and wastewater recycling. Wabag India has also added in this portfolio a new service offering under its umbrella with its new International Engineering Centre. This centre offers full fledged state-of-the-art engineering services in line with global standards both in terms of quality and delivery.

Wabag India is also foraying into plant operational management and within a few years has added a number of cities and municipalities

as its clients. Currently, it is also operating India’s first wastewater treatment facility based on a BOOT model.

Wabag India implemented a quality management system at an early stage and has acquired the ISO 9001:2008 accreditation since 2000 and in addition ISO 14001:2004 & OHSAS 18001:2007 in 2010. All in all, the company can point to over 100 reference plants both at home and abroad.n

Indian Bajaj Auto Helps Plot KTM its Global Comeback

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ne in 5 of Austrian company's bikes are made in Pune, for a big cost advantage, enabling it to take market share from rivals.

In late March this year, China saw the roll-out of two locally assembled motorcycles from the brand of Austrian off-road specialist KTM AG. The latter, Europe’s largest twowheeler manufacturer, joined hands with Chinese company CFMoto, building the two bike brands at a facility in Hangzhou, eastern China.

And, both motorcycles were designed, developed and manufactured at Pune by India’s second largest two-wheeler producer, Bajaj Auto, before shipping these to China for final assembly.

Also, the Duke 200 and Duke 390, sold in Europe and America alongside the Duke 125, are also made by Bajaj. In fact, Bajaj-made bikes accounted for a fifth of the total sales of KTM in 2013. Categorised as street bikes, they led the growth for KTM last year, when sales grew to an all-time high of 124,000, a growth of 16 per cent, beating BMW for a second year in Europe. Street bikes, majorly including those made by Bajaj, grew 40 per cent to 45,681 units, opening a new segment for KTM. KTM is recognised for dirt bikes, high-end street bikes and superbikes A 14.5% stake buy by Bajaj in 2007 paved the way for a global strategic India Newsletter • 5

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partnership Traditionally, KTM has been recognised for its dirt bikes, highend street bikes and powerful superbikes. But a 14.5 per cent stake buy

by Bajaj in 2007 paved the way for a global strategic partnership covering joint product development, technology and distribution sharing between the partners. Bajaj Auto has since raised its stake to 48 per cent and secured two (occupied

by Rajiv Bajaj and S Ravikumar) of the 11 seats on KTM’s supervisory board. More, KTM has outsourced all product development work up to 800cc to the Rajiv Bajaj-led company.

A new twin-cylinder engine platform and two new models (RC 200 and RC 390) to complement the existing range, to be launched later in the year, are some of the projects Bajaj Auto is working on with KTM. A total of 11,000 KTM bikes were sold in India in 2013-14 and another 24,000 were exported. Bajaj aims to raise the annual export figure to 70,000 annually. Further, it is making room for producing the Husqvarna motorcycle, a brand KTM chief Stefan Pierer acquired recently from BMW. The first ones are expected to roll out in 2015-16 from Bajaj’s Chakan factory, near Pune. Bajaj will develop vehicle platforms and engines which will be shared between itself, KTM and Husqvarna in future.

Riding on new-found successes, the Austrian motorcycle maker posted a net profit of €36.5 million (Rs 310 crore) in 2013, a far cry when compared with a €81.4 mn (Rs 500 crore) net loss in 2008-09. From annual sales of around 90,000 units before the stake sale to Bajaj, these grew to 123,859 units in 2013. Rajiv Bajaja, managing director of Bajaj Auto, told Business Standard, “KTM has gained market share without exception in all its existing markets, including Europe and Japan, while being able to finally enter markets such as China and Thailand, for which it didn’t have viable products so far.” Bajaj’s frugal manufacturing 6 • India Newsletter

base is allowing KTM to enjoy greater pricing advantage, as products are made for 30 per cent less than those produced in Europe.

Development costs on these highperformance machines are much lower in India than in the research center of KTM in Austria.

After dethroning BMW from the top position, KTM has set its sight on Japan’s bike makers. It has an ambitious plan to displace Kawasaki and Suzuki by 2020 - going past Suzuki in two years and beating Kawasaki in five years - in the premium notorcycles segment. KTM is already ahead of Suzuki on sales in Japan and claims it has reached halfway on beating Kawasaki. Bajaj’s Pune plant will, thus, become the production hub for all KTM bikes with engines up to 800cc.

On being asked if Bajaj Auto would assume a bigger role in defining the way forward for KTM, Rajiv Bajaj said, “Qualitatively, it’s as originally envisaged whereas quantitatively, with each passing year, our joint products represent a greater share of KTM’s global sales.”n

Engineering exports set to cross $70 b this fiscal

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ngineering exports are set to cross $70 billion in the current fiscal, growing by 15 per cent over the previous year, as demand in key markets such as the US and the UAE is on a rise.

“The flow of orders from the US and the UAE has increased substantially in the recent months. We are hopeful that this would continue the rest of the year,” Engineering Export Promotion Council (EEPC) Chairman Anupam Shah said.

Engineering exports, which account for a fifth of the country’s total exports, had taken a big hit in 201213 with shipments dropping 3 per cent to $57 billion as demand in the recession-hit Western countries dried up.

With the global situation improving, exports picked up in 2013-14 and increased 9 per cent to $62 billion.

Apart from traditional markets in the US and the EU, markets in Eastern and Central European countries such as Poland also hold huge promise.

“The non-EU countries in Europe are virgin markets that we have successfully started tapping,” Shah said.

On the prospects for the on-going fiscal, Shah said that things looked bright if the export growth of 24 per cent in the April-May 2014 period was anything to go by. “We will go by a conservative growth target of 15 per cent, while we certainly hope we will have higher growth,” he said.

While export sops given by the Government helps exporters to stay competitive in the foreign market, what is also required is more clarity in existing policy so that exporters spend less time in handling litigation.

“For instance, while we have been told that there is no need to pay TDS (tax deducted at source) on foreign commission, there is no formal notification which leads to trouble,” Shah pointed out.

Engineering exporters also want States to speed up VAT refunds as payments are pending in some cases for as long as three-four years.n

Govt aims to develop 5 airports, award contracts

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he civil aviation ministry will start the development of five no-frills airports and award management contracts of four airports to private operators in the current financial year. The targets were set in a meeting between secretaries of ministries and Prime Minister (PM) Narendra Modi.

Planning Commission Secretary Sindhushree Khullar coordinated the meeting attended by secretaries from the railways, road transport and highways, civil aviation, power, coal, renewable energy, ports and shipping, telecommunications, petroleum and natural gas ministries and the PM. A ministry official said, "The outlay for the civil aviation sector has

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been increased 66 per cent. It was decided to start work on five of 50 low-cost airports. The locations are yet to be finalised. We have decided to award management contracts in at least four of six airports to private operators, processes for which were started last year."

The year’s outlay for the civil aviation ministry is Rs 934 crore.

The United Progressive Alliance (UPA) government had last year started the process to award management contracts at airports in Chennai, Kolkata, Lucknow, Guwahati, Jaipur and Ahmedabad to private operators. The process had to be stalled earlier this year due to Assembly elections. "Depending on the response we receive from private operators and the readiness of the airports, we would award the contracts at at least four of the six airports," added the official.

The ministry has set the target of awarding contracts keeping in mind possible obstacles. There is a court case pending in relation to an awarding of a contract at the Chennai airport to a private operator.

The progress of the projects, with those identified in transport, communications and energy sectors, will be reviewed by the PM at a meeting next month. The Cabinet secretary would work towards a mechanism to ease possible hurdles.

Other projects under review by the PM include high-speed rail freight corridors, gas pipeline grid and clean energy. The government discussed a 10-point agenda to determine targets for the railways for the current financial year. Also, the Budget allocation for the renewable energy ministry was proposed to be increased two-thirds to Rs 2,500 crore.

An official said, "There is a lot of focus from the prime minister's office on efficiency in power transmission, full metering, increased deployment of clean energy, an improved gas supply network and an overall technical improvement of the sector."n

Services sector expands for third straight month

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ervices activity expanded for the third month in a row in July, easing from a 17-month high in June, as a recovery continued in the sector that contributes 60 per cent to the Indian economy.

The economy seems to be on a revival path since the Narendra Modi-led government took over in the last week of May, with key indicators such as car sales, industrial production and exports looking up.

The HSBC Purchasing Managers Index (PMI) for services stood at 52.2 points in July, down from 54.4 in June, but above the 50-point mark that separates expansion from contraction. It was the third successive month of expansion after a 10 consecutive months of decline.

"Growth in the services sector softened in July after a big jump in the previous month. Nevertheless, the sector recorded its third consecutive month of expansion, following several months of subdued activity," said Frederic Neumann, Co-Head of Asian Economic Research at HSBC. Of the six monitored sub-sectors, only hotels and restaurants and transport and storage companies registered reductions in activity.

The Indian economy expanded 4.7 per cent in 2013-14, marginally up from the decade-low 4.5 per cent recorded in 2012-13, as manufacturing contracted 0.7 per cent. Services expanded 6.7 per cent in 2013-14 compared with 7 per cent in the previous financial year, according to data from the Central Statistical Office.

While new business in the service sector rose for the third month in a row in July, it slowed to 52.6 last month from 54.3 in June, according to the report, based on a survey of 350 private sector firms.

New orders across the private sector as a whole continued to rise at a robust pace as manufacturers reported the sharpest increase in new work intakes since February 2013.

"New business flows and business sentiment have moderated relative to the previous month, too," said Neumann. Manufacturing PMI, released on Friday, had shown a sharper rise in activity, touching a 17-month high of 53 from 51.5 in the month before, on account of a surge in new orders.

The report was cautious about rising inflation in the economy. The RBI maintained a status quo on rates in its monetary policy on Tuesday.

"Meanwhile, final prices were marked up at a faster pace to reflect rising costs, underscoring the need for RBI to remain cautious about inflation."n

Honda to set up world’s largest scooter plant in Gujarat

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onda Motors, which is swearing by scooters in India, is setting up the world's largest scooter plant in Gujarat to roll out 12 lakh units annually and achieve leadership position in the Indian two-wheeler market, especially with a growing number of customers shifting to this unisex multi-utility mode that has caught the fancy of many and outpaced almost every other segment.

Scooter sales have jumped by 29% in the ongoing fiscal, and now form 27% of the total two-wheeler market from just 8% a decade back. The ever-rising demand for scooters that has far outstripped supply has prompted Honda to set up its first dedicated scooter plant in Ahmedabad. "Even as we have more than doubled our scooter capacity in India, we have not been able to match up with the demand.

After 13 years of its launch, Activa continues to be on 'waiting' even as competition has multiplied ten times," said YS Guleria, Honda VP for marketing and sales in India. Honda had fired the imagination of scooter lovers with its Activa — launched way back in 2001.

"Even though we raised our production with three new scooters, India Newsletter • 7

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demand still outstrips our estimates.

While scooter production has trebled in the past decade, we still have a backlog of 60,000 scooters that should multiply in the festive months ahead," Guleria added.

Honda would spend Rs 1,100 crore on the new plant in Ahmedabad, and expand its range with a few more offerings.

The company, which leads the scooter market with a 53% share in the domestic market, would have two assembly lines for scooters, which would create 3,000 more jobs.

The fourth plant would enhance its cumulative production capacity in India to 58 lakh units by 2015-16, including 16 lakh from its first plant in Haryana, 12 lakh from the one in Rajasthan, and 18 lakh from the Karnataka plant.

The sales from its Indian subsidiary have already climbed to the second spot for Honda's two-wheeler business worldwide, and it believes that the fourth plant would help India become its top global market.

Honda's decision for a dedicated scooter plant is backed by an overwhelming response to its five scooter brands which have been runaway successes in India.

In fact, all big auto companies — Hero MotoCorp, Suzuki, Yamaha, TVS Motors and M&M — are planning to expand in an effort to cash in on the exploding demand. They have gained from a surge in sales in the first quarter that has helped the segment post record high sales of 1.01 million units in the April-June ended period. Scooters grew 23% to sell 3.60 million units in the fiscal ended March.

Analysts said that the new generation automatic scooters, that are unisex in nature and are fuel efficient, have helped them grow manifold over the more traditional roughand-tough bikes.

"Going by the shift, they (scooters) are expected to corner a third of the market," said Deepesh Rathore, director at EMMAAA , a Delhi based consultancy firm.n 8 • India Newsletter

Panasonic to make India its headquarter for mobiles

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anasonic Corporation will make India the global headquarters for its mobile devices business and expand operations into SAARC and Middle East countries over 2014 as it rebuilds its presence in the smartphone market worldwide after retreating last year. The Japanese consumer durables maker, which sells televisions, air-conditioners, washing machines and refrigerators, will spend 12% of its India revenue of $ 1.65 billion on brand promotion, managing director for Panasonic India Manish Sharma said.

"India is a very promising market.

The penetration and growth of smartphones will continue for the next five to six years," Sharma said.

India's smartphone market more than doubled to 44 million devices in 2014 and is expected to touch 80 million devices this year, according to IDC. Panasonic is aiming for a 5% share of the Indian smartphone market within one year, which should help India's over all business contribute 5% to global revenue. The mobile phone business is expected to contribute 15-20% to overall India revenue by next year. The company also plans to launch smartphones that will run on the Windows Phone OS. Panasonic will begin exporting handsets to Sri Lanka, Bangladesh and Nepal this month, relying on the contract manufacturing model used

by Apple and other leading mobile phone makers. It plans to start sales in Dubai, Saudi Arabia and Kuwait in the Middle East and South Africa, Zimbabwe, Nigeria and Tanzania in Africa next month. "We will follow an asset light strategy and we're executing the scrap and re-building model in all countries," Sharma said on the sidelines of the launch of Eluga, its flagship smartphone, which costs Rs 18,990. About 15 smartphones and eight feature phones will be introduced over the rest of 2014, ranging in between Rs 4,500 and Rs 30,000.n

Microsoft to set up data centre in India to accelerate growth

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n a move that is likely to be followed up by several global technology majors, Microsoft is planning to set up a local data centre in India. The move would help Microsoft offer its cloud offerings to several industry sectors, especially banking, financial services and insurance sector, which is the biggest consumer of technology. Jim Dubois, Microsoft's corporate vice-president and chief information officer, confirmed the move. He, however, did declined to divulge more details.

"We are considering a data centre in India. That's all that we can say for now," he said.

Speaking to Business Standard, he added: "It will absolutely help us accelerate. There are a lot of companies that are looking at us now in anticipation that Microsoft will at some point have a local data centre." Even as Microsoft has seen exponential growth for its cloud platform Azure in India, the firm has not yet set up local servers. Due to the absence of a data storage facility on Indian soil, several industries such as BFSI are unable to use Azure for certain specific requirements.

There has been demand for setting up local servers in India in view of the potential security threat of storing sensitive data at remote locations abroad.

Not very long ago, BlackBerry was forced to set up local servers in India after the Department of Telecommunications asked the Canadian company to do so if it wanted to continue operations in India.

Governments across the globe have become cautious about sensitive information being stored on servers at foreign locations after Edward Joseph Snowden released thousands of classified documents he had acquired while working as a National Security Agency (NSA) contractor for Dell and Booz Allen Hamilton. Snowden's release of NSA

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material to several media outlets was called the most significant leak in the history of US by Pentagon Papers leaker Daniel Ellsberg.n

By 2025, every seventh netizen will be an Indian

B

y 2025, every seventh netizen in the world will be an Indian. The country would emerge as a leading player in the virtual world by having 700 million Internet users as against the 4.7 billion global users by 2025.

Half of the 4.7 billion will come from the emerging countries, led by countries like India, Cameroon and Pakistan.

“During the same period, the entire European Union will add only 105 million new broadband subscriptions, from about 143 million in 2012 to 248 million in 2025,” the Microsoft report Cyberspace 2025 – Today’s decisions, Tomorrow’s terrain.

The report said that the total number of broadband subscriptions in India would go up by over 30 times to reach 700 million from the present 20 million.

As this rapid growth presents good opportunities, the connected world could also be exposed to significant risks, particularly cyber threats.

“But the risks are not just from the commonly recognised sources such as criminals, malware or even targeted cyber attacks. They can emerge from policies as well,” J Paul Nicholas, Senior Director, Global Security Strategy and Diplomacy, Microsoft, said in the recently released report.

Highlights of the report were presented to a group of visiting journalists at Redmond last week.

“The relationship between the national policy and cyber space is complex and, at times, indirect. One of the primary challenges facing policy makers is how to balance massive technological change and simultaneously manage the new generation of risks to cyber security,” the report said.

However, as the proliferation of

Internet connections goes up, emerging countries will experience an increase in cyber security incidents.

The report visualises three scenarios – plateau, peak and canyon, depending on the enabling environment in different countries.

“The countries that recognise (these scenarios) can help their citizens and economies thrive in the next decade and beyond,” the report said. It cautions against the poor availability of human resources by 2025 to handle the huge tasks. “Over four billion people and countless devices will be connected to the Internet.

There will be nearly 20 million science, technology, engineering and mathematics (STEM) graduates, with more than three quarters coming from emerging economies,” the report observed.

The report called for an open, free Internet where privacy is protected and advanced cyber security risk management and coordination across countries. It also called for harmonising laws and standards impacting cyber security.n

India set to open a new window to universe in two years

T

he country has developed the world’s second largest gamma ray telescope that will help scientists gain new knowledge on the origin of the universe and origin of cosmic rays that bombard the space.

State-owned Electronics Corporation of India Ltd in Hyderabad has designed the giant 45 m high and 180 tonne telescope.

The Rs 45-crore mammoth structure will begin its journey on Saturday to the high altitude Hanle region in Ladakh, where it will be finally be installed to study the universe.

“The telescope will be operational in Ladakh by early 2016. After we reassemble the structure there, we will have to have some scientific trials and calibrations,” P Sudhakar, Chairman and Managing Director of ECIL, said.

Fourth gama ray telescope This will be the fourth gamma ray telescope in the world. The largest such telescope built by a consortium of European countries with a diameter of 28 m is currently in operation in Namibia. “ This is the second largest with a diameter of 21 m. But because it is being located in the high altitude Ladakh region, it will have the same capabilities of the one in Namibia,” T Koul, Head (Astro Sciences division), BARC, said.

The other two gama ray telescope are located in Spain and the US. Indigenously built telescope Significantly, unlike the other three, the Indian telescope is totally built indigenously, with designs supplied

by BARC. Basically, the telescope is fitted with over 1,300 specialised diamondturned mirrors that can capture gamma rays that hit the earth’s atmosphere from space more than 100 million light years away.

The rays are then captured by a 1088-pixel camera fitted at the tip of the structure. “ We can study super nova rays, pulsar energy flashes and other unidentified sources of such energy in the space,” Koul said.

How is the telescope useful to man?

“Primarily, it can be used to satisfy the eternal curiosity of man to have better knowledge of the university.

We can also study the black hole phenomena in the universe, among other things,” he said.

Spin-off technologies But more important, as such projects have earlier demonstrated, it will give India some new spinoff technologies that have wide application.

For example, the diamond-turned mirrors, developed for the first time in India, can be used in strategic applications such as defence and space sectors. Also, the high resolution camera can throw up new technologies for high-precision cameras that can find application in healthcare and other sectors.

India Newsletter • 9

Embassy of India, Vienna

The structure will be dismantled and transported a distance of 2,500 km to Ladakh in the next three weeks, while some critical components will be airlifted.n

India, China sign pact on industrial parks

I

ndia and China formalised an agreement to take forward the setting up of China-dedicated industrial clusters in India, with an aim to boost Chinese investment in infrastructure and manufacturing.

The agreement, signed during Vice-President Hamid Ansari’s visit to Beijing, was, however, short on details. With China still considering at least four locations for setting up its first parks, officials described the MoU as more “an enabling framework” rather than a concrete agreement.

The MoU also did not mention whether the proposed clusters would be given any preferential policies, only saying that benefits would be “no lower than that envisaged under the prevailing policy frameworks in India such as Special Economic Zone (SEZ), National Investment & Manufacturing Zone (NIMZ), and existing policies of the State Governments, as applicable”.

Officials hope that the agreement will send a strong signal to Chinese firms that India is open to investment, particularly in infrastructure and manufacturing.

Commerce and Industry Minister Nirmala Seetharaman, who met with her counterpart Gao Hucheng for talks here on Monday morning, said there was “immense scope” for Chinese investment, “not just for manufacturing but many sectors where the Chinese have an advantage”. “Whether manufacturing or railways, we could always find out more such areas where Chinese investments can be encouraged,” she said.

Market access sought During her meeting, Seetharaman also called on China to improve market access for Indian firms

10 • India Newsletter

here, particularly in sectors such as pharmaceuticals and IT where companies have complained of an opaque regulatory framework.

She made the point that the widening trade deficit, which touched $31 billion last year out of two-way trade of $65 billion, was unsustainable. According to the MoU, an Industrial Park Cooperation Working Group, made up of equal number of representatives from both the countries, will be set up to identify and agree upon the detailed modalities, with four locations already being considered by China.

The group will meet alternately in each country and periodically review progress.

MoU on hydrological data The agreement was one of three MoUs signed following Ansari’s talks with his counterpart Li Yuanchao.

Both countries also signed an MoU on the provision of hydrological data and for a first ever training exchange programme for officials of both countries, between the Lal Bahadur Shastri National Academy of Administration (LBSNAA), Mussoorie and the China Executive Leadership Academy (CELAP) in Shanghai.

China has agreed to allow Indian hydrological experts to conduct study tours in Tibet to monitor the flows of the upper reaches of the Brahmaputra, in an apparent move to assuage India’s concerns about on-going dam projects on the upper reaches of the river – known as the Yarlung Zangbo in Tibet.

China has in the past been sensitive about allowing access to Tibet, and Indian hydrological experts have, as yet, not formally visited the region. China also agreed to extend provision of hydrological data from May 15 to October 15 every year on a daily basis, adding 15 days to an earlier agreement. The data will be provided by three stations, at Nugesha, Yangcun and Nuxia in Tibet on the main stream of the river.n

Air India joins Star Alliance Group

A

ir India spokesperson, Praveen Bhatnagar says, executives at Star Alliance met Air India officials and agreed for the airline, which has been in talks to join since last year, to become its 27th member.

Membership allows Air India to share routes with the other airlines to more than 1,200 destinations, helping it to compete with Gulf carriers like Emirates, which have increased their share of long-distance flights into and out of India.n

99 percent growth in “Tourist Visa on Arrival”

A

s a facilitative measure to attract more foreign tourists to India, the Government launched the “Visa on Arrival” (VoA) Scheme in January 2010 for citizens of five countries, viz. Finland, Japan, Luxembourg, New Zealand and Singapore, visiting India for tourism purposes. The Government extended this Scheme to the citizens of six more countries, namely Cambodia, Indonesia, Vietnam, the Philippines, Laos and Myanmar in January 2011. Recently Govt of India has extended Visa on Arrival (VoA) Scheme for South Korea for which Ministry has started receiving data w.e.f 15th April 2014.

The following are the important highlights of VoAs issued during June, 2014.

During the month of June 2014, a total of 2,112 VoAs were issued under this Scheme as compared to 1,062 VoAs during the month of June 2013, registering a growth of 98.9%.

During January-June 2014, a total number of 11,953 VoAs were issued as compared to 9,328 VoA during corresponding period of 2013 registering a growth of 28.1%.

During January-June 2014, the highest number of VoAs were issued at New Delhi airport (5,542) followed

by Mumbai (2,428), Chennai (1,607), Bangalore (820), Kolkata (782), Kochi (346),Hyderabad (305) and Trivandrum (123)..n

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INDUSTRY The Indian Education Sector

T

he late Nelson Mandela once said, “No country can really develop unless its citizens are educated.”

Education plays an important part in the building of a nation. The Indian government realises its significance and hence has taken several initiatives and reforms over the years to impart education and instil the values of secularism, equality, respect for democracy and self-belief among its youth.

According to the rankings released

by Quacquarelli Symonds (QS), 17 Indian universities have made it to the list of top 300 universities in the Asian continent. Also, the topmost Indian management institute, Indian Institute of Management, Ahmedabad (IIM-A) has been globally ranked the fourth-best overall among 20 leading B-schools, according to the Economist.

The education sector in India is at a vital stage of its growth. The vast diversity in ethnicities coupled with varying demographics has prompted different players to invest in the sector. Meanwhile, the upward surge in the Indian economy and consequent increase in income levels has aided the spending on education in the average Indian household.

■■ Market Size It is expected that the Indian education sector’s market size will increase to Rs 602,410 crore (US$ 100.23 billion) by FY 15 from Rs 341,180 crore (US$ 56.77 billion) in FY 12, due to the expected strong demand for quality education.

The present Indian higher education system comprises of about 700 universities and over 35,500 colleges.

More than 85 per cent of these students are enrolled in bachelor’s degree programmes and about one-sixth of all Indian students are enrolled in Engineering/Technology degree programmes.

To increase the percentage of students going for higher education to 30 per cent by 2020, India will need 800 more universities and another 35,000 colleges, according to the Ministry of Human Resource Development (HRD).

■■ Investments The interest of entrepreneurs and private equity players to invest in this sector is generated due to the fact that the sector is not affected much by recession and requires minimal working capital.

Some of the recent major investments in the education and training sector in India are as follows: ■■ Tata Consultancy Services (TCS) has joined hands with the Indian Institutes of Management (IIMs) for a five-year contract of US$ 5 million to conduct the Combined Aptitude Test (CAT) examinations in India.

■■ The Arya Vaidya Chikitsalayam and Research Institute, Coimbatore, and the University of Latvia have joined hands to offer Ayurvedic education programmes to Western medical graduates. The proposed education programme is expected to help Ayurveda get a stronger global footing.

■■ Newcastle University, UK has announced that it will provide two Indian scholarships for undergraduates applying for entry into degree programmes in the Faculties of Humanities and Social Sciences, Science, Agriculture, and Engineering and Medical Sciences.

■■ A collaboration has taken place between IIM-A and Massachusetts Institute of Technology (MIT), Harvard University, and University of California, Berkeley to conduct joint research projects to develop field water quality testing and filtration equipment, ambient pollution measuring products and mobile technologies for health purposes.

■■ Pratt & Whitney (P&W) headquartered in Connecticut, USA

has planned to set up an engine training centre at Hyderabad airport to train aircraft engineers and technicians on current and new engine models, which will be operational from 2015.

■■ The University of Oxford has approached the Indian government seeking collaborations in medical technology research and training in order to address an acute shortage of biomedical engineers in the UK and evolve cost-effective models of healthcare delivery.

■■ Indian Electrical and Electronics Manufacturers’ Association (IEEMA) joined hands with New York-based Institute of Electrical and Electronics Engineers (IEEE) in order to promote collaboration on various initiatives that include skill development and training in the electrical and electronics sectors and enrichment of technical and technological knowledge among the electrical and electronics fraternity in India.

■■ IIT-Madras has established a centre for technology and policy to address development problems and help technology innovators work more effectively. The centre will enable consultation and networking with policy makers, industry, investors and various other stakeholders and will also play a role in the design, promotion and assessment of public policies imposed by technological and scientific innovations.

■■ Government Initiatives The following are some of the major initiatives taken by the Government of India for the development of the education and training sector: ■■ To facilitate research in the securities market, Securities and Exchange Board of India’s (SEBI) Development Research Group has invited applications from academicians and researchers with more than 15 years of experience to undertake research on nine different India Newsletter • 11

Embassy of India, Vienna

topics.

■■ India has signed a global treaty, the ‘Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled (MVT)’. This treaty will facilitate import of accessible format copies from the member states

by Indian educational institutions, libraries and institutions working for the benefit of visually impaired persons.

■■ The Ministry of Human Resource

Development (MHRD) has proposed to provide for 5,000 faculty positions in higher education under the Rashtriya Uchchatar Shiksha Abhiyan (RUSA), under the current Five Year Plan (2012–17).

■■ In order to promote higher education, the Government of India, through the Faculty Research Promotion Schemes (FRPS) of the University Grants Commission (UGC) offer research support to the University Science Faculties at three different levels.

■■ Road Ahead The currently drafted Five Year Plan proposes to provide inclusive and qualitative expansion of higher education in India. It also aims to propel the gross enrolment rate across levels; establish new entities; liberalise the sector, that is, allow private universities and foreign players; and take other measures including access enhancement so as to revive and sustain the demand for this sector.

OPPORTUNITIES IN INDIA’S EDUCATION SECTOR

G

ross Enrolment Ratio (GER) in higher education in India is

has set itself an aggressive target of

(including capital and operating

achieving 30% GER by 2020

expenditure) in the next seven years

than the global average of 26%.

The target entails an additional

to enrol an additional 25 million

Therefore, the Indian government

investment

students.

still about 18%, which is far lower

of

US$190

billion

*The above quoted stats are taken from a FICCI report on higher education in India (based on the twelth five year plan) and UGC’s annual report 2010-11. 12 • India Newsletter

www.indianembassy.at

OPPORTUNITIES FOR FOREIGN INVESTMENT ■■ Between 2010 and 2015, the market size of the higher education sector is expected to register a compounded annual growth of 25%, thus making it worth US$57 billion by 2015.

■■ The twelfth Five-Year Plan aims to enrol 35.9 million students in higher

education institutions, with a Gross Enrolment Rate (GER) of 25.2 % (up from 19.9 % during 2007-12, which was up from 12.3 % at the beginning of that period).

■■ The private sector’s share of student enrolment has grown from 33% in 2001 to 59% in 2012.

■■ The total allocation of funds for the education sector, under the twelfth Five Year Plan (2012-17) is about US$82 billion; out of which the share of higher education is only 24%. The remaining share is spread across the primary and secondary education segments.

year from the Shiv Nadar Foundation, set up by information technology czar Nadar, will throw open its MBA programme. A couple of kilometres from Ashoka, looms the impressive edifice of O P Jindal Global University, founded by Naveen Jindal, who runs a Rs 20,000-crore steel and power empire.

There is a fresh round of sorelyneeded money coming into education, and this time it is not looking for returns. It is clear the funds will make only a blip in the country’s gross enrolment ratio of 18 per cent in higher education in 2011-12, which the government is trying to push to 25 per cent by 2016-17. These universities have the advantage of strong job linkages, since their owners have experience of running business empires. They also have scale. Unlike a private college, a university can award a degree, vital to attract undergraduates, and it can offer a number of programmes and disciplines.

Experts, though, question if these shiny campuses will bring with them the one thing Indian education, from school-level to college level, government-run or private, is dubious on - quality.

“These universities are yet to come up. They are not known in the world like Harvard or MIT. Quality is not determined by some big man pouring money into a building,” scientist and Bharat Ratna recipient C N R Rao told Business Standard.

He urged Indians not to accept lowquality education and said young graduates were earning money but had stopped applying their minds.

Proactive state govts The fresh investment in universities shows some states have been smart enough to change their laws to attract private funds into education.

After a long period of government control in higher education in the form of central and state universities, private universities such as Amity, with a mini Singapore-like campus, burst on the scene because states such as Haryana and Uttar Pradesh (UP) enacted laws to allow private universities to start without central government approval. Education in India is a concurrent subject, which both central and state governments can tackle.

The Haryana Private Universities Act, 2006, ushered in the O P Jindal University in 2009. The government simply amends the Act to let in a new university, and till 2014 had allowed in 17 universities, the last three being Ashoka, B M Munjal and Al-Falah.

Uttar Pradesh, similarly, established Amity University by a state law. Later, Sharda University and Galgotias University were let in through similar laws, enacted in 2009 and 2011, respectively, copies of which are on the universities’ websites.

Punjab, Rajasthan and Karnataka are other states actively encouraging private universities. The first two gain from the advantage of locations such as Gurgaon (Haryana), Sonepat (Haryana), or Noida (UP) with their proximity to Delhi, which brings in students, and the one-stop shop of permissions that hubs such as the Rajiv Gandhi Education City offer. Manoj P, associated with the

LATEST INDUSTRY NEWS Private universities usher in a wave of big money in education A luxury bus leaves from Hotel Oberoi in central Delhi for the Rajiv Gandhi Education City near Sonepat on a Sunday. Every seat has a lunch box with cashew, juice, chips, chocolate and biscuits. Riding the bus is serious entrepreneurial and family money.

Ashish Dhawan, founder of ChrysCapital, holds a mike and tells the story of how he discussed the idea of setting up a university in 2005 with Sanjeev Bikhchandani, founder of naukri.com, a well-established job site. Bikhchandani recounts how the meltdown forced a scaling down of the plan which is now taking shape. Ravi Jhunjhunwala of LNJ Bhilwara leans back on the last seat and discusses the university with his wife. He is soon joined by Puneet Dalmia.

Ashoka University founders and their families are visiting the campus, some for the first time.

Together, they have managed to put in Rs 200 crore for a liberal arts varsity, signifying a break from tech and business schools and being part of a wave of big money coming into Indian education. Ashoka University will get its first class of undergraduates in August. So will BML Munjal University, started by the Hero Group, the country’s largest motorcycle maker.(PRIVATE UNIVERSITIES BACKED BY BIG BUSINESS) In Noida, Shiv Nadar University, which gets a grant of Rs 250 crore a

India Newsletter • 13

Embassy of India, Vienna

Azim Premji University in Bangalore since its start, enabled by the Azim Premji University Act, 2010, said the Karnataka government has since then allowed in eight-nine private universities.

Impact “You have the greatest impact (on society). That’s what you want to do,” said Ajit Rangnekar, dean of the Indian School of Business or ISB in Hyderabad, a privately-run business school co-founded with Rajat Gupta in 2001, which is looking to become a university. ISB, whose main campus falls in the recently created state of Telangana, said it would offer multi-disciplinary courses and take in undergraduates if made into a university. ISB has roughly 760 post-graduate students of business administration in its Hyderabad and Mohali campuses. Four founder supporters of ISB, Analjit Singh of Max India, Rakesh Bharti Mittal of Bharti Enterprises, Sunil Kant Munjal of the Hero Group, and Atul Punj of the Punj Lloyd Group, invested Rs 50 crore each in the Mohali campus which started in 2012.

While the Punjab government has offered ISB university status, Dean Rangnekar is hesitant as it leaves out its Hyderabad campus where the parent state, he says, may not have a private varisty law. Rangnekar wants a national law on private universities that allow multi-campus institutes to become universities.

ISB offers a post-graduate diploma, and not degrees, in management to its students, just the way the Indian Institutes of Management or IIMs do.

Though the private universities fill a need, the high cost of being a student there is a matter of much discussion online among aspirants.

The Jindal Law School, for instance, charges Rs 6.75 lakh fees per year, including hostel charges, for a fiveyear BA LLB course; in sharp contrast to the National Law School of India University, Bangalore, which charges Rs 1.76 lakh per year, including residence, for the same course.

“While in the US it might be possible to get a loan and couple the effort with previous savings and workings during the law school study to afford the fees, how does one expect a person with average Indian

income to pay the exorbitant fees at JGLS (Jindal Global Law School)?

Great effort but I would still go to a National Law University,” said Sandipan De, commenting in Bar & Bench, an online platform for the legal community.

Deans of the universities say they are generous in offering scholarships. A Jindal Law School student assured De, for instance, that it is possible to get a full fee waiver. At Ashoka, where the undergraduate course costs Rs 3.9 lakh per year, 60 per cent students will get 20 per cent to full fee waiver.

A reason a large-investment university is considered viable is because attracting good faculty has long been a struggle, as India does not produce enough research scholars to fill faculty positions.

Universities backed by deep pockets can hunt globally for teachers.

Ashoka University, for instance, has a British teacher for Sanskrit; Dean of academics, Jonathan Gil Harris, a scholar of Shakespeare and a fan of Vishal Bhardwaj, has taught English at the George Washington University.

PERSPECTIVES ON INDIA Improving business

of the major emerging economies

Africa have received downgrades

sentiment propels India

of the world are likely to face the

in growth projections by 0.6 per

continued adverse effects of supply

cent, 1.1 per cent, 0.2 per cent and

side constraints and tightening of

0.6 per cent respectively. For 2015,

financial conditions.

IMF projects India’s GDP growth to

India’s economic outlook, however,

accelerate further to 6.4 per cent.

is looking relatively better in the

The recovery in business sentiment

coming quarters as compared to

has been especially strong after the

other large emerging economies.

elections this year leading to the

by Aparna Dutt Sharma, CEO, IBEF

I

n its latest World Economic Outlook report, the International

Monetary Fund (IMF), has cut the global economic forecast for 2014 by 0.3 per cent to 3.4 per cent.

Some of the downside concerns

In its outlook for BRICS economies

formation of a stable government

that have been highlighted for the

(Brazil, Russia, India, China and

at the centre. The index of industrial

second half of the year include rising

South Africa) in 2014, India is the

production (IIP) also rose by 4.7 per

geopolitical risks leading to rising

only economy for which IMF has

cent in May 2014, the highest growth

oil prices, financial market risks

retained its growth projection for

recorded

and a reversal of recent risk spread

the year at 5.4 per cent. On the other

Moving forward, India is expected

and volatility compression. Some

hand, Brazil, Russia, China and South

to post higher rates of growth.

14 • India Newsletter

since

October

2012.

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EXPERT BUSINESS ADVICE This article has been authored by Mr. Azeem Merchant, Founder & CEO, Messung Global Connect - A global advisory & implementation organisation based in India which helps global companies Enter, Set-Up and Expand their business in India. For further details or to contact the firm, please email Mr. Jaideep Patil under jaideep@messungglobalconnect.com or visit messungglobalconnect.com

C

arrying on with our theme of the methods of ‘How to do business in India’, this article aims to highlight one very significant approach of setting up a Joint Venture with a local partner in India.

The world is looking at India as an attractive investment destination with strategic advantages and lucrative commercial incentives.

Beyond this, India offers a vast internal market for various products and services. It is therefore apparent that India has a lot to offer to anyone looking to do business here from both the producers’ and consumers’ perspectives.

In making a decision to enter India, to benefit from the inherent advantages offered by an exist¬ing Indian partner in terms of market access, local knowledge or quick ramp-up, foreign investors and companies should seriously consider forming Joint Ventures with Indian businesses (hereinafter referred to as “JVs”). There is still a lack of technologies and processes in India despite all the progress it has achieved. Foreign companies possessing such technologies and pro¬cesses can add significant value to JVs in India and take advantage of local skills and markets. The process of establishing a JV in India and commencing the business can be relatively uncomplicated if it is preceded by proper planning, market research and partner assessment. Pulling off a suc¬cessful JV requires setting specific and measurable objectives, identifying and critically assessing potential partners and target market, and determining the right mode and

format of JV. ■■ What is a Joint Venture?

A JV may be defined as any arrangement whereby two or more parties co-operate in order to run a business or to achieve a commercial objective. This co-operation may take various forms, such as equitybased or contractual JVs. It may be on a long-term basis involving the running of a business in perpetuity or on a limited basis involving the realization of a particular project.

■■ Purposes for Establishing a JV JVs are envisaged as alliances that yield benefits for the JV partners by offering a platform to attain their business goals which would be difficult or uneconomical to attain independently.

■■ iLeveraging Resources ■■ Exploiting Capabilities and Expertise ■■ Sharing Liabilities ■■ Market Access ■■ Flexible Business Diversification ■■ Forms of JVs JVs may be either contractual or structural, or both. They may be broad based or narrowly defined and the main classification of JVs is as equity/corporate JV and contractual JV. An equity JV is an arrangement whereby a separate legal entity is created in accordance with the agreement of two or more parties. The parties undertake to provide money or other resources as their contribution to the assets or other capital of that legal entity. This

structure is best suited to long-term, broad based JVs. The contractual JV might be used where the establishment of a separate legal entity is not needed or the creation of such a separate legal entity is not feasible. This agreement can be entered into in situations where the project involves a temporary task or a limited activity or is for a limited term.

The four most common structures employed to constitute a JV are (see diagram in the next page): ■■ Company JV Here the parties to the JV would create a joint venture company (“JV Co”), under the Companies Act, 1956 (“Act”) and would hold the shares of such company in an agreed proportion. This arrangement can also be termed as Equity/Corporate JV. ■■ Partnership A partnership firm created under the Partnership Act, 1932, is in many respects simpler than a company, and may perhaps be regarded as a halfway house between a corporate joint venture and a purely contractual arrangement.

A partnership represents a relationship between persons who have agreed to share the profits of business carried on by all or any of them acting for all. A partnership JV or hybrid models are unincorporated forms of JV which represent the business relationship between the parties with a profit motive.

■■ Limited Liability Partnership In 2008, the Limited Liability Partnership Act, 2008 (“LLP Act”) introduced limited liability India Newsletter • 15

Embassy of India, Vienna

partner¬ships (“LLPs”) in India. An LLP is a beneficial business vehicle as it provides the benefits of limited liability to its partners and allows its members the flexibility of organizing their

internal

structure

as

a

partnership based on an agreement.

At the same time a LLP has the basic features of a corporation including separate legal identity.

16 • India Newsletter

■■ Unincorporated Joint Ventures Co-operation Agreements/Strategic Alliances The most basic form of association is to conclude a purely contractual arrangement like a coop¬eration agreement or a strategic alliance wherein the parties agree to collaborate as independent contractors rather than shareholders in a company or partners in a legal partnership. This type of agreement is ideal where the parties intend not to be bound by the formality and permanence of a corporate vehicle.

Such alliances are highly functional constructs that allow companies to acquire products, technology & working capital to increase production capacity and improve productivity.

■■ Documentation in a JV Establishing a JV involves a series of steps and selection of the best

partner after proper due dili¬gence is the most significant of all. Once a partner is identified, a memorandum of understanding (“MoU”) or a letter of intent (“LoI”) is signed by the parties expressing the intention to enter into definitive agreements.

JV transactions demand efficient, clear and foolproof documentation.

Depend¬ing upon the nature of the JV structure, definitive agreements would be drafted. (see table in the bottom) Essentially a JVA/SHA provides for the method of formation of the JV company and sets out the mutual rights and obligations of parties for the purposes of conducting the JV and the manner in which the parties will conduct themselves in operating and managing the JV. The successful implementation and smooth functioning of the JV depends on the definitive agreements and hence it is critical to draft it in the best possible manner without any room for ambiguity. A convoluted and vague docu¬mentation can be fatal to the JV and hamper the interest of the parties. The following are the most significant clauses that are to be carefully incorporated into the JVA: ■■ Object and scope of the joint venture; ■■ Equity participation by local and foreign investors and agreement to future issue of capital; ■■ Financial arrangements; ■■ Composition of the board and

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management arrangements; ■■ Specific obligations; ■■ Provisions for distribution of profits; ■■ Transferability of shares in different circumstances; ■■ Remedying a deadlock; ■■ Termination; ■■ Restrictive covenants on the company and the participants; ■■ Casting vote provisions; ■■ Appointment of CEO/MD; ■■ Change of control/exit clauses; ■■ Anti-compete clauses; ■■ Confidentiality; ■■ Indemnity clauses; ■■ Assignment; ■■ Dispute Resolution; ■■ Applicable law ■■ Force Majeure etc.

■■ Memorandum & Articles of Association The Companies Act requires every

company to have a Memorandum of Association (“MoA”) and Articles of Association (“AoA”). The MoA and AoA are the charter documents of the company.

The JV agreement is between partners and does not bind the JV company unless its terms are included in the AoA of the JV company.Therefore it is necessary to specifically incorporate the terms of the JVA /SHA into the AoA of the JV company. In India, the AoA and MoA prevail over the JV agree¬ment and the Act prevails over the MoA and AoA. In order to avoid conflicts arising between the agreement and the AoA, it is usual to include a provision in the JV agreement to the effect that if the AoA is inconsistent with the provisions of the JV agreement, then the parties will amend the MoA and AoA accordingly.

The main requirement in the MoA will be to make the main object clause sufficiently wide to cover the company’s proposed activities.

The Memorandum of Association is in a way a flexible document and can be altered by the shareholders in accordance with the provisions of the Act. The objects specified in it, as required by the Act, cannot be overstepped. Any ultra vires activity has serious consequences. A contract by a company on a matter not included in the Memorandum of Association is, therefore, ultra vires. Therefore, the parties to the JV should ensure that the current main objects of the company are vide enough to cover the proposed activity of the JV Company.

Articles of Association are regulations for internal management of the company. They are the rules or bye-laws for the conduct of Board & Shareholders meetings, issue and transfer of Shares, Pow¬ers & duties of Directors, Managing Director etc.

The AoA will contain such of the basic rules of the company as are not set out in the agreement and will set out the different class rights (if any) of shareholders.

TRADE FAIRS INTERESTED IN VISITING A TRADE SHOW IN INDIA? In case your company is interested in visiting a tradeshow/B2B event in India, be it one listed here or another one that came to your attention, get in contact with us via marketingofficer@indianembassy.at to get more information about possible assistance/subsidies.

29 September 2014 - Ahmedabad

India Newsletter • 17

Embassy of India, Vienna

18 • India Newsletter

www.indianembassy.at

India Newsletter • 19

Embassy of India, Vienna

INVEST INDIA Federation House, Tansen Marg New Delhi—110 001 0091-11-23765085, 23487278 investindia@ficci.com www.investindia.gov.in

I

nvest India is the country’s official agency dedicated to investment promotion and facilitation. Set up as a joint venture between FICCI (51% equity), DIPP (35% equity held by the Department of Industrial

20 • India Newsletter

policy and Promotion, Ministry of Commerce & Industry) and State Governments of India (0.5% each), its mandate is to become the first reference point for the global investment community.

It provides granulated, sectorspecific and state-specific information to a foreign investor, assists in expediting regulatory approvals, and offers hand-holding services. Its mandate also includes assisting Indian investors make informed choices about investment opportunities overseas.

www.indianembassy.at

TOURISM

Pushkar

by Hugh & Colleen Gantzer In the long, blue, evenings of Autumn, when the moon begins to fatten for the brightest night of the year, the tribes start to move.

They stream out from all over Rajasthan, winding through the scrub-lands and deserts, the thickets of thorn trees and bristly fields of bajra, in rivulets of kaleidoscopic, plodding, caravans. They are people of many communities, varied professions. Camel-herding Raikars trudge with their supercilious beasts, and turbans of smouldering sunsets; wandering Gujjars stalk, their women gossiping in laughing groups, gypsy-bright skirts swaying like flowers in a breeze, silver jewellery clinking and glittering in the sun; itinerant Lohars plod beside their creaking, nail-studded carts; and martial Bhils whose ancestors, not so long ago, foraged as dreaded bandits in the scrub-covered ravines, stride proudly.

Fascinated, we join then. We drive out from the holy town of Ajmer and head for the brassy desert around the three sacred lakes of Pushkar.

Once, a legendary time ago, Lord Brahma, the Creator of the Hindu Trinity, had flown over this land.

Three petals had fallen from the lotus he carried and touched three places on the earth below. Miraculously, three lakes had appeared: Kanishtha Pushkar, the youngest; Madhyam Pushkar, the middle one; and the great elder, Jayeshtha Pushkar.

Recognising this as an auspicious omen, the Creator had landed and performed a powerful yagna, a fire sacrifice. Some of the colourful tribal folk claim that he had married a tribal girl, just before, because he had to have a wife at his side to make the yagna efficacious. Ever since then, people have gathered here in their thousands to bathe and worship on the anniversary of the Creator’s sacrifice.

In fact, regardless of its legendary origins, Pushkar has grown into one of the world’s largest and most colourful livestock fairs.

Cattle, sheep, goats, camels and thoroughbred horses are bought and sold in good-natured haggling encounters. Families, separated by arid stretches of desert, meet relatives; bright-eyed maidens

exchange glances with handsome young men and the prolonged negotiations for marriages are begun; and there is a great deal of shopping and eating, and swirling on the giant-wheels.

But for us, as our car breasts a hill, magic unfolds. In the distance, below, glint the three lakes, their stepped shores rising to the massed old town of Pushkar: flat-roofed in shades of yellow and white. And through the soft ochre, dust-and-sunset, haze, campfires twinkle on the plain, each fire marking the resting caravan of a family, a community, a tribe, with their animals tethered around them.

We manoeuvre our way through crowded roads lined with openfronted shops, and blaring music, and into the comparative serenity of the Tourist Village set up by the state’s Tourism Development Corporation. Our seemingly rustic hut has all the comforts that a weary traveller looks forward to. There is a marquee-restaurant serving buffet breakfasts, lunches and dinners.

And a packed-earth stadium for performances by folk artistes.

We sleep early, looking forward to India Newsletter • 21

Embassy of India, Vienna

having breakfast while desert-dew still sparkles on the plain. And then walking across the road, from our secure campus, and becoming one with the razzmatazz, colour and ordered chaos of the fair. And that is what we did.

Pushkar is a shifting kaleidoscope, a flicker-glitter of swift impressions on the six senses. Yes, even the protective sixth one: jink, instinctively, out of the camel’s path; turn fast to frame that smiling face; avert your eyes from that fearsome mendicant who seems to be high on holy hash. A Tourist Police officer smiles reassuringly. The fearsome mendicant grins, showing a set of brilliant, white, teeth. He says “You’re shooting into the sun. You might damage your exposure meter with overload!” His accent is a curious mixture of Bengali and German.

Pushkar attracts an eclectic mix of people.

The bustling, central, area of the fair is crowded with visitors thronging the shops, entertainment booths and eateries. The farmers and their animals are camped on the duncoloured plain all around. They know that the major transactions take place on their plain, redolent of animals and cooking fires. We decide to visit that area later because it is already midday and we’re hungry.

The irresistible aroma of frying pakoras and sizzling, succulent, golden jelabis emerges from a dhaba presided over by a man who has the build of a wrestler and the expression of a buccaneer. We risk his appearance and indulge ourselves not wisely but too well.

The high-calorie snack seems to sharpen our perceptions. We spot a tourist perched awkwardly on a camel, looking rather nervous, while, in the foreground a man lies near a sharp pile of pitchforks, called chaukni, a mobile phone plastered to his ear. Pushkar bridges time and equipment: chaukni and cell-phone perfectly matched.

We drift through the crowd, applaud at camel races and turban-tying competitions, thrill at the roaring 22 • India Newsletter

tension of the Well of Death, delight at children tumbling out of an inflatable Mickey Mouse. We visit a stall with superb white horses with pink ears. A young Haryanvi farmer has himself photographed beside the tallest and most expensive of the steeds the way a Formula 1 fan might stand beside a Ferrari. He says that the superb animal was of the Nukra breed and that it had originally been sold for 13 lakhs but was now priced at 51 lakhs. He is convinced that the owner does not really want to sell it but has put a price tag on it only to attract attention to his other horses.

We move on.

It is only when we notice the lengthening shadows that we realize that we have been here the whole day. We stroll past women shopping for bangles while their lone male companion stands behind, frowning unhappily. Camels slurp water from a trough, dipping into their own reflections. The great tented camp on the plain, and its cooking fires, mottle the dusk, touched by the orange disc of the setting sun. When we weave our way through them, many look up, smile, and offer to share their meal with us: charcoal baked bajra rotlas and the lightly fried beans of a desert shrub with a delicately bitter flavour, accompanied by a brass tumbler of chas: a yoghurt drink spiced with chillies. Most desert people have a strong tradition of hospitality. We sit cross-legged around a fire, on sheepskin rugs, smile at their near awe when they learn we live in the Himalayas. We return to our Tourist Village and take in an amusing rural play about two women trying to drive reluctant cattle; men play the driven beasts much to the delight of the audience.

We rise before dawn the next morning and merge into a river of humanity flowing towards the Jayeshtha Pushkar. We are caught in an irresistible current for almost an hour. We can’t slow down; we can’t speed up; we can’t move right or left. Then people begin peeling off and veering into lanes that lead down to their favourite bathing

ghats. Placing ourselves on the flat roof of a lake-side temple, we look around. What an incredible sight!

On three sides spreads the Jayeshtha Pushkar lake, metallic in the predawn light. The steps leading down to the lake are crowded with barechested man and brightly dressed women. All eyes are fixed on the glowing, eastern, horizon. And then, as a chip of the sun thrusts over the edge, the temple bells begin to ring. Men and women plunge into the water, chants surge out from a thousand throats as the bathers raise water in their cupped hands and let it fall as a libation to the sun and a new day. Priests wade into the bathing pilgrims carrying brass thalis containing coconuts, rice, vermillion powder and roses.

Soon, a floating carpet of pink rose petals starts to spread out from the bathing ghats across the lake.

Later that morning, we tread carefully along the water-slicked streets and follow the pilgrims as they climb the steps of one of the very few Brahma temples in our land, and pay their homage to him. We then go round the fair again but though it is still colourful, it had clearly lost its zest.

That night, while the great full moon of Autumn silvers the lake, we stand on our temple terrace and look out over the water. Thousands of tiny oil lamps flicker like gold fireflies on the steps of the ghats. Slowly, while temple bells chime and incense rises in fragrant blue clouds, pilgrims carry their lamps to the water’s edge and set them afloat in homage to the lake of the Creator.

We know that, when dawn comes, bright and flaming over the desert, most of the lamps would have flickered out, the tents would have been struck, and the pilgrims and their camels and cattle and caravans would be trudging back across the sands. But next autumn, before the huge Purnima moon brightens the sky, the tribes will be back, lured by the irresistible spell of Pushkar.

www.indianembassy.at

India Newsletter • 23

Embassy of India, Vienna

Invitation for the Flag Hoisting ceremony on occasion of the 68th Independence Day of India

The Embassy of India, Vienna, invites all Indian Nationals, persons of Indian origin and friends of India to the Flag Hoisting Ceremony on the occasion of the 68th Anniversary of India’s Independence Day on Friday, August 15th, 2014.

VENUE India House Spitzergasse 2, A-1180 Wien PROGRAMME 09:45 - Assembly at the Embassy Residence 10:00 - Flag Hoisting by Ambassador Rajiva Misra 10:05 - Reading of President’s Message by the Ambassador 10:30-11:00 - Refreshments Please R.S.V.P. to the event via email under infoasstt@indianembassy.at 24 • India Newsletter

www.indianembassy.at

INDIAN MOVIE EVENING AT THE EMBASSY Due to limited capacity, seats will be given on a first come, first served basis. Therefore, you are highly encouraged to reserve your seats online at www.indianembassy.at, via email under marketingofficer@ indianembassy.at

Mission Liebe - Ek Tha Tiger Ek Tha Tiger is a romantic thriller which tells the story of a Trinity College scientist suspected of selling missile technology secrets to Pakistan. The Indian government sends a secret agent, codenamed Tiger (Salman Khan), to find out about the professor’s activities. Tiger falls in love with the professor’s caretaker Zoya (Katrina Kaif ) who is studying at a fictional dance academy located at TCD, and together they embark on a rollercoaster journey that takes them from Dublin to Istanbul then to Kazakhstan and Chile.

■■ Director: Kabir Khan ■■ Stars: Salman Khan, Katrina Kaif, Ranvir Shorey ■■ Genre: Action | Romance | Thriller ■■ Duration: 132 min ■■ Release Year: 2012 ■■ Language: Hindi ■■ Subtites: German

Showtime August 29th, 17:30

NEW TIME!

Indian Embassy Business Centre (1st Floor, Kärntner Ring 2, 1010 Vienna)

India Newsletter • 25

Embassy of India, Vienna

NOTICE BOARD EMBASSY’S LIBRARY ■■ The EMBASSY’S library is opened DAILY from 10am to 1pm without appointment. NEW OPENING HOURS! ■■ For scheduling an appointment outside the opening hours, please contact the information assistant under infoasstt@indianembassy.at or 01 505 8666 33

BUSINESS CENTRE ■■ The EMBASSY’S Business Centre is opened DAILY from 10am to 1pm. NEW OPENING HOURS! ■■ For scheduling an appointment outside the opening hours, please contact the commercial wing under the contacts given below.

■■ Marketing Officer: marketingofficer@indianembassy.at or 01 505 8666 30 ■■ Marketing Assistant: marketingassistant@indianembassy.at or 01 505 8666 31

STUDENTS WELFARE OFFICER ■■ Mr. Pawan T. Badhe, Third Secretary in this Embassy has been designated as Officer to look after welfare of Indian Students in Austria and Montenegro.

■■ His contact details are: 0043 1 505 866 15 and cpolitical@indianembassy.at

MINISTRY OF EXTERNAL AFFAIRS GOES MOBILE Now you can...

■■ Avail services : passport, visa, consular assistance ■■ Ask your Minister : on the go, anytime, anywhere ■■ Follow your PM : on his visits abroad ■■ Find the nearest Indian Mission/Post : for emergency consular assistance ■■ Be informed : about India’s Foreign Relations on the move and form your own opinions ■■ Know more : about how to undertake Kailash Manasarovar Yatra and Haj Pilgrimage ■■ Download and watch : pictures & documentaries on India ■■ Play and Personalize : what you need, when you need ■■ Share and contribute : your views, pics & suggestions All this & much more on your smartphone Ministry of External Affairs proudly presents “MEAIndia” – an integrated smart app for mobile and other hand held devices ‘MEAIndia’ is now available for download on App Store and Google Play Store..

FACEBOOK ■■ Our Facebook page targets the India-Austria community and covers subjects such as Business, Culture, Embassy News, India-related events and programmes in Austria, and much more.

■■ We have reached the 1300 followers mark!

■■ ‘Like’ our facebook page and be the first to know!

www.facebook.com/IndianEmbassyVienna 26 • India Newsletter

www.indianembassy.at

INDIA PERSPECTIVES MAGAZINE India Perspectives is now available on all mobile platforms The flagship magazine of the Ministry of External Affairs,India Perspectives, is

now available on all mobile platforms and App Stores through Magzter Mobile App, in 14 languages. in addition to web at www. indiaperspectives.in it can also be found at Apple, Google Play, Windows

8, Samsung, Amazon and Huawei platforms An exclusive webpage of the Ministry of External Affairs, has been created on Magzter.com. ( One of the biggest Digital Magazine Stores)

www.magzter.com/publishers/meaindia

India Newsletter • 27