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Vol.4

Issue 12

December 2017

100

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EXCLUS IVE IN TE RV IEW S R. S. SODHI Managing Director, Amul H.E. ALPHONSUS STOELINGA Ambassador of the Netherlands to India CHARLOTTE NAN JIANG Development Specialist, Doing Business Group, World Bank JULIUS SEN Associate Director – ITPU, London School of Economics MADAN SABNAVIS Chief Economist, CARE Ratings ...AND MANY MORE!

India’s rank in the World Bank’s Doing Business 2018 report jumped 30 places from 2017 to reach 100. While this is a remarkable achievement, the country still lags behind its peers on many important parameters like cross-border trade and enforcing contracts. Is India really on its path to stardom or are we celebrating too early? The Dollar Business analyses India’s new-found status.

Ribbon fish

Paper & paperboards

The fish is highly in demand amongst Chinese buyers

Growth in diverse applications is driving their imports

The prize (by)catch

Rolling in profits

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LETTER FROM THE EDITOR – IN – CHIEF

A COMPLICATED GESTATION OR A LOW-RISK MISSION?

A

simple yet important question to begin with: There is a certain chapter missing in the Harmonised Commodity Description and Coding System (popularly called HS codes; the international system of names and numbers to classify merchandise in foreign trade). Which is it?

Now that the question is known, you will dig around on Google and do a quick job with educating yourself – but that’s not the point. The point here is whether ALL masterminds who worked hard on formulating the revised Foreign Trade Policy (FTP) and in turn took a shot at deciding the future of millions of exporters and importers in India know the answer. Hopefully, they ALL do.

Next, the revision.

Delays in its release did lead us to assume that FTP 2.0 has endured a good degree of complicated gestation. The eventual release however makes it look more like FTP 1.1; still a notch better than the initial format released in April 2015.

Improved rates under MEIS to accommodate labour-intensive and MSME-driven industries, expansion of the ambit of SEIS (by increasing the incentive by 2% and making the scrips transferable), increase in validity of duty scrips to 24 months from the present 18, shifting of capital goods allowed from one unit of EPCG holder to another and clubbing of EPCG authorisation, relaxation in rules governing imports of second-hand goods for repair works, conditional empowerment of RAs to issue Advance Authorisations, etc., indicate the government's intent to attend to urgent needs of India’s export community.

But it’s still a mixed bag.

The concept of the e-wallet (to address the capital blockage issue of exporters) is known and more than the date of its implementation, exporters are worried about its effectiveness. Payment of GST with duty scrips is a subject still avoided by the government. Nothing has been done to relax the burden of IGST payment for inputs imported under AA despite other markets like EU and other GST-governed countries giving 100% duty exemption on imports of inputs used for re-exports. And how does the government decide on an across the board 2% rate increase? There clearly has to be some science to justify how two very different products, with very unique supply chain and manpower involvement in manufacturing, and which have fared very differently in export demand since the last policy was announced, are given the same treatment.

Let me quickly mention a problem indicated by an exporter. Para 4.29(iv) of the revised FTP states that wherever SION permits use of an input, “the specific input together with quantity which has been used in manufacturing the export product] should be indicated/endorsed in the relevant Shipping Bill/Bill of Export/Tax invoice for supply prescribed under GST rules. And “only such inputs may be permitted for import in the authorisation in proportion to the quantity of these inputs actually used/consumed in production, within overall quantity against such generic input/alternative input.” So, if a biscuit manufacturer plans to export orange-flavoured biscuits and import chocolate flavour duty-free under DFIA, he won't be allowed to. How does this encourage Ease of Doing Business?

It’s not that no effort has been put into the new draft by the government think tanks. But while some changes are practical, much of it seem to be ad hoc experimental shots. All in all, the revision looks like a low-risk mission of the government to keep its word of releasing an FTP 2.0.

It remains version 1.1 still. www.thedollarbusiness/blogs/steven

@SPWarner

The revised policy draft can be considered an improvement over the previous FTP. But while the changes made are incremental, the bundle is still a mixed bag.

Steven Philip Warner

President (VMPL) & Editor-in-Chief, The Dollar Business steven@thedollarbusiness.com www.tumblr.com/blog/steven-p-warner DECEMBER 2017 II THE DOLLAR BUSINESS 3

Volume: 4 Issue: 12 December 2017 www.thedollarbusiness.com facebook.com/tdbIndia twitter.com/TheDollarBiz in.linkedin.com/in/thedollarbusiness/ President (VMPL) & Editor-in-Chief EDITORIAL & RESEARCH Editor Executive Editor Senior Editor Assistant Editors

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16 COVER STORY EODB RANKINGS

TOO SOON TO CHEER?

India’s ranking in the World Bank’s Ease of Doing Business Report 2018 jumped 30 places from 2017 to reach 100. While this is a remarkable improvement, India still lags behind its peers in many important parameters. What can the government do to make India a top contender when it comes to attracting business?

28 H.E ALPHONSUS STOELINGA

AMBASSADOR OF THE NETHERLANDS TO INDIA

Discusses the present and the future of the India-Netherlands bilateral relationship.

CIRCULATION, SUBSCRIPTION & DISTRIBUTION Manager : M. Vinay Kumar

36 RS SODHI

ALLIANCES & COMMUNICATIONS Sr. Manager : Rasanpreet Kaur Asst. Managers : Sravya Palakuru, Aishwarya Ramarajan FINANCE & ADMIN Manager Executive

MANAGING DIRECTOR, AMUL

On the success of Amul’s unique cooperative movement and its expansion plans.

: V. Srikanth Tumati : Chandrakant Nawande

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© Copyright 2017 No part of this magazine may be reproduced in whole or in part without an expressed permission of the publisher. The information on this magazine is for information purpose only. Manish K. Pandey, Editor, The Dollar Business, is responsible for the selection of news and content under PRB Act. Vimbri Media Pvt. Ltd. assumes no liability or responsibility for any inaccurate, delayed or incomplete information, or for any actions taken in reliance thereon. The information contained about each individual, event or organisation has been provided by such individual, event organisers or organisation without verification by us. All disputes are subject to exclusive jurisdiction of competent courts and forums in Hyderabad, Telangana.

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4 THE DOLLAR BUSINESS II DECEMBER 2017

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INBOX Letters to the Editor Readers’ feedback that hit our mailbox in November 2017.

38

MANAGEMENT INTELLIGENCE VIKRAM MOHAN MD, Spalon India Pvt. Ltd. on the company’s growth plans.

08

MONOLOGUE PEOPLE SPEAK Ivanka Trump on the GES, Kristilina Georgieva on India’s EODB ranking and much more.

40

SECRET INGREDIENT FROZEN RIBBON FISH Can this low-value product be a viable export opportunity for India’s seafood exporters?

12

TRADE WRAP India- Afghanistan trade, Trump’s visit to Asia and more.

44

POLICY MONITOR ISEPC Satish Gupta, Chairman, on the need for promoting silk exports.

32

IMPORT’ONOMICS PAPER & PAPERBOARDS New applications across sectors is fuelling the demand for imported paper & paperboards

46

TDB FORUM Questions about foreign trade that hit our mail box in Nov 2017.

50

BORDERLINE Editor’s Column

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editorial@thedollarbusiness.com SMS your views to +91-7680-80-7111

WE VALUE YOUR FEEDBACK, WHETHER CRITICISM OR APPRECIATION. AND HERE ARE A FEW THAT HIT OUR MAILBOXES IN NOVEMBER 2017

A

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GLOBA

In recent on its tra months, the Trump de protec acts and tionist cam administration has paign double optimistic thoughts omino us signs rhetoric. Many con d down bun for fre sid prove a big ch which believ es the tra e trade. But the er US’ business nations. de vacuum re is an opport Question is – can As unity for some exp left by US cou ld ian make hay ort while the nations and Ind s-focussed ia in particu ‘Trump’ sun lar, shines?

Fresh gra

Indian grap The heady taste of es are findi succ ng acceptan ess ce across the globe

have been a happy subscriber of The Dollar Business for more than two years now. The magazine in my view, offers cutting-edge insights on multiple sectors related to foreign trade. I must say that the research team of the magazine deserves a round of applause here. Their analysis is not only unbeatable but is also always presented beautifully with the help of infographics. That is one thing that I admire the most about the magazine.

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6 THE DOLLAR BUSINESS II DECEMBER 2017

Issue 11

UNDEL TRRADE 2.0 HE SHADOTW

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Vol.4

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he Dollar Business magazine is an excellent platform to refer to for issues related to foreign trade. Along with the presentation, the content is elaborate and well researched. I always look forward to reading the magazine every month.

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eading magazines like The Dollar Business is always a great experience. The information and content that the magazine provides is focused mainly on export and import Phenol and that makes the magazine stand out from the rest. Referring to it provides a holistic view of the happenings in foreign trade.

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monologue T

his is the first time India has hosted the Global Entrepreneurship Summit. It is a symbol of the strengthened friendship between our two peoples, and the growing economic and security partnership between our two nations. As President Trump said earlier this year: India has a true friend in the White House.

IVANKA TRUMP ADVISOR TO US PRESIDENT Speaking at the inaugral session of the GES Source: US Department of State

I

t is particularly rare when we talk about size of India. I understand that in a cricketloving nation hitting a century is a very important milestone.

KRISTALINA GEORGIEVA WORLD BANK CEO TH ON INDIA’S 100 RANK IN EASE OF DOING BUSINESS RANKING Source: World Bank

O

ur demand of food is set to double over the next five years. Being (the) six largest food and grocery market in the world, India is a destination that merits global attention in the food sector.

HARSIMRAT KAUR BADAL UNION CABINET MINISTER OF FOOD PROCESSING On FDI in the food processing sector Source: IANS

P

utting the TPP 11 into effect will not only give us an open and free transPacific trade system, but it will also act as a strong message to the US to return to the trade pact.

KAZUYOSHI UMEMOTO JAPAN’S LEAD TPP NEGOTIATOR On the TPP and US Source: Nikkei Asian Review

A

trade surplus that is too large has a negative impact on Chinese people’s enjoyment of national wealth. Only by reducing the trade surplus can Chinese people feel a greater sense of gratification.

FU ZIYING CHINESE MINISTRY OF COMMERCE VICE MINISTER On reducing China’s enormous trade surplus Source: Reuters

8 THE DOLLAR BUSINESS II DECEMBER 2017

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s President, I am committed to achieving a fair, free, and reciprocal trading relationship. We seek equal and reliable access for American exports to Japan’s markets in order to eliminate our chronic trade imbalances and deficits with Japan.

DONALD TRUMP US PRESIDENT On trade with Japan Source: White House

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BREXIT

A never ending crisis!

Rumours and criticism of a proposed £50 billion bill for separation from the EU turned out to be just one of the many problems stalling Theresa May’s plans to officially finalise the Brexit deal. One of the biggest obstacles to a final ‘divorce’ has been the nature of borders and continued access to EU markets. A recent meeting between European Commission President Jean Claude Juncker and Prime Minister May had to be abruptly ended due to a disagreement between May and Ireland’s leaders regarding a regulatory alignment of Ireland’s border.

The suggestion of a regulatory alignment was being made, according to May’s government, in order to avoid a hard border within the region. The EU remains adamant that Britain will not be able to broker a deal that only keeps the ‘good bits’ of EU without sharing the pains.

PAKISTAN

Energy woes In a major blow to Pakistan’s LNG plans, US petroleum major Exxon is stepping away from a multi-company LNG deal.

The deal was a partnership between six companies in Pakistan’s Port Qasim. The other partners include Total (France), Mitsubishi (Japan), Qatar Petroleum (Qatar), Global Energy Infrastructure Limited (Turkey) and Hoegh LNG (Norway). The decision by Exxon is being attributed to differences with the other partners. It is being reported that Exxon is planning to invest in a separate project.

The Port Qasim project is now reaching out to new partners to complete the project which now faces roadblocks in the absence of a full quorum of partners.

12 THE DOLLAR BUSINESS II DECEMBER 2017

TRANS-PACIFIC PARTNERSHIP

New name, new direction?

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fter months of “Will They, Won’t They”, the first official announcement on the renegotiation of the TPP came in the form of a joint statement made at the Asia Pacific Economic Cooperation (APEC) meeting in Vietnam. The announcement was made by top officials from the remaining 11 countries of the original 12 TPP countries (now known as the TPP-11). The group has agreed to the basic framework of the newly rechristened Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The agreed upon framework currently excludes 20 of the original provisions, including medical devices, investment and telecommunications. It is being reported that there are four main “country-specific” provisions that will need to be agreed on before the deal is officially signed.

The original deal had reached a roadblock when the then newly-elected President of the United States Donald Trump announced his decision to quit the TPP, claiming that the multi-nation trade deal was against the interest of the American consumers and trade community. The remaining 11 signatories to the trade deal include Canada, Japan, Australia, Brunei, New Zealand, Peru, Mexico, Singapore, Chile, Malaysia and Vietnam. The deal aims to improve trade relations between nations within the region through reduced tariffs and trade barriers, across sectors. The deal also hopes to help strengthen the regions’ position against the growing strength of China in global trade.

TRUMP IN ASIA

Of photo ops and trade talks After 11 months of flip-flopping on the nature of US’s relationship with China, US President Trump made his first visit to Beijing as a part of a 12-day multi-nation visit. The visit started in Japan and ended in the island-nation of Philippines. President Trump kicked off his visit in the Japanese capital of Tokyo on November 5. Post Tokyo, President Trump’s subsequent trips were to the South Korean Capital of Seoul and the much-anticipated visit to the Chinese Capital of Beijing.

While the US has been actively talking about taking action against China’s unfair trade practices, the recent visit by Chinese President Xi Jinping to the US and Trump’s visit to Beijing showed no signs of acrimony, as the two nations announced the signing of over $250 billion worth of deals. The Chinese President also extended an invitation for American companies to join China’s One Belt One Road (OBOR) initiative. While President Trump has announced the visit to be a huge success, critics have said that he has been rather soft on China. The coming days are expected to provide a much clearer picture on whether the visit to China was just another case of photo ops and news-making global diplomacy or were they steps towards a new alliance.

TRADE ROUTES

Paving a new path In a landmark development, India’s first consignment of wheat to Afghanistan via the Chabahar port in Iran reached the Afghan city of Zaranj. The consignment travelled from the port to Afghanistan via road. The opening of this route now allows India to directly export to Afghanistan bypassing Pakistan. The newly-inaugurated port route is expected to play an important role in expanding trade relations between India and the rest of the land-locked Central Asia, which had been cut off after Pakistan refused access to transportation of goods between India and Afghanistan.

This consignment is a part of an ‘Indian grant’ to provide Afghanistan with 1.1 million tonne of wheat.

INDIA - ITALY

Of trade and terrorism During his two-day visit to India, Italian Prime Minister Paolo Gentiloni inked six deals between India and Italy. The deals pertain to a variety of areas from tackling terrorism and cybercrime and strengthening ties between the two countries in areas such as railways and energy to mutual investments. Indian Prime Minister Narendra Modi has expressed hope that the two countries will be able to strengthen both trade and political relations. PM Modi also invited participation by Italian companies in the Indian government’s flagship programmes like ‘Smart Cities’.

INDIA - ETHIOPIA

New and approved The Union Cabinet gave its ex-post facto approval to a trade agreement between India and Ethiopia in the first week of November. Indian President Ram Nath Kovind had during his visit to Ethiopia, in October, signed the agreement with Ethiopian President Mulato Teshrome.

The new agreement replaces the trade deal that had been previously signed in 1982, and is expected to encourage trade, economic and technical cooperation and investments between the two nations.

FTP REVIEW

Exports get a new boost

A

fter a delay of almost six months, the DGFT finally released the Foreign Trade Policy 2015-2020 review document on December 5. The main focus areas of the new policy are ease of doing business, expanding into new markets, diversifying the export product basket, logistics-related initiatives and increasing access for agricultural exports. Taking into consideration concerns about GST, the review also included various incentives and initiatives to ease some of the burden that traders were facing since its implementation. Some policy changes announced included a provision for imports of gold (for re-export) via Specified Nominated Agencies without payments of GST and imports under schemes like EPCG and Advance Authorisation and imports by 100% EOUs without upfront payment of GST. The government also announced an e-wallet system to be put into effect from April 2018.

Additionally, increments were announced for both MEIS and SEIS schemes.

For Readymade Garments and Made-ups, the incentives have been increased from 2% to 4% while for the MSMEs and labour-incentive sectors like rubber and leather sector, an overall 2% increase was announced. A similar 2% increment was announced for the services sector, under the SEIS scheme. In total incentives worth Rs 8,450 crore were announced. The review was initially expected to be announced before the GST implementation in June, this year, but was delayed to include solutions for GST-related concerns of the trading community. Additionally, the government announced a new services division in DGFT to examine Exim policies and procedures to push services exports and a division to provide data analytics and immediate solutions.

GES

Encouraging entrepreneurs Thought leaders, entrepreneurs and investors gathered in Hyderabad last month for the three-day Global Entrepreneurship Summit 2017 (GES 2017).

In its 8th year, the summit while continuing to emphasise on encouraging startups and entrepreneurs, put a special focus on women entrepreneurs with the theme, ‘Women First, Prosperity for All’. The GES this year had attracted participants from over 150 countries. Heading the US delegation was Ivanka Trump, First Daughter and Advisor to the President of the United States, herself a succesful entrepreneur. The global event saw participation from a range of Indian ministers – from Prime Minister Narendra Modi, Defence Minister Nirmala Sitharaman, Telangana Chief Minister K Chandrashekar Rao, Telangana Minister for Information and Technology KT Rama Rao, to Minister for Overseas Affairs Sushma Swaraj, apart from high profile leaders from both Indian and global companies. While the event saw participation from entrepreneurs and investors across a wide cross section of industries, the key sectors highlighted at the event were energy & infrastructure, digital economy & technology, healthcare and life sciences and media & entertainment.

DECEMBER 2017 II THE DOLLAR BUSINESS 13

COVER STORY

EASE OF DOING BUSINESS

INDIA'S RISE IN 'DOING BUSINESS 2018' RANKING:

A CELEBRATION TOO EARLY?

World Bank’s recently published ‘Doing Business Report 2018’ upped India’s ease of doing business rank to 100 this year. While India is still a long way from making it to the top 50 (which is the Modi government's goal), this remarkable jump by 30 ranks suggests that the business slumber party is over and work to creating a business-friendly environment is actually on in India. Also, India figuring as the only economy in South Asia to join the list of the 10 top improvers in the 2018 report and Moody's upgradation of India's sovereign rating could mean an early Christmas for Modi-land. Has India's business climate remarkably improved in a matter of just a year? If yes, what are the parameters that have helped us make this remarkable leap?

BY INDRANIL DAS, EXECUTIVE EDITOR, THE DOLLAR BUSINESS 16 THE DOLLAR BUSINESS II DECEMBER 2017

my of the ill-conceived demonetisation initiative and the hastily implemented Goods and Services Tax (GST) reform.

There was more good news in the offing.

Just a fortnight later, the government received another shot in the arm when Moody’s Investor Service upgraded the Government of India’s sovereign ratings by two notches, from Baa3 stable to Baa2 positive.

RANKINGS & RATINGS

T

he date October 31, 2017, was a remarkable day for the Modi-led government, as the World Bank published the 2018 edition of Doing Business report announcing that India is now a member of the top 100 club in the Doing Business rankings. The cricket-loving nation that we are, we sure were happy to hit a century. As everybody surely knows by now, India jumped by 30 places in the ease of doing business rankings to the 100th position out of 190 countries, the highest jump for any nation this year.

The jump was a great morale booster for the government which had been at the receiving end of criticism, especially when it came to handling the nation's economy. GDP and job growth were both lack-lustre and economists and industry were blaming it on the double wham-

While the twin good news does call for celebration, let us first look at what the improved ratings and rankings really mean. Moody’s rating (of Baa2) for India, which was last upgraded in 2004 to Baa3, simply means that the government is now in a better position to repay its debt, and should be able to therefore negotiate better debt terms from external lenders, which should in turn lower cost of India's infrastructure projects. More foreign direct investment (FDI) is also expected to flow in, as some investors who don’t invest in countries having a rating of below Baa3 will now invest in India. Moody’s upgraded rating indicates that India’s growth prospects are a strong in the medium-term.

The Doing Business ranking by the World Bank on the other hand shows how much regulatory environment in a country has changed over a year relative to that in other economies. The agency, this year, has overhauled its methodology by focusing on “Distance to Frontier (DTF)” scores. According to the World Bank, “The DTF score helps assess the absolute level of regulatory performance over time. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represent the frontier.”

And the difference between an economy’s DTF score in 2017 and 2018 reports illustrates the extent to which the economy has closed the gap over the past year.

India’s DTF score increased to 60.76 this year from to 56.05 last year.

However, the change in methodology, brings into question whether the rankings of Doing Business 2018 are at all comparable to that of Doing Business 2017. When The Dollar Business sought clarity on the comparability issue from

DOING BUSINESS STUDY HAS LIMITATIONS THAT CANNOT BE OVERLOOKED Charlotte Nan Jiang, Senior Member, Doing Business team, World Bank, she said, “With regards to the issue of comparability, the rankings are calculated for the current year only and therefore, previously published rankings are not comparable. Year-to-year changes in the number of economies, the number of indicators and methodology changes affect the comparability of rankings from previous years.”

What ever be the intricacies involved in a changed methodology and therefore comparability, a jump of 30 ranks is by no means a small achievement. This specially at a time when the government was being roundly criticised by the opposition and the industry on its handling of the demonetisation initiative and the implementation of GST. This was validation for the government, and that too from independent international agencies, that the government was on the right path when it came to economic reforms. It was also a cause for the industry to cheer, as this would mean that investments both domestic and foreign would sooner rather than later start flowing in.

GOODS ACKNOWLEDGED

As we celebrate our improved ranking in the Doing Business report, let us look at what the World Bank report really said about India this time. What were the factors and parameters that helped us take this giant leap?

The Doing Business report ranks a nation based on 10 parameters, that includes aspects such as: processes, cost and time to start a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, ease of paying taxes, ease of trading across borders, enforcing contracts and resolving insolvency. To India's credit this time, of the 264 reforms that were implemented by 119 DECEMBER 2017 II THE DOLLAR BUSINESS 17

COVER STORY

EASE OF DOING BUSINESS

economies to ease doing business, that the Doing Business report takes into consideration, India implemented 9 reforms and emerged as the only South Asian country amongst the top 10 countries showing remarkable growth.

According to the report, India’s improved ranking can be credited to improvement in various aspects pertaining to the DTF (distance to frontier) level – a score to provide an absolute measure on how close or how far an economy is from the best regulatory practice (a maximum score of 100) in different business-related aspects. According to the report, this year, India saw improvements in tax com-

pliance, recovery of debts, the introduction of online procedures, strengthening infrastructure at ports for exports, labour reforms, etc. India also made starting a business faster by merging the applications for the Permanent Account Number (PAN) and the Tax Account Number (TAN), and by improving the online application system. Worth mentioning also is the fact that while the study did not take into consideration the GST bill, the World Bank lauded the GST initiatives and observed that the path-breaking tax reform in coming years would not just help improve tax compliance but would also help in curbing the growing

India showed significant improvement in distance to frontier (DTF) scores in parameters like ease of paying taxes and getting finance.

problems of non-performing assets by bringing in more transparency into the system. The tax reform is also expected to improve our ease of paying taxes score in the next edition of the report.

THE WORLD VIEW

The government is happy, and the industry is optimistic, but what does the international community think of the big ‘jump’? According to Katherine Hadda, Consul General at US Consulate General at Hyderabad, the big jump signifies the increased confidence of American companies opening and expanding their operations in India. “Today, more than 600 American companies operate in India. So I think the numbers and the steps American businesses are taking to increase their footprints in India really speak for themselves, and based on the enthusiasm I personally see here from American companies, I can say for sure, the effects of business-friendly national and state-level policies are definitely being felt," affirms Hadda.

UK India Business Council (UKIBC), which helps Indian and UK businesses to collaborate, also believes that the rankings are an indicator of the government's commitment towards reforms. UKIBC in a communiqué to The Dollar Business states, “We have seen a genuine commitment from both the Central and state governments to improve the operating environment across the country.”

Kevin McCole, Chief Operating Officer of UKIBC, though had a note of

Doing Business 2018 Report: Winner versus runner-up Bhutan is placed 1st, closely followed by India in the South Asian rankings 9 8 7 6 5 4 3 2 1 0

Starting a business

Bhutan

Dealing with construction permits

Getting electricity

India

18 THE DOLLAR BUSINESS II DECEMBER 2017

Registering property

Getting credit

Protecting minority investors

Paying taxes

Trading across borders

Enforcing Contracts

Resolving Insolvency

Source: TDB Intelligence Unit and World Bank's Doing Business 2018 ranking

“THE NEW RANKING HAS COME AT THE MOST OPPORTUNE TIME” AJAY SAHAI, DIRECTOR GENERAL & CEO, FEDERATION OF INDIAN EXPORT ORGANISATIONS

TDB: Does the improved ranking along side an improved credit rating by Moody's provide opportunities for improved growth in foreign trade too?

AS: The improved ranking in Ease of Doing Business and Credit Rating by international agencies are clear indicators that the business climate in the country is improving on a year-on-year basis. The improvement in getting credit, paying taxes, getting electricity, protecting investor’s right, enforcing contracts are all important for stakeholders in foreign trade too. However, I would like to add that this is just one of the factors that impacts foreign trade. There are numerous other factors such as the growth of global trade, movement of the exchange rate, logistics cost, infrastructure which are equally vital for growth in foreign trade. This sector is hugely important not only for managing the foreign exchange of the country, but also for employment generation in the country. Many of the important sectors of exports like textiles, handicrafts, gems & jewellery, marine & agriculture are major creators of employment. There is a need to nourish and nurture these sectors.

TDB: Going forward, can India maintain this new-found momentum? What role do you envision for India’s Exim sector when it comes to promoting ease of doing business?

AS: As mentioned before, reforms are ongoing and must be

pursued with greater zeal. There is a need to look into land and labour reforms to unleash the true potential of this great nation. Going forward, Exim sector should be the driver of Indian economy. If the country has to exhibit double-digit growth, exports should clock 15-20% annual growth. India’s GDP growth story in the first decade of the 20th century owes its success to a spectacular growth in exports. Our share in global merchandise exports is 1.7% and in services 3.4%, but our country has the wherewithal to take our combined share to 5% of the global trade in the next 10 years.

TDB: Leaving aside the thumbs up by the World Bank, what challenges still persist for the exporting fraternity?

AS: The exporting community is saddled with heavy logistics cost, high transaction cost, high rate of credit and infrastructure inadequacies. Our transaction cost, though having come down due to the introduction of EDI, is still much above the international benchmark. The cost of credit in India is about 5% more than most of our competing countries. The infrastructure, particularly the roads, which carry two-third of our exports need immediate attention. It is quite heartening that government has realised to have a holistic view on logistics and created a separate Department of Logistics. I am sure, this will provide focused attention to logistics. However, we have to look into the structural issues that are reducing the competitiveness of our exports as reflected in a recent report by CRISIL. TDB: Are these ratings a true representation of the ground reality in India? Critics say these ratings are based on data taken from just Mumbai and Delhi. Also factors such as demonetisation and issues arising out of GST’s rollout have also not been factored in this time. Your thoughts?

AS: One has to compare apples to apples. If the past ratings were based on findings of Delhi and Mumbai, subsequent ratings also have to reflect improvement in these cities. However, World Bank can include other cities, provided it has the necessary manpower. The introduction of GST may not have fallen in the period adopted by the World Bank. I am hopeful that procedural and technical challenges relating to GST would be overcome shortly. When in the next edition of the Doing Business Report this revolutionary tax reform is considered, it will hugely improve India’s ranking in Ease of Payment of Taxes.

There are numerous reforms that helped create a better business climate but have not been factored in this edition. I am sure these will be considered in the next edition of the report, thereby assisting the country to climb up the rankings.

DECEMBER 2017 II THE DOLLAR BUSINESS 19

Interview by Ahmad Shariq Khan

TDB: India’s has climbed 30 places in the Ease of Doing Business ranking. How will this impact the economy?

Ajay Sahai (AS): India’s surge in the latest World Bank Report on Ease of Doing Business from 130th rank to 100th rank has come at the most opportune time when the impact of constructive disruptions like demonetisation and GST are gradually withering. What is more reassuring is that India is amongst the top 10 “improvers” globally, having done better in eight out of 10 business indicators. This is a very important signal that India is moving in the right direction and creating the kind of channels that will attract foreign direct investment. Such improved ranking provides impetus to investment, both internally and through FDI/FII routes. However, we should continue with the reform process, particularly in those parameters where the index still ranks India lower amongst 190 countries.

The reforms are a continuous process which is all the more necessary as other countries are also undertaking many radical reforms to improve their ranking. In my view, the government's commitment to bring India into the top 50 in ease of doing business ranking is both commendable and required to provide an enabling eco-system for trade and industry to prosper.

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caution and adds, “The reported changes are yet to be filtered to the day-to-day operational level of the bureaucracy. Thus, the next leap forward should be to reduce such challenges for businesses, exporters and foreign investors.

Echoing similar thoughts, Kazuya Nakajo, Chief Director General of Japan External Trade Organisation (JETRO), tells The Dollar Business that the improved rankings are a clear indicator of the improved environment in the country when it came to ease of financing, transparency and access. Coming from the agency that represents Japan, which is the third-largest source of FDI for India, this is a sure signal that India's improved

Doing Business rankings has been able to boost investors confidence on the country. Worth noting here is the fact that in the recent past there have been instances of red-tapism that have affected big-ticket investments from countries like Japan.

A case in point could be the Delhi-Mumbai Industrial Corridor – a $100-billion project in which Japan holds a 26% stake – that for years now has been plagued by delays, red tape and disputes over land acquisition issues. Nakajo feels that while the improvements are laudable, “to maintain the momentum, India needs to keep on creating a higher reputation in all areas requiring course corrections”. Similar thoughts have also been expressed by

H.E. Alphonsus Stoelinga, Ambassador of Netherlands to India, who when asked about the factors that hinder FDI inflows into the country says, “Cumbersome procedures and an unpredictable business environment are the two factors that in my view still play spoilsports to the cause of smooth FDI inflows into the country”.

INDUSTRY CAUTIOUS

So, while we now know that the international community is fairly convinced that the country is taking corrective measures to improve the ease of doing business in India, let us look at what the Indian industry thinks about this improved ranking. Will the rankings actually help our

"THE RESULT SHOWS INDIA'S COMMITMENT TOWARDS REFORMS” CHARLOTTE NAN JIANG, SENIOR MEMBER, DOING BUSINESS TEAM, WORLD BANK

TDB: India has moved 30 places up in the ease of doing business index. How important is this for an economy like India?

Charlotte Nan Jiang (CNJ): The results show that India is committed to improving its business climate. A continued process of improving the regulatory framework that affects local business can contribute to stronger entrepreneurial activity in the country. When smart regulations help reduce the regulatory burden for small businesses they are able to focus their resources and energy on increasing their productivity and expanding their markets and ultimately creating more jobs.

In Doing Business 2017, the authorities focused on some medium-to-long term reforms, which were complex but with significant potential impacts on businesses down the road. In the 2018 study, the initiatives have started to show impact. For example, India introduced the online Single Window System for approval of building plans and several other services through the Common Application Form (CAF). This online system allows for the submission and approval of building plans prior to requesting the building permit. It has also streamlined the process of obtaining a building permit.

TDB: The Doing Business rankings 2018 are based on the Distance to Frontier scale. How different is this from the previous methods? And doesn’t it create inconsistencies while comparing to previous rankings?

CNJ: The distance to frontier (DTF) score provides an absolute 20 THE DOLLAR BUSINESS II DECEMBER 2017

measure on how close or how far an economy is from the best regulatory practice (a maximum score of 100) in the different areas covered by Doing Business. And the difference between an economy’s DTF score in 2016 and 2017 illustrates the extent to which the economy has closed the gap over the past year.

With regards to the issue of comparability, the rankings are calculated for the current year only and therefore, previous published rankings are not comparable. Year-to-year changes in the number of economies, the number of indicators and methodology changes affect the comparability of rankings from previous years. For example, in recent years, Doing Business introduced improvements to all of its indicator sets. In Doing Business 2016, dealing with construction permits, getting electricity, registering property and enforcing contracts introduced new measures of quality, and trading across borders introduced a new case scenario to increase the economic relevance. In Doing Business 2017, paying taxes introduced new measures of post-filing processes.

TDB: Many criticise that the rankings judge countries on a universal scale and may not be a true representation of a country’s ‘business conditions’. Your comments?

CNJ: Doing Business measures business regulations and their enforcement for local firms. The indicators are built on solid background papers, which identify policies and practices that governments should focus on for economic outcomes. The

countries’.

Speaking on similar lines and on a rather optimistic note, Charlotte Nan Jiang, Senior Member, Doing Business team, World Bank says, “For the past two years, India has implemented reforms in the area of trading across borders by taking several measures including the use of electronic platforms and improving administrative efficiency. However, there is still room for improvement”.

DEVIL IS IN THE DETAIL

While numbers in the report clearly suggest that the government has taken firm steps to improve the business environment in the country, is the improve-

choice of indicators has also been guided by extensive economic research and firm-level data, specifically data from the World Bank Group’s Enterprise Surveys.

Doing Business does not measure the full range of factors, policies and institutions that affect the quality of an economy’s business environment or its national competitiveness. The focus is deliberately narrow to allow the comparability of 190 economies. It does not, for example, capture aspects of macroeconomic stability, development of the financial system, market size, the incidence of bribery and corruption or the quality of the labour force. Ensuring comparability of the data across a global set of economies is a central consideration for the Doing Business indicators. We believe that the report is a very useful tool for governments that want to help SMEs grow.

TDB: Which, according to you, have been the red flag areas that India needs to work on?

CNJ: India’s weakest performance is in the areas of dealing with construction permits and enforcing contracts. In dealing with construction permits the costs associated with the regulatory steps to build a commercial warehouse are much higher than in OECD high-income economies. In Mumbai and Delhi these costs amount to 22.5% and 23.9% of the warehouse value respectively, while the cost is only 1.6% in OECD high-income economies. In the area of enforcing contracts, it takes almost three times in India to resolve a commercial dispute between two businesses (1,445 days) compared to OECD high-income economies (577.8 days).

TDB: Some critics in India are of the opinion that the rankings provide only a large city perspective, while a country’s true potential lies in many of the lower rung cities. Your take?

CNJ: It is true that business regulations and their enforcement may differ within a country, particularly in federal states and

ment enough to propel India into the big league? Has business environment across the length and breadth of the country really changed? And how do we stack up against our peers and competitors?

Let us first delve deeper into what the new report highlights and what it fails to.

First and foremost, the report is based on data surveys of business conditions in Delhi and Mumbai for a typical midsized firm only, and might not be the true representation of lakhs of firms (both small and large ones) spread across the length and breadth of the country. The World Bank though defends the methodology of selecting two major business centres by saying that it is the case with

large economies. In the case of India and for 10 other economies with a population of more than 100 million, as of 2013, the coverage was expanded since the Doing Business 2015 report to include the second-largest business city as well. While some of the regulations measured by Doing Business depend on the authorities at the local level, many other laws and regulations are of national scope and therefore applicable to every jurisdiction. In this respect, using the largest business cities as a proxy for the entire national territory continues to provide relevant insights on the regulatory climate for the economy. Moreover, where policymakers are interested in generating data at the local level, beyond the largest business city, Doing Business has complemented its global indicators with subnational studies.

For example, six economies completed subnational studies this year: Afghanistan, Colombia, three EU member states (Bulgaria, Hungary and Romania) and Kazakhstan.

TDB: One of the 10 parameters is cross-border trade. What have been India’s strengths and weaknesses on this parameter. What aspects need to be worked on?

CNJ: For the past two years India has implemented reforms in the area of trading across borders by taking several measures including the use of electronic platforms and improving administrative efficiency. In Doing Business 2018 India reduced import border compliance time in Mumbai by improving infrastructure at the Nhava Sheva Port from 283 days last year to 265 days now. Export and import border compliance cost were also reduced in both Delhi and Mumbai by eliminating merchant overtime fees and through the increased use of electronic and mobile platforms.

However, there is still room for improvement. The time for border compliance for imports and exports (including time for customs clearance, inspections by the relevant authorities and port handling) is above both the regional average for South Asia and the average for OECD high-income economies.

DECEMBER 2017 II THE DOLLAR BUSINESS 21

Interview by Anishaa Kumar

exports grow? According to Ajay Sahai, CEO of the Federation of Indian Export Organisations (FIEO), both the new improved ranking in Ease of Doing Business and credit rating by international agencies are clear indicators that the business climate in the country is improving on year-on-year basis. “The improvement in getting credit, paying taxes, getting electricity, protecting investor’s right and enforcing contracts are important for stakeholders in foreign trade also,” feels Sahai.

Calling the reform process a continuous process, Sahai hopes that the government would continue with reform process ‘particularly on those parameters where the index still ranks India lower amongst 190

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EASE OF DOING BUSINESS

all economies. Well, anyone who does business in India knows that doing business in Dimapur in Nagaland is a far cry from doing business in Mumbai!

Secondly, since June 1 has been the cutoff date for ranking, the havoc caused by the hasty GST implementation, was not factored in this year. Had the responses factored in the troubles that the industry went through in the initial phases of GST

implementation, the results could have been quite different. That said, both industry and experts agree that these were teething troubles and in the long run GST will pay big dividends to the economy and improve the business environment of the country.

The other place where the report falls short is in comparing a complex economy like India to that of say a Singapore

or a Bhutan. Critics may say that just the sheer size of the economies and geographies make them non-comparable. Julius Sen, Associate Director and Senior Programme Adviser, International Trade Policy Unit, London School of Economics, talking about the value and comparability of such rankings says, "As with all such indices, it should be possible to make improvements. But even then, the

“EVERYONE KNOWS THAT THE EASE OF DOING BUSINESS INDEX IS BEING GAMED” JULIUS SEN, ASSOCIATE DIRECTOR, ITPU, LONDON SCHOOL OF ECONOMICS

TDB: Many reports suggest that improved rankings have little or no corelation to improved GDP and FDI. Despite this data many countries and companies look towards these reports for basing their policy and investment decisions. What makes this ranking so important?

JS: Like all global indexes or rankings, the World Bank's Ease of Doing Business rankings are at some level superficial. But like credit rating agencies they provide some insights into the conditions of an economy and help determine the cost of borrowing by helping to assess risks. Investors still need to do their own due diligence relating to their specific investment ideas, but this is sometimes a useful starting point. For the exercise to be meaningful, it may be useful to create an independent Ease 22 THE DOLLAR BUSINESS II DECEMBER 2017

of Doing Business index for the states and union territories of India. This would actually be more useful for many international and national investors.

TDB: A recent Carnegie India paper stated that in order to create an effective trade policy, India needs to implement corresponding effective economic domestic reforms. Do you agree with this statement?

JS: I agree that there has to be better policy alignment between domestic trade and economic policies, and international commitments. The best way to do this is to take the regulatory principles of the WTO and transpose them into India’s domestic policy framework. This is however an immensely complex task because of the way the Constitution of India is structured, especially with respect to the special provisions relating to tribal states and Jammu & Kashmir, scheduled castes and scheduled tribes. A complex, sensitive and delicate task to be sure, but certainly necessary.

TDB: The Ease of Doing Business rankings include different countries with different economic situations. Many criticise that the rankings judge these countries on a universal scale and may not be a true representation of an improvement or decline in a country’s business conditions. Do you agree wit the statement?

JS: Yes, certainly. As with all such indices, it should be possible to make improvements that respond to the points you have mentioned. But even then, the argument will be that each country is unique in terms of history, culture, systems, geography, politics, etc., which of course is true. But imagine if you are big international investor or business and you want inputs to inform your investment or expansion strategy, where would you start if you didn’t have these indexes?

Interview by Anishaa Kumar

TDB: Indian government has announced a more liberal FDI policy, making it easier for foreign companies to establish local units or invest in existing businesses. Still, many foreign investors are wary of investing in India. Critics say that an improvement in India’s Ease of Doing Business ranking is a small drop in a large ocean. Please comment.

Julius Sen (JS): Although I largely agree with the critics, creating the right conditions is a process that takes time and is not always easy to manage in a complex federal system, and in a situation where investments are usually in an international currency and not your own. Everyone knows that the Ease of Doing Business index is being gamed, and that improvements are not really substantive. At the same time, foreign investors also play a game with governments like India that need foreign investments. We need to bear in mind that many of these foreign investors are actually Indian companies that have shifted money offshore, and are thus looking for a double benefit. On the one hand they escape taxation, and then hope to extract more favourable terms to bring the money back in.

argument will be that each country is unique in terms of history, culture, systems, geography, politics, etc., which of course is true. But imagine if you are big international investor or business and you want inputs to base your investment or expansion strategy on, where would you start if you didn’t have these indices?" Most experts agree that investors won't start pouring in funds just looking

at the overall ranking. They will go into each parameter and do their own due diligence, but then the overall ranking is good place to start.

Let us now talk about how we stack up against our peers. If we take the example of BRICS, of which India is an integral member, India still lags far behind most of its fellow BRICS peers. This time, Russia topped the BRICS with a ranking

of 35, followed by China (ranked at 78) and South Africa (at 82nd rank). The only factor that goes in India's favour when it comes to these nations is that India has shown more improvement over the past four years than the other BRICS members and Brazil (ranked at 125) was placed lower than India.

If we talk about our peers in the larger Asia region, we notice India, this time

“IMPROVEMENT IN RANKING IS A GOOD SIGN FOR BUSINESSES” ANWAR SHIRPURWALA, EXECUTIVE DIRECTOR, MAIT

TDB: Does improved rating and ranking provide opportunities for better growth?

AS: I think the ratings are largely a depiction of business environment in a country. Any domestic or international company needs a basis on which it can set up a business or invest in a country. These ratings and rankings are about how smoothly one can operate its business in that country.

If you look at how India is moving from the first time the rankings were announced, you’ll find out that more and more parameters are being added and the rankings are getting improvised. It’s a gradual process of improvement.

Being a representative of an industry, when I look at an overall perspective, I think the improvement in India’s ranking is a good sign for businesses. I think it would give a positive sign to investors, businesses and to the country as a whole.

TDB: Critics say that a ranking based on the business environments of only Mumbai and Delhi is not a true representations of the ground realities. What is your take on this?

AS: It is very easy to criticise. There is no system which is com-

pletely fool-proof. Those who are criticising should provide practical suggestions as to how to make the Ease of Doing Business rankings more relevant.

TDB: When it comes to ease of doing business, India still lags on some parameters. How can we improve further?

AS: According to me, every single parameter is important. I believe the government has already taken a note of the parameters where we are lacking. From all the interaction which I have with the government, I clearly see the spirit of doing better.

TDB: Does the impact of these rankings and ratings differ from sector to sector?

AS: It is obvious that some sectors find there is no impact but some may find its positive impact. I look at the rankings optimistically. For our sector, improved ranking gives a sense of confidence to our investors. It is a sign that we are moving in the right direction.

TDB: Can India sustain this momentum? What role can private sectors play in improving our rank?

AS: I think what is important to see is how the ratings change next year. It is easy to move from 130th rank to 100th rank, but coming under 50 is a much tougher task. We have to see how things shape up in the coming years.

In fact, I believe, India can sustain this momentum but we have to work harder. The rankings are based on the government policies that are aimed at creating a conducive environment for doing business in India. In such type of rankings and ratings, private players don’t have a direct role to play. But if businesses are provided with a conducive environment to grow, they will contribute to the economy. If business grow, then better jobs will come in and the economy will grow.

DECEMBER 2017 II THE DOLLAR BUSINESS 23

Interview by Aamir H. Kaki

TDB: What is your take on World Bank’s ‘Ease of Doing Business’ ranking and Moody’s upgraded sovereign ratings for India?

Anwar Shirpurwala (AS): The improved Ease of Doing Business ranking and Moody’s upgraded rating are definitely very important for the country as well as the industry as these help us to set up benchmark and also set us on the course of correction. As these are not the internal assessments and being conducted by independent international bodies, these are quite significant. These ratings and rankings give a clear roadmap or a direction to the country – in what direction one should move, what are the steps a country should take to keep on improving.

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was outranked by a host of Northeast and Southeast Asian economies. These include: South Korea (4), Hong Kong (5), Taiwan (15), Thailand (26), and Japan (34) all figuring in the top 50. Even countries like Vietnam (68) and Indonesia (72), whose economies are somewhat similar to ours, have outranked us this time. Worth also taking account is the fact that countries mentioned above are

also India’s closest competitors as export centres in world trade. Some of them are also competing for the same FDI pie. So, while we have improved a lot, the fact remains that there is a lot of ground to be covered before India can shake off its legacy of bureaucratic babudom and red tapism and become really business friendly. The devil as they say lies in the detail.

GROUND REALITY

Another factor that needs to be taken into consideration while analysing the report is the difference between intent and reality. While Charlotte Nan Jiang, of the Doing Business team, lauds India’s various recently introduced measures aimed at curtailing down the ‘time to export’ and ‘cost to export’ factors, the reality faced by exporters is quite different.

“THE RANKING IS DIRECTED AT POLICIES FOR DOING BUSINESS” MADAN SABNAVIS, CHIEF ECONOMIST, CARE RATINGS

TDB: How important are these ratings when foreign investors look to invest into a country? Are there any particular parameters (of the 10 used for the ranking) that have a bigger impact on a country’s position when it comes to investment and trade potential?

MS: Foreign investors look at the overall ranking to get an indication of the direction of reforms. They look at individual ranks when it comes to specific decisions. Further, they look at specific conditions in the location where they are investing. It must be remembered that the ranking is based on the environment in Mumbai and Delhi and does not cover other centres.

Property, construction, electricity, etc., conditions vary across cities as states have different rules. At times, investors look at just the headline numbers of ranks and take a call. But there are different rules for different industries that matter. For example, if one wants to invest in telecom, the rules prevailing here mat24 THE DOLLAR BUSINESS II DECEMBER 2017

ter more than generalised ranks. But as a whole, a better rank is good for the image of the country.

TDB: Some critics are of the opinion that these rankings do not provide a realistic picture of the economy. How do you perceive such criticism?

MS: The criticism is not well founded. World Bank has an objective measure of gauging the ease of doing business environment across all countries. India has done remarkably well on some of these parameters and that is why we have jumped 30 ranks. There can be no debate on this. As long as the rank was low, it was never pointed out by critics that the criteria was not realistic. When we talk of the economy there are other factors concerned like GDP, infrastructure, currency, etc. But then that is a different set of issues. The World Bank ranking is directed at policies for doing business where there has been substantial improvement. We should not mix the two issues.

TDB: There has been an increased focus on opening up sectors for FDI and increasing exports. What role will the improved ranking, latest Moody’s rating upgrade and the change in FDI policy play in expanding our GDP? MS: In the long run, they all help. Moody’s ranking is important as several investors take a call on destination, based on country rating. Change in FDI policy takes care of the pull factor. But, foreign investors look at different markets and opportunities and put money where it works the best. Thus, the immediate impact may be muted. We did ease FDI norms in defence and railway equipment, but that has not led to increase in investment. It takes time and we need to have enough investable funds in the world market. World Bank ranking, as mentioned before, is a broad indicator of policy and more than the rank the specific parameters matter when it comes to FDI.

Interview by Anishaa Kumar

TDB: India has seen an improvement in its ranking in the latest World Bank Ease of Doing Business report. Is this a sign of better days to come for the Indian economy and the trade communities?

Madan Sabnavis (MS): The World Bank rank is a reflection of policies that have been put together to foster businesses. This said, the flow of foreign investment is not decisively determined by this rank. Foreign Portfolio Investment (FPI) is driven by the state of equity markets and valuations as well as interest rate differentials between the world and domestic markets. Foreign direct investment (FDI) is based on long-term plans and while a better rank due to better policies will help at the margin, we cannot expect enormous amounts to flow in immediately. Over the long-term, as reforms keep pace, FDI will tend to increase.

In terms of trade, specific trade enhancing policies have to be viewed rather than the overall rank.

Ports remain congested and clearing customs remain a cumbersome task. While, as per Jiang the online Single Window System for approvals such as Common Application Form (CAF) has streamlined the business processes countrywide, K. K. Lalpuria, Executive Director at Indo Count Industries Limited, feels otherwise. According to him, the IT infrastructure of the government still lacks the required levels of robustness. Citing recent teething hiccups faced as a result of GST’s introductions, he says, “During pre-GST era, we used to file online for the duty drawback refunds and only one document was required for the online filing and the company used to receive the refunds in a matter of 6-7 days, now post GST, a small part of duty drawback is refunded through online filing, and the balance is being done through manual filing. The manual filing is a cumbersome procedure and has increased the time of refund by the government to around 3-4 months”. He also highlights that the Customs “ICE GATE Systems is not robust enough to handle peak loads and is prone to hanging.” Many exporters, despite the government's various announcements for actualising E-governance goals and a push for a digital economy, are still not able to upload shipping bills and eventually end up facing long delays. “Eventu-

ally, we have no option but to resort to manual intervention,” rues Lalpuria.

ACHILLES HEEL

So, what are the areas that need improvements to make life easy for India's businesses (and exporters as a whole)? The Doing Business report provides a guideline for it.

India's ‘starting a business rank at 156 out of a total of 190 countries is abysmal to say the least and validates the industry’s complaints regarding the prevalence of license raj and red-tapism.

According to Puran Dawar, Regional Chairman, Council for Leather Exports (CLE), and President of Agra Footwear Exporters and Manufacturers Chamber (AFMEC), “Though the government seems committed to removing bottlenecks, bureaucratic red tape and issues in licensing procedures are rampant across the spectrum. The key problem in dealing with the government machinery is that there seems to be no accountability nor a timeline fixed to expedite the industry’s demands,” says Dawar while adding that, “the mindset of the officials is to find technical or other reasons to block the industry's demands. Unless this changes to a mindset where officials find clauses under which our requests can be facilitated or accommodated, things

won’t improve.”

And this is not the case with the smaller industries only. Big, iconic, high value projects too have been mired in similar problems. Take for example, the scrapping of the proposal of setting up of 12 million-tonnes-a-year steel plant with an investment of around Rs.52,000 crore in Odisha by POSCO, the world’s fourth-largest steelmaker. The proposal, which had initially been put forth in 2005

by POSCO, was scrapped in 2017 after 12 long years that saw several twists and turns, as it ran into trouble due to problems in land acquisition − a sure a sign as any that the country has to work harder to remove regulatory hurdles for land acquisition. And not just that, if a project that large and backed by big investors can take 12 years just to be scrapped, what signal does it send out to smaller investors?

Besides improving on time and cost to start a business, the areas that require immediate attention are enforcing contracts and trading across borders − both factors that are important to the foreign trade community. Of these 'enforcing contracts' has been a major worry for foreign firms that want to do business in India or with Indian companies. The country has such a huge inventory of unresolved civil lawsuits, that it is almost impossible to receive justice let alone receive it in time.

While the country has jumped 30 ranks in the overall rankings, it's lowly rank when it comes to enforcing contracts has kept many large investors away.

DECEMBER 2017 II THE DOLLAR BUSINESS 25

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When it comes to trading across borders, where we are ranked 146th, the issue is of even more importance to the foreign trade fraternity. How can a country, which wishes to become a major exporting nation and a reliable supplier in the global manufacturing value chain, afford to rank so low? How serious are we about foreign trade? Our performance in logistics does not suggest so. Our cost of logistics as percentage of total cost remains way higher than that of our peers.

Our roadway and railway projects that are aimed at goods transport are way behind schedule, and the less we talk about the congestion at our ports the better.

According to Ashok Rajani, Chairman, Apparel Export Promotion Council, despite government announcing that all the country’s leading seaports and airports will move to a 24x7 customs clearance operation some two years back (effective from December 31, 2015) thus reducing time and costs, the real status of India’s ports is still a far cry from the ideal vision. “Nhava Sheva, the largest container port in India is marred by multiple issues.

Despite a 24x7 mandate, the irony is that there are bureaucratic hurdles galore at

INDIA NEEDS TO IMPROVE ITS OVERALL SCORE TO ATTRACT INVESTORS

the port; weekends are off for the staff there, shipments are regularly stopped for one reason or the other. Inspections take a lot of time too," says Rajani.

Rajani's sector that reported a y-o-y decline in exports of 39% (in $ terms), during October 2017, has recently apprised the Chief Economic Advisor to the Government of India, Dr. Arvind Subramanian, of the hardships faced by the apparel exporters of the country.

According to Rajani, till the time the government does not come up with a broad-based conducive pro-trade policy, backed equally by supportive, pro-trade legislations such as GST, factors such as the 'time to export' and 'cost to export' would continue to remain high in India.

Conforming to Rajani’s views, Lalpuria of Indocount says, "For us, ease of business means a better trading ecosystem with good services, but at the moment we face many hiccups – there are congestion issues at ports like JNPT and often we find the port gates jammed as there is lack of infrastructure to handle our shipments.”

The government has reiterated the need for bringing down country’s logistics cost from an existing 14%. Unless that happens, the country will not be able to give a competitive edge to its exporters. As per an ASSOCHAM-Resurgent India joint study, India can save up to $50 billion if logistics costs are brought down from an existing 14% to 9% of GDP. Further, currently, India lags far behind in ports and related logistics infrastructure too. In India, against a share of 9%

of railways and 6% of roads in the GDP, the share of ports currently stands at a mere 1%.

Unlike the Indian scenario, China’s key manufacturing hubs are close to major ports, which help its exporters to save costs too. The much-touted inland waterways can be a game changer in this regard.

There are takeaways to be drawn from the success stories of China, South Korea, Japan and Singapore where the ports have been instrumental in leading the country’s economic growth roadmap. In this, the government's ambitious Sagarmala project that is aimed a harnessing at port-led economic growth, along with a focus on developing economic corridors and logistic parks on national highways, could be some of the big-ticket endeavours that have the potential to make a difference in turning around the fortune of India’s ease of doing quite considerably.

MARCHING AHEAD

A country like India still has a long way to go before it can actually be termed as an actual improver on any business friendliness index. What cannot be overlooked is the fact that in India over 93% of the workforce remains in the unorganised sector. As per the Economic Survey 2015-16, the informal sector accounted for 90% of jobs through the period 2004-05 to 2011-12. And this trend was supposed to increase marginally to 92-93% in 2017, according to a report by the National Commission for Enterprises in the Unorganised Sector

India's distance to frontier (DTF) score

Overall, India's DTF declined by 9.46%, which is a sign of progress 9 8 7 6 5 4 3 2 1 0

Starting a business

Overall

2017

Dealing with constrution

2018

Getting electricity

Getting credit

Protecting minority investors

Paying taxes

Trading across borders

Enforcing contracts

Resolving insolvency

Source: TDB Intelligence Unit and World Banks' Doing Business 2018 report

26 THE DOLLAR BUSINESS II DECEMBER 2017

(NCEUS). Worth noting is that this is the very section that has been hit hard by GST and the demonetsation drive! It is unclear how much of this segment is appropriately reflected in the World Bank ranking or gets reflected in any other similar ranking for that matter.

To really usher in an era of business friendly governance, instead of sitting on its laurels, the government has to work on both the guidelines provided by the World Bank as well as the feedback from the business community to bring in policies that inspire the confidence of investors on the country. The government has announced that its goal is to be ranked amongst the top 50 in the world. A laudable goal no doubt, but the road will not

be easy. While jumping 30 ranks from 130 to 100 is in itself an achievement, moving up the ranks will come even harder. What is more as that key indices like time and cost to start a business are also important factors that will decide the fate of the government's flagship projects like 'Start-up India' and 'Make-in-India'.

The government has made all the right moves when it comes to reforms. Not so with their implementation. If we need to make a significant leap from our present ranking, execution will be key, and that is when we will see inclusive and sustainable economic growth and investors lining up to do business in and with India.

The government has to understand that more than glorified rankings, reality mat-

ters more. Do you think China ever cared about any ranking on any Doing Business parameter while enroute to becoming the superpower it is today? It made progress that included smaller, unorganised business units and China Inc. alike.

Having said that, of course we are waiting for the day when we celebrate a half-century. Rankings aren't everything perhaps but we should be proud when we are headed for the summit. That India has moved up the order in Doing Business report this year is an indication − albeit with a narrow viewpoint given the limitations of the study − of how the world views the nation's objectives. We however should be a nation of early movers and adopters; not early celebrators.

“THE RANKING WILL HELP US LEVERAGE BETTER TERMS OF ENGAGEMENT” RAJOO GOEL, SECRETARY GENERAL, ELCINA

TDB: Going forward, what challenges do you foresee for the exporting fraternity, particularly in your sector, when it comes to foreign direct investment inflow into the country?

RG: Imports and exports are an essential part of successfully operating electronics sector. This sector is technology intensive and being part of a globally integrated value chain is dependent on FDI to a large extent. In my view, a better business environment will now give an advantage to the Indian entrepreneur to leverage better terms of engagement with foreign trade partners. Having said that, I would like to add that the velocity of investment deals will ultimately depend on the parties involved in each instance of FDI and the inherent strength of the business case made out by the concerned partners.

Further, exporters in India continue to face challenges with respect to Goods and Services Tax (GST) and high cost of finance vis-à-vis competing nations. Thus, these and several other issues need to be addressed on an urgent basis. Going forward, our focus should be to better our global rank.

TDB: As per critics, the World Bank ranking cannot be said to represent a pan-India business sentiment as it is based on data from just two metros – Delhi and Mumbai. Factors such as demonetisation and issues arising out of GST’s rollout have also not been factored in this time. Your thoughts.

RG: Of course, there continue to be many day-to-day business challenges in the short- to medium-term that will need to be addressed, especially to facilitate the growth of the MSME segment of the electronics sector. Changes in the legal/regulatory environment, such as the roll-out of the GST, is a step in the right direction and will play out to India’s advantage in the long-term. Having said that, many GST-related issues persist and may take another 6-12 months to get sorted out, as these relate to an understanding of the system, the IT infrastructure requirement and the tax rates, which even after the recent announcement of major corrections by the GST Council are anomalous in some cases. Further, digitisation of financial transactions has to be a gradual process, and it would be much better and effective if such a change is embraced voluntarily by the sector rather than forced upon.

DECEMBER 2017 II THE DOLLAR BUSINESS 27

Interview by Ahmad Shariq Khan

TDB: Does an improved ranking and credit rating provide opportunities for improved growth in foreign trade too?

Rajoo Goel (RG): An improved ranking and credit rating for India creates a positive impression in the minds of global investors with respect to the overall ‘ease of doing business’ in the country. This is likely to result in higher investments in trade, business and manufacturing in the country, including greenfield projects. A better business environment resulting from better tax administration, improvement in the enforcement of commercial law, easier cross-border trade, availability of power will surely give a fillip to domestic as well as foreign trade.

OVERSEAS TALK

H.E. ALPHONSUS STOELINGA, AMBASSADOR OF NETHERLANDS TO INDIA

“WE ARE ONE OF INDIA’S BIGGEST TRADE PARTNERS” References of a strong trade alliance between India and Netherlands can be traced back to the 17th century. Even today, the two nations boast of a robust relationship.

In an interaction with The Dollar Business, H.E. Alphonsus Stoelinga, Ambassador of Netherlands to India, talks about the ways to further consolidate the strong bilateral relations and maximise opportunities for investors from both countries.

INTERVIEW BY AHMAD SHARIQ KHAN

TDB: Indian Prime Minister Narendra Modi called Netherlands ‘India’s natural partner’ in economic development.

Your Comments.

H.E. Alphonsus Stoelinga (AS): Today, warmth, friendship and commonality of views on a wide range of issues are characteristics of India-Netherlands relationship. Historically, trade between India and Netherlands dates back to the early 17th century, as far as 1610 AD. Textiles, precious stones, saltpetre, indigo, opium, silk, and pepper were some of the products shipped by the Dutch to and from India during that period.

The Netherlands today continues to be one of India’s largest trading partners in the European Union. It also remains amongst India’s top ten partners when it comes to trade volumes with a positive balance of trade in favour of India.

Netherlands is also the third largest investor in terms of foreign direct investment (FDI) inflow into India. On the other hand, India is for us the fifth largest source of FDI. Recent times have witnessed the relations between India and the Netherlands largely being shaped by engagement in trade and investment. About 40% of our economy is dependent on international trade, so we have no way out but to look for international business. India, on the other hand, is less dependent on international business.

28 THE DOLLAR BUSINESS II DECEMBER 2017

There have been some major acquisitions and mergers by Indian companies including that of Corus by Tata Steel and Vredestein by Apollo Tyres and many Indian companies are exploring the possibilities for further tie-ups.

TDB: What are your thoughts on India’s youth and workforce? Will India’s demographic dividend pay-off in the long-run? How do you see India’s growing startup culture?

AS: On the basis of my regular interactions with the Indian youth, I have noticed a new spark, a new energy in them.

Undoubtedly, they are more globally connected now. Indian students today are in significant numbers in all European universities, including in universities in the Netherlands.

In fact, we recently launched the Golden Tulip Scholarship for Indian students that involves 21 Dutch educational institutes. Indian students have a preference to study subjects such as pure sciences, physics, chemistry and mathematics, etc. They have science in their DNA! I believe, that calls for a lot of dedication and persistence too – that’s why I think you have outstanding chess players like Vishwanathan Anand.

When it comes to startups, in Holland, we have created a programme called Dutch Startup Delta that fosters the startup culture. We want to con-

nect and collaborate with the best of Indian minds to tap mutually beneficial avenues. We were in Bangalore for our ‘Holland Meets Bangalore’ week from October 23 to October 27, during which a sub-event titled ‘Get in the Ring’ had 20 Indian and Dutch startups pitch their innovative ideas. The winners of the contests won tickets to the Global Meetup 2018! The entrepreneurial pool from Bengaluru, the Silicon Valley of India, is of great interest to Netherlands which is also why the new Dutch Consulate in the city is coming up in 2018. We are already working on a strategy to support Indian and Dutch startups.

Recently, I also had the pleasure of meeting Saket Modi, an Indian IT entrepreneur and CEO of Lucideus Tech, a cybersecurity company. He was invited at a major international conference on cybersecurity in Holland. I believe people like him represent the new India. It’s young Indians like Saket that will take India into the future.

TDB: Which sectors have the potential for Indo-Dutch collaborations?

AS: There are many areas where we can collaborate. I am of the view that with the help of Dutch technology, together with the low-cost innovations from India, both sides can tap many winwins. While the Netherlands has worldclass expertise in water management,

biotechnology, agriculture, agro-processing, dairy farming, horticulture, and floriculture, India is strong in low-cost innovation in software development and upscaling inventions to marketable products.

Holland is also home to many world-acknowledged agroforestry innovations. Partnerships in areas such as agriculture can pay rich dividends to both sides. We can support India in doubling its food production and doubling the farmer’s income. For example, in the hilly areas of Himachal Pradesh and Kashmir, where apples are grown in abundance, due to the shape of the apple trees, a farmer cannot grow too many trees per hectare. In Holland, by combining different plant varieties, we have succeeded in breeding a type of tree that stands more like a column - tall and thin, whereby all the branches get an equal amount of sunshine. The technology has also resulted in a shorter gestation period of a little over 12 months.

Recently, I was at a university in Kashmir, where faculties showed farmers how switching over can benefit them.

With the help of the government, we are helping farmers switchover. And in that, it is not just the State government that is offering subsides but banks like J&K Bank are also offering very generous credit terms. In order to meet the burgeoning Indian demand, we are building a nursery of such trees here itself.

Another notable example is in the potato breeding segment. Last February, I inaugurated a joint venture between Mahindra Agritech industries and HZPC Holland, in Mohali. Currently, the average potato yield in India is 23 tonne per hectare. With the seed potatoes of HZPC, we can lift that to 46 tonne per hectare. Under the arrangement, HZPC with its R&D focus will provide access to latest technology, varieties and open up global markets for the Indian farmers. We are now getting similar queries from states such as Tamil Nadu and UP.

TDB: Nitin Gadkari, the Indian Minister for Road Transport & Highways, Shipping and Water Resources, seems bullish on the prospects of inland waterways in India. How are Dutch com-

NETHERLANDS IS THE THIRD-LARGEST INVESTOR IN INDIA, IN TERMS OF FDI INFLOW INTO INDIA panies collaborating in this segment?

AS: Yes, the honourable minister is very keen on developing India’s inland waterways as there exists a huge potential for its development. We are offering our assistance on this front as we have world-proven expertise in this. We have many canals, rivers and lakes in Holland.

Long back, a large part of our country was water, and we claimed one-third of our land from sea and lakes.

Interestingly, there is a legend in Holland that says God created the world and the Dutch created half of their country themselves! In Holland, all the rivers, canals, lakes are continuously dredged, because only a deep river stays at its place. In case it turns shallow, it’s bound to change its position. I observe this problem in the Indian state of Bihar where each year farmers have to shift the location of their farms. Also, if you wish to make your rivers deep enough for transportation, you need to do dredging, and we are quite good at that – both inland and offshore. Today, if you happen to visit Hooghly River in Kolkata, you would see the result of our involvement. Many Dutch companies are engaged in various national inland waterways projects including the pro-

duction of shallow barges, etc. We could build small dredging ships here in India.

We are optimistic on the market prospective for such equipment. The Indian government’s ambitious Sagarmala project can turnaround the face of inland maritime trade. What is needed is more public-private partnerships in this area.

TDB: Evidently, waterways and renewable energy are two areas where Netherlands has expertise. Is the country engaging with India in projects such as Clean India?

AS: Yes, expertise in renewable energy is our strength. We are situated at the mouth of the sea, which makes us an apt choice for such projects. When PM Modi came to Holland, he also took note of our expertise in such initiatives.

We have windmills, water solutions and solar energy-based projects expertise.

Backed by this expertise, many Dutch players are involved in activities of the Clean Ganga Mission.

As we speak, a Dutch government agency is conducting a river modelling study across the length and breadth of the capture area of the Ganga river.

Furthermore, we have planned many waste-to-energy solutions like sewage DECEMBER 2017 II THE DOLLAR BUSINESS 29

OVERSEAS TALK

H.E. ALPHONSUS STOELINGA, AMBASSADOR OF NETHERLANDS TO INDIA

treatment plants (STP) here.

We were recently in Lucknow and Kanpur to launch a tannery waste-management project led by Solidaridad Network Asia, to reduce the use of water and to bring down the level of contamination by introducing new technologies and capacity building.

TDB: Post-Brexit, how do you envisage India-EU relations to evolve?

AS: What investors hate most is uncertainty. So, whatever the result of the negotiations between EU and Britain on Brexit, they should finalise these negotiations as fast as possible and create clarity. If not, investors will vote with their money. Fact is that the number of Indian companies establishing themselves in the Netherlands has shot up by 350% per year since June 2016. After Brexit, Britain of course will want to ink a separate trade and investment treaty with India. The signals from the Indian side are that they will first want to conclude an agreement with EU and use that as the format for one with UK. TDB: The EU-India FTA has been in a limbo for a long time. Is Netherlands pitching any agreement with India?

AS: In recent times, the two sides have actively been exploring such win-wins, but the problem is the Netherlands is a member of the EU under which we have agreed that some issues have to be taken up at EU level only, and that include trade negotiations and investment treaties. Now we are waiting for negotiations at EU levels to conclude as these issues can now only be discussed as a complete package between India and EU. TDB: What has been your experience when it comes to ease of doing business in India? Is the country moving in the right direction?

AS: India’s ease of dong business in recent times has improved, no doubt about that! We understand that PM Modi has set a target of bringing the country to 50th place but then it is India’s sheer size and varied domestic market dynamics that pose a challenge here. GST is certainly a big leap forward. The general impression we get from our Dutch busi30 THE DOLLAR BUSINESS II DECEMBER 2017

nesses is that corruption at the highest level has been tackled successfully, but then individual states and cities need to follow suit and do their bit.

TDB: The Indian government has announced FDI reforms aimed at attracting more investments into India. How do Dutch companies plan to capitalise on the opportunity?

AS: Of late, PM Modi has introduced many significant reforms across a wide range of sectors. There are reforms announced in sectors such as insurance, defense and multi-brand retail. I believe, so far, many Dutch companies have shown interest in these sectors. Defence-related equipment, radars and ancillary parts are also our strengths. For us, multi-brand retail is also very important. We have a very big supermarket brand called SPAR Netherlands whose India wing has recently announced that it aims to record a turnover of €300 million by 2019.

TDB: What are the top two bottlenecks for FDI into India?

AS: Cumbersome procedures and an unpredictable business environment are the two factors that in my view still play spoilsports to the cause of smooth FDI inflow into the country. As an Ambassador, such aspects are brought to my notice and I am informed of uncertainty around various procedures such as leasing, tenders, starting a business, etc. At times, policy-related surprises create hurdles. Even though Netherlands is the third-largest source of FDI for India, there is still no bilateral investment treaty between the two countries.

TDB: What makes the Netherlands an ideal investment destination for Indian investors?

AS: Out of our many USPs, the first is our locational advantage. We are right in the middle, between France, England and Germany. In fact, 20% of India’s Europe-bound exports enter Europe via Netherland’s Rotterdam Port and Schiphol Airport. The recent, Joint Cooperation Agreement between KLM, Air France and Jet Airways also marks a new, historic chapter between India and

the Netherlands. Under this agreement, bilateral trade will witness more connectivity, comfort and choice.

In the last two-three years, looking at the increased pro-trade dynamism in India, we have positioned Holland as India’s hub in Europe. We have good connections to the hinterlands in the whole of Europe. If you wish to export to Germany, Rotterdam is your most efficient bet. The mega port also brings together a whole ecosystem needed for smooth trade. It offers a whole lot of facilities related to manufacturing, processing and packaging, etc. For Indian companies and banks, post-Brexit, the Netherlands will offer the best alternative in the EU for many reasons. We are just 100 km away from London and we all speak English (and two and a half lakh speak Hindi).

We are also the fourth most innovative economy in the world. And our people and economy are hyper connected.

As we have an open economy, it’s very easy to invest in the country. Our ease of doing business is very high too.

In fact, we are ranked amongst the top ten. London’s status as the financial capital of Europe is becoming very uncertain. The transfer of the influential and prestigious European Medicines Agency (EMA) from London to Amsterdam is a precursor of what is to come.

TDB: Netherlands, as you said, has a sizable population people of Indian origin. How important is this connect?

AS: At present, Netherlands has the second-largest population of people of Indian origin in Europe, in which we have a sizable proportion of Hindustani people [whose ancestral roots are mainly in Uttar Pradesh and Bihar] who left Suriname after its independence in 1975 and decided to settle in the Netherlands.

In recent years, many Indians from India have joined them. We recently also celebrated Suriname Day on the banks of Hooghly, accompanied by Minister of State for External Affairs M. J. Akbar, who unveiled a plaque in the Dutch language at the Mai Baap Memorial on Suriname Ghat. Today, the Hindustanis and the NRIs share a common cultural base and many hold good positions in all walks of Dutch life.

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MONEY TO 56161

IMPORT’ONOMICS

PAPER AND PAPERBOARD

ROLLING IN THE MONEY Despite an increased emphasis on digitisation, the humble paper has not lost its sheen. With domestic demand for paper outpacing production in India, the only option left with traders is to depend on imports to bridge the demand-supply gap. Will Indian manufacturers be able to step up to meet the rising demand or will imported paper continue to be the preferred choice? The Dollar Business delves into the details.

BY AAMIR H. KAKI

T

ill a few years ago, if you were mid conversation and needed to jot down a phone number, you would look around for a piece of paper or your handy leather-bound organiser. Today, your smartphone is your notebook, recorder and, of course, the quickest way to get in touch with a friend. From legal documents to greeting cards; from newspapers to letters, paper in a many ways has always been an essential item of life, across sectors, countries and age groups. But, in today’s digital world where you can get everything from a bank statement to a greeting card on your phone, one would assume that the demand for paper was on a decline. The reality is quite the opposite. The demand for paper is increasing as paper finds use in a variety of different applications. Today, beyond printing and writing, paper finds 32 THE DOLLAR BUSINESS II DECEMBER 2017

use in packaging, and several industrial and construction processes. India’s rising consumption of paper has outpaced India’s domestic capacity and made the imports of paper an attractive option.

THE ROLLERS

What has been fuelling this domestic growth in demand? Education and development, it seems. What is more is that the type of paper that is used for these purposes is mostly not produced in India, and that is the reason that of all our paper and paperboard imports the type of paper that is imported under HS Code 481019 is by far the highest.

Rohit Pandit, Secretary-General, Indian Paper Manufacturers Association (IPMA), says, “Greater emphasis on education and literacy by the government, coupled with the growth of organised retail and demand for better quality pa-

per, are the major drivers for paper and paperboards. Demand for better quality packaging of FMCG products marketed through organised retail, rising healthcare spends, over-the-counter medicines and increasing preference for ready-toeat food are the key demand drivers for paperboard and packaging paper.”

Presently, paper consumption in the country is around 16 million tonne per annum (TPA), which is expected to rise to 23.5 million TPA by FY2025. “An additional 1 million TPA of integrated pulp, paper and paperboard capacity is required to be created in India to meet the growing demand,” adds Pandit.

COST IS KEY

Despite the need for an additional 1 million TPA capacity, the scarcity of raw materials is preventing production from matching the demand. The raw material

World’s largest importers of paper and paperboard

India is world’s third-biggest importer 5% 2%

India’s largest sourcing destinations of paper and paperboard

China is by far the largest exporter to India

7%

14% 11%

12%

Germany US India France Other

74%

Source: TDB Intelligence Unit and UN Comtrade; HS Code: 481019; break-up for CY2016

here being wood fibre. India is a wood fibre-deficient country and wood price is 50% of the total cost of production of paper. The domestic availability of wood is 9 million TPA compared to demand that is presently at around 11 million TPA. According to Pandit, the cost of wood has also been significantly going up over the last few years. The mill-delivered cost of domestic wood in India is higher by almost $30-40 per tonne compared to other Asian countries. This is the primary reason for the cost of paper production in India being higher by $100 per tonne.

In addition, the restrictions on supply of wood by the Indian government due to environment concerns has also been impacting the production of paper in India. Tushar Gupta, Proprietor, Om Shiv Packaging, says, “The restrictions by the government are both on paper as well as plastic. But, there is a need to promote the paper industry that has made thousands of crores of investment and provides employment to lakhs of people.”

IMPORTS TO THE RESCUE

The lack of capacity has naturally opened up the market for importers. In fact, over the past six years, imports have increased at a compound annual growth rate (CAGR) of 15.8% in value terms to Rs.8,237 crore, and 17.6% in volume terms to 1.42 million tonne in FY2017, according to IPMA. India imported around $317.84 million worth of paper and paperboards under HS Code 481019 during FY2017.

Four years ago, imports were worth just

China South Korea US Indonesia Other

40%

15% 20%

Source: TDB Intelligence Unit and Ministry of Commerce, GoI; HS Code: 481019; break-up for FY2017

India’s import of paper and paperboard over the years Imports have been on a steady rise 350 250 200 150 100 50 FY13

FY14

FY15

FY16

While the volumes are high, the margins in this business tend to be low Cost ($/MT)* 460.00 Freight & Insurance ($/MT)** 20.00 CIF ($/MT) 480.00 CIF (Rs./MT)*** 31,200.00 BD (10%) 3,120.00 CIF + BD 34,320.00 Cess (3%) 93.60 CIF + BD + Cess 34,413.60 IGST (12%) 4,129.63 Final Cost 38,543.23 Selling Price in India# 40,000.00 Profit 1,456.77 Profit Margin 3.64% * Stocklot of coated and uncoated paper and board of mixed varieties; HS Code: 48101990; ** Freight and insurance cost from Hamburg in Germany to Mundra in Gujarat; Minimum order quantity (MOQ): 20 MT; ***Assuming USDINR at 65; # Wholesale Price (TDB Intelligence Unit).

Note: Profitability ignores brand equity

300

0

Profit estimates for paper and paperboard imports

FY17

Source: TDB Intelligence Unit and Ministry of Commerce, GoI; figures in $ million; HS Code: 481019

$172.72 million. During the April-August period of the current fiscal, the country has already imported $194.87 million worth of paper and paperboard under the same HS Code, signalling that the growth in imports remain unabated.

According to importers, it is not only a matter of availability but also of quality. Gupta says that the paper produced in India is mostly of low burst factor (BF), and the cost of producing high BF is quite high. BF refers to the strength of the paper. However, the paper produced in other countries is of high BF and is cheaper compared to similar products produced in India. The quality and pricing of the imported paper has made importing a viable choice.

What’s more? According to Pandit, “Imports of paper and paperboard in the current financial year has touched an alltime high of 4.7 lakh tonne in the first quarter against 3.2 lakh tonne in the corresponding quarter in the previous year.”

Important disclaimer: Profitability has been calculated based on time-bound indicative prices (prevalent during the third week of November 2017). Prices may vary during a different time period, resulting in profit fluctuation. Factors like brand value, supply chain-related costs like warehousing and logistics, administrative costs, sales and advertising costs, etc., have not been included in the cost of procurement. Margins have been calculated considering government policies (announcements, notifications, etc.) as on November 20, 2017.

Risk factors and currency fluctuations have to be considered while importing.

Calculations have been provided for informational purposes only; The Dollar Business takes no responsibility for any loss resulting from investments in the said commodity/product. Though all efforts have been made to ensure the accuracy of the content stated herewith, the same should not be considered a statement of law or used for any legal purposes. Prior permission is required before calculations stated herein are published or quoted in a third party web or print property.

IMPORT OF PAPER AND PAPERBOARD FROM CHINA AND ASEAN IS RISING DUTY-FREE ADVANTAGE

Since the shortage in raw materials and their rising costs have been the main reasons behind India’s inability to increase production, imports have had to fill in the demand supply gap. But the reason for the increase in imports is not limited to unavailability of the domestic product.

The duty structure for imports and global market dynamics also have had a role to play. Let us first look at the countries that are the sources of India’s paper and paperboard products under HS Code 481019. The main countries exporting paper and paperboards to India are China, South Korea, US and Indonesia.

DECEMBER 2017 II THE DOLLAR BUSINESS 33

IMPORT’ONOMICS

PAPER AND PAPERBOARD

Out of these, China is the largest exporter of paper and paperboards to India. It exported around $127 million worth of paper and paperboards under HS Code 481019 in FY2017. Imports from South Korea have also been increasing at a steady clip. Imports from the ASEAN region have also been on a rise, and Indian manufacturers blame the ASEAN-India FTA for the same, as it has meant that duty on these products are nil, making importing more profitable than producing. The same is the case with South Korea as the South Korea-India CEPA dictates that the import duty on this product will be 0% from January 2018.

Imports of paper and paperboard, excluding newsprint, into India from ASEAN in the last six years have grown at a CAGR of 42.5% in value terms and 43.3% in volume terms. Interestingly, imports

from South Korea alone have grown at a CAGR of 60.3% in value terms and 58% in volume terms.

Citing another reason for such a steep growth in imports from the ASEAN region, Pandit says that the conventional markets for China and Indonesia have been US and EU. In both these markets, anti-dumping and anti-subsidy tariffs have been imposed on paper and paperboard imports in order to protect their domestic industries. “Further, the economic slowdown in developed economies and export-dependent economies like ASEAN has led to excess capacity of paper and paperboard in these countries.

Taking advantage of the low import duty rates in India, these countries find India as an attractive outlet for diverting their excess inventory,” says Pandit.

Cheaper imports are forcing domestic

companies to bring down their rates, thus hurting their margins and profitability.

The industry has also sought for government intervention and is demanding a level-playing field by urging the government to increase import duties.

AN IMPORTERS’ GAME

According to IPMA, the paper industry is poised to grow at a rate of 6-7% per annum, in the foreseeable future. And while domestic capacity building is happening, it is unlikely to keep pace with the rise in demand for the product.

For exporters, India is thus proving to be a worthwhile market. Poonam Gupta, CEO, PG Paper Company Ltd., a UKbased exporter, says, “India has a huge population and its per capita usage of paper is still lower compared to most developed countries, and that provide enor-

“THE INDUSTRY IS POISED TO GROW AT 6-7%” TDB: Import of paper and paperboard has been rising steadily over the last few years. According to you, what are the reasons for this rise?

Rohit Pandit (RP): India is a wood fibre-deficient country. Availability of wood domestically at 9 million tonne per annum (TPA) is way lower than the demand, which is currently about 11 million TPA and is projected to rise to 15 million TPA by FY2025. Mill-delivered cost of domestic wood is higher by almost $30-40 per tonne as compared to other Asian countries. Due to this, cost of paper production in India is higher by $100 per tonne. The problem has been exacerbated by the government’s policy of extending preferential tariff treatment to import of paper and paperboard under the different free trade agreements.

Under the India-ASEAN FTA, import duties on almost all tariff lines of paper and paperboard have been progressively reduced and the basic customs duty came down to 0% with effect from January 1, 2014. Under the India-Korea CEPA, the basic customs duty will be 0% with effect from January 1, 2018, and imports from South Korea will rise.

34 THE DOLLAR BUSINESS II DECEMBER 2017

grow at around 6-7% per annum in the future. The packaging paper and paperboard segment is expected to grow at 9-10%, while writing and printing paper segment is expected to grow at 4-5%.

Rohit Pandit

SECRETARY GENERAL, IPMA

TDB: Do you envisage imports of paper and paperboard growing further?

RP: Currently, per capita paper consumption in India is around 13 kg and is projected to increase to at least 17 kg

by FY2025. Under the baseline scenario, domestic consumption is projected to rise to 23.5 million TPA by FY2025. If we cannot increase our production, imports will naturally grow. According to Indian Paper Manufacturers Association (IPMA), the paper industry is poised to

TDB: How is GST expected to impact the paper and paperboard industry?

RP: GST is expected to have an overall positive impact on India’s paper industry, though there are bound to be some short-term transitional and implementation issues. In the medium-term, the cost competitiveness should improve with unification of the fragmented domestic market and reduction in costs associated with inventories and logistics, especially with the removal of entry barriers.

Ideally, the paper industry would have liked a uniform GST rate on all grades to avoid classification problems. Most grades are covered under 12%, while there are some in the 18% category and newsprint is in the 5% category. By and large, the industry is satisfied with the GST rates on the output side, though the rates on raw material and inputs could have been lower so as to avoid the blockage of working capital.

mous opportunities for growth. The fact that plastic is being increasingly replaced by paper as a more environment-friendly alternative by corporates is also propelling the demand for paper in India.”

Gupta, of PG Paper, feels that domestic Indian paper industry also has enormous potential and opportunities for growth. “The industry has witnessed a steady growth over the last few years.

And, I expect that the industry will be on positive growth trajectory in the coming years, leading to increase in domestic production as well as imports,” she says.

Of course, when it comes to profitability, importers offer mixed opinions. But then, most importers The Dollar Business spoke to say that the margin is usually fixed and is around 2% or in some cases lower, depending on the market price and the dollar conversion rate. The mar-

While the packaging paper and paperboard segment is expected to grow at 9-10%, the writing and printing paper segment is expected to grow at 4-5%.

ket, these importers say, adjust according to the international prices making higher profits difficult.

Importers are quite positive about the growth in demand of paper and paperboard in India despite the narrow profit margins. An increase in literacy, changes

in lifestyle and a populace that is increasingly environment conscious, coupled with growth in sectors like organised retail, FMCG, packaging and construction means the demand for paper is here to stay. Question is, will importers be able to write their own future on paper?

“85% OF OUR PAPER IS EXPORTED TO INDIA” TDB: What challenges do you face while exporting to India?

Poonam Gupta (PG): When you talk about exports, all markets have their own individual challenges. India is no different and has its own unique set of challenges. However, we certainly have the advantage of being present in the industry for 14 years. We also have an in-depth understanding of Indian legislation. Recently, the implementation of Goods and Services Tax (GST) in India had presented some challenges and had affected our industry, but the industry is now embracing this new tax regime and business is stable.

TDB: Recently, you announced plans to set up a paper manufacturing facility in India. What has been the motivation behind this move?

PG: Around 85% of our exports go to the Indian subcontinent. India is a growing market and I see paper as an environment-friendly alternative to plastic packaging, which is currently widely used in India. So, it makes sense to set up manufacturing facilities in India and take advantage of the growing packaging

to India does not originate from these countries. However, we also strongly believe that the paper industry places a higher demand on natural resources like water and wood logs. So, for a country like India, it makes sense to put these resources to human use rather than utilise them for producing paper. Thus, for India, sourcing paper from other countries makes more sense.

Poonam Gupta

CEO, PG PAPER COMPANY LTD., UK

sector. It will also make our supply chain more effective. I see a lot of opportunities for growth in India in the coming days.

TDB: The Indian government initiated an anti-dumping probe on paper imports from Indonesia, Thailand and Singapore. How will this impact your paper exports to India?

PG: The anti-dumping probe might actually have a positive impact on our business as most of the paper that we supply

TDB: The paper industry is expected to grow at a rapid clip in the coming years.

How are you preparing yourself to meet the increasing demand?

PG: The paper industry is still growing despite a decline in publishing paper grades. This is due to an increase in technology and environmental awareness. As a result, we have shifted our focus towards packaging grades and diversifying our product portfolio. The packaging and labelling industry is growing rapidly, and we are aggressively tapping into this segment. We see the progression towards packaging materials to be a continuing trend and will focus on developing our team and product portfolio to meet this demand.

DECEMBER 2017 II THE DOLLAR BUSINESS 35

GLOBAL MANAGER

R. S. SODHI, MANAGING DIRECTOR, GCMMF LTD. (AMUL)

“INDIA IS A PRIORITY MARKET FOR AMUL” When one talks about dairy products in India, the first name that perhaps comes to mind is Amul. R. S. Sodhi, Managing Director of Gujarat Co-Operative Milk Marketing Federation (GCMMF which owns the brand) Ltd., spoke with The Dollar Business about the USP of the cooperative, the continued relevance of its business model and Amul’s expansion across overseas markets.

INTERVIEW BY ANISHAA KUMAR

TDB: When it comes to dairy products, Amul is a well-known name both in India and abroad. What is the secret behind Amul’s success?

R. S. Sodhi (RSS): The Amul brand name that you know has two audiences: our consumers and our farmers or suppliers, and we have been able to gain the trust of both. The reasons for our success has been our business philosophy – ‘Value for Many and Value for Money’. Value for Many means giving value day-afterday and at a remunerative price to our 3.6 million milk producers. They are after all the owners of this brand and this growing organisation. When they give milk to us, they are assured that the price that they get will be very good. On the other hand, we provide consumers the best quality products, using the best ingredients, using the latest technology for processing and packaging at a very affordable price. Because of this business strategy of ours, other producers find it difficult to compete with us. Any business would like to buy raw materials at as low a price as possible and would like to sell the finished product at a price as high as possible. When it comes to Amul, we buy our raw material at a price as high as possible and sell at a low price.

TDB: In FY2017, GCMMF saw an increase in turnover by around 17.5%.

Has this met your expectations?

RSS: Yes. Most FMCG companies have shown less than double-digits growth, at around 6-7%. We on the other hand have seen a much higher growth rate.

36 THE DOLLAR BUSINESS II DECEMBER 2017

If you see over the last seven years, our CAGR has been around 19%. In FY2010 our turnover was around Rs.8,000 crore, which in FY2017 grew to Rs 27,043 crore.

This is the turnover of Gujarat Co-operative Milk Marketing Federation (GCMMF). If you look at the Amul brand, you can add another Rs.9,000- Rs.10,000 crore. In FY2018, we are already growing at almost the same rate. We are confident that revenues will continue to grow further. In India, there lies an immense opportunity for value-added dairy products. The size of the dairy market in India is around Rs.5 lakh crore but the organised sector constitutes only 17% of this. There is a lot of scope for growth.

TDB: GCMMF aims to achieve a turnover of Rs.50,000 crore and become the largest FMCG organisation in India by 2021. How does the federation plan to achieve these targets?

RSS: In the dairy industry, you cannot grow only by putting up of more plants as the raw material is not easily available.

Our strategy to achieve this goal has been of 3Es – Expansion in milk procurement, milk processing and marketing. We have been working for the last five years on this strategy and will continue to do so for the next five years. We have been expanding procurement, both within and outside Gujarat. At present, 15% of our milk procurement is from outside Gujarat. Our average annual milk procurement growth has been around 9-10%.

This year it may be slightly more. Next is expansion in milk processing. We are

investing in more facilities. Every year, we invest around Rs.600-800 crore in expanding processing. In FY2011, we had a processing capacity of only 120 lakh litre per day. Today, we handle around 320 lakh litre per day which we plan to soon expand to 380 lakh litre per day. We are also expanding our distribution network.

We have four types of products: Products which are stored and distributed at room temperature in tetra packs like ghee, milk powder, etc.; frozen products like ice creams; chilled products like butter and cheese and then fresh products like milk in pouches, dahi, etc. We are adding more stock points, distributors, retailers, etc., both across India and abroad, for all these product categories.

TDB: How do you plan to expand Amul’s global footprint?

RSS: When it comes to exports, there are two types of products that we ship.

The first is packaged consumer products – mainly for the Indian diaspora (products like Amul Butter, Amul Cheese and Amul Ghee, etc.). The second are commodities like milk powder and white butter. Export of commodities depends on international prices. The conditions are not conducive for exports of milk products presently due to price volatility in international markets. Export of butter is however becoming viable.

We are currently concentrating on exports of branded products like tetrapack milk, ice creams, etc. Last year, we exported products worth Rs.250 crore and this year we expect exports to touch

WHEN IT COMES TO EXPORTS, WE ARE FOCUSSING ON PACKAGED BRANDED PRODUCTS body is coming to India, there surely is untapped potential in this market. Since we are located in India, a market which is the largest and the fastest growing, we obviously have to focus more on the domestic market. So, India is our main focus and we would like to export only after meeting the local demand. We would be focussing on expanding abroad and exporting, but for Amul Indian market will always remain a priority.

Rs.1,000-crore mark. We are also setting up production facilities outside India. In fact, we now have two small production bases in US to produce ghee, shrikhand, etc. In near future, we plan to set up a production facility in Europe as well.

TDB: How difficult is it to find an audience among non-Indian consumers?

RSS: Our focus has been mainly on the Indian diaspora. But now, in terms of products like ghee, the mainstream consumers are also buying. In the case of cheese, people who want to buy vegetarian cheese prefer Amul Cheese. Even the Amul ice creams are taste wise better. So, while concentrating on the South Asian diaspora we are expanding our audience.

TDB: In November 2016 Amul tied up with Amazon to sell its products in the

US market. Can you shed some more light on this new sales channel?

RSS: With growing popularity of yoga, many want to try ghee – a product that offers many health benefits. We went to Amazon (US) to sell Amul Ghee to their mainstream consumers because reaching this scattered population is difficult.

Amazon is giving us very good results.

TDB: India is the biggest producer of milk in the world. Despite this, we lag far behind when it comes to its exports.

What have been the hurdles?

RSS: India is not only number one in milk production, but it is also the world’s largest and the fastest growing market.

On the other hand, markets like Europe and US are mostly stagnant. Hence, the world is eyeing India. Everybody wants to to sell their products in India. If every-

TDB: With the growth of other FMCG brands how is Amul bracing up for the competition in this sector?

RSS: Competition is always good and welcome because if more corporates come into the market they will bring in technologies and transparent commercial systems that will help our farmers.

This will in turn ensure that farmers will get better prices. And Amul is always happy when we see our farmers happy.

Amul is the only big dairy company in India that has its own Cow to Consumer (C2C) supply chain. Most other companies in this business invest in processing plants and branding, but very few have a connect with the farmers.

TDB: Amul has been following a co-operative business model since inception. How challenging has it been to maintain this model in the present dynamic business environment?

RSS: The co-operative model is relevant and very necessary, even today. India is a country of small farmers where production is very small. There is a need to aggregate the produce of these farmers and producers, else they will be exploited. There is no better model than a cooperative for this purpose. And while Amul is owned by farmers, it is managed by a professional team. We are thus able to combine traditional and modern approaches to achieve success.

DECEMBER 2017 II THE DOLLAR BUSINESS 37

MANAGEMENT INTELLIGENCE FEATURE

Rising consumer awareness and spending capacity has provided the Indian spa and salon industry the right boost to expand in both tier-1 and tier2 cities. Over the years, Spalon India Pvt. Ltd. with its brands like Bounce and Kanya has been growing steadily. Spalon’s Managing Director Vikram Mohan talks about the USP of its brands, the company’s expansion plans and the challenges and opportunities the Indian market presents.

“COMPETITION KEEPS US ON OUR TOES” TDB: Could you take us through the process of how you started Spalon India Pvt. Ltd. What was the inspiration behind entering the segment?

Vikram Mohan (VM): Our company was founded in 1983 by my mother Latha Chandra Mohan. At that point of time, she began with a 200 square-foot ladies-only beauty parlour. Her driving force was simple – her sheer passion for the beauty industry. The parlour called Kanya Beauty Salon, is still around today and continues to be one of the top brands in Chennai and Bangalore when 38 THE DOLLAR BUSINESS II DECEMBER 2017

it comes to the ladies-only salon segment. When I joined her in 2013, Spalon India was born. We added what are now well-known brands like Bounce which is our high fashion unisex salon chain, Oryza – our day spa and Bounce Academy for Hair and Makeup, to our brand portfolio as we slowly began to grow and expand our clientele. The inspiration for us at Spalon was to be the market leader when it came to offering great customer experiences. This was backed by providing our staff with intensive training in order to establish ourselves as a serious

player in the hair, beauty and wellness space in India.

TDB: Today, Spalon India brands have a presence in major metropolitan cities like Bangalore, Chennai, Hyderabad and Mumbai. Do you plan to further expand in these markets or are you looking at entering newer markets in the coming days?

VM: In the coming days, we will be opening more salons in Mumbai, Hyderabad and Bangalore. In addition, we will be adding cities like Coimbatore to our

VIKRAM MOHAN

MANAGING DIRECTOR, SPALON INDIA PVT. LTD.

growing national footprint, by the end of this financial year. Overall, in FY2018, our plan is to include an additional eight new salons to the group.

TDB: The salon market in India is choco-bloc with both Indian and international names. What makes Spalon India brands like Bounce stand out?

VM: The market has been growing steadily over the years. But, we are proud to continue to stand out in the crowd. We are proud to be a completely home-grown brand and are one of

the few hairstylist-owned and operated brands in the country, with over 35 company-owned outlets. We do not franchise and are obsessive about quality control and customer satisfaction.

TDB: Taking about your current locations, cities like Bangalore, Chennai, Hyderabad and Mumbai are known to attract a large number of both national and international tourists. They are also popular Indian destinations for expats. Do you see scope for international clientele in India when it comes to spa and salon services?

VM: Our brands have always been patronised by the expat community and they continue to remain a favourite with the community. A major reason for that has been the skill level of our staff. All our hair stylists are trained in the latest trends and techniques. In addition, all our senior-most talent is trained in the most prestigious academies from Europe and the Far East. Our spa therapists are trained by trainers from Indonesia and Thailand.

We also have the advantage of our world-class facilities and we use only the best available products for the services we offer. The quality of facilities and products goes a long way in attracting our non-residential clientele. It’s always a great pleasure for me when I see that so many of our expatriate clients, make it a point to get all their hair and beauty services at our salons before heading out of India on their annual vacations, back to their home countries. We hope to be able to continue to provide worldclass services to both the domestic and international clients in the days ahead.

TDB: Wellness and Beauty have a growing demand, not only in India but also abroad. Do you plan to expand your brand presence beyond India?

VM: There has been a growing demand in not only India but also the world, in this segment. But currently, at Spalon India, we are focusing on only on our India expansion in the days ahead.

TDB: Could you tell us about the initial challenges you faced while starting the brand. How has your approach

changed over time?

VM: There were numerous obstacles when we started off, some more challenging than the others. If I were to mention the main ones, I would say that when we started our first salon, at the point of time, we were one of the first, unisex brands in the country. At that point of time, my sister and I would end up working on the floor catering to our customer’s requirements. The sector was still new and growing so we had to train all our staff from scratch.

Things are different now. Today, thanks to the rapid evolution in the industry, finding talent isn’t that difficult. Even then we make sure to retrain everyone in order to provide our clients with quality services. Also, through our academies, we have trained over a thousand hair and makeup artists.

TDB: Earlier, competition was only from within the domestic market. With the entry of many well-established international brands in this segment what changes have you seen. How will this benefit the segment?

VM: The competition in the market is very healthy and helps keep us on our toes. While international brands have been entering for a while now, I think, we can say that we are doing pretty well for ourselves. I have always believed that your work should speak for itself.

As long as we are clear about our fundamentals goals, which is to constantly evolve, keep our clients as our top priority, keep the service quality consistent, and ensure the brands in our portfolio are always in trend, we should be able to stay competitive despite the entry of new or established brands.

TDB: As Managing Director, what have been your biggest achievements? What are your plans for the years ahead?

VM: Without doubt, I would say that my dedicated and experienced team, along with our loyal and growing customer base have been the biggest achievements. Moving forward, we would like to continue our current growth trajectory – taking over the world, one head at a time!

DECEMBER 2017 II THE DOLLAR BUSINESS 39

THE SECRET INGREDIENT

FROZEN RIBBON FISH

IT’S CALLED SILVER EEL FOR A REASON While it’s considered a low-value product compared to other seafood, frozen ribbon fish exports from India has started regaining momentum after a decline over the last few years. Though the export numbers may not be on par with those of frozen shrimps and prawns, the growth potential of this product is huge. The pros and cons of exporting ribbon fish - dissected and analysed for you Mr. Exporter!

BY ANISHAA KUMAR

C

ome Chinese New Year, ribbon fish or cutlass as they are otherwise known, whether braised, seared or grilled, become an ubiquitous part of the Chinese menu. Interestingly, a large chunk of ribbon fish arrive on the Chinese or Vietnamese table from Indian shores.

You may not have seen this fish in In-

40 THE DOLLAR BUSINESS II DECEMBER 2017

dian markets or recipes and while they are evidently not as glamorous as other varieties of seafood like shrimps, crabs, freshwater fishes and other crustaceans; ribbon fish contributes significantly to India’s marine product exports.

DEMAND IN NUMBERS

While India is a large exporter of rib-

bon fish, the business hasn’t been exactly smooth for exporters. Over the last few years, the export of ribbon fish has gone through its share of upheavals. In FY2017, the exports of frozen ribbon fish from India reached $199.46 million, up by 18% from FY2016, but was still a decline of 34.3% from FY2014. India, however, continues to be an important

source of frozen ribbon fish in the international market. If one looks at the seven-month period between January 2017 and July 2017, India’s exports of frozen ribbon fish witnessed a 42.8% year-onyear (y-o-y) jump during the period.

Explaining the growth in export numbers, Rajesh Masani, Owner of Veraval (Gujarat)-based Kartik Cold Storage, says, “Our business depends a lot on the catch. This year, the catch of ribbon fish has been very good and this has translated into higher exports as there is hardly any domestic market for the fish.”

Currently, when it comes to export of ribbon fish from India, Vietnam is by far the largest exporting destination with China coming a distant second. In FY2017, India exports of frozen ribbon fish to Vietnam were worth $180.95 million, while that to China were worth a mere $16.97 million. Interestingly, the end consumer of most of India’s ribbon fish exports is China. This anomaly, according to exporters, has to do with the high import duties imposed by China on exports from India. Exporters say that most Indian cargoes of ribbon fish go to China through Vietnam in order to avoid the high import taxes levied by China. Exporters also say that China also places restrictions on the number of cargoes that can be imported.

The demand in China, Masani says, is especially high during the Chinese New Year that falls in February. The demand, he says, grows from October till January.

It then picks up again at the end of February. This ensures that the demand for ribbon fish is constant. Another reason, as per Chandresh Suyani, Proprietor of the Veraval (Gujarat)-based Chandrashila Exports, that makes it popular amongst lower-income communities in China and Vietnam is its low price.

Overall, India has seen a growing catch of ribbon fish. According to data from the Central Marine Fisheries Export Institute, the annual national landing volume increased from 177,259 metric tonne (MT) in 2015 to 217,100 MT in 2016. Well, that’s 22.4% y-o-y increase!

OF VOLUME AND VALUE

The catch is increasing and so are exports, but exporters rue about the low

INDIA’S EXPORTS OF FROZEN RIBBON FISH INCREASED 18% Y-O-Y IN FY2017 profitability of the product. K. S. Jayakrishnan of the Kerala-based Relish Custom Foods, says that as it is a low-value product with high demand, fluctuations in procurement price can have an impact on the margin. For instance, during some months, if there is more demand for fishes like mackerel, the international price of ribbon fish may decline.

“Otherwise too, it is a competitive sector and margins are usually thin,” adds Jayakrishnan.

Azaz H. Patni, CEO of Sun Exports, another Veraval-based seafood exporter, concurs. “There is so much competition that the profit margin is almost negligible. It all depends on the catch. On some days we make profits and on other days we have losses,” he says.

In fact, when it comes to China, one of the largest markets for the product, exporters of frozen ribbon fish operate on wafer-thin margins. “There are very few opportunities of making big profits. Sometimes, when there is a good catch and we are able to load the catch immediately into containers, we may make a decent profit. But, usually, it is a high-volume, low-margin business for us because of the limits of our negotiating power,” says Masani.

Currently, exporters of ribbon fish receive a 7% reward under Merchandise Exports from India Scheme (MEIS) and a 0.4% duty drawback and according to them they are actually surviving on these benefits. In fact, exporters complain that there has been a sharp decline in incentives over the years. At one point in time, according to exporters, they were receiving a total incentive of 18% which has has been reduced to a mere 7.4% today.

The profitability, Jayakrishnan adds, depends on various factors including domestic prices and demand – it can vary from 5% to even 25%. The average price of the fish usually hovers around Rs.150160 per kg, depending on the size and

Profit estimates for exports of frozen ribbon fish Exporters can expect decent margins if the landing is good Cost of Production (INR/Kg) FOB Value (INR/Kg) Operating Profit Operating Margin (%)

150 155 5 3.2%

Frozen ribbon fish in 200 gm packs; HS code: 03038930; FOB Pipavav Port, Gujarat; MOQ: 500 kg; The cost of production excludes government subsidies (like duty drawback of 0.4%) and incentives ( like 7% reward under MEIS).

Important disclaimer: Profitability has been calculated based on time-bound indicative prices (prevalent during the third week of November 2017). Prices may vary during a different time period, resulting in profit fluctuation. Factors like brand value, supply chain-related costs like warehousing and logistics, administrative costs, sales and advertising costs, etc., have not been included in the cost of procurement. Margins have been calculated considering government policies (announcements, notifications, etc.) as on November 20, 2017. Risk factors and currency fluctuations have to be considered while exporting. Duty drawbacks have not been factored in while calculating indicative profitability. Calculations are provided for informational purposes only; The Dollar Business takes no responsibility for any loss resulting from investments in the said commodity/product. Though all efforts have been made to ensure the accuracy of the content stated herewith, the same should not be considered a statement of law or used for any legal purposes. Prior permission is required before calculations stated herein are published or quoted in a third party web or print property.

India’s export destinations Vietnam has always been the biggest market for Indian frozen ribbon fish

8% China

31% 91% Vietnam

1% Other Source: TDB Intelligence Unit and Ministry of Commerce, GoI; HS Code: 03038930; break-up for FY2017

weight of the fish. The prices start from Rs.60 per kg, for a very small fish.

Apart from the cost of procurement of the fish, exporters also incur a variety of additional costs. Exporters say that there is an additional expense of at least Rs.30 per kg which includes overheads like electricity, labour, wastage, etc.

While in countries like China ribbon fish is a delicacy, in many other markets most varieties of ribbon fish are used as bait feed and hence fetch low prices. This also limits the chances of exploring new markets for exports.

DESPITE THE ODDS...

Despite the challenges, being a low-value product also has its advantages, say some exporters. For the export of shrimps, exporters are faced by numerous restrictions and regulations regarding the presDECEMBER 2017 II THE DOLLAR BUSINESS 41

THE SECRET INGREDIENT

ence of antibiotics. But as ribbon fish is a low-value product and comes directly from the sea, Jayakrishnan says that it is usually easier to export the fish while maintaining quality standards.

Suyani of Chandrashila Exports agrees and says, “We have a requirement for

FROZEN RIBBON FISH

testing and certification, but the process is fairly straight-forward. We just have to send the sample to a MPEDA-recognised lab that conduct the tests. Once it conducts the test, it give us a certificate and we can go ahead. The process is easy to comply with and is not expensive.”

India’s exports of ribbon fish

After a sharp decline, exports started rising again in FY2017 350 300 250 200 150 100 50 0 FY2014

FY2015

FY2016

FY2017

Source: TDB Intelligence Unit & Ministry of Commerce, GoI; figures in $ million; HS Code: 03038930

A BUYERS’ MARKET

Exporters of ribbon fish believe that a bit of government support and some financial assistance from banks can go a long way in providing the sector the much-needed boost. “We do not get any assistance from the government with regards to storage facilities. Even banks do not give us credit. If we had these facilities, we could negotiate a better deal with Chinese importers,” says Masani.

And not just Masani, almost all ribbon fish exporters feel that even when the catch and landing is good they are powerless at the bargaining table because of the lack of these facilities. Masani explains, “The Chinese, who are our main buyers, come down personally to negotiate deals in various ribbon fish exporting hubs in India. We have had problems this year as the importers are offering a lower price, which is at least 40 cents

“CHINESE IMPORTERS HAVE AN UPPER HAND” TDB: What challenges do you face while exporting ribbon fish?

Rajesh Masani (RM): Ribbon fish is a low-value product. Indian exporters are at a disadvantage because the Chinese, who are our main buyers, come down personally to negotiate the deals in various ribbon fish export hubs across India. We have had problems this year as the importers are offering a lower price, which is at least 40 cents per kg less than that they were offering last year. They are able to get away with this because they know that the Indian seafood companies have no other market for ribbon fish.

This is our biggest challenge as it gives them an upper hand in negotiations.

And we end up working on their terms and conditions. We also do not get any assistance from the government with regards to storage facilities. Even banks do not give us credit facilities. If we had these facilities, we could negotiate a better deal with Chinese importers.

TDB: With the product being low in value and requiring additional pack42 THE DOLLAR BUSINESS II DECEMBER 2017

aging and storage facilities, how does it impact your profit margins?

RM: The additional cost we incur for exports of ribbon fish include electricity, freight, labour costs, etc., and adds at least Rs.30 per kilogram to our expenses.

When it comes exporting to China, it has always been a high-volume, low-margin business for us. There are very few opportunities of making big profits. Sometimes, when there is a good catch and we are able to load the catch immediately into containers, we may make a decent profit. But, usually, it is a high-volume, low-margin business for us because of the limits of our negotiating power.

We pray that at least our high labour and electricity costs are factored in our incentives. It is difficult to be optimistic because our government isn’t supportive.

These are perishable goods and we need good storage facilities. Banks also need lend to fishermen. Without money, the fishermen cannot fish as they need operating expense for their trawlers.

TDB: What are the characteristics of

Rajesh Masani

OWNER, KARTIK COLD STORAGE

the Chinese market? And which is your most important market?

RM: Almost 99% of our export shipments are destined for China, with the rest going to South Korea. The demand peaks during the Chinese New Year, which falls in January-February – the Chinese consume most ribbon fish during these festivities. The peak season for exports of frozen ribbon fish is therefore from September till the end of December. That said, there is a year-round demand for the product.

per kg less than that they were offering last year. They are able to get away with this because they know that Indian exporters have no other market for ribbon fish and at the same time they have no proper facilities to store the catch for a long time. This has always been one of our biggest challenges as it gives them an upper hand in negotiations. We end up working on their terms and conditions.”

Issues like the Doklam standoff with China have also proven to be a challenge.

Suyani says that the standoff had restricted the visits of prospective Chinese importers. “Usually, importers from China come and stay for a couple of months and finalise the deals. However, this year only a small fraction of the usual number of Chinese importers visited,” he explains.

Indian exporters also find themselves in a challenging position due to increasing competition from neighbouring

countries like Pakistan and Bangladesh as these countries enjoy a price advantage over India. Masani explains, “The price of the fish is lower in Pakistan because of low operating cost. Bangladesh is also a big competition as exporters their receive huge government subsidies.

We also face competition from companies in Indonesia, Singapore, Iran, etc.”

A NEW WAVE AHEAD?

Despite concerns on competition and price, most exporters The Dollar Business spoke to believe that the demand for

frozen ribbon fish is expected to rise in the coming days and India will continue to be an important sourcing hub for importers in China. Further, an emerging market that exporters from India can tap on is South Korea. “South Korea imports the headless, tailless variety of ribbon fish. A bit of value addition can fetch Indian exporters a better price in this market,” says Jayakrishnan. Overall, the chances of higher profits are increasing as there is a rising demand for the processed ribbon fish from supermarkets in Europe and US where the Chinese and South Korean diaspora is expanding.

Having said that, China will always remain a major buyer of Indian ribbon fish. But then, options are emerging that will reduce their negotiating power. And that is good news for Indian exporters of ribbon fish as this high-volume product can then fetch a better price too!

“RIBBON FISH IS A 100% EXPORT-ORIENTED PRODUCT” TDB: What factors impact the export demand for frozen ribbon fish?

Chandresh Suyani (CS): One of the main factors that impact the export of ribbon fish from India is the catch and landing in nearby countries. Some time ago, Indonesia used to have a good catch and importers in China and Vietnam preferred to import from Indonesia as the price was less, and so was the distance.

The catch is now better in India.

TDB: What are your biggest markets for ribbon fish?

CS: Our biggest export markets, when it comes to ribbon fish, are Vietnam and China. The reason for an increased demand in these regions is that ribbon fish is popular amongst the lower income population in these countries.

While ribbon fish is also locally available in these countries, the supply is not enough to meet their growing domestic demand. This has forced China and Vietnam to resort to imports. The only time the demand for the Indian produce slackens is when the catch is good in In-

donesia. The price we can fetch also reduces during these times.

TDB: What are the testing and certification requirements that exporters of frozen ribbon fish have to follow? How difficult is it to follow these compliance?

CS: We have a requirement for testing and certification but the process is fairly straight forward. We just have to send the sample to the lab. MPEDA, our export promotion council, has a couple of recognised labs that conduct the tests.

Once they conduct the test, they give us a certificate after which we can go ahead.

It is not very difficult to comply with and is not a very expensive process.

TDB: What are the challenges faced by Indian exporters of frozen ribbon fish?

What needs to be done to increase India’s exports of this fish?

CS: There is no domestic demand. It is a 100% export-oriented product and apart from competition that arises, when there is good catch in nearby countries, we face no other challenges. There is a perennial

Chandresh Suyani

PROPRIETOR, CHANDRASHILA EXPORTS

demand for ribbon fish, so if there is a good catch and landing, there will be good exports. We did face some challenges during the Doklam standoff with China. This standoff resulted in less visits by prospective Chinese importers of ribbon fish to India. Usually, importers from China come and stay in India for a couple of months to finalise the business agreements. During the standoff at Doklam only a small fraction of the usual number of Chinese importers came to India. With the standoff over, it is business as usual.

DECEMBER 2017 II THE DOLLAR BUSINESS 43

POLICY MONITOR

SATISH GUPTA, CHAIRMAN, INDIAN SILK EXPORT PROMOTION COUNCIL

“DECLARE SILK A PRIORITY SECTOR” Although India is the world’s third-largest exporter of silk, exports from the sector have been on a continuous decline for quite some time now. In an exclusive interaction with The Dollar Business, Satish Gupta, Chairman, Indian Silk Export Promotion Council (ISEPC), discusses the reasons behind the fall and suggests initiatives to help boost exports of silk and silk products from the country.

INTERVIEW BY ANISHAA KUMAR

TDB: How has silk exports from India evolved over the last few years? Which product categories do you think have the highest potential for growth?

Satish Gupta (SG): Export of silk and silk products from India has witnessed various radical changes, especially over the past few years. With the rise in the cost of raw material, currently, international buyers are mostly looking for two categories of products – high-fashion exclusive garments and low-cost fashion accessories such as scarves, shawls, etc.

TDB: As per Silk Board statistics, export earnings from silk have fallen from $323.57 million in FY2016 to $248.59 million in FY2017. What are the reasons for this steep decline?

SG: There has been a continuous decline in exports of silk and silk products from India. There are many reasons for the decline, but the two biggest hurdles to exports, as of now, are the rising cost of raw material and a strong domestic demand.

Though India is the world’s second-largest producer of silk, it is also one of the major consumers of the product. Unfortunately, despite improved quality and increased production, we have not been able to stem the decline in exports.

TDB: Silk producers have raised concerns about the impact of mulberry silk import from China on their business.

What’s driving its import from China?

Why is Indian textile industry not procuring it from domestic market?

SG: Import of mulberry silk from Chi44 THE DOLLAR BUSINESS II DECEMBER 2017

na has been on the rise because our domestic consumption is much more than our production. Indian textile industry has a huge demand for low-cost silk and is naturally turning to source it from China. For the purpose of exports, textile manufacturers rely on domestic silk producers who fulfil their demand for high-quality silk required for making exclusive fashion-oriented garments.

TDB: What assistance does the Council provide to its members?

SG: The Indian Silk Export Promotion Council provides market feedback to exporters as well as gives suggestions to the government to boost exports from the sector. The Council also helps its members in showcasing their products to overseas buyers by organising exclusive trade fairs, both in India and abroad.

TDB: Is the sector happy with the incentives it receives? What more can the government do to boost export of silk and silk products from the country?

SG: It is unfortunate that the support to this sector is being gradually withdrawn and that too at a time when it is most needed. Silk was given the highest weightage in the erstwhile Focus Products Scheme with a view to boost its competitiveness in the international markets, but the reward under Merchandise Exports from India Scheme (MEIS) has been brought down to a mere 2%.

The MEIS rate for silk should be raised to 5%, which is equal to that for other sectors like handloom, carpets, hand-

icrafts etc. Silk is not recognised as a priority sector in FTP 2015-2020 and as such exporters of silk and silk products do not receive the benefits that other priority sectors can avail. If the government includes the sector in the priority list, it will give a boost to our efforts to increase exports of silk and silk products.

TDB: Are there GST-related concerns that continue to bother the silk sector?

SG: As far as the sector is concerned, many issues persist. The sector is hoping that the government will consider the removal of the compulsory requirement of Letter of Undertaking or bond for exports without paying taxes, provide GST exemption to merchant exporters, simplify the refund process and announce a uniform rate for job work.

TDB: You participated in Textiles India 2017, recently held in Gujarat. How do such events help exporters?

SG: The idea of organising Textiles India was brilliant and was intended to showcase the strength of our textile sector to overseas buyers. Participants gained valuable experience and knowledge from the show. Events like these help showcase India as a valuable and reliable sourcing hub for importers, connect global buyers with sellers and help establish the Indian brand in the international marketplace.

TDB: Which are India’s largest export destinations? How can we further expand our presence in these markets?

SG: For Indian silk exporters, US and

INVESTMENT IN R&D IS REQUIRED TO IMPROVE THE QUALITY & VARIETY OF SILK PRODUCTS

Europe are major markets. What makes these markets important for India is the lifestyle, economic background and high purchasing power of buyers in these markets. To further expand India’s presence in these markets and beyond, there is a need to build a strong brand image for Indian silk. This will help in increasing the unit value realisation and creating a USP for Indian silk and silk products and help us compete with other silk-producing nations.

TDB: When it comes to silk exports, India ranks third after China and Italy.

What has been restricting our growth in the international market?

SG: There is a need to make silk exports lucrative by subsidising marketing initiatives and thereafter developing a unique and strong brand image. India can certainly overtake China, both in terms of production as well as in terms of exports, provided that the government lends full

support to the industry on aspects such as marketing and brand building. The government can also help by investing in research and development to improve the quality and variety of our products.

TDB: The FY2018 Union Budget saw a 15% increase in allocation for the development of silk textiles. How has this helped increase silk exports?

SG: The problem with this allocation is that although the funds have been provided to the Textile Ministry, a major part of it will be spent by the Central Silk Board which is the custodian of the Indian silk industry. Funds will therefore be spent with the aim to help develop the domestic market whereas there is also a need to fund growth initiatives for exports to be able to sustain the momentum. Indian Silk Export Promotion Council (ISEPC), as the nodal agency for silk exports, must also get some funds to help boost exports from this sector.

TDB: What challenges does the Council face when it comes to promoting and marketing Indian silk and silk products in international markets?

SG: The only challenge with regards to the work of ISEPC, as mentioned earlier, is the paucity of funds. We receive funds only from the Department of Commerce, whereas a sizeable amount of funding should come from the Ministry of Textiles. While allocating funds to ISEPC the Department of Commerce takes only export performance into consideration. Here is where problem arises.

As we are at present not performing too well, we end up getting the lowest share.

The Ministry of Textiles in this scenario should come forward and take the call for funding various export-development projects of ISEPC. As mentioned earlier, we recommend that the government should declare silk sector as a priority sector for exports and provide the sector with the required support.

TDB: Are there any specific programmes that need to be expanded or introduced to assist the silk sector?

SG: Yes, there are many areas that we need to focus on to help the sector progress. When it comes to schemes, there is currently an urgent need for more efforts to be made for design development.

There is also a need for setting up of a resource centre on export markets.

TDB: How do you see silk exports growing over the next five years?

SG: The way we see it, there is a huge potential to increase our exports. Many of our competitors are gradually withdrawing from this sector due to high labour costs. China is at present the only competitor but it is also in the process of withdrawing from the fray. India now has the opportunity to expand its presence across the globe!

DECEMBER 2017 II THE DOLLAR BUSINESS 45

TDB FORUM I want to import dry lead battery scrap from South Sudan (Africa) into Mundra Port in India. Can I import them from this origin?

Or import of the product from Sudan is banned? Please advise.

(Alok, Director, Xcel Traders Ltd., +919997113XXX, carpetindia@gmail.com)

Ask a Question

I would like to import gold and silver for selling them in India.

What are the import duties that I will have to pay along with other charges like freight and insurance?

And what would be the cost per kg for silver and gold? (Shiva, KTS Silver Palace, Hyderabad, +91-40-65503XXX, ktssilverpalace@gmail.com)

Dear Shiva: We are happy to know that you want to get into imports of gold and silver. Imports of gold and silver can be done only through the agencies notified by the DGFT or the banks authorised by RBI as nominated agencies, according to Para 4.41 of Foreign Trade Policy (FTP) 2015-2020. As many as 36 banks have been authorised by RBI to import precious metals like gold and silver. In addition, the nominated agencies under FTP for importing precious metals are MMTC Ltd., The Handicraft and Handlooms Exports Corporation of India Ltd., PEC Ltd., STCL Ltd., MSTC Ltd. and Diamond India Ltd. Apart from these, banks and nominated agencies, Four Star Export Houses from gems and jewellery sector and Five Star Export Houses 46 THE DOLLAR BUSINESS II DECEMBER 2017

In the world of export-import, each shipment counts.

And you cannot afford to make any “uninformed investment”. So, if you have any doubt or a question, ask us. Our team of experts at The Dollar Business Intelligence Unit will be happy to answer your queries. Your question(s), if approved, will also be published on www. thedollarbusiness.com, and/ or in the forthcoming issue of The Dollar Business

Dear Alok: We assume you want to import waste and scrap of batteries falling under ITC HS Code: 8548.

Since the import of products under the said HS Code is restricted you need to apply for grant of an ‘Authorisation’ for import or export of the said items to RA, with a copy to DGFT headquarters in ANF 2M (as prescribed in Handbook of Procedures) along with documents prescribed therein. Original application along with Treasury Receipt (TR) / Demand Draft needs to be submitted to RA concerned and self-attested copy of same needs to be submitted to DGFT in duplicate along with proof of submission of application to concerned RA. Response by: Steven Philip Warner President (VMPL) & Editor-in-Chief, The Dollar Business

from any sector can be recognised as a nominated agency. The FOB/FOR criteria an exporter should achieve to be recognised as Four Star Export House and Five Star Export House are $500 million and $2,000 million per annum, respectively.

India imposes 10% customs duty on gold and silver in addition to 3% IGST. The freight and insurance depend on the country that you plan to source from. Further, the prices of gold and silver are market driven and keep changing.

Response by: Sabyasachi Ray Executive Director, Gem & Jewellery Export Promotion Council (GJEPC) Continued on page 49

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TDB FORUM Can I import copper scrap (No.1 copper and No.2 copper scrap) from India to US? Is there a list of prohibited items that cannot be imported from India to US? What are the tax implication and duties to be paid while importing from India to US? [George, +91-9725050XXX, gmammen31@aol.com]

Dear George: We are happy to learn that you want to import copper scrap from India. There is no restriction on exports of copper scrap (HSN Code:

I am a Hyderabad-based manufacturer of abayas and supplying the product across India. I have IEC, but I don’t know how to start an export business. Please advise. (Sahidul Islam, Owner, Sona Hijab Collection, Hyderabad, +91-9032557XXX, sonahijab.co@gmail.com)

Dear Sahidul: We are happy to hear of your decision to head into the world of foreign trade. You can approach your concerned association – Apparel Export Promotion Council (AEPC) – for assistance. Additionally, you can also explore The Dollar Business CONQUER Programme (You can read more on TDB CON-

740400) of any kind from India to any country. However, the country which is importing including the US may have local restrictions. You need to check on the local laws of importing country.

While there is no restriction on exports of copper scrap, India does have a list of restricted and prohibited items. The list is available on the website of the Directorate General of Foreign Trade (www.dgft.gov.in).

US too has its own list of prohibited

items that cannot be imported into US. Further, there is no export duty on export of copper scrap from India. For the import duties in US on copper scrap, you will have to check on the website of US Customs and Border Protection (www.cbp.gov).

QUER Programme on https://www. thedollarbusiness.com) that gives an in-the-making super successful exporter like you the access to TDB EXIMAPS (https://www.thedollarbusiness.com/exim-maps), the most powerful buyer discovery and competition analysis tool for Indian exporters, which ensures you touch newer highs in global trade. In case you have further queries, do write back to us.

Is there any export incentive available under Merchandise Exports from India Scheme (MEIS) for Indian Kabuli Chickpeas (HS Code: 07132000)? (Bharat Parekh,

Response by: Manish K. Pandey Editor, The Dollar Business

Response by: R. K. Sharma Secretary General, Federation of Indian Mineral Industries (FIMI)

Director, Tricos Exports Pvt. Ltd., +919820034XXX, tricosexports@gmail.com)

Dear Bharat: Indian Kabuli Chickpeas (HS Code: 07132000) does not qualify for MEIS benefit or any other such benefit under the Foreign Trade Policy FY2015-2020.

Response by: Dr. A. K. Sengupta Chief Consulting Editor, The Dollar Business

You can log on to www.thedollarbusiness.com/tdb-forum and submit your foreign trade-related queries, or write across to our experts at editorial@thedollarbusiness.com. Every question matters – to your business, to The Dollar Business.

DECEMBER 2017 II THE DOLLAR BUSINESS 49

BORDERLINE

EDITOR’S COLUMN

GENTLEMEN, MAKE WAY FOR THE LADIES

G

lobal Entrepreneurship Summit (GES) 2017 was recently held in Hyderabad, the capital of the southern Indian state of Telangana.

Co-hosted by the governments of the United States of America and India, the theme of the Summit was ‘Women First, Prosperity for All’ and as such the focus was on supporting women entrepreneurs and fostering economic growth globally. Perhaps, this was the reason that more than 50% of the delegates that attended the event were women. When the world is looking at India to give a fillip to global economy, there could have been possibly no better a time to organise such event in India and applaud a handful of extraordinary women entrepreneurs. Did I say, handful?

That women are important economic actors has long been settled. In India and across the globe, the liberalisation of trade has had a significant effect on the number of women in the workforce across manufacturing and services sectors. As participation of women in the workforce increased, so did their presence in decision-making roles.

In fact, over the years, women have increasingly grabbed headlines for their roles in business, politics and society.

And foreign trade is no exception – several women are making significant contributions to this vital sector. But then, the number remains abysmally small.

According to International Trade Centre [the joint agency of the World Trade Organisation (WTO) and the United Nations (UN)], while close to 40% of SMEs worldwide are women-owned businesses, only 15% of exporting firms have women at the helm of affairs. Further, as per the agency, women-led businesses are mostly confined to traditional industry sectors such as healthcare and social assistance, professional and educational services, administrative and support services, etc.

The reason for this gender disparity, be it foreign trade or business within borders, is simple – discrimination against women due to dominance of societies that are still mostly patriarchal. And there are enough evidences to prove it! For instance, according to a World Bank surwww.thedollarbusiness/blogs/manish 50 THE DOLLAR BUSINESS II DECEMBER 2017

Manish K. Pandey Editor, The Dollar Business

vey of 173 countries, 90% have at least one law impeding women’s economic opportunities. This in itself speaks a lot about the level of discrimination against women in societies, including the developed ones, across the globe. A fallout of this is that women-owned business, across the globe, very often face difficulties in accessing finance. If World Bank data is something to go by, women-owned SMEs have unmet financial needs of between $260 billion and $320 billion a year. That’s indeed a big obstacle is holding women back from success in business.

While the World Bank’s Doing Business 2017 report states that “globally, the elimination of all forms of discrimination against women would raise per capita productivity by 40%”, a research by New York-based management consulting firm McKinsey & Company highlights that “advancing women’s equality could add $28 trillion to global GDP by 2025”. Well, that’s equivalent to adding a new United States and China to global economy! What’s more? There are several studies that show that businesses that have women at the helm perform better, financially and otherwise. While a recent study conducted by Scandinavia’s biggest bank Nordea Bank shows that since 2009 public firms run by women went on to beat the benchmark MSCI World Index in all but one year [the bank studied almost 11,000 publicly traded companies across the globe], a paper published by the University of California last year revealed that “big California companies with at least some women at the top performed considerably better than ones with mostly male boards and executives.”

All evidences suggest that empowering women entrepreneurs and providing them equal economic opportunities not only have a positive impact on the economic growth of a nation, but also results in beneficial outcomes for society as a whole. Hence, policies are needed to better integrate women into the international business system.

While the governments across the globe (including the Indian government) seems moving in the right direction on this front, a lot still needs to be done. And the sooner the better! @MK_Pandey

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