APR-MAY 2022
INDIA
BUSINESS TRADE Indian enterprise. Global synergies.
DOMESTIC MARKET FOR E-COMMERCE IS GROWING Dr. K. Rangarajan Centre Head & Professor, IIFT
FOR INNOVATIVE STARTUPS, THE WORLD IS A PLAYGROUND Deep Bajaj Co-founder, Sirona
READY FOR THE
DIGITAL LEAP? A NUMBER OF COMPANIES ARE LEVERAGING CROSS BORDER E-COMMERCE TO EXPAND THEIR INTERNATIONAL BUSINESS. CAN THIS BE A TIMELY CATALYST FOR INDIA’S EXPORTS?
Trade Promotion Council of India
From the Editor’s desk When a new product category is introduced in the market, it has to face high buyer inertia initially. If the product & technology represent a radical change in conventional consumer patterns and sensibilities, a large section will perceive purchase to be risky, especially if the cost is high. Everett M Rogers wrote an iconic publication Diffusion of Innovation in 1962, where he presented a model to better understand this process. This model divides the market into Innovators (2.5%), Early Adopters (13.5%), Early Majority (34%), Late Majority (34%) and Laggards (15%); where percentages indicate the share of the addressable market. This follows a bell curve, where maximum adoption occurs in the Early Majority and Late Majority stages. These consumer categories differ in a number of ways, notably their financial background, social status, ability to take risk, identify new ideas, and new ways of doing things. Now, let us understand this process vis-à-vis the electric vehicle (EV) category, which is as radical as it gets from a consumer perspective. The Internal Combustion Engine technology that it seeks to replace was first introduced in the market in 1776! EVs promise benefits on several fronts – lower running costs, zero carbon emissions, government subsidies, convenience of charging at home, no noise pollution, etc. For India, they present a vital solution to the huge oil import bill. Consumers are well aware of the challenges of environmental pollution today as well as benefits of cleaner transportation. As a consumer, though, the key problem areas that would come to mind are high initial costs, perceived risk of buying an electric vehicle and the behavioural transformation it entails. Cost, convenience and easy availability of charging are not even factors with conventional petrol/diesel cars, thanks to decades of infrastructure development on their side. Current levels of EV charging infrastructure and resale value of old cars further impact buyer sentiment. However, in defiance of these challenges, an undercurrent of change seems to be sweeping the automotive landscape and the general consensus is that EVs are here to stay. According to data from Federation of Automobile Dealership Associations of India, the segment witnessed a humungous 3x surge in FY 2022, with sales of 429,217 EVs. Electric two-wheelers still account for the overwhelming majority, selling 231,338 units over the year. Many are linking this to the correspondingly rising prices of fossil fuels, drop in EV prices with FAME 2 subsidies, growing numbers of launches (around 250 startups in electric scooters alone), easy financing options and a buoyant youth market. Today’s generation also seems to be passionate and cognizant about environmental conservation and sustainability. A corresponding surge for four wheelers will take time, as players firm up their roadmap and ecosystem. Tata Motors, for instance, launched a concept car Avinya based on the EV-only Gen-3 platform, and is getting into manufacturing of EVs and semiconductors. Maruti is planning investments of Rs 10,445 crore in Gujarat by 2026 for manufacturing Battery Electric Vehicles (BEVs) and BEV batteries. But CRISIL’s analysis concludes that 2-wheelers and 3-wheelers have attained parity with ICE vehicles in the previous fiscal with runs of 6,000 km and 20,000 km respectively. By 2026, the parity may be strong enough for EVs to sustain without subsidies. Meanwhile, EV charging stations are expected to come up at a vigorous pace. ICRA states that India is likely to see around 48,000 additional electric vehicle chargers with investments of around Rs 14,000 crore by the next 3-4 years amidst healthy EV penetration in the country. As this critical barrier to adoption dissipates, India could start approaching the centre of the bell curve in EVs much sooner than earlier anticipated.
VIRAT BAHRI Editor, India Business & Trade
INDIA
BUSINESS TRADE Indian enterprise. Global opportunities
Vol 2 | Issue 1
Apr-May 2022
TPCI CHAIRMAN Prashant Garg ADDITIONAL DIRECTOR GENERAL Vijay K Gauba DEPUTY DIRECTOR GENERAL Sandip Das
EDITORIAL EDITOR Virat Bahri DEPUTY EDITOR Nikhaar Gogna
DESIGN SR. ART DIRECTOR Prakash Shetty DESIGNER Ajay Kumar
India Business & Trade is a bi-monthly magazine published by Trade Promotion Council of India, 9, Scindia House, Connaught Circus, New Delhi- 110001, India and printed at Multiplexus (India) C-440, DSIIDC, Narela Industrial Park, Narela, Delhi-110040 Material in this publication may not be reproduced in any form without the written permission of TPCI. Editorial/external opinions expressed in this magazine are not necessarily those of TPCI, and TPCI does not take responsibility for the advertising content, content obtained from third parties and views expressed by any independent author/contributor. For editorial queries/feedback, contact: editorial@tpci.in For advertising queries, contact: advertise@tpci.in
24
TABLE OF
CONTENTS 14
TPCI NEWS BUZZ 4 Latest trade & business news updates from across the world.
CATR DATA CRUNCH 6 India-US F&B trade Analysis of the most promising categories for exports to the US, India’s top F&B export destination.
PERSPECTIVES CRYPTO REGULATION Is it a critical intervention or the end game?
8 Russia-Ukraine war & Indian F&B exports This war boils down to the question of self-sufficiency and brings a mixed bag for Indian exporters. 10 Services sector post-COVID With rise of digitisation and automation, India must evolve its approach towards services to stay competitive.
16
12 India-Australia trade pact This article discusses some of the key sectors that can benefit from the culmination of the India-Australia deal. 14 The cryptic case of the ‘crypto elephant’ in the room IBT analyses the possible contours that cryptocurrency regulation should now take. 16 Reinventing India’s creative economy in a digital era Improving demographics, access to ICTs & lifestyle shifts, promise a bright future for creative economy.
FOCUS SECTOR INDIA-AUSTRALIA ECTA Furthering bilateral trade and economic ties.
2 | India Business & Trade • Apr-May, 2022
18 Charting the unchartered Inland waterways is an underutilized mode of freight transportation, but is being positioned as part of India’s larger infrastructure and logistics-focused policies.
36
STARTUP SPEAK 20 For innovative startups, the world is a playground Deep Bajaj, co-founder of Sirona, talks about the drivers of the success of his brand.
STATE PROFILE 22 Karnataka’s exports: Caffeinating India’s software hub! To be a holistic export destination, Karnataka needs to take steps to boost its merchandise exports.
RESILIENT & RELIANT
Building customer trust & assessing risk are crucial for a firm to survive.
COVER STORY 24 Ready for a digital leap? Indian companies are leveraging cross border e-commerce. Can this be the next big catalyst for India’s exports?
38
29 Preparing the ecosystem With confidence and certainty, Indian entrepreneurs can leverage cross border e-commerce effectively. 30 Trade rules in e-commerce to benefit Indian industry India should be at the forefront of global negotiations on e-commerce. 33 Is India missing out on a big trend? Stakeholders in India are still looking at cross-border e-commerce as a fringe area. This needs to change.
TRADE PARTNER
LATEST@TPCI
TPCI successfully organised the 5th edition of Indusfood.
34 Can India-Denmark GSP inspire rapid green transitions? India-Denmark Green Strategic Partnership aims to build on the existing linkages to tackle Climate Change.
CHOPPER VIEW
44
36 Keeping pandemic blues away Pushkar Mukewar explains how SMEs can tackle pandemic-induced challenges. Tide over challenges posed by the pandemic.
ACTIVITIES 38 What’s the latest @TPCI? Read about what kept the TPCI team engaged throughout the first three months of 2022.
VIEWPOINT: YOGA 44 Apply ‘Local for Global’ in yoga exports Yoga is connecting us with people of different cultures who are unaware of our language or culture.
LOCAL FOR GLOBAL
Standardization can boost yoga as a service export.
Apr-May, 2022 • India Business & Trade | 3
News Buzz
Business & Trade
War backtracks global economy
T
he World Bank has said in its current “Commodity Markets Outlook” that most commodity prices are expected to rule sharply higher till 2023-24, compared to the past five years, owing to supply chain disruptions caused by the Russia-Ukraine war. In context of agricultural commodities, high input costs due to
costlier fuel, chemicals and fertilizers, are also likely to play a role. The World Bank projects an 18% rise in agri commodity prices and a 16% increase in metal prices. It also expects Brent crude oil prices to average US$ 100 a barrel this year, rising 42% yoy. This is attributed to disruptions in Russia’s energy exports, with many countries seeking
alternative suppliers. “The long-term effects of the war on commodity markets will depend on how extensively commodity trade is diverted, how much demand is reduced, and whether new supplies emerge,” the bank’s current Commodity Markets Outlook said. The IMF projects a slowdown in global growth from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. It has estimated the US economy to grow at 3.7%, Europe at 2.8%, the UK at 3.7%, China at 4.4%, India at 8.2% and Russia at -8.5%. Consequently, the Federal Reserve raised its benchmark interest rate for the first time since 2018. It is forecasting six more rate hikes and inflation over 4%, a significant rise in its inflation outlook. RBI was also compelled to hike the policy repo rate by 40 basis points in a mid-term review on May 4.
India-Australia sign pact to double trade
U
nion Minister of Commerce & Industry, Piyush Goyal, and Australian Minister for Trade, Tourism and Investment, Dan Tehan, signed an Economic Cooperation and Trade Agreement (ECTA) on April 2. The pact seeks to almost double their bilateral trade in the next five years to US$ 45-50 billion from US$ 27 billion presently. Both India & Australia will benefit on tariff lines or the reduction of rates for different commodities. While India will gain from preferential market access by Australia on 100% of tariff lines or each band of tariff rate irrespective of the commodity, it will be offering preferential market access to Australia on over 70% of tariff lines. In the case of services, Australia has offered wideranging commitments in around 135 sub-sectors and Most Favoured Nation status in 120 sub-sectors. As per the pact, India will remove
tariffs on certain edible meats, while Australia will issue a new category of student visas as part of the new trade agreement between the two countries. They will also hold technical consultations on trade and production of wine, collaborate on projects, share best practices on policies and procedures, as well as exchange information and technical
4 | India Business & Trade • Apr-May, 2022
assistance. The two countries have committed to exchange information on matters pertaining to organic production, certification of organic products and related control systems. The 2 trade partners will also work together to facilitate greater trade in human prescription medicines, including generic prescription and biosimilar medicines, and medical devices.
NEWS BUZZ
India-UAE trade deal comes into force on May 1
T
he path-breaking Comprehensive Economic Partnership Agreement between India and the UAE, India’s third-largest trading partner, came into effect on May 1. The agreement was signed by Commerce and Industry Minister Piyush Goyal and UAE Minister of Economy Abdulla bin Touq Al Marri. It will provide significant benefits to Indian and UAE businesses,
NUMBER GAME
including enhanced market access and reduced tariffs. The deal is expected to boost trade between India and the UAE from US$ 60 billion to US$ 100 billion in the next five years. Under the pact, the UAE has offered immediate market access at zero duty from Day 1 of the agreement to products accounting for around 90% of India’s exports to the UAE in value terms. It has offered market access to India in around 111 sub-sectors from the 11 broad service sectors. The pact encompasses goods, services, rules of origin, customs procedures, government procurement, IP rights and e-commerce. The two trading partners will also liberalise norms to enhance trade in services and give a boost to investments.
In FY22, India’s exports hit record high
7.85 million
tonnes India’s wheat exports hit record in 2021-22.
$64 billion
Indian semiconductor market potential by 2026. IN QUOTES
A
ccording to data released by the Ministry of Commerce & Industry recently, India’s merchandise exports rose to a record US$ 418 billion in FY22. In FY 2020-21, merchandise exports were worth US$ 292 billion. The country’s outbound shipments rose from US$ 34 billion in March 2021 to US$ 40 billion in March 2022. This was buoyed by petroleum products, engineering goods, gems and jewellery and chemicals (US$ 111 billion against US$ 76 billion). The other commodities that contributed to the increase were petroleum, cotton yarn/fabrics/madeups, handloom, gems and jewellery, engineering goods, electronic engineering products, leather goods, chemicals, plastic and marine products. The
Scott Morrison Australian PM on AustraliaIndia Trade Deal
US, UAE, China, Bangladesh and the Netherlands were the top destinations for India’s exports. “Notwithstanding the challenges posed by successive waves of Covid, India’s merchandise trade performance has shown impressive growth and exports remained above US$ 30 billion for 12 consecutive months during April 2021 to March 2022,” the Commerce and Industry Ministry said.
These are never all or nothing deals as far as we’re concerned, we see all of these as the next step.
Apr-May, 2022 • India Business & Trade | 5
India-US F&B trade Identifying future promise The US is India’s top F&B export destination with exports increasing at a CAGR of 4% between 2017 and 2021. In this analysis, IBT deep dives into the export numbers to identify the most promising F&B categories for exports by India to the US.
1
YoY growth rates (%) of the top 5 commodities in 2021 India’s F&B exports to the US grew by 25% YoY in 2021. Beverage, Spirit & Vinegar, Dairy Produce & Fish saw the fastest growth, while Meat, Cereals, Sugar & Sugar Confectionery, Preparations of Cereals, Preparations of Vegetables, & Products of Milling Industry have dropped.
250 211.20
200 150
38.46
28.27
Animal or Vegetable Fats and Oils...
43.55
Fish and Crustaceans...
Beverages, Spirits, and Vinegar
0
Dairy Produce; Birds’ Eggs...
55.34
50
Edible Fruit and Nuts...
100
Source: DGCIS, MoC; figures show YoY growth rate (%)
2
Growth in top 5 commodities (2017-21) In terms of CAGR (2017-21), Beverages, Vegetable Plaiting Materials, Sugar & Sugar Confectionery, and Edible Vegetables are the top F&B exports. Exports of Edible Fruit and Nuts, Lac, Gums, Resins, Cocoa and Cocoa Preparations, and Oil Seeds have shown a decline in values.
35 30
28.82
25 19.29
20
16.02
15
15.60 11.43
10 5
6 | India Business & Trade • Apr-May, 2022
Preparations of Meat, or Fish...
Edible Vegetables and Certain Roots and Tubers
Source: DGCIS, MoC & UN Comtrade; CAGR in %
Sugars and Sugar Confectionery
Vegetable Plaiting Materials...
Beverages, Spirits and Vinegar
0
For exports of Lac, Gums, Resins (HSN 13), Cereals (HSN 10), Coffee (HSN 09), Fish (HSN 03), Products of Milling Industry (HSN 11), and Oil Seeds (HSN 12), India is not only “revealed” to have a competitive strength, but also exports ‘intensely’ with the US relative to the global pattern. Hence, these are critical categories, which India can focus on to increase its F&B exports to the US.
3
India’s top 10 exported F&B commodities in 2021
Top-performing products with YoY growth rates higher than the overall F&B sector were Beverages, Spirits, & Vinegar, Dairy, Fish, Edible Fruits & Nuts, and Animal or Vegetable Fats.
3000 2500 2000 1500
Animal or Vegetable Fats and Oils...
Preparations of Vegetables, Fruit... 20
122
Dairy Produce; Birds’ Eggs...
146
4
161
15
Oil Seeds... 12
191
Miscellaneous Edible Preparations
Lac, Gums, Resins... 13
201
Cereals
Coffee, Tea, Mate and Spices
231
9
363
Preparations of Meat, or Fish...
401
16
3 Fish and Crustaceans...
593
10
1000 500 0
21
2663
Source: DGCIS, MoC; figures in US$ million
4
5
Trends of RCA Index values for advantageous commodities It was observed that India has a revealed comparative advantage in 11 out of the 19 F&B products in 2020.
0.00
1.00
2.00
3.00
4.00
5.00
Lac; gums, resins…
5.78
6.79
8.00 7.82
3.75 3.89 4.43
Coffee, tea, maté and spices 1.66
Sugars and sugar caonfectionery
2.86
Vegetable plaiting materials...
2.10
Edible vegetables and certain roots and tubers
1.02 0.87 1.01
Lac; gums, resins…
2019
2020
Source: UN Comtrade; Based on CATR calculations of RCA index for India’s F&B exports
15.19
17.80
6.51 6.77 6.75 4.52 4.95
Cereals
6.24
5.68 4.97 5.63 3.23 3.71
Preparations of meat, of fish…
Preparations of vegetables, fruit, nuts or other parts of plants
2018
12.16
Fish and crustaceans…
Products of the milling industry; malt; starches; inulin; wheat gluten Dairy produce; birds’ eggs; natural honey; edible products of animal origin, not elsewhere... Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal... Miscellaneous edible preparations
0.93 0.90 1.20 0.96 1.02 1.05
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00
5.12
2.36 2.08 2.74
Coffee, tea, maté and spices
2.75 2.69
1.74 1.48 1.47
Oil seeds…
9.00
A higher degree of export intensification between India and the US has been seen for 11 F&B products.
Oil seeds… 4.07
3.06 2.96 2.93
Fish and crustaceans…
Products of the milling industry
7.00
4.12 3.70 4.62
Cereals
Meat and edible meat offal
6.00
Trade Intensity Index values for commodities that are traded intensely
1.80 1.55 2.26 2.05 1.90 1.85 0.98 1.08 1.17 1.14 1.08 1.07 0.71 0.74 1.06
2018
2019
2020
Source: UN Comtrade; Based on CATR calculations of Trade (Export) Intensity Index for Indian F&B products
Apr-May, 2022 • India Business & Trade | 7
PERSPECTIVES
Russia-Ukraine War & Indian F&B exports The ramifications of the Russia-Ukraine war can be felt as the value of Rupee falls, even as India sees rise in sales of segments like wheat, corn and spices. If the confrontation continues, exporters will face a far more difficult situation in the months ahead. BY NIKHAAR GOGNA
O
n February 24, 2022, Russia launched a fullscale military invasion into Ukraine citing the need for “demilitarisation and deNazification” of Ukraine. Many countries responded by imposing sanctions (penalties) on Russia. The US decided to ban all Russian
oil and gas imports, and Western countries froze the assets of Russia’s central bank. Russia, on its part, retaliated by banning exports of 200+ products until the end of 2022, among other measures. Consequently, food and energy prices have surged in recent days and supply chains are
severely broken. The IMF notes, “The sanctions on Russia will also have a substantial impact on the globe & with significant spillovers to other countries.” India is also impacted by this turmoil. In this article, we look at the impact of the Russia-Ukraine war on India’s F&B exports.
INDIA’S TOP 10 F&B EXPORTS TO RUSSIA IN 2020-21 140
Jan-Dec 2020 (R)
Jan-Dec 2021 (F)
% Growth
120
80 70 60
100
50 40
80
30
60
20
40
10 0
20 0
-10
Fish and crustaceans , molluscs….
Coffee, tea, mate...
Misc edible prep…
Cereals
Lac; Gums, Resins...
Oil seeds and olea. fruits; mics...
Source: Department of Commerce, Government of India. (all values are in US$ mn)
8 | India Business & Trade • Apr-May, 2022
Edible fruit and nuts...
Meat and edible Edible vegetables meat... and certain roots...
Preparations of vegetables, fruit...
-20
RUSSIA-UKRAINE WAR
INDIA’S TOP 10 F&B EXPORTS TO UKRAINE IN 2020-21 25
120 Jan-Dec 2020 (R)
Jan-Dec 2021 (F)
% Growth
100
20
80 60
15
40 20
10
00 -20
5
-40 -60
0
Misc edible prep...
Oil seeds and olea...
Cereals
Coffee, tea, mate...
Fish and crustaceans, molluscs…
Edible vegetables...
Source: Department of Commerce, Government of India. (all values are in US$ mn)
EXPORTERS’ DILEMMA According to data from the Department of Commerce, top F&B commodities that India exported to Russia & Ukraine in 2020-21 were fish & crustaceans; coffee, tea & spices; cereals; lac, gums and resins; oilseeds; edible fruits, vegetables and nuts and meat. Some of the most affected sectors in the Indian F&B industry are tea, coffee & spices, meat, seafood, oilseeds, fruits and vegetables, and cereals. In the context of Indian tea, Russia accounts for about 18% of India’s tea exports. The drastic fall in the value of the Russian Ruble by almost 15% vis-à-vis the US$ as well as logistical issues in exporting tea consignments are adding to the woes of Indian tea exporters. Sujit Patra, Secretary, Indian Tea Association, opines, “The industry was already battered by payment issues while shipping to Iran, another key market. It is worried that less exports could lead to an oversupply of tea in the domestic markets.” Similarly, the war has put coffee exports in jeopardy as CIS countries (Russia accounts for 75% of this while Ukraine has more than 20% share) have been traditionally the major soluble/instant coffee importers from India. A concern that Indian exporters are grappling with is related to payments after the West imposed sanctions on Russia, including removing some Russian banks from the SWIFT messaging system. Reportedly, Indian
Prepations of vegetables, fruit, nuts...
exporters have payments between US$ 400-500 million stuck in Russia, leaving them in a fix. Further, according to the Coffee Board, the conflict will push up prices of fuel, metal/aluminium (instant coffee is mostly exported in metal cans and containers) and packaging materials in addition to the ballooning of shipping costs. Consequently, overhead costs will rise for exporters. Interestingly, though, this is an excellent time for Indian cereal & spice exporters. Skyrocketing global prices have made Indian wheat, corn & spice exports very competitive, as India steps in to fill the void left by the Russia-Ukraine war. Another factor that has worked out in favour of Indian corn exporters is the fact that over the past two
RUSSIA IS THE LARGEST DESTINATION FOR INDIAN TEA AND CONTINUED TENSIONS COULD LEAD TO OVERSUPPLY.
Edible fruit and nuts; peel...
Lac; gums, resins...
Animal or vegetable fats and oils...
years, corn exports from Myanmar have dwindled after the military coup in the country. Ukraine has been a big exporter of non-GMO corn. Current tensions in the Black Sea region and high freight rates have left a supply gap that India is in a good position to fill. GEARING UP FOR THE UNEXPECTED The ramifications of the RussiaUkraine war can be felt as the value of Rupee falls. One one hand, India is witnessing a growth in exports of wheat, corn and spices as a result of the war situation. For instance, India is looking at exporting 10 million tonnes of wheat in FY 23 to bridge the gaps as a result of the conflict. But on the other hand, if the confrontation continues, India will face a far more difficult situation in the months ahead. Two major challenges that the industry is facing are availability of ships/containers and payments issues due to sanctions. Amidst these tense times, India has been looking to chalk a robust payment system with Russia, like it did for the sanctions hit Iran, or route payments through other countries. It also needs to look inward and build a self-sufficient ecosystem. During the short term, India may need to look at alternate markets for some of the F&B products like coffee and tea. Meanwhile, India is also faced with an inflation problem to address in the short term, especially in sunflower oil.
Apr-May, 2022 • India Business & Trade | 9
PERSPECTIVES
Services sector post-COVID: Shifting gears for the next ‘wave’! With the rise of digitisation and automation, accelerated by the COVID-19 pandemic, India will have to evolve its strategic approach towards services in order to stay competitive in the sector in the post-pandemic future. BY VIRAT BAHRI
T
he services sector is the highest contributor to India’s GDP at over 50%. Unfortunately, it was also among the worst affected as a result of the pandemic-related transformations. Within services, however, noncontact segments like IT, financial services, professional and business services were relatively unaffected, while tourism, retail, trade, hotels, entertainment and recreation were deeply impacted. The business community witnessed a sudden surge in use of technology tools that enabled remote working. There is a general consensus that this paradigm will outlive the pandemic. A McKinsey Global Survey of Executives concludes that as a result of COVID-19, companies have accelerated the digitisation of their customer and supply chain interactions by 3-4 years, and Asia Pacific is at the forefront of this change. Companies that have proven more resilient to the crisis have identified strengths in a range of technology capabilities – filling gaps for technology talent during the crisis, use of more advanced technologies, and speed in experimenting and innovating. To understand the importance of improving India’s digital resonance for its services sector, we look at how some of the major sectors have been transformed by the pandemic. INFORMATION TECHNOLOGY The sector stands to benefit from the growing prominence of remote interactions and the demand for knowledge intensive and high technology services. Indian companies witnessed revenue
growth of over 21% in H1, 2021-22, owing to demand for digital support, cloud services and infrastructure modernisation to address new pandemic challenges. IT companies need to prepare to tap on sunrise segments including remote collaboration tools, e-commerce and Industry 4.0 technologies. IT spending trends show the possibility of increased investments in cloud infrastructure services and specialised software. Emerging tech areas like IoT software, big data/analytics, AR/VR, etc are expected to grow the fastest by 104% between 2018 and 2024. HEALTHCARE The healthcare ecosystem was brought to desperate fire-fighting mode during the pandemic. Shortage of essential equipment like oxygen, medicines, PPE kits and hospital beds took a toll. This tragic period has also made us realise both the importance of
10 | India Business & Trade • Apr-May, 2022
technology, and its relatively weak penetration in healthcare. Telehealth systems had to evolve in quick time to respond. In July 2021, McKinsey concluded that telehealth services had risen 38X from the prepandemic baseline. Buoyed by this trend, venture capitalist (VC) firms invested 3X more money in digital health startups in 2020 as compared to 2017. India’s healthtech industry, valued at US$ 1.9 billion in 2020, is expected to reach US$ 5 billion by 2023, growing at a CAGR of 39%. Telehealth tech, continuous and remote diagnostics, remote mental healthcare, virtual fitness, and aging-in-place technologies are expected to continue to grow post the pandemic. EDUCATION As per World Economic Forum, even before COVID-19, there was already high growth and adoption in education technology, with global
SERVICES
EdTech investments reaching US$ 18.66 billion in 2019 and the overall market for online education projected to reach US$ 350 billion by 2025. COVID -19 has acted as a catalyst to accelerate the pace of adoption of online teaching tools. Whether it is virtual tutoring, video conferencing tools, or online learning software, there has been a significant surge in usage in India. Indian edtech startups raised US$ 4.7 billion in 2021 with three unicorns, making it the third most funded sector during the year. TOURISM Consulting firm Oliver Wyman forecasts a sharp rebound in global tourism, expecting it to exceed pre-pandemic levels by 2023, basing their forecasts on herd immunity/vaccination trends and travel sentiments apart from other statistics. It is an apt time to attract global travellers and offer them bespoke experiences to chart a new growth trajectory. It is felt that the rise of platformbased business models and digital transformation will be key to recovery. This digitisation could lead to some job losses in the short term, necessitating reskilling. Companies that effectively leverage data to understand and adapt to consumer sentiments and market trends will be more likely to stay ahead. MEDIA & ENTERTAINMENT Though film production and exhibition have been deeply impacted, digital platforms and OTTs had more than their moment in the sun. While there will be an obvious rebound to some extent post pandemic, the World Economic Forum believes that some of this changed behaviour could become deeply embedded. According to Research Dive, the global OTT marketplace is expected to post a CAGR of 19% by 2026 (16% prepandemic) to reach US$ 438.5 billion. FINANCIAL SERVICES Financial services firms have a
major role in reviving business and economy post-pandemic as well as ensuring large scale financial inclusion with seamless digital access. Fintech firms are leading the way in this regard, playing a critical role in taking financial services like payments, neobanks, lending, insurance & stockbroking to the last mile. From being considered an extension of the BFSI ecosystem, fintech firms are moving centrestage at a brisk pace. E-COMMERCE When everything else stalled during the pandemic-induced lockdowns, e-commerce witnessed a 10-year growth boost in just three months starting from March 2020, according to Shopify. IBM’s US Retail Index suggests that the pandemic hastened the transition to e-commerce by 5 years. When
NATIONS MUST ENSURE WIDESPREAD DIGITAL ACCESS, & BUILD A FACILITATIVE ENVIRONMENT FOR DIGITAL INNOVATION. it comes to India, Worldplay FIS (financial technology product and services provider) predicts that e-commerce will grow by 84% to US$ 111 billion by 2024 due to gains in demand generated by the COVID pandemic impact. It is no longer the purview of traditional websites – consumers are equally tuned to making their purchases on social media sites, digital payment applications and also their Whatsapp. The e-grocery segment has been a major beneficiary, as users get comfortable with making daily purchases through mobiles. GIG ECONOMY As work from home gained momentum in 2020, it boosted the already emerging gig economy and hybrid work force. Backed by a robust digital infrastructure and
well-drafted laws, the gig economy is sure to create enormous employment in the foreseeable future. According to Oxford Internet Institute’s Online Labour Index, India has the highest number of gig workers, with 24% of global online labour. Boston Consultancy Group (BCG) projects that the gig economy has the potential to contribute 1.25% share in GDP in the long term, adding 90 million jobs in the non-farming parts of the economy. However, leveraging this requires creating a conducive growth environment and aggressive deployment of appropriate skilling programmes, particularly in identified potential sectors. Sectors like FMCG, Pharma, technology/BPO, services, manufacturing and banking, financial services and insurance (BFSI) are expected to substantially enhance their gig workforce. UPSKILLING IS KEY A report by OECD titled Digital Transformation in the Age of COVID-19: Building Resilience and Bridging Divides, Digital Economy Outlook 2020 highlights that nations need to ensure widespread and trustworthy digital access and effective usage, & build a facilitative environment for digital innovation, which will correlate strongly with growth and resilience of their startup ecosystems. Going forward, preparing the workforce will be a key objective, as will be focus on online security and preventing the rise of digital monopolies. For companies, digitisation has increased the emphasis on speed, efficiency and productivity, and a shift towards outcome-based business models. Barriers to entry are much lower today, so companies and individuals have to work harder to stay competitive. BPM operations, for instance, are now more about revenue generation as opposed to cost control. Traditional functions like customer service are increasingly being taken over by bots, and businesses will compete on their ability to deliver insights, knowledge and consulting expertise. Upskilling is no longer an option, but it’s an unavoidable necessity.
Apr-May, 2022 • India Business & Trade | 11
PERSPECTIVES
India-Australia Trade Pact: An Opportunity to Unlock Potential After signing the historic Economic Cooperation and Trade Agreement (ECTA), India and Australia are looking to further bilateral trade and economic ties by converting this into a CECA towards the end of 2022. A look at the key sectors that could benefit. BY DR. JAVERIA MARYAM & ANGANA PARASHAR SARMA
I
ndia and Australia signed a historic Economic Cooperation and Trade Agreement in early April, 2022 and are looking forward to furthering bilateral trade and economic ties by signing a Comprehensive Economic Cooperation Agreement (CECA) towards the end of this year. Notably, this is the first trade agreement of India with a developed country after over a decade. Through the ECTA, India stands to benefit from preferential market access provided by Australia on 100% of its tariff lines. This encompasses a number of labourintensive sectors like gems and jewellery, textiles, leather, footwear, furniture, food, and agricultural products, engineering products, medical devices, and automobiles. India will also give preferential access to Australia on over 70% of its tariff lines, including key products of interest such as coal, mineral ores and wines, as reported by the release of the Department of Commerce, Government of India.
In the realm of services, Australia has offered commitments in around 135 sub sectors and Most Favoured Nation (MFN) in 120 sub sectors. India’s interests are covered in sectors like IT, ITeS, business services, health, education, and audio visual. Provisions include quota for chefs and yoga teachers; post-study work visa of 2-4 years for Indian students on reciprocal basis; mutual recognition of professional services and other licensed/ regulated occupations; and work & holiday visa arrangement for young professionals. The Australian Government has highlighted to invest over US$ 280 million in India. Also, to broaden the Australia-India Strategic Research Fund for Australia-India Innovation and Technology Challenge, Australia has committed US$ 17.2 million. The Australian Government has affirmed its commitment to the India Economic Strategy and its ambitious goal is to make India one of its top 3 export markets by 2035.
12 | India Business & Trade • Apr-May, 2022
STATUS OF BILATERAL TRADE With India rising as one of the fastest-growing consumer markets, Australia is expected to be an ideal strategic partner. It is the 13th largest economy in the world in terms of GDP and has a stable economic environment as compared to other developed economies. As per data from the Ministry of Commerce and Industry, India’s exports to Australia were recorded at US$ 4.04 billion in fiscal 2020-21, increasing to US$ 6.33 billion during April-Jan 2022. However, India has a trade deficit with Australia with imports worth US$ 13.5 billion during April-Jan 2022. This trade deal is expected to significantly reduce the trade gap. Growth in trade between India and Australia has been on account of their growing complementarities. India’s key imports from Australia include minerals, gems and jewellery items and inorganic chemicals; while its key exports include minerals, gems and jewellery, pharmaceutical products, railway equipment and machinery.
INDIA-AUSTRALIA TRADE
For development of sectors such as electric vehicles, demand for minerals would rise in India and Australia can be a key import market. For India, apart from leveraging its strengths in sectors such as pharmaceuticals, there is a great opportunity to enhance services exports. Some key sectors to look out for collaborations are: Electric Vehicles: India is gradually shifting its focus towards electric vehicles and Australia has one of the biggest reserves of minerals such as lithium, which is a critical component of electric car batteries. Given the need to meet humungous supplies for the e-mobility programme, Indian companies can also collaborate with Australian companies which are engaged in these critical minerals. Pharmaceuticals: India is one of the largest exporters of low-cost and high-quality pharmaceutical products and biosimilars in the world. However, India’s share of global exports to Australia only accounts for 1.6%. Australia’s market demand for biosimilars and generic drugs has been growing and India’s competence in manufacturing low-cost generic drugs would be favourable for the latter. Both sides have also agreed to have a separate Annex on pharmaceutical products, to enable fast track approval for patented, generic and biosimilar medicines. As a part of the trade deal, negotiating a Mutual Recognition Agreement (MRA) for pharmaceutical products with Australia can be beneficial, similar to the one concluded with the UAE recently. Gems and Jewellery: This is the largest sector contributing towards India’s goods exports. While Australia imports a huge share of gems and jewellery from India, it is mainly concentrated in a few segments. Through this trade pact, Indian exporters can diversify their exports to meet the growing demand in segments such as diamonds, emeralds, ruby, sapphires, etc.
BILATERAL TRADE BETWEEN INDIA AND AUSTRALIA 16 14 12 10 8 6 4 2 0
2014
2015
2016
2017 Exports
2018
2019
2020
Imports
Source: ITC Trade Map; Figures in US$ billion
AUSTRALIA’S LITHIUM RESERVES CAN HELP INDIA GREATLY IN ITS VISION TO BOOST PENETRATION OF ELECTRIC VEHICLES Education: Education services are amongst the highest exported services from Australia to India, with the number of Indian students increasing year on year. The education sector in India is also expanding with the rise in online education. Through this trade deal, both Australia and India can look at mutual recognition of educational qualifications to increase the number of students seeking education in either country. Agribusiness: The high productivity and quality produce of Australian agriculture is renowned globally. India has an opportunity to expand knowledge transfer in agri-tech. Collaboration can be explored in a plethora of distinct areas like innovative storage techniques, Mega Food Parks, and the availability of aquaculture technology designs at low costs in India. Ready-to-Eat Foods: In Australia, the Indian diaspora has been growing over the years and the popularity of Indian cuisine is on the rise. This provides ample opportunities for Indian companies in the ready-to-eat food segment to enhance their exports. Large Indian processed food manufacturers/ exporters already have a strong
presence in retail stores in Australia. Other players can also explore Australia as a potential market for exports of ready-to-eat products of Indian origin. Wine: Australia is keen to get market access in areas such as wine, which will not compete with domestic products in India. As a part of the trade pact, India is expected to reduce its duties on imported wine, where Australia accounts for almost 40% of the total wine imported by India. CONCLUSION Rising complementarities in recent years between India and Australia, who are also Quad partners, have raised prospects of greater bilateral trade and economic ties. While both sides are yet to finalize the products, the early-harvest deal is expected to be concluded at the end of this month. These are some of the key areas for collaboration; opportunities exist across a range of other sectors such as agriculture, textiles, IT, etc. By inking this trade pact, India and Australia are expected to significantly reduce their import dependence on China. The trade deal is expected to increase bilateral trade from US$ 27.5 billion currently to US$ 45-50 billion in 5 years. Besides, the supply chain resillience initiative among Quad nations can provide a definite advantage for the India-Australia trade agreement. However, the outcome of the interim trade deal and later the CECA would depend on the global trade scenario as impacted by the ongoing Russia-Ukraine trade war.
Apr-May, 2022 • India Business & Trade | 13
PERSPECTIVES
The cryptic case of the ‘crypto elephant’ in the room While the debate on whether crypto currency is a boon or a bane is simmering in the country, IBT analyses the possible contours that cryptocurrency regulation should now take. BY NIKHAAR GOGNA
R
ecently, El Salavador became the first country in the world to use bitcoin as legal tender. India, too, is not far behind in this cryptocurrency race. A report by Chainanalysis suggests that India has the second-highest cryptocurrency users in world. Furher, it is interesting to note that while India has decided to not recognise bitcoin as a legal tender, the 2022-23 Union Budget has proposed to impose a 30% tax on gains made on such trades, besides subjecting crypto transactions beyond a threshold to 1% TDS (Tax Deducted at Source). Finance Secretary TV Somanathan emphasised later that 30% is also the taxation rate for all speculative activities like horse racing and that crypto will never be legal tender. At the same time, the government has maintained that only the ‘Digital Rupee’ of the Reserve Bank of India will be a legal
tender in India and it is working on the ‘Cryptocurrency and Regulation of Official Digital Currency Bill’. As the cryptocurrency market grows in India, it is pertinent to understand this concept, what the crypto bill encompasses and how it can be regulated. WHY REGULATE CRYPTO? Virtual currencies have no single authority regulating their issuance. They also have the advantage of eliminating third party merchants such as Visa or Master Card, thereby, reducing the transaction cost. Cryptocurrency transactions
are validated by other users and then stockpiled in a secure manner. An Inter-Ministerial Committee constituted to study the issues related to virtual currencies (2019) recommended banning of cryptocurrencies in India and imposing fines & penalties for carrying out any activities connected with cryptocurrencies in the country. This was on account of the risks associated with them and volatility in their prices. Some of the technical risks identified by the committee were scalability and transaction speed; interoperability and integration; cyber security; data
CRYPTOCURRENCY REGULATION: A BUMPY RIDE
2013
RBI warns the public against use of cryptocurrency
14 | India Business & Trade • Apr-May, 2022
FEB 2017
RBI circular re-emphasised its concerns
END-2017
RBI & finance ministry release another warning, 2 PILs in Supreme Court
CRYPTOCURRENCY
privacy; key management; volatility; governance & lack of maturity. It also highlighted a few legal and regulatory challenges such as lack of vetting standards, clarity about ownership and jurisdictions; customer due diligence requirements; and concerns regarding how such transaction disputes or erroneous transactions can be resolved. Manhar Garegrat, Executive Director - Policy and Special Projects, CoinDCX adds, “There are challenges which are unique to India; the capital control piece is very unique to India, and there is a lot of potential for scams. The thought leaders in this space and the regulators in the country need to work together to come up with a unique regulatory framework.” CRYPTO BILL: GOOD OR BAD? The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ refers to cryptocurrency as “any information, code, or token which has a digital representation of value and has utility in a business activity, or acts as a store of value, or a unit of account.” Some of the concerns associated with the bill are: •
Cryptocurrency may encompass various forms of digital tokens, which have not been generated through cryptography.
MAR 2018
CBDT submitted a draft scheme to ban cryptocurrencies
•
The bill ignores the fact that there are also many advantages associated with cryptocurrency.
•
The penalties prescribed for certain offences under the Bill seem to be disproportionately higher compared to other similar economic offences in India.
However, there are others who believe that cryptocurrency regulation is vital for the country. For example, the US-based Blockchain Council is optimistic that the new policies of the GoI will bring in the future, fix the irregularities and issues in this otherwise revolutionary
“REGULATION OF CRYPTO ASSETS IS OF PARAMOUNT IMPORTANCE AS INDIAN CITIZENS NEED TO HAVE ACCESS TO CRYPTO ASSETS IN A SAFE AND SECURE MANNER. CRYPTO IS BETTER USED AS AN ASSET INSTEAD OF CURRENCY.” sharan nair, chief business officer, coinswitch
APR 2018
RBI bars various financial entities from dealing in virtual currencies
MAR 2020
Supreme Court lifts the curb
eco-system having many paradigmchanging innovations. The industry has a few suggestions that the crypto bill can incorporate. The Blockchain Council proposes that the bill should allow room for innovation, while ensuring that it is able to build consumer and investor confidence in cryptocurrencies, and more importantly, the underlying technology of blockchain. They believe, “Provisions that can help avoid price manipulation, monopolization & bring more clarity on use cases surrounding the Blockchain technology will add value”. Nair suggests that the crypto bill must focus on classifying crypto as an asset, there should be a proper framework for the movement of funds, the industry needs rigorous KYC (know your customer) procedures & a proper reporting structure must be put in place. A regulatory body that overlooks both the cryptocurrency and the blockchain players looks to be a primary starting point. But experts also point out that it would take time for a new regulator to fully grasp the intricacies of this sector. Having said that, India needs to make a start as soon as possible, and the regulatory mechanisms can evolve subsequently in consultation with stakeholders; promoting responsible innovation and managing risk. Letting the industry continue without regulation for long could be extremely debilitating.
FEB 2022
Union budget proposes 30% tax on crypto games; announces digital rupee
Apr-May, 2022 • India Business & Trade | 15
PERSPECTIVES
Reinventing India’s creative economy in a digital era COVID-19 has led to a sharp increase in the consumption of creative products and services. Improving demographics, better access to ICTs and dynamic shifts to new lifestyles, promise a progressive future for India’s creative economy. BY SRIJATA DEB
C
reative economy has become a significant transformative force that relies on creative resources with economic, cultural and social aspects that have the potential to facilitate economic growth. The idea of creative goods and services in developing economies draws attention to the significant creative assets and rich cultural resources that exist in these countries. These have manifested in the production of advertising, architecture, arts and crafts, design, fashion, film, video, photography, music, performing arts, publishing, research & development, software, computer games, electronic publishing, and
TV/radio, among others. India has fared extensively well in the trade of these goods. The country stood as the 8th largest exporter of creative goods globally and third largest among developing countries. Indian creative exports grew from US$ 4.4 billion in 2003 to US$ 20.7 billion in 2019. Major exporting destinations for India with respect to such creative goods and services include United Arab Emirates, United States, China, Hong Kong, Singapore and major countries of Europe. Studies have indicated a positive trade balance of creative goods with jewelry, fashion accessories and arts & crafts leading exports. The best performing sectors were design, audio-visual
16 | India Business & Trade • Apr-May, 2022
and publishing. Interventions in the telecommunications and multimedia industries, in addition to their convergence with technology, evidently have a significant impact on the demand and supply of creative goods and services. These technologies facilitate production, distribution and consumption of creative commodities. Furthermore, it has fostered new forms of artistic and creative expression. Digitalization, thus, has brought about significant progress in the range of media, through which creative content is delivered to consumers, such as videoon-demand, music podcasting, streaming, computers and the
CREATIVE ECONOMY
provision of television services via cable, satellite and the Internet. The persistence of the COVID-19 pandemic has further led to an exponential growth in creative digital content consumption and production. However, the same digitisation has also revealed the sector’s vulnerability. In the COVID-era, the MSMEs in the sector have contracted by around 16% and the impact on the remaining freelance and gigworkforce has been disproportional and far adverse (FICCI, 2019). Individual professionals and artisans have faced hand-to-mouth existence surviving on food parcels and state governments micro-grants. Notably, India’s exports have dropped sharply by over 35% YoY in 2020 to reach US$ 13.4 billion. The digital divide, coupled with poor access to stable internet connectivity and skills to utilize digital interventions in the country has been flagged as the major reason for the unprecedented downfall of such entrepreneurs and enterprises. The long-term growth of around 90% of the creative sector has been endangered owing to social distancing norms in both importing and exporting countries, according to the report. Evidence from UNCTAD reports suggests flourishing exports of creative goods relying on various digital forms of production and consumption. However, industries with diversified and non-virtual creative elements have not been
CREATIVE ECONOMY EXPORTS FROM INDIA 25 20 15 10 5 0
2016
2017
2018
2019
2020
Source: UN Comtrade, figures in US$ billion
ENTREPRENEURS MUST ADAPT & ACCESS NEW AUDIENCES THROUGH DIGITAL TECHNOLOGIES. performing optimally. It is imperative for entrepreneurs and producing organizations in niche areas of this sector to adapt and access new audiences by embracing digital. Electronic commerce is the pathway to a bigger marketplace for several design products, showcase artisanal craft work and performances. These can help to rekindle India’s traditional skills and empower millions of microentrepreneurs and SMEs, especially considering the vast population
of craftspersons in the country. However, many entrepreneurs and small industry owners of such creative and cultural products lack access to internet, financial resources, and the desired skillsets to fully utilise the digital platforms of the current era. The remedy, in this case, can be in the form of dedicated digital skills programs and knowledge dissemination sessions to resolve the long-term systemic issues for upskilling entrepreneurs to adapt to new ways of producing, distributing, and selling; as well as collaborative efforts by the governments and institutions to facilitate digital inclusion in the industry. Moreover, there is need for increased intra-regional and crossborder trade and taking steps towards building a contingency plan to reduce non-tariff barriers and increase digital infrastructure related cooperation, to facilitate and foster trade in niche creative products. Therefore, increasing demographics, better access to ICTs and dynamic shifts to new lifestyles associated with creative products and services, promise a progressive future for this avenue. The COVID-19 pandemic has brought new opportunities for creative industry, turning crafts, films and digital concerts as an outlet with many people flocking in. Now more than ever, a culture of digital inclusion must be created to foster diversity and empower the creative industry.
Apr-May, 2022 • India Business & Trade | 17
PERSPECTIVES
Inland Water Transport - Charting the Uncharted Inland Waterways is a highly underutilized mode of freight transportation and is overwhelmed by road and rail modes of transportation. But this mode is being positioned as part of India’s larger infrastructure and logistics-focused policies. BY AMSHIKA BRIGIT GEORGE
F
reight movement in India is highly skewed in favour of road transport (60%), while inland waterways and coastal movement of cargo remain in the nascent stage (ADB, 2020). But there have been efforts to promote Inland Water Transport (IWT) in the 111 waterways (declared as NWs under the National Waterways Act, 2016), from which 25 NWs have been determined to be technically and economically feasible through Detailed Project Reports (DPRs). Inland Waterways Authority of India has set a five-year vision to develop IWT as a self-sustaining, economical, safe, and environmentfriendly supplementary mode of transport to achieve the larger growth goals of the economy. It aims to increase the share of IWT from the current figure of 2% to 2.5% in bulk and containerized cargo shipment. As part of the
Maritime India Vision 2030, IWAI aims to operationalize 23 waterways by enhancing terminal and allied infrastructure, navigational aids, and RIS provisioning. Development of the terminal will also include creation of concrete/ steel, and floating platoon jetties on specific circuits for river cruise tourism. The vision also includes development of more than 10 Ro-Ro terminals and ferry terminal development in over 60
BULK CARGO TRANSPORT VIA WATERWAYS OF COAL, FLY-ASH & ORE IS ECONOMICAL AND ENVIRONMENT FRIENDLY
18 | India Business & Trade • Apr-May, 2022
locations with state government collaborations. Ample opportunities have been identified by IWAI to allow for greater collaboration with private players, thereby opening the doors wider for IWT. Bulk cargo transport through waterways of coal, fly-ash, and iron ore are economical, environment friendly, and less polluting than Road and Rail modes of transport. As on date, 15 NWs are operational, 7 projects are in appraisal stage, development of 2 NWs has been taken up as per the State Financial Corporation (SFC) directives for FY 2021 to FY 2025, and development of 1 NW has been taken up with technical and investment support from World Bank. MULTI-MODAL APPROACH In a bid to herald in a new age for Multi-Modal Connectivity, PM Narendra Modi launched
INLAND WATER TRANSPORT
the Gati Shakti National Master Plan on October 13, 2021 to provide a digital platform that can enable 16 ministries including Railways, Roadways, Civil Aviation among others to come together for integrated planning and implementation of infrastructure connectivity projects. Various infrastructure schemes of the Central Ministries and State Governments such as the Sagarmala, Bharatmala, inland waterways, UDAN, etc. have been linked together to comprehensively and systematically review and monitor the progress of crosssectoral projects. Various economic zones and clusters across sectors such as pharmaceuticals, defense, electronics, industrial corridors, fisheries, and agriculture zones have been covered to facilitate connectivity, reduce logistical costs, and increase global competitiveness. GROWTH TRENDS Latest data on cargo movement through National Waterways and linked coastal waterways reported a growth rate of 1.5% from FY 201420 and a 13.5% annual growth rate in FY 2021 over the previous year, according to government data. The increased volume of cargo shipment through IWT has been attributed to the concerted efforts of the Government to actively develop water highways and bring down costs of transportation. According to the RITES Report (2014) on “Integrated National Waterways Transportation Grid”, a comparative intermodal cost has been computed per tonne-km across Railways, Highways, and IWT, which has determined IWT to be the cheapest mode of cargo transportation at Rs. 1.06 relative to Rs. 1.41 and Rs. 2.58 as post-service tax freight charges for Railways and Highways respectively. Through World Bank assistance, collaboration on development of NW 1 aims to enable upgradation/ modernization of the Farakka lock to shorten waiting time to cross the lock and enable two-way traffic
through the narrow passage. Additionally, setting up of River Information System (RIS) is also included in development activities of NW 1 to allow tracking of vessels by barge-operators and cargo-owners, planned berthing of vessels for improved logistical ease, installing navigation facilities, and devising emergency protocols. CONSTRAINTS IN IWT One of the major challenges faced by IWTs is the limited navigable inland waterways which are dependent on a minimum water depth level. Due to the seasonal nature of rivers, the depth of water varies, causing limitations to be imposed on shipping and traffic of large cargo barges to be restricted
IWT HAS BEEN DETERMINED TO BE THE CHEAPEST MODE OF TRANSPORATION IN PER TON-KM WHEN COMPARED WITH RAILWAYS AND HIGHWAYS BY RITES to limited stretches of the river with a water depth of 2.5 m to 3 m being maintained perennially. Hence, large-scale dredging is frequently required to support movement of large barges as well as actively maintain water levels. Development of IWT and adoption of hi-tech technologies (such as RIS) requires a massive inflow of investments from both public and private sectors. There is a fund requirement for highly capital-intensive vessel building activities and for setting up of MRO (Maintenance, Repair, and Overhaul) facilities for vessels. A well-functioning multi-modal digital platform for comprehensive development of the logistics management system necessitates the use of sophisticated and hitech organizational systems,
digital transformation, technical professionals, and a high degree of inter-ministerial and departmental coordination at different levels. Attractive incentive measures would need to be in place to galvanize investments and promote trade. Thirdly, concentration of waterway routes due to geographical and topographical conditions makes penetration of water transport mode challenging. Moreover, development of multimodal transit hubs for a smooth transition of cargo and passengers from one mode of transport to another seamlessly, well-equipped cargo handling facilities, transit sheds, customs office, open storage yards, etc. would be crucial. The need for greater levels of participation of freight forwarders and shipping line associations in stakeholder meetings and engagement with the government has been observed. This will allow for a two-way flow of information between policymakers and logistics service providers where information on new rules, regulations, and incentive measures can be obtained by the latter and the government can better gauge on-ground bottlenecks. Lastly, long-term dredging operations along the river banks are expected to cause drastic changes to the aquatic flora and fauna of the river ecosystem. These long-term effects include alterations in the river course, deterioration of water quality through saltwater/seawater ingress, dangers of oil spillage, solid and liquid waste discharges from vessels, and drastic changes in the fish community structure. IWT is being proactively pursued as an economical and environmentfriendly alternate mode of transport to create a more balanced modalmix. Augmentation of the current capacity of waterways requires coordinated efforts to develop and maintain the terminals, and regulate waterways for navigation. The 15 NWs under development would require constant and consistent project evaluation and monitoring along with ESG dimensions to mitigate constraints.
Apr-May, 2022 • India Business & Trade | 19
STARTUP SPEAK
For Innovative, Market-oriented Startups, the World is a Playground Deep Bajaj, co-founder of Sirona, talks about the drivers of his company’s success – personal conviction, highly innovative products, purpose-driven marketing and the power of cross border e-commerce. HOW IT STARTED The aphorism, “Necessity is the mother of invention” stands true for Sirona. The inspiration for PeeBuddy came to me on a road trip in 2013, when I witnessed the struggle my wife and friends went through in search of clean toilets. They had to go for hours without drinking water to control the urge to pee, all the while dreading the moment when it would be impossible to hold pee any longer. Visiting a public toilet would entail uncomfortable squatting/bending, or in worst case scenario, they would have to be sitting on the dirty toilet seat. To put an end to this trauma, we devised PeeBuddy, India’s 1st Female Urination Device. With this funnel, women can stand and pee, thus avoiding contact with dirty toilet seats. Soon, we realised that PeeBuddy could also help women with arthritis and pregnant women as well, who have trouble bending. While it continues to help thousands of women every day, the journey of its launch has not been free of challenges. When we came up with PeeBuddy, we initially faced resistance from distributors and retailers, as was expected. They could not bring themselves to terms with the subject ‘stand and pee’ as a solution for women, and particularly the word ‘pee’ in the product name. However, endorsement from doctors and e-commerce websites ultimately encouraged people to try the product and its popularity in the market grew by leaps and bounds. So far, as a resullt of the exceptionally positive customer
menstrual hygiene. Being reusable for up to 10 years, the cups have proved to be an ecologically friendly and economically viable period solution. With more women adopting our products, we have a stronghold on the feminine hygiene market and an ever-increasing customer base. But we believe that to be innovative and relevant in the long run, we need to keep evolving our methods of communication and offerings in accordance with the changing customer needs. Deep Bajaj Co-founder of Sirona
response, Sirona has sold over 30,00,000 PeeBuddy units. HOW IT’S GROWING Since then, Sirona has been on a mission to offer a range of innovative problem-solving products for women for each life stage from puberty to menopause. We have diversified our business over a range of other products that include Menstrual Cups, Menstrual Cup Sterilizer, Tampons, Panty Liners, Intimate Wash, PeeBuddy funnel, PregRx pregnancy test strips, Period Pain Relief Patches, Period Stain Remover, Tampons and Condom Disposal Bags, Sanitary Waste Disposal Bags, Lubricants, and so on. Our innovative products are making a difference in the lives of our customers in India as well as globally. We have sold over 10 lakh Sirona Menstrual Cups, thereby ensuring better and hassle-free
20 | India Business & Trade • Apr-May, 2022
INTERNATIONAL OUTREACH AND E-COMMERCE We have become a trustworthy brand in the country since we offer top quality products, which are easy to use and economical. But ensuring success on a global scale entails more than this. Usually, it requires huge investments and brands have to go through a long gestation period. Thankfully, technology is changing the rules of the game in the favour of startups today.
TECHNOLOGY IS CHANGING THE RULES OF THE GAME IN THE FAVOUR OF STARTUPS TODAY. CROSS BORDER E-COMMERCE AND ONLINE RETAIL HAVE CONTRIBUTED TO GROWTH OF BRANDS LIKE SIRONA
SIRONA HYGIENE
Cross border e-commerce and online retail have contributed to accelerating the sales and popularity of brands like ours that are disrupting a category. It allows them to save crores of rupees that would otherwise have been spent on set up, distribution and marketing. E-commerce is a three-part puzzle – finding distributors, finding customers, and taking care of the logistics. In our case, Amazon has taken care of these to a large extent. Once brands crack this, the world becomes their playground. Sitting right here, we are getting orders from across the world – the USA, the United Kingdom, Germany, France, etc. To sum it up, cross border e-commerce platforms can help Indian companies tap into the vast potential that global markets offer.
E-COMMERCE IS A THREE-PART PUZZLE – FINDING DISTRIBUTORS, FINDING CUSTOMERS, AND TAKING CARE OF THE LOGISTICS. ONCE BRANDS CRACK THIS, THE WORLD BECOMES THEIR PLAYGROUND. CHALLENGES FACED AND POSSIBLE SOLUTIONS We have quality solutions and understand customer service very well. But the only help we need is for the regulations to become simpler. For instance,
if any of our products is returned from the international market, we have to pay duty on those. If such issues are taken care of, business will become easier. I believe that if quality Indian brands have access to the right platform and the stocking and selling is made easier, they can efficiently take care of the rest. With better conditions and improved customs by the governments, things would be streamlined for them. Indian policy makers and our respected industry members can facilitate local entrepreneurs in easing the aforementioned issues and thus help Indian companies achieve greater heights in the global landscape. The author is a co-founder of Sirona India. Views expressed are personal. Usual disclaimers apply.
Apr-May, 2022 • India Business & Trade | 21
STATE PROFILE
KARNATAKA
Karnataka’s exports: Caffeinating India’s software hub! Karnataka is known for its software exports, just as it’s known as the land of coffee in India. To be a holistic export destination, it needs to take steps to boost its merchandise exports. BY NIKHAAR GOGNA
F
ormed in 1956, Karnataka is the fourth-largest manufacturer of automobiles in India, second- highest producer of special purpose and heavy electrical machinery, and among India’s top states contributing to the electronic industry. The state also prides itself in being a key operational hub for 400 Fortune 500 companies & is India’s largest software exporter. Companies attribute this technological prowess, in part, to the ease of doing business in Karnataka, just as they laud its rich talent pool. Karnataka was the top FDI recipient state during FY 202122 (up to June 2021) with a 48% share of total FDI equity inflows. Other factors such as presence of a skilled labour pool and robust infrastructure network have further enhanced its attractiveness. In addition to its expertise in the technological domain, Karnataka accounts for about 70% of coffee production and 33% of silk production in India. It is also a leading producer of cashew nut,
millets, marine products, rose onions, gherkins, green chillies, tamarind, sunflower and Byadgi Chilli. Furthermore, it is the largest producer of aerospace and defence equipment in India. KEY EXPORTS Karnataka has 52 notified Special
Economic Zones, out of which 32 are operational; 45 of them are in the IT/ITeS sector. Further, it has 1 SEZ each in other sectors like textiles, pharmaceuticals, engineering, aerospace, biotechnology and electronics. The state is “ranked 1st in the country in terms of overall trade
SECTOR-WISE OPERATIONAL SEZs IN KARNATAKA
3% 3%
3% IT/ITeS
3%
Biotechnology
3%
Hi-tech engineering products &
3%
related services Electronics hardware and
3% 4%
75%
software/ITES Aerospace & industry Pharmaceuticals Textile Multiproduct Precision engineering products
Source: IBEF
22 | India Business & Trade • Apr-May, 2022
KARNATAKA
(merchandise and services) and contributes around 18.9% to national trade (2020-21). Overall exports in 2020-21 stood at US$ 94.37 billion (merchandise + services). The State is ranked 6th in merchandise exports, contributing around 5.2% to national merchandise exports. It is ranked 1st in Services Exports and its contribution to national services exports is around 38%.” The state is exporting engineering products to Germany, China, South Korea, Brazil, USA, Malaysia, Thailand, South Africa and Singapore. Aerospace products are being exported to products to US, UK, Germany, Russia Mauritius, Malaysia, Nepal, Oman and Ecuador. A CRITICAL ASSESSMENT Karnataka secured 9th rank
overall (out of 36) in NITI Aayog’s Export Preparedness Index 2020. According to the report, it performed very well in two parameters – export promotion policy (scoring 79.16) & business ecosystem (68.09). Karnataka’s export performance can be attributed to business friendly policies, marketing support, policy focus on quality & standards, and existence of a supporting institutional structure. A case in point is Karnataka’s One District, One Product policy for exploiting the potential of unorganised microfood processing by offering credit, avenues for the marketing of products, and technical know-how. The state also has an excellent business ecosystem, which is strengthened by supporting ecosystem drivers like innovative
KEY EXPORTS FROM KARNATAKA 600000
500000
400000
300000
200000
100000
0 All India 2016-17
Karnataka 2016-17
A. Software and Service Exports
Source: Karnataka State Government Data
All India 2020-21
B Merchandise Exports (Sl 1 to 21)
Karnataka 2020-21 TOTAL (A+B)
capacity, single window clearance, labour reforms, cluster strength, air cargo facilities and access to finance. However, some of the pillars where the state can do well include export preparedness (where the state scored 43.93) and export performance (16.61). According to the NITI Aayog, it needs to buckle up as far as indicators like setting up trade exhibition centers, hosting capacity building sessions, registering members in trade promotion councils, existence of R&D facilities, and export penetration are concerned. Karnataka has approved a new Information Technology (IT) policy that will help the state increase its contribution to the national objective of making India a trillion dollar digital economy and creation of 6 million jobs during the policy period. The new policy, which will be in effect from 2020-25, will help Karnataka retain and leverage its position in technology and innovations, according to a government statement. The stated goal is to enable Karnataka’s “IT industry to contribute 30% share in a trilliondollar digital economy”. Karnataka’s performance in India’s exports is quite robust, especially as far as software and service exports are concerned. However, going forward, the journey from top 10 to top 5 will require a change in approach. Identification & training of prospective exporters, setting up trade exhibition centres in the state, creating an ecosystem that promotes R&D, and diversification of products and their target markets are necessary steps. The state has a high potential to ramp up exports in sectors like aerospace, hardware, nanotechnology, biotechnology and pharma, where there needs to be greater focus. Moreover, it has also emerged as the startup capital of India, with over 13,000 out of the 57,000 startups in India. Karnataka could therefore envision a larger role for itself in leading India’s competitiveness in industries of the future including 3D printing, IoT, AI, machine learning and industry 4.0.
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PREPARING FOR THE
DIGITAL LEAP A number of Indian companies are leveraging cross border e-commerce to expand their business. Can this medium be the next big catalyst for India’s exports? BY VIRAT BAHRI
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CROSS BORDER E-COMMERCE
T
he pandemic has precipitated a meteoric rise in e-commerce, which raises expectations that it will be the dominant medium of commercial exchange in the near future. A report by Payoneer titled One Giant Leap, noted how global e-commerce revenues grew by over 80% YoY in Q3 and Q4, 2020. Forecast for US e-commerce penetration till 2030 surged from 21% of all retail to 34%. This rise has focused the spotlight on the huge potential that e-commerce has in international trade, through the niche but fast emerging phenomenon of ‘cross border e-commerce’. In essence, cross-border e-commerce is defined as the selling of goods from a website of a national store in one country to another party in a foreign country. It can operate in B2C, B2B, or C2C modes. Businesses today have the opportunity to trade within their domestic country, residence, or internationally with other countries through powerful online platforms like Amazon. According to Zion Market Research, global cross-border B2C e-commerce market revenue was estimated at US$ 562.1 billion in 2018 and is predicted to reach US$ 4,195.4 billion by 2027, implying a CAGR of nearly 28.4% during 202027. This rise is fuelled by growing internet penetration, increased propensity for e-commerce, integrated logistics frameworks,
GLOBAL CROSSBORDER B2C E-COMMERCE MARKET REVENUE WAS ESTIMATED AT US$ 562.1 BILLION IN 2018 AND IS PREDICTED TO REACH US$ 4,195.4 BILLION BY 2027, IMPLYING A CAGR OF NEARLY 28.4%. secure payment options and the rampant rise in globalisation. Companies get a vital route to expand internationally and even OEMs can bypass long channels to directly reach customers. They have the strong backing of data now to also ascertain buyer behavior and preferences across markets. Customers, on the other hand, are able to access products from multiple suppliers, giving them the luxury of ever increasing choice and research-based decision making. Over 50% of customers used D2C for buying consumable or durable products during the COVID pandemic, according to Zion. Industry experts assert that from an e-commerce and technology penetration point of view, the pandemic has accelerated the transition by at least a decade.
SIZE OF INDIAN E-COMMERCE MARKET 250 188
200
200
150 100
84
50 14
20
2014
2015
39
21.9
30
2018
2020
99
0 2017
2021
2024
2025
Source: Statista; figures in US$ billion; Data points post-2018 are projections
2027
HOW BIG IS IT? Projected to reach around 15% of total retail in a few years, e-commerce is not exactly overrunning traditional retail in the near future, as one would like to believe. But still, the numbers are huge. Amazon has projected US$ 20 billion in exports from India by 2025, twice its earlier target. E-commerce in India is expected to grow by 21.5% and hit US$ 74.8 billion in 2022, according to GlobalData. Customers were already buying non-essential products such as clothes and electronics on e-commerce websites before the pandemic. But now, they are also open to buying essential categories like groceries. E-commerce is likely to be the fastest-growing segment within the overall retail industry in India in the coming 5-10 years, growing its share of total retail from 3% to 1015%. It is also likely to play a larger role in India’s cross border trade and business. India crossed US$ 1 billion in exports for cross border e-commerce in 2020. Categories like handicrafts, home and linen, bedsheets, curtains, upholstery and apparel are enjoying strong demand abroad. It is expected to rank among the top 10 countries in terms of cross border e-commerce growth. India’s potential can also be gauged from the segment’s growth in its key export markets. For example, when you look at the US market, online shopping was estimated at US$ 861 billion in 2020 with merchants based in the US, according to the US Department of Commerce. This was a growth of 44%, nearly thrice the 15% YoY growth witnessed in 2019. Mckinsey states that around 73% of US companies make cross border payments daily. By 2022, cross-border e-commerce is expected to be a regular occurrence across North America, Latin America, APAC, and EMEA, according to Citcon. It further projects that European countries will account for around 28.3% of global cross border sales of US$ 1.2 trillion in 2022.
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THE NEW WORLD OF TRADE Among the companies that are taking the route to cross-border e-commerce, one prominent category is of the traditional brands that aim to increase their online presence significantly. They have already been listing on various marketplaces for the domestic market, and are now exploring the opportunity to go global. The second major phenomenon being observed is the rise of D2C brands across categories. They are finding cross border e-commerce as a viable route to access any market across the world. Marketplaces like Amazon, Tokopedia, Lazada and Shopee are available to help a company target specific markets. Venkat Nott, CEO, Vinculum, comments, “Technology has completely flattened the earth a long time back and SAAS products like us have ready integration to market places and logistics companies across South East Asia, Middle East and US etc. So a brand
IT IS ONLY A MATTER OF TIME WHEN CROSS BORDER E-COMMERCE VOLUMES WILL GROW TREMENDOUSLY, AND PLAYERS WILL WANT TO LOOK AT THE OPPORTUNITY COSTS OF WAITING IT OUT can easily start listing its products into marketplaces and they are able to manage orders and entries sitting in one place. You don’t have to think about which market place should I sell to, how do I integrate, how I manage my orders and who will ship on my behalf.” But to succeed in D2C cross border e-commerce, one needs to take a lot of care to understand the end consumer’s tastes and preferences and the nuances that you need to succeed there. A brand
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has to look at whether the cost arbitrage works for it in the particular market, including elements like duties, platform costs and most importantly, shipping costs. But there are other elements of cost economics. While your product is virtually on the marketplace, it has to physically be available in that market (or in close proximity) to ensure timely delivery. Minimum order quantities become important, and shelf life is a key factor when it comes to perishables. Lastly, you need partners who can import on your behalf and take care of aspects like compliances and payments. While this is still complicated, the digital medium gives you a relatively inexpensive route to test and expand your business in international markets. Experts believe that it is only a matter of time when cross border e-commerce volumes will grow tremendously, and players will want to look at the opportunity costs of waiting it out, rather than the risks of plunging in.
CROSS BORDER E-COMMERCE
Deep Bajaj, CEO, Sirona Hygiene, agrees wholeheartedly and vouches for the power of cross border e-commerce in helping his company scale its business of feminine hygiene products across global markets. He comments, “To a very large extent the three core areas (finding your own distributors, finding your customers and taking care of logistics) are taken care of, at least in markets where we are selling. But exporters need help when it comes to compliances to stock the products and take them back to the home country. If we work on this aspect, the world is playground for brands like us.” CAN INDIA ACE THIS E-COMMERCE SPACE? According to Dr. K. Rangarajan, Centre Head & Professor, Indian Institute of Foreign Trade, Kolkata Campus, the fact that India will scale in e-commerce is a given. But the actual question is whether it will grow in tune with its potential and contribute more significantly to India’s ambitious export target of US$ 1 trillion by 2027.
For this, he strongly emphasises that a synchronised coordination of all stakeholders is important. Every transaction involves a variety of stakeholders – logistics, e-commerce platforms, certification bodies, customs, regulators, payment service providers, etc. If any country does not clearly define guidelines, then larger players may do so, which will be to the detriment of the entire industry. For SMEs, there are significant
challenges, one of which is the lack of trust regarding digital transactions, digital signatures, etc. Facilitation centres across states will play a major role and need to be facilitated by respective governments to address such issues. A major factor is whether the platforms will ensure you get your payments, and if so at what cost? This is even more critical in the case of returns. Basically, if the customer
SHARE OF E-COMMERCE IN US RETAIL SALES 30 25 20 15 10 5 0 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Payoneer, Bank of America, US Department of Commerce, ShawSpring Research
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For SMEs, there are significant challenges due to the inherent lack of trust regarding digital transactions, digital signatures, etc.
in any country rejects the product for any reason, getting it back can be expensive, time consuming and stressful at the same time. Global branding is another significant challenge, particularly for new entrants in the market. How does a new brand, especially in a higher value category, assure the target customer of product quality and genuineness? Generating brand awareness, preference and recall entail significant investments, without which a majority of the brands can get lost in the clutter. Venkat believes that this hurdle can be crossed through branding investments, but with the help of market inputs, connections and government support. A strong nation brand recognition in any product category can provide a significant boost to players in that category. For instance, New Zealand has identified officials for marketing categories of products from the country. They address questions like - How do we establish the brand? What connections are required in the target market? How do we make sure that Made in New Zealand is recognized with quality? How do we facilitate brands to scale? Enterprise Singapore is a government agency that strives for the cause of enterprise development. It works with committed companies to help them build capabilities, innovate and internationalise and also helps to propel the growth of Singapore as a hub for global trade and enterprise. As the national standards and
GENERATING BRAND AWARENESS FOR SUCCESS IN CROSS BORDER TRADE ENTAILS INVESTMENTS, WITHOUT WHICH MANY BRANDS CAN GET LOST IN THE CLUTTER. accreditation body, it strives to build trust in Singapore’s products and services through ensuring quality and standards. However, India may need to be wary of trying too much at once. Rajat Wahi, Partner, Deloitte, suggests, “If you look at what South Korea, Japan or other countries did, they are going after specific industries and putting a lot of their might behind that. South Korea is in electronics and automobiles, while Japan has been specifically looking at consumer technology. So I think we have to figure out what is important for us.” Factors that may be considered in this regard include share of GDP and employment, availability of natural/human resources & future growth potential. Dr Rangarajan agrees that strong nation branding is critical as firm-level branding is not going to be easy in the initial stages. He suggests that the government can go for organising E-fairs where potential export products
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can be showcased and some initial dialogue/discussion can be arranged. More platforms can be created that command the trust that brands like Amazon have gathered over the years. With greater decentralisation, Dr Rangarajan is positive that this can be taken up by state governments as well. Finally, he opines that the flow of goods needs to be simplified at the regulatory level. Digitisation should be implemented to the extent that an exporter, no matter where he is located, can comfortably understand e-transactions, e-payment, e-signatures etc. Otherwise, he will be looking for solution providers, who will add to the transaction cost. Multimodal transportation is critical in the present day and age, whether it is e-commerce or traditional export, so will a product be able to travel with a single logistics document which is accepted by every authority? Digitisation is not just about the superiority of the technology but more about the acceptance of different documents across agencies involved. Regulating these platforms will also be important, along with a single window to tackle issues. If these issues are addressed effectively, India has a lot going for it when it comes to capitalising on cross border e-commerce, thanks to its entrepreneurial dynamism and strong base of SMEs with a wide range of products. Certainly, it is an opportunity that the country cannot afford to pass.
CROSS BORDER E-COMMERCE
A catalyst to propel exports Dr. K. Rangarajan feels that with certain degree of confidence and certainty, Indian entrepreneurs can certainly leverage cross border e-commerce effectively.
C
ross border trade is unquestionably a field of great potential nowadays, particularly post-pandemic. The moot point, however, is whether India can tap it in a manner that is commensurate with its scale and potential. Though the government has come out with a draft policy that is going through multiple revisions, synchronized participation of the mediating players will be important. In any kind of an international transaction, the central bank, customs, and logistics players are involved. In cross-border e-commerce, one more key component involved is the platform. If a proper ecosystem is not being dictated or prescribed, then individuals may find that big players like Amazon and others are trying to shape it to their advantage. And that can be disadvantageous for a country like India. Due to the COVID pandemic, lots of smaller players, especially SMEs, started coming together and using digital platforms for reaching out to consumers. Exchange, digital signature, digital transactions, realization in money, and the element of trust, are some of the points to be considered when looking at SMEs. As far as India is concerned, the more saleable products in overseas market are those of labour intensive unorganized sectors or traditional SME products like leather, handicrafts, food products, apparels and gems and jewellery. The focus has to shift towards converting some of these traditional exports to cross-border exports and leveraging e-commerce as is being done in the domestic market. Branding is a challenge for SMES. To resolve this, country branding has to be the first step, rather than individual firms doing their branding. This is going to be a huge task. We may definitely
Dr K. Rangarajan Professor & Head, Center for MSME Studies, IIFT Kolkata
have individual success stories. But those are exceptions and the effort should be on country branding, as most of our export basket belongs to small and medium enterprises. One suggestion is organising more e-fairs, which allow products to be showcased on a 3D plane. Most developing countries have started doing this and the gems and jewellery sector has already had success. The government should strive to create a kind of brand equity among buyers, which platforms like Amazon have successfully done. Decentralization can help accelerate this process. State governments are willing to incentivize facilitation centers to be set up in their states. As long as these facilitation centers are decentralized and dispersed in terms of ownership, it won’t be a problem. If big players grab these opportunities, then probably the platform will dictate the transaction rather than importers and exporters having a fair play in it. The free return policy is in place in the domestic import-export
market, but in foreign transactions, there is no clarity or proper definition for return policies. If an international customer wants to return the product, what should be done? What will be the cost to bring it back and who will bear it? The moment these loose ends are tied up, we’ll find accelerating growth. Another area of concern is the compliance certification. The parties in e-commerce exports should be comfortable understanding e-transactions, e-payment, e-signatures, e-shipping and other digital solutions. This can affect cost competitiveness, when business owners are looking at people to educate them about these factors. The regulatory framework has to be improved upon. When multimodal transportation comes into play, the level of integration in India is not satisfactory. It is not possible to travel with a single logistics document, which is accepted by every authority, inside or outside of India. A separate logistics department has been set up to work on this. Foreign exchange, customs, duty and credit in international returns (and whether there can be any incentives to cover these costs), data security, validity and legality of transactions are some practical problems associated with e-commerce, which need some protocols to adhere to. Having a single window to address and channelize these issues can help. There is no doubt that crossborder e-commerce can play a key role in achievement of India’s US$ 1 trillion export vision. A really careful deliberation is required during policy framing. The unprecedented growth of e-commerce in the domestic market is proof that once there is a certain level of confidence, there will be no stopping Indian entrepreneurs from entering global markets.
Apr-May, 2022 • India Business & Trade | 29
COVER STORY
Negotiating trade rules in e-commerce to benefit the Indian industry As the pandemic continues, digtialisation will play a key role in inclusive growth and recovery of the Indian economy. India should be at the forefront of global negotiations on e-commerce, particularly the Joint Statement Initiative that now has 86 member countries. BY DR PRITAM BANNERJEE AND DR ARPITA MUKHERJEE
I
ndia’s digital economy is projected to be US$1 trillion by 2025, constituting around 18-23% of the GDP. Its e-commerce market was valued at US$ 38.5 billion by volume in 2017 and is estimated to reach US$ 165.5 billion by 2025. NASSCOM data shows that the Indian technology-based industry has grown from US$ 191 billion in FY 2019-20 to US$ 194 billion in 2020-21. The sector employed around 4.47 million in FY 2020-21. India is the 3rd largest technology start-up hub in the world. In 2020-21, telecom, computer and information services accounted for nearly 50% of India’s services exports. Thus, India is at the centre-stage of the global
digital and e-commerce revolution, and needs to harness its strength through policy reforms and negotiations in global platforms. INTERNATIONAL ENGAGEMENT India has been a proponent of liberalising Mode 4 (temporary movement of high-skilled professionals) and Mode 1 (crossborder trade) in the WTO and in its trade agreements. While India continues to maintain this position, as it concludes trade agreements with key partners like the UAE and Australia and fast tracks negotiations with partners like the UK and the EU, it is yet to take an active role in wider international discussions on e-commerce.
30 | India Business & Trade • Apr-May, 2022
For example, India is not a part of the Joint Statement Initiative on e-commerce, which was launched by 71 WTO members at the 11th WTO Ministerial Conference in December 2017, and now has 86 members. India also did not sign on “sharing of data with a trust” during the Osaka Track of the Japanese G20 Presidency. The discussions in JSI are moving at a fast pace and participating countries have finalised the negotiating text on issues like e-signatures and authentication. By not participating, India may be at the receiving end, where it has missed the bus on contributing to the discussions. There can be some genuine concerns for India to take a
E-COMMERCE NEGOTIATIONS
defensive position. The country is yet to come up with a regulation governing data protection and privacy. Majority of Indian industry players exporting are General Data Protection Regulation (GDPR) compliant. Hence, the industry is ready and in fact requesting for a regulatory framework, that’s transparent and fair. At the same time, not all countries participating in JSI have their regulatory framework in place, so JSI will have to keep options for regulatory evolution with technology developments. Based on UNCTAD research, India has submitted a communication to the WTO on the E-commerce Moratorium: Scope and Impact, along with South Africa, in March 2020 and received clarification on the scope. Regarding, continuation of the moratorium, and other issues discussed in JSI, the authors had in-depth meetings with technology companies, their associations and policy experts. The summary of the discussions is presented below. MORATORIUM, DUTIES & TAXES Some researchers would like the government to oppose the extension or permanency of moratorium on Customs duty for digitally delivered products and services in the WTO, as it will potentially lead to tariff loss, especially for developing countries. However, JSI proposals include provisions allowing domestic taxation of such intangible digital products. For most developing countries, since most of the major providers of digital content and products are large MNCs, imposing domestic taxes would be akin to a tariff. OECD has already developed a robust framework for digital taxation to which India is a party. For large developing countries, like India, that would like to retain policy space to promote local digital firms and development of local digital content, tax breaks or incentives for local digital content development, startup incentive funds, and incentives designed for
specific digital products can also be used. Many of these instruments are being used by other countries to support growth of their digital economies. Since over 50% of India’s services exports are IT/ITeS, and a significant share is delivered crossborder digitally, some measure of tariff-free market access would be critical. So a moratorium works in favour of the Indian IT/ITeS industry. India is also developing its export capabilities in areas like e-sports and online gaming. So it is in India’s interest to ensure that its exports are not adversely impacted by any decision taken in the interest of other developing countries, who may not be exporting digital products and services.
OVER 50% OF INDIA’S SERVICES EXPORTS ARE FROM IT/ITES, AND A SIGNIFICANT SHARE IS DELIVERED CROSS-BORDER DIGITALLY. LEGAL FRAMEWORK The JSI proposal requires members to mandatorily develop a legal framework based on the UNCITRAL Model Law on E-Commerce to govern e-commerce transactions, while ensuring that it doesn’t put unnecessary regulatory burden on e-commerce and electronic transactions. There is concern that the mandatory requirement to develop a legal framework to govern e-commerce would put unnecessary burden on existing legal institutions of developing countries. In addition, the requirements to adhere to the UNICTRAL model law, would limit legal flexibilities available to regulators in developing countries in being able to adequately regulate big technology firms from markets
such as the US, EU, and China. Given that cross-border e-commerce is increasing, there is an urgent need to have laws based on internationally agreed upon principles governing these transactions. Unless India participates in the discussions, how can it raise its concerns? There is a need for detailed discussions with the industry and legal experts on the UNICTRAL model law. This law already includes fundamental principles that allow regulation of anti-competitive and monopolistic practices and provide leeway in developing national standards. Using the UNICTRAL Model law as a guide, India and other developing countries can choose to define what legal principles are necessary and draft proposals to the JSI accordingly, prioritizing legal instruments and principles essential to ensure competitive safeguards. This can include an essential 5-year review mechanism; given the dynamic nature of technology, and new technological means that enable incumbents to create monopolies or impose unfair and anti-competitive practices. E-SIGNATURE & CONTRACTS JSI has proposals for rules for universal acceptability of electronic signatures, contracts, and invoices. Its proposals also want to push for universal acceptability of digital versions of all trade related documents, i.e., ensure that most documents submitted to Customs and other regulators for exports and imports are in electronic form. There are concerns that developing countries may lack the requisite financial resources, technology and adequately trained manpower for large scale mandatory adoption of these technologies, and that SMEs in developing countries would be disadvantaged. However, given the ongoing pandemic, governments are fast adapting technologies and digital inclusion of SMEs is a priority for all governments, including India. In fact, India is a leader among developing countries in terms of
Apr-May, 2022 • India Business & Trade | 31
COVER STORY
both electronic contracting and signature use, and, therefore, has all the more reason to proactively participate in this aspect of JSI negotiations. Countries lacking resources can be given more time for adoption (special and differential treatment as mandated under other WTO agreements). This is an area where the JSI made significant progress. In a statement issue by co-conveners Japan, Australia and Singapore, on December 14, 2021, it was mentioned that the JSI has achieved good convergence in negotiating groups on eight articles, namely, online consumer protection; electronic signatures and authentication; unsolicited commercial electronic messages; open government data; electronic contracts; transparency; paperless trading; and open internet access. All these will facilitate trade and are important for businesses and India needs to know and see what is agreed upon. For example, not all JSI proposals on electronic transactions may be easy to agree to. The Chinese proposal to grant full market access to foreign e-payment services and equal treatment on par with national firms is an overreach. Governments would have legitimate security and consumer protection concerns about safeguarding their citizens and firms. There are also complicated issues related to the jurisdictional ability of local regulators to hold a foreign e-payment firm accountable in case of wrongdoing. These concerns are shared by most countries, and India won’t be alone in rejecting them. DATA FLOW AND LOCALISATION While JSI proposals are strongly in favour of eliminating restrictions on cross-border transfer & offshore processing of data, and opposes data localization, there’s consensus on “data sharing with a trust”. Large developing countries like India generate a lot of commercially profitable data.
There is a fear that data generated in developing countries can be tapped by large digital players in industrialized countries for profit, while data generators in developing countries will get no benefit. This is an important concern that needs to be looked at. The linkage between data localization leading to data centres being developed locally and that leading to competitiveness is highly spurious. What matters is who ‘owns’ the data, and can exploit it for economically profitable ends. Without having firms that can manage the process of collecting and storing big data, and have the knowhow for applying algorithms and analytics, it would be impossible to leverage benefits of big data in industrial design and automation (industry 4.0), logistics management, product design & development, consumer targeting & marketing, or provide embedded digital products & services across manufactured products. There is no doubt that a country like India can benefit with state-of-the art data processing facilities, and government needs access to data for governance and policymaking. However, the issue is of governments being able to access this data when needed, and ensuring that sensitive data is kept safe. Both these objectives can be achieved irrespective of where the data is stored. In fact, most global MNCs have data centres in multiple locations. Malaysia, for instance, hosts many data centres, but apart from some revenues from data centre location, gains little economic advantage from the data across the world being hosted in these centres. India has one of the world’s largest consumer markets including a large and growing middle-class that generates massive amounts of data. The allowed restrictions in JSI proposals on personal and sensitive geological or logistical data, again based on allowed restrictions on security aspects would create a natural case for locating data centres in India. This would not be true for
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most other developing countries. India also has a large pool of technically skilled manpower and start-up/innovation eco-system that can analyse this data successfully. The combination of the two would make India an ideal location for developing data centres and associated analytics and related data centre services. If India can provide assured high-class digital infrastructure that is secure and reliable, economies of scale and average lower cost skilled manpower would make it the global location for data centres; a major source of revenue. TO CONCLUDE India is negotiating bilateral trade agreements and discussions in JSI are going to be reflected in these agreements. Existing bilaterals like the one with Japan are also up for review. It is better to be a part of a forum like JSI and play an active role to develop trade rules rather than to enter JSI at a later stage or agree to it through bilateral agreements. 2022 is important in JSI as discussions in key areas like data sharing and localisation and source code will be held. Discussions will also intensify on market access. India cannot afford to be outside such discussions. At the same time, it is important to collect and collate robust data on e-commerce and digital trade in the country, identify export barriers, and understand the expectation and requirements of the industry. Interests of the Indian industry should be at the centre of India’s negotiating strategies – that will help achieve the goal of “Atmanirbhar Bharat” and also emerge the world’s 3rd largest economy by 2047. Dr. Pritam Banerjee is Logistics Sector Specialist Consultant with the Asian Development Bank (ADB) and Dr Arpita Mukherjee is Professor at ICRIER. Article has been edited due to space constraints. To view the full column, visit tpci. in/indiabusinesstrade. Views expressed are personal.
CROSS BORDER E-COMMERCE
Is India missing out on a big trend? Stakeholders in India are still looking at cross-border e-commerce as a fringe export business. This needs to change so that SMEs, too, can access its benefits.
I
n recent years, cross-border e-commerce has risen to become a major force in B2C and B2B segments. Amazon Global is the only company that is active in sourcing from India and its efforts have shown good results, with projection of US$ 20 billion in exports by 2025. Export stakeholders in India are still looking at CBEC as a fringe export business, unlike China, which has been pushing CBEC exports for over a decade now. There had been no concerted efforts to enter this sector in any meaningful way. A recent growth trend has been the rise of CBEC, especially in the US and China. This has been possible due to the high De Minimis duty threshold, that is imports are duty-free if they fall below a certain threshold, for example, US$ 800 in the US, US$ 177.30 in the EU, and US$ 3,782 (annual ) in China. The value of cross-border e-commerce has been predicted to grow by 25% a year – almost twice as fast as domestic e-commerce. In 2020, 1 in every 5 e-commerce dollars was generated via crossborder trade – and it’s not only the big companies; SMEs too can access the benefits that international e-commerce brings. According to Zion Research, total value of global cross-border e-commerce hit US$ 562.1 billion in 2018 and is expected to reach over US$ 4 trillion by 2027, at a CAGR of 27.4%. A recent study of apparel shoppers across 11 countries revealed that over two-thirds (67%) of them had purchased something from abroad in the last 12 months. Even 1% market share comes to US$ 40 billion in exports for India. Growing at 30%, China is the largest CBEC market in the world. The Chinese government looks at CBEC as one of the pillars of its import and export growth engine. Premier Li Keqiang reiterated the
government’s support for accelerating growth of CBEC and enhancing China’s international shipping capacity in the 2020 Government Work Report. Over the last several years, the government has been rolling out policies, including adding new CBEC pilot zones and pilot cities for CBEC retail importation, extending the CBEC retail import list, and lowering tax and tariffs to boost CBEC. In January 2020, 50 cities were added to the existing 36 pilot cities for CBEC retail importation. In May 2020, the State Council unveiled 46 new comprehensive pilot zones for CBEC, bringing the total number of CBEC pilot zones in China to 105. In the last six years, the proportion of China’s CBEC exports in the country’s total foreign trade jumped from 2.2% to 11.25%. It has already started putting a proactive policy framework in place to promote CBEC in the RCEP region before the deal entered into force. Guangzhou is the first city to issue special policies to help the local business community benefit from RCEP, addressing the following aspects: • • • • •
Optimize the business environment for CBEC Foster main market players Strengthen innovation capacity Expand international marketing network Enhance training of professionals Mega platforms such as Alibaba’s
TMall encourage large brands to come to China and have created warehouses and consolidation centres in strategically located sites in Europe and US. To sell Indian products from SMEs, these should be introduced through increasingly popular social media selling platforms like Wechat. China presents the most exciting CBEC opportunity today. CBEC is largely free from non-tariff export barriers, which are very common in China. Not only are imports duty-free for <US$ 727 single purchase and <US$ 3,782 annually per head for over 1,300 products, but VAT is also reduced by 30%. India can sell a large number of items on the Chinese positive list. Even OTC medicines were added to the approved retail import CBEC list (positive list) in January 2020. Among other examples, Shopee, the major platform in ASEAN countries, is embarking on an expansion program to enter Latin America. Jumia and its rival DHL are expanding operations in Africa, which today represents a US$ 25 billion market. However, to gain a share of the burgeoning CBEC market, the government needs to create an ecosystem where CBEC exports can flourish. Through its agencies, it must come up with end-to-end logistics and fulfillment policies. Amazon Global’s success lies in total control over back-room fulfillment services, from collecting the consignments from India to final delivery to customers. A comprehensive strategy on leveraging CBEC markets can not only give a boost to SME export firms but also international logistics, cross-border payment mechanisms, and supplychain finance. Suhayl Abidi is Research Advisor, GOG-AMA Centre for International Trade & Consultant, Centre for VUCA Studies, Amity University.
Apr-May, 2022 • India Business & Trade | 33
COUNTRY PROFILE
Can India-Denmark GSP inspire rapid green transitions in developing countries? India-Denmark Green Strategic Partnership aims to build on the existing linkages to tackle Climate Change, and has the potential to accelerate the march towards a low carbon future. BY PRASHANT SHARMA
T
he India-Denmark bilateral economic relationship of around 400 years was accorded GSP status during the virtual Leaders’ Summit on September 28, 2020. A catalytic pathway appears to be the 2009 Joint Commission for Cooperation Pact. The pact resulted in joint Working Groups on a range of sectors such as renewable energy, urban development, environment, agriculture, food processing, science, technology and innovation, shipping, labour mobility and digitalization etc. India-Denmark GSP aims to build on existing linkages to tackle the daunting challenge of Climate
Change and deliver on Sustainable Development Goals. In this context, the visit of the Danish Prime Minister was a significant milestone as it came right after a year of the 2020 Summit, and right before Glasgow Climate Conference in OctoberNovember 2021. Measures such as India-Denmark Joint Action Plan for 2021-26 have also been put in place for implementation of GSP. High level political exchanges are further expected, including at the India-Nordic Summit in Copenhagen in 2022. The two countries could now strive to build on a few focus areas to maximise sustainability gains for India & other developing countries.
34 | India Business & Trade • Apr-May, 2022
SYNERGISING PRIORITIES Denmark has set an ambitious goal of reducing greenhouse gas emissions to 70% by 2030 compared to 1990 and achieving carbon neutrality by 2050. On the other hand, India has set the target to achieve carbon neutrality by 2070, and announced a 2030 transition pathway. It strives to increase non-fossil fuel based energy capacity to 500 GW, meet 50% of India’s energy requirements from renewable sources, reduce 1 billion tonnes of projected carbon emissions, and cut carbon intensity of the economy below 45%. India’s position at Glasgow Climate Conference is in line with
DENMARK
the ‘Common but Differentiated Responsibilities and Respective Capabilities’ principle of the Paris Agreement. But having underlined the ambitious 2030 goals, India seems to be leading the way for developing countries. India and Denmark could foster closer global cooperation to mobilise the required skills, technology, climate finance and adaptation support. A joint India-Denmark Centre of Excellence for Offshore Wind and Renewable Energy (CoE) has been launched in New Delhi on September 09, 2021. This could accelerate resource mobilisation as well as renewable energy investments from the EU and Nordic countries, among others. The CoE’s role will be vital, particularly in view of India’s 30 GW offshore wind energy target by 2030 along its 7,600 km coastline. India and Denmark could steer scalable collaborations to build offshore wind and floating solar farms along India’s territorial waters and EEZs. They could even underpin such a renewable energy transition for Small Island Developing States and developing countries in the Indo-Pacific region. For greater techno-commercial and financial viability of renewable energy projects in India and other developing countries, it will be useful to localise global best practices. Rewa Solar project in India, for example, could provide the basis for effective project planning and implementation at scale with competitive tariffs and greater environmental, social, and governance impact. LEVERAGING LINKAGES India and Denmark coordinate on global issues at various regional and multilateral formats including on the margins of UN General Assembly and Asia-Europe Meeting. India’s outreach to Nordic countries of Denmark, Finland, Iceland, Norway and Sweden in the form of IndiaNordic Summit focuses on global issues of security, economic growth, innovation and climate change. India-Denmark GSP also
resonates with resolutions of the first India-Nordic Summit that took place in Stockholm on April 17, 2018. The two countries have also agreed to take steps under EU Strategy on the Indo-Pacific and India-EU Connectivity Partnership. Except Norway and Iceland, other Nordic countries including Denmark, with or without Euro as their national currency, are members of the EU. But all Nordic countries belong to the Schengen area, the world’s largest visa free zone enabling free and unrestricted movement of people within and beyond Europe with common judicial and police cooperation system.
INDIA & DENMARK COULD STEER SCALABLE COLLABORATIONS TO BUILD OFFSHORE WIND & FLOATING SOLAR FARMS ALONG INDIA’S TERRITORIAL WATERS AND EEZS. Moreover, the EU is India’s third largest trading partner with expanding investment linkages. Timely progress on a potential India-EU trade pact, as well as separate negotiations on investment protection and geographical indications will tremendously boost trade and market access linkages for India-EU in general and IndiaDenmark in particular. India-Denmark bilateral trade in goods and services was US$ 3.58 billion in 2020, where trade in services was US$ 2.32 billion. Denmark and India are usually at an advantage in services and goods trade, respectively. Danish companies in India are more than twice in number as compared to Indian companies in Denmark. They represent transport & logistics, water, waste to wealth, waste to energy, agriculture & food processing, renewable energy,
innovation and digital transformation and clean technology sectors. India-Denmark innovation and digital transformation partnerships are deepening too. For example, supply chain digitalisation in India in both domestic and cross border contexts is assisted by a Danish company – Maersk. On the other hand, Indian companies in Denmark are also building greater economic, innovation and people-to-people linkages. A recent partnership between Infosys Technologies and Aarhus University to establish a Denmark-based Centre of Excellence for Sustainability Solutions for India is an example. Similarly, there is an Urban Living Lab in Goa for sustainable and smart cities, while efforts for framing Indo-Danish Water Technology Alliance are taking shape. Similarly, India and other developing countries need to build domestic capacities to adapt to developed countries’ emission reporting requirements from imports and consumption. For example, Denmark’s climate goals enshrined in its 2020 Climate Law are subject to annual parliamentary review, and include a provision for such reporting. Similarly, Denmark’s global engagement guidelines on climate change and climate finance have also been stipulated. In view of that as well as broader European Green Deal, among others, closer global cooperation on capacity building and mobilising climate finance for green transition in developing countries will be needed. India has the potential to become a knowledge and capacity building hub for another Green Revolution! India and Denmark could therefore strive to synergise, leverage and deepen institutional linkages with the EU, Nordic and other likeminded countries. The partnership could then help accelerate green economic transition in India and other developing countries in its neighbourhood and elsewhere.
Apr-May, 2022 • India Business & Trade | 35
CHOPPER VIEW
Business survival strategies: Keeping pandemic blues away Pushkar Mukewar explains some business survival strategies that can help SMEs tide over challenges posed by the pandemic for international trade.
I
t’s been over two years since the nationwide lockdown imposed during the pandemic. Looking back, it is appalling to see the vast number of businesses that were forced to shut shop because of unanticipated disruptions like the global supply chain crisis, soaring raw material costs, labour shortage, and paucity of containers for shipment, to name a few. While most found it challenging to adapt to the emerging uncertainties, some businesses and their visionary entrepreneurs paved the way and came forth with innovative solutions to stay afloat. This blog looks into the interplay between struggle and strategy, and the problems surrounding some entrepreneurs over the past two years, their coping mechanisms, lessons, insights, business survival strategies and visions that others can emulate. THE WAIT AND WATCH APPROACH A lot of MSME exporters found themselves in the middle of a serious logistics challenge. Container shortages began to have a significant impact on export shipments, in addition to augmenting volatility, increasing freight charges and causing unprecedented delays. In this kind of a situation, patience may be the key for companies to keep their businesses afloat. Prashanna Sivaraman, Head of Finance at Sri Kanthammal Padmanaba Modern Rice Mill, talks about his current ‘wait and watch’ approach to business. He cautions companies to play safe in these turbulent times and only stick to well-known markets. He adds: “Around 60% of our
Pushkar Mukewar CEO & Co-Founder, Drip Capital
rice trade to African nations is conducted through containers. But the shortage of vessels has heavily affected business in this region, resulting in trade in the market coming to a standstill. There has been a 500%-600% increase in freight costs due to multiple bottlenecks, causing us to let go of some businesses and seek new markets and players. However, currently, we don’t have plans to go out of our way to procure new buyers and will prefer focusing our business in Southeast Asia and China, where conditions are still favorable.” To stay on top of its game, the company resorted to bulk cargo shipping as part of its supply chain innovation strategy. The unpredictable times that exporters are going through have not left much room for speculation. However, Sivaraman still hopes for the best while preparing his team for a continuation of the crisis in the coming years through sound financial planning.
36 | India Business & Trade • Apr-May, 2022
INSURANCE A MUST Speaking on similar lines of Sivaraman, Vyom Varshney, Owner of Eco Organics, also believes in opting for a conservative approach instead of a modern one, considering the highly unprecedented times. This involves taking minimum risks and undertaking thorough assessments to ensure financial integrity of the organizations. Companies must, for example, not accept orders without insurance, and prioritize safety at all times as against taking on complex challenges At the same time, he advises businesses to continue building trust with buyers and assuring them to the extent they can in these distressing moments. Consumers today are more sensitive to who they are doing business with. Thus, the 2020 Edelman Trust Barometer Special Report found that for 53% of respondents, trusting the company behind a brand or product is the most important factor when making a buying decision, even more than price. This can ultimately lead to improved customer loyalty,
CONTAINER SHORTAGES BEGAN TO HAVE A SIGNIFICANT IMPACT ON EXPORT SHIPMENTS, APART FROM RAISING VOLATILITY AND FREIGHT CHARGES AND CAUSING UNPRECEDENTED DELAYS.
COVID SURVIVAL STRATEGIES
higher levels of repurchase, more referrals, and a better reputation. CONSULTATIONS WITH LOGISTICS EXPERTS Another useful strategy to overcome uncertainties is to ask the experts. Stressing the importance of one-on-one consultations with subject matter experts, and staying abreast of key trends across various markets, Sreeram Innagalla, Owner and MD at SriAqua Seafoods, today, prioritizes the understanding of dollar calculations and costing as integral parts of conducting international business. Moreover, the exporter also highlights the need to build a good rapport with freight forwarders and shipping liners, “Nobody understands market predictions as brilliantly as these skilled individuals. They have a thorough grasp of the situation and can easily gauge the monthly costs for any specific destination. Although we have plans to expand to new markets, the time isn’t right, and this we understood through our robust network of talented logistics personnel,” adds Innagalla. Besides gaining insights from experts to understand the most suitable geographies to target, their knowledge helps one realize which markets to avoid, considering the present situation. However, at the same time, Innagalla suggests it is crucial to continue establishing a network in all markets, as you never know when an unsung opportunity could suddenly knock on the door. BUILDING CUSTOMER RELATIONS IS KEY Outlining the significance of mindful yet cordial business relations, Aditi Goyal, Business Development & Operations Manager at Shreedhar Cotsyn Pvt Ltd, discusses the importance of mutually beneficial contracts as a business survival strategy that can keep both parties happy. According to Goyal, this will help maintain positive relations with
THE 2020 EDELMAN TRUST BAROMETER REPORT FOUND THAT FOR 53% OF RESPONDENTS, TRUSTING THE COMPANY BEHIND A BRAND OR PRODUCT IS THE MOST IMPORTANT FACTOR buyers while showcasing how well you understand and value your clients’ needs. Talking about the specific challenges her industry is currently enshrouded with, Goyal mentions that business was initially faring well until cotton prices skyrocketed, accompanied by a sudden fall in demand for Indian cotton due to tight supplies. Even industry experts claimed that Indian cotton has been facing stiff competition from its US and Australian counterparts, causing further damage to indigenous businesses.
She explains, “Despite the rising raw material costs, our primary focus is to not lose out on our loyal customer base and strive towards enhancing their experience. Besides conducting regular communication with clients and absorbing their needs, we are compromising by paying high freight costs for our old customers even if it eats into our profit margin a little and arriving at a middle ground when it comes to negotiating contracts.” THE BIG PICTURE Considering how these entrepreneurs have efficiently managed to rebuild their supply chain and do their bit to continue to stay resilient, businesses must manage risks, bolster customer relations and rope in subject matter experts to avert crises and stay resilient. Exploring innovative strategies & giving a proactive response to customers can also promote resilience. Pushkar Mukewar is the CEO/ Co-Founder, Drip Capital. Views expressed are personal.
Apr-May, 2022 • India Business & Trade | 37
HAPPENINGS
What’s the latest
@ TPCI
5th edition of IndusFood & 2nd edition of IndusFood Tech
Inspired by the motto ‘Mask on, Business On’, TPCI orchestrated South Asia’s most integrated trade show for the F&B and food tech industries, Indusfood 2022. Shri Bhagwanth Khuba, Hon’ble Minister of State for Chemicals & Fertilizers and New & Renewable Energy;
and Shri S. Muniswamy, Hon’ble MP, Lok Sabha were the guests of honour at the session. Over 450 Indian F&B exporters & foodtech suppliers, 10 major retail chains, and 1,000 international buyers across 50+ countries participated in the show. Some of the
major delegations were from Nepal, Lebanon, Bangladesh, Iraq, Egypt, Belarus, Russia, Ukraine and Uzbekistan. TPCI MSME Export Excellence Awards 2022 were also held on the eve of Indusfood to honour the most exemplary achievers in the Indian F&B and food
processing technology sectors over the previous year. Shri Narayan Rane, Hon’ble Minister of Micro Small and Medium Enterprises, Government of India, was the Chief Guest for the awards function, which was also graced by the presence of Shri S. Muniswamy, Hon’ble MP, Lok Sabha, Mr Mohit Singla, Founder Chairman, TPCI, Mr Vivek Aggarwal, Chairman, F&B Sectoral Committee, TPCI and Mr Abhishek Poddar, Vice Chairman, F&B Sectoral Committee, TPCI.
Location: India Expo Mart, Greater Noida Date: January 8-10, 2022
38 | India Business & Trade • Apr-May, 2022
WHAT’S THE LATEST @TPCI
Stakeholder discussions on India-UK Trade Agreement TPCI organised earnest discussions with various segments of the Indian F&B industry in partnership with Indian Council for Research in International Economic Relations (ICRIER). Leading names across segments like fresh fruits, processed food, fisheries, organic food and meat industry participated in these discussions. The sessions aimed to ascertain their views on the prospects, difficulies faced by Indian exporters in this market and strategies
adopted by foreign brands in these sectors to establish their operations in India. They also discussed the requisite policy interventions needed; pivotal role of research and modern technology in amplifying these exports; and the effect of the pandemic in exacerbating the existing problems.
There was also a dedicated session that examined challenges faced in terms of import procedures, regulatory issues, costs, ease of doing business, etc., F&B products that are banned in the Indian market; and the areas where India and UK can work to improve trade facilitation/ease of business for exports.
Screenshots of F&B stakeholder discussions held with representatives from: 1. Fresh fruits 2. Processed food 3. Fisheries 4. Organic food 5. Meat 6. Indian importers and retailers
The sessions saw enthusiastic participation by the attendees who contributed proactively to the discussions by highlighting some pertinent points useful for negotiators of the FTA on advancing India-UK trade in the F&B sector. Dr Arpita Mukherjee, Professor, ICRIER represented the prominent policy think tank at these discussions and the sessions were moderated by Virat Bahri, Deputy Director, Media & Corporate Communications, TPCI.
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3
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Apr-May, 2022 • India Business & Trade | 39
HAPPENINGS
Training on Trade Finance & Forex solutions TPCI organised a virtual workshop & training programme on Export Finance & Forex Solutions for Indian exporters with the support of the Department of Commerce, Government of India. TPCI’s member exporters (numbering around 250) attended the various sessions from across India hailing from chemical and allied products category. Vijay Kumar Gauba, Additional Director General - TPCI, delivered the opening remarks and welcomed all the attendees at the event. Shri Manish Chadha, Joint Secretary of EP (CAP), Department of Commerce, Government of India, delivered the keynote address. He
appreciated TPCI’s efforts to conduct this workshop, spoke on the paradigm shift in doing business post COVID-19 and highlighted the importance of engaging in the virtual mode.
The sessions were addressed by speakers hailing from from prominent organisations like ECGC, ICICI Bank and Myforexeye. The attendees congratulated TPCI for hosting this
insightful session. The session was moderated by Sameer Pushp, Director Media & Corporate Communications, TPCI.
Date: February 8 & 9, 2022
Workshop for the Ceramic Industry TPCI successfully organised a virtual workshop and training on design and brand building for the ceramic Industry. The panel of experts
hailing from reputed bodies deliberated upon various topics to leverage the strength of Brand India in the global market. The TPCI member
exporters hailing from ceramic products categories joined this session. This workshop was supported under the MAI scheme of the
Ministry of Commerce & Industry, GOI. The esteemed panel of speakers comprised of Anju Pawar – Discipline Faculty, Ceramic & Glass Design, National Institute of Design, Ahmedabad; Arunotpal Thakur, Visiting Professor, Dept. of Design, Delhi Technological University, New Delhi, India; Sourav Vikash Borah- Assistant Professor, Marketing IIM Ahmedabad; and Pallavee Dhaundiyal Panthry, Founder and Executive Director, Amigoz PR & Communications. It was moderated by Sameer Pushp, Director Media & Corporate Communications, TPCI.
Date: February 25, 2022
40 | India Business & Trade • Apr-May, 2022
WHAT’S THE LATEST @TPCI
Briefing for Indian food exporters to the US
TPCI partnered with Consulate General of India, NY, US Customs and Border Protection, US Food & Drug Administration, Port Authority of New York and New Jersey and Entry
India to host a briefing for Indian F&B exporters to the United States. The speakers for the session were Hon. Randhir Jaiswal, Consul General of India in NY, Govt. of India; Vijay
Kumar Gauba, Additional Director General in TPCI; Cory Wyatt, Mid Atlantic Account Manager, PANYNJ; Nicol Polidoro, Northeast Regional Account Manager, PANYNJ; Theresa
Smedley, Supervisor Consumer Safety Officer, FDA; Navin Pathak, Chief Operating Officer, Entry India; & Basil Liakakos, Branch Chief Trade Operations Division, US CBP. The virtual session discussed various challenges faced by Indian exporters in the US. F&B exporters got an opportunity to understand the procedures and regulations at US ports, and also address their specific queries. It was fairly well received.
Date: March 4, 2022
India-Brazil Business Round Table TPCI and India Brazil Chamber of Commerce hosted an exclusive IndiaBrazil Round Table on March 14. The event was organised to welcome a special delegation that was visiting India from the state of Minas Gerais in Brazil to promote bilateral trade and investment opportunities with India. The Brazilian delegation visit was organised by the India Brazil Chamber of
Commerce with the Government of the State of Minas Gerais and the Consulate General A.H. of India in Minas Gerais, supported by the Embassies of both countries, Brazil and India. The delegation was headed by HE Mr. Paulo Brant, Vice-Governor of the State of Minas Gerais, his special advisors, and complemented by the Secretary of Economic Development of the State, Mr. Fernando Passalio.
They were accompanied by Mr, Élson de Barros Gomes Júnior, Honorary Consul General of India in Minas Gerais and Mr. Leonardo Ananda Gomes, Honorary Consul General of India in Minas Gerais and President, India-Brazil Chamber of Commerce. Mr João Paulo Braga, President, Invest Minas, discussed investment opportunities in the state with the delegation. The TPCI team was led by Mr Vijay Gauba, Additional Director General, Mr Suresh
Kumar Makhijani, Joint Director General and Mr Ashok Sethi, Director. The session was moderated by Mr Virat Bahri, Deputy Director, Trade Promotion Council of India. After the discussion, TPCI also signed an MoU with the State of Minas Gerais with the aim to deepen collaboration to promote bilateral trade and investment.
Location: Le Meridien, New Delhi Date: March 14, 2022
Apr-May, 2022 • India Business & Trade | 41
HAPPENINGS
Source India Bangladesh Top representatives from the Bangladesh Chemical Importers and Merchants Association, including Mazakat Harun Manik, President; Maksudur Rahman Sapon, Vice President; and Abul Kalam Azad, Secretary General – also attended the event.
TPCI with support of the Department of Commerce, Government of India, organized its flagship export promotion event called Source India Bangladesh. The show was
Around 70 exporters from India exhibited in Source India Bangladesh, while around 700 buyers from Bangladesh visited the event. It was well appreciated by industry.
Date: March 26-28, 2022
inaugurated by Abdullah AL Mahmud, President, Bangladesh Export Forum; AKM Sayedad Hossain, Secretary, Bangladesh Export Forum; & Sandip Das, Deputy Director General, TPCI.
India-Canada Business Round Table TPCI and Indo-Canada Chamber of Commerce hosted an India-Canada Business Round Table with delegates representing the business community in Canada. The TPCI team was represented by Mohit Singla, Founder Chairman; Suresh Makhijani, Joint Director General; Sandip Das, Deputy Director General;
Deepak Vohra, Director; Asgar Khan, Regional Director and Nupur Kumaria, Sr. Assistant Director. Indo-Canada Chamber of Commerce was represented by Ripudaman Singh Dhillon, President; Virender Rathi, Corporate Secretary & Executive Vice President, Membership Engagement; Arvind
42 | India Business & Trade • Apr-May, 2022
Bhardwaj, Executive Vice President & Director, Finance, Sponsorship & Communications; Vikas Sharma, Executive Vice President & Director, Small & Medium Enterprises; Murarilal Thapliyal, Vice President & Director, International Trade & Global Affairs; Bhavik Parikh, Director, IT and Sheelu Sharma, Director, Programs &
Events. The delegates discussed the broad disruptive trends across the business landscape in India and Canada during the pandemic and the strategic approaches taken by governments and business in both countries.
Date: March 29, 2022 Location: Constitution Club of India, New Delhi
WHAT’S THE LATEST @TPCI
WEBINARS F&B Trade and Investment Opportunities between India and West Canada TPCI, in collaboration with the Consulate General of India, Vancouver, organised an interactive panel discussion on F&B Trade & Investment Opportunities between India & West Canada, a key trading partner for India. The webinar focussed on trade and investment opportunities for Indian companies specifically in the region of West Canada, which includes British Columbia, Alberta, Saskatchewan, Yukon and
Northwest Territories. The webinar was addressed by Manish, Consul General of India, Vancouver, Canada; Manjish Grover, Consul (Commerce), CGI Vancouver; Tony Singh, CEO & President, Fruiticana; Abhishek Poddar, Vice Chairman, Food & Beverage Sectoral Committee, TPCI; Suresh Kumar Makhijani, Joint Director General, TPCI; and Ashok Sethi, Director, TPCI.
Future of Cryptocurrency in India
Trade Promotion Council of India organized a webinar on The Future of Cryptocurrency in India. The panellists from industry and academia discussed the growth of cryptocurrency in India, safety concerns about the trend and the implications of policy mechanisms being devised to regulate this sector. The esteemed panel included Manhar Garegrat, Executive Director – Policy and Special Projects,
CoinDCX; Dr Sushmita Ruj, Senior Lecturer, School of Computer Science and Engineering, University of New South Wales, Sydney; Sanchit Vijay, Partner – Deals & Valuations, Corporate Professionals; and Dr Suranjali Tandon, Assistant Professor, National Institute of Public Finance and Policy.
Date: February 22, 2022
AI in India: Post-COVID trends and Future Prospects TPCI organised a webinar on AI in India: PostCOVID trends and Future Prospects on March 30. The webinar aimed to deliberate on the evolution of AI across the world in the pandemic period, its progress & potential impact on India’s business competitiveness, and how the country can leverage its lucrative ecosystem and strong policy support to emerge a frontrunner in this technology area of the future. The panel consisted of Dr. Avik Sarkar, Faculty,
Indian School of Business; Dr (Maj) Satish S Jeevannavar, Founder/CEO, Ai Health Highway; Prof Rajat Agrawal, Faculty, Department of Management Studies, IIT Roorkee; Anees Merchant, Executive VP – Growth, Course5 Intelligence; Vijoe Mathew, Global Director of Analytics, Anheuser-Busch InBev; Prashanth Kaddi, Partner, Deloitte India; and Anoop Menon, PrincipalInvestments, Chiratae Ventures.
Date: March 30, 2022
Date: March 9, 2022
Apr-May, 2022 • India Business & Trade | 43
VIEWPOINT
Apply ‘Local for Global’ in yoga exports During the pre-COVID phase, many yoga institutes used social media largely for promotions. But the pandemic has brought forward the importance of Mode 1. AN INTERACTION WITH DR. NEHA GUPTA IBT: How do you view the nonstandardization of yoga practices as a challenge to its evolution? Dr Neha Gupta: All around the world, people are becoming yoga instructors without a formal process of standardization. For instance, one can be a yoga instructor by just undergoing 100-200 hours of classes with any yoga Institute, which need not be Indian. There are around 10-15 universities in India that offer degree courses in yoga; however, this is still an open unregulated field sans barriers to entry. Further, as yoga has been an ancient knowledge base, different Yoga Schools teach their own styles. What concerns me is that due to lack of formal training and experience and lack of skills about the treatment of specialized diseases, there can be some harm to the student/patient/ learner. Some teachers possess the knowledge and are well-versed but lack skills/training; while some can communicate well, teach proper asanas, and have training, but lack theoretical knowledge. So, the need of the hour is the ‘Regulation of Yoga’. The Indian government in collaboration with yoga institutes has to create awareness and make yoga a regulated field. Universities must launch more mandatory and formal degrees based on different levels of yoga instructions as well as bring specialized modules for different kinds of diseases. India must unleash its competitive edge in the theoretical aspect of yoga. IBT: How can FTAs & RTAs be leveraged to boost yoga as a service export from India? Dr Neha Gupta: Trade agreements can help boost exports of yoga
services from India, provided we make rational commitments regularly followed by proper implementation of those commitments. For example, during 2011, under India-Japan CEPA, it was agreed to liberalize all services modes to cover movement of yoga teachers/services providers; and most importantly, in 2018, under the early harvest package of upgraded India-Korea CEPA, commitments were made to allow Indian yoga instructors and institutes to open centers in South Korea, offer guidance in Korean hospitals, in return for allowing Korean Taekwondo teachers into India. I would like to point out the signing of the India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement in 2021, where service providers from India will be getting access to the yoga services sector. As this is a newer agreement and involves exchanges between Asia and Africa, it can serve as a good starting point to capture the actual capacity of FTAs in terms of improving the trade of yoga services. IBT: How has the COVID-19 pandemic impacted yoga exports? Dr Neha Gupta: Pre-COVID, many yoga institutes used social media largely for promotion and refrained from adopting online classes/courses. But the pandemic brought forward the importance of Mode 1. As demand and popularity of yoga have increased through telecommunications and internet usage, negotiations under FTAs must escalate. Why not apply ‘Local for Global’ in yoga services exports? The COVID-19 pandemic has changed the mode of exports of yoga; before this, the supply of yoga
44 | India Business & Trade • Apr-May, 2022
services by India under GATS was mostly under Mode 3 (investing abroad by opening centres) and Mode 2 (consumption abroad), which have been major sources of earning. On the other hand, note that the movement of India’s yoga professionals (Mode 4) has also got boosted post-2014 when Indian embassies abroad agreed to have a Teacher of Indian Culture. WTO trade negotiations can now include yoga too; however, this would require proper categorization. To explain, despite few commitments under FTAs on yoga services’ exports, negotiations remain weak due to the difficulty in classifying this sub-sector under the WTO agreement, i.e., whether to classify it under health services or recreational/ sporting services. All this causes hindrances in assessing country-wise commitments on yoga services under the WTO GATS framework. Also, some literature suggests including certain matters relating to yoga services under education services. The questions thus arise: what is the right way of classifying yoga services to initiate better negotiations under FTAs and to know about other members’ commitments? What are the key barriers preventing India from harnessing export potential in this industry and how can these be addressed? Can a comprehensive policy be formulated to guide India’s export strategies in yoga? Dr Neha Gupta, Fellow at ICRIER works on trade issues in manufacturing and yoga services.
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