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Published by the Embassy of India, Vienna Year 4 • Issue 43 • July 2014


India Newsletter • 1

Embassy of India, Vienna



India's millionaire households ranked 15th globally with 175,000 millionaire households in 2013.n


The organised apparel industry in India is expected to register a 15 per cent growth in 2014.n


The branded quick service restaurant (QSR) market in India is valued at US$ 13 billion.n


Water management firm Wabag to cuts costs by shifting control from Austria to India. VA Tech Wabag plans to operate its overseas businesses from India to take advantage of lower costs and higher margins, according to Mr Rajiv Mittal, Managing Director, VA Tech Wabag.n


India became a permanent member of the Washington Accord (WA) on June 13, 2014. The country now joins an exclusive group of 17 countries who are permanent signatories of the WA, an elite international agreement on engineering studies and mobility of engineers.n


The Union Government will create a separate ministry for 2 • India Newsletter

promoting entrepreneurship and skill development, as per Mr Narendra Modi, Prime Minister of India.n


Net investment by foreign investors into the Indian market stands at Rs 26,165 crore (US$ 4.36 billion) in June so far.n


Exports post double-digit growth in May. As shipments of key commodities such as engineering goods, petroleum products, readymade garments and pharmaceuticals registered strong growth, the exports from #India posted a 12.4 per cent increase in May 2014, the highest in six months.n


In FY12, India had as many as 51,877 registered food processing units with total foreign direct investment of approximately USD170.2 million, which more than doubled to USD401.5 million in FY13.n


The total amount of equity investments held through P-Notes in May 2014 was up by over Rs 15,735 crore (US$ 2.61 billion) to reach Rs 133,828 crore (US$ 22.19 billion).n


India is expected to register fastest Facebook user growth (40 per cent) globally in 2014.n


Mobile services market in India is expected to grow at a CAGR of 5.2 per cent to touch US$ 37 billion by 2017.n


India attracted foreign direct investment (FDI) worth US$ 28 billion in 2013, as against US$ 24 billion in 2012.n


Kozhikode (Calicut) is emerging as the fastest second non-leather footwear hub after Delhi, recording an impressive 132 per cent rise in business in 2013-14.n


Investments into Indian shares via participatory notes (P-Notes), a favoured route for overseas HNIs and hedge funds, reached Rs 2.12 trillion (more than US$ 35 billion) in May 2014, a sixyear high.n


Non-food credit of scheduled commercial banks in India grew by 13 per cent to Rs 5,589,500 crore (US$ 929.35 billion) in May 2014 from Rs 4,944,700 crore (US$ 822.38 billion) in the same period last year.n

NEWS ARTICLES Efkon: Vehicle Tracking Devices sold to Indian Oil Corporation Ltd.


ontinuing the winning streak in the VTS business, EFKON India, a fully owned subsidiary of Austriam STRABAG SE, a Global leader for intelligent transport and traffic solutions, again was successful in winning 4 tenders for vehicle tracking systems. The Indian Oil Corporation LTD. ordered a total amount of 6631 devices which equals an order intake of € 1,4 Mio. Indian Oil Corporation LTD. (IOCL) is an Indian state-owned oil and gas corporation. It is the world's 83rd largest corporation according to the Fortune Global 500 list and the largest public corporation in India when ranked by revenue. The Indian Oil Group owns and operates 10 of India's 22 refineries with a combined refining capacity of 65.7 million metric tons per year. The company is mainly controlled by Government of India which owns approx. 79% shares in the company. Early this year, IOCL invited tenders for supply, installation, testing commissioning, operation and maintenance of vehicle tracking systems. Instead of a single tender for the entire project, tenders were announced state wise. EFKON had submitted bids for 7 of these tenders and was able to win 4 of them (Uttar Pradesh: 1900 devices, Delhi: 2218 devices, Chandigarh: 1130 devices, Noida: 1383 devices).n

Water management firm Wabag to cuts costs by shifting control from Austria to India


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

Chennai-based multinational. Earlier, its international businesses were run out of Austria, the base of its erstwhile parent company, which it acquired in 2007. But now, new subsidiaries fully handled out of India have emerged as better paying verticals, says Mittal. In 2013-14, the overseas businesses contributed over 60 per cent of the company’s revenue of about ₹2,230 crore. The business in Egypt, Tanzania, the Philippines, Nepal and Oman are directly under Indian team support, on the basis of financials, technology and manpower. Even the large markets in Latin America are supported from India. “We believe the margins from this vertical are closer to those in India, by about 10-12 per cent, rather than that those of international markets with margins of around four-five per cent,” he said. The company takes advantage of the global reach of the 90-year-old Wabag brand with lower costs and comparable expertise available in India. This gives it an edge over international competition, he said. The company has strengthened its operations in South-East Asia, West Asia – with focus on Qatar, Oman and Saudi Arabia – and entered Africa last year, he said. Also, common functions like human resource management, finance, treasury, MIS (Management Information System) reporting are being brought to India for better control and done at one-fifth the cost the company will have to pay in Europe. “This is helping us rationalise costs. We are not reducing but shifting people,” Mittal said. Markets handled out of Austria cover Central and Eastern Europe, including Turkey, and North Africa, part of West Asia. It is also slowly moving into some CIS countries. Over the last three years, VA Tech Wabag achieved its annual guidance

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

Bajaj helps plot Austria's KTM its global comeback


ne in 5 of Austrian company's bikes are made in Pune, for a big cost advantage, enabling it to take market share from rivals In late March this year, China saw the roll-out of two locally assembled motorcycles from the brand of Austrian off-road specialist KTM AG. The latter, Europe’s largest twowheeler manufacturer, joined hands with Chinese company CFMoto, building the two bike brands at a facility in Hangzhou, eastern China. And, both motorcycles were designed, developed and manufactured at Pune by India’s second largest two-wheeler producer, Bajaj Auto, before shipping these to China for final assembly. Also, the Duke 200 and Duke 390, sold in Europe and America alongside the Duke 125, are also made by Bajaj. In fact, Bajaj-made bikes accounted for a fifth of the total sales of KTM in 2013. Categorised as street bikes, they led the growth for KTM last year, when sales grew to an all-time high of 124,000, a growth of 16 per cent, beating BMW for a second year in Europe. Street bikes, majorly including those made by Bajaj, grew 40 per cent to 45,681 units, opening a new segment for KTM. THE STREET BIKE ROARS KTM is recognised for dirt bikes, high-end street bikes and superbikes A 14.5% stake buy by Bajaj in 2007 paved the way for a global strategic partnership India Newsletter • 3

Embassy of India, Vienna

Traditionally, KTM has been recognised for its dirt bikes, highend street bikes and powerful super-bikes. But a 14.5 per cent stake buy by Bajaj in 2007 paved the way for a global strategic partnership covering joint product development, technology and distribution sharing between the partners. Bajaj Auto has since raised its stake to 48 per cent and secured two (occupied by Rajiv Bajaj and S Ravikumar) of the 11 seats on KTM’s supervisory board. More, KTM has outsourced all product development work up to 800cc to the Rajiv Bajaj-led company. A new twin-cylinder engine platform and two new models (RC 200 and RC 390) to complement the existing range, to be launched later in the year, are some of the projects Bajaj Auto is working on with KTM. A total of 11,000 KTM bikes were sold in India in 2013-14 and another 24,000 were exported. Bajaj aims to raise the annual export figure to 70,000 annually. Further, it is making room for producing the Husqvarna motorcycle, a brand KTM chief Stefan Pierer acquired recently from BMW. The first ones are expected to roll out in 2015-16 from Bajaj’s Chakan factory, near Pune. Bajaj will develop vehicle platforms and engines which will be shared between itself, KTM and Husqvarna in future. Riding on new-found successes, the Austrian motorcycle maker posted a net profit of €36.5 million (Rs 310 crore) in 2013, a far cry when compared with a €81.4 mn (Rs 500 crore) net loss in 2008-09. From annual sales of around 90,000 units before the stake sale to Bajaj, these grew to 123,859 units in 2013. Rajiv Bajaja, managing director of Bajaj Auto, told Business Standard, “KTM has gained market share without exception in all its existing markets, including Europe and Japan, while being able to finally enter markets such as China and Thailand, for which it didn’t have viable products so far.” Bajaj’s frugal manufacturing base is allowing KTM 4 • India Newsletter

to enjoy greater pricing advantage, as products are made for 30 per cent less than those produced in Europe. Development costs on these highperformance machines are much lower in India than in the research center of KTM in Austria. After dethroning BMW from the top position, KTM has set its sight on Japan’s bike makers. It has an ambitious plan to displace Kawasaki and Suzuki by 2020 - going past Suzuki in two years and beating Kawasaki in five years - in the premium notorcycles segment. KTM is already ahead of Suzuki on sales in Japan and claims it has reached halfway on beating Kawasaki. Bajaj’s Pune plant will, thus, become the production hub for all KTM bikes with engines up to 800cc. On being asked if Bajaj Auto would assume a bigger role in defining the way forward for KTM, Rajiv Bajaj said, “Qualitatively, it’s as originally envisaged whereas quantitatively, with each passing year, our joint products represent a greater share of KTM’s global sales.”n

India Inc’s foreign investment limit eased


ndia Inc could now find it easier to buy foreign assets, with the Reserve Bank of India (RBI) restoring the limit on their overseas direct investments (ODIs) under the automatic route to 400 per cent of net worth. The limit was cut by three-fourths to 100 per cent in August last year after the rupee touched an all-time low of 68.80 a dollar. There is, however, a caveat. RBI said any financial commitment exceeding $1 billion or its equivalent in a financial year would still require a prior approval. RBI said funding of ODIs through external commercial borrowings would continue with the limit of 400 per cent of net worth. The move is the latest in a series of steps taken by the central bank in recent months to relax the controls imposed in August. Last month, it had raised the Liberalised Remittance Scheme (LRS) limit

to $125,000 without end-use restrictions, except for prohibited foreign exchange transactions like margin trading, etc. State Bank of India Chief Economic Advisor S K Ghosh said though the measure might not immediately lead to higher investments by Indian companies abroad, it was a clear signal to the world that India’s external-sector problems were behind. The foreign exchange reserves, at about $ 314 billion as of June, was comfortable, he added. The CEO of an engineering company said the move would not have much impact, as there was not much appetite among Indian companies to invest in new projects or make large-scale acquisitions. “The cap would have had an impact if it had come earlier, when Indian companies were actively searching for foreign assets,” he added. ODIs by Indian corporates during April-August last year was $16.36 billion. This went up to $20.54 billion in the September-March period. In the current financial year till May, the total ODI was $7.18 billion, including guarantees and investments through equity and loan, according to RBI data. Meanwhile, the rupee ended at 59.74 a dollar on Thursday, compared with the previous close of 59.69 a dollar. “This step will not have any impact on the rupee immediately. It shows RBI is more comfortable with the level of the rupee. However, over a period, there may be outflows from India in the name of investments abroad,” said a senior treasury official of a public-sector bank.n

Easing up: Govt extends industrial licence validity to three years


he Government has extended the validity period of an industrial licence to three years from two years, with a provision for further extension by two years. This will enhance the ease of doing business, the Commerce Ministry said in a release.

Extension process The licence will, however, lapse automatically after five years, in the absence of commencement of commercial production, a Press Note issued by the Ministry said. Industry body CII said the Government’s decision demonstrated its commitment to improving the ease of doing business in the country. The applicants fulfilling the given requirements are to be granted an extension of industrial license, with the approval of the Joint Secretary of the Administrative Ministry concerned, without referring the application to a Licensing Committee, the Press Note added. “We hope that this will help in the expeditious clearance of fresh industrial licence applications and the extension of the existing industrial licences,” CII DirectorGeneral Chandrajit Banerjee said. Recently, the Government has taken a number of steps to improve India’s ranking by the World Bank in the ease of doing business. Defence production This included delicensing several Defence products for the private sector. The National Industrial Classification Code has also been upgraded with a view to making the business climate more investor-friendly. According to a World Bank report, India ranks 134th out of 189 economies in the ease of doing business index.n

Government to plan new Foreign Trade Policy aimed at minimum paperwork


he Directorate General of Foreign Trade (DGFT) is aiming at making the new Foreign Trade Policy (FTP) smoother, free from manual hassles and mostly digitised. Pravir Kumar, director general, foreign trade, said, “The new FTP 2014-2019 would be on the lines of maximum governance through simplifying procedures, thereby

minimising human interference.” “We are trying to draft such a policy that would be as paperless, simple and comfortable as possible. That is the main thrust area,” he said. Kumar stated that all sectors have made their suggestions and recommendations and depending on that, the directorate would take a decision. He added, “There were challenges, and all cannot be resolved by the DGFT itself, as they were related to other departments, but DGFT would be facilitating traders by putting across the points of concerns before the various departments.” The interaction was a part of the policy framing process wherein the DGFT is holding consultations with industry on the problems and challenges they face, while trading with other countries. The new five-year FTP is expected to be announced after the presentation of the Budget. He also asked the industry to categorise their concerns namely related to policy, related to products and issues related to other departments.n

India is 15th in world in premium volume


lobal re-insurer Swiss Re’s sigma study on world insurance in 2013 said India stood at 15th position in the world in terms of premium volume. In 2012, it was at 14th position. The study showed insurance penetration in India fell to 3.9 per cent in 2013 compared to four per cent in 2012. India’s life insurance penetration was 3.1 per cent, while in nonlife insurance it was 0.8 per cent. Insurance density stood at $52 (about Rs 3,120) compared to $53 (about Rs 3,180) in 2012. In the world average too, both insurance penetration and density saw a fall. Globally, premiums written in the global insurance industry grew by 1.4 per cent in real terms to $4,641 billion in 2013 after a 2.5 per cent increase in 2012, said its latest sigma

study. Insurance penetration refers to premiums as a percentage of GDP, whereas insurance density (measured in $) refers to per capita premium or premium per person. The slowdown was primarily due to weakness in the life sector in advanced markets. Global life premiums were up only 0.7 per cent in 2013, with weak sales in North America and the advanced Asian markets offsetting a strong performance in Western Europe, Oceania and most emerging markets. Non-life premiums grew by 2.3 per cent, also less than the previous year, as growth slowed in the advanced and emerging markets. Overall profitability in the life and non-life sectors improved, despite the impact of still low interest rates on investment returns. India saw a 0.5 per cent growth in life premiums for the period, whereas non-life premiums saw a 4.1 per cent growth. Total premiums for India stood at $66 billion (Rs 3.9 lakh crore approximately), up by 1.2 per cent. World premiums were up by 1.4 per cent at $4641 billion (Rs 278.46 trillion approximately). Premium growth in the advanced Asian markets was flat relative to the previous year, further offsetting the sector’s strong performance in other regions. At global level, life premiums grew by just 0.7 per cent in 2013 to $2,608 billion -- down from 2.3 per cent growth in 2012. Premiums in the US contracted sharply by 7.7 per cent due to the non-recurrence of large corporate deals which had boosted group annuity business in 2012. The study said life premium growth was expected to resume in the advanced and improve in the emerging markets. The firming economy and labour markets in the advanced markets will support the life and non-life sector, and growth in the emerging markets should hold up also. “In the life sector, China and India in particular should see a return to higher growth rates,” said India Newsletter • 5

Embassy of India, Vienna

the Swiss re sigma study. Overall profitability has improved in the life and non-life sectors. However, the study said investment returns, an important component of insurers’ earnings, remain low given the very low level of interest rates since the 2008 financial crisis.n

‘India became an investment destination under Modi’


ndia has ‘suddenly’ become a promising investment destination for foreign companies looking to do business here, after the new government led by Prime Minister Narendra Modi took over, according to Nitin Nohria, dean of Harvard Business School (HBS). He was speaking to reporters after delivering leadership lessons to top bureaucrats from power, coal and renewable energy ministries. India-born Nohria imparted lessons on leadership qualities to senior bureaucrats of the rank of joint secretary and above in an interactive session organised by energy minister Piyush Goyal. “The first Indian dean of HBS flew in to Delhi to give us a sense of what leadership is all about,” said Goyal said after the session. Goyal himself is pursuing an HBS programme, Owner/ President Management, according to his website. The interactive session lasted for about one-and-a-half hour. Nohria said the country is going through a historic transition in leadership. “These transitions are important events. We cannot imagine economic development without power and coal. Better leadership inspires others,” he said. On being asked what he thinks about the business sentiment in India, Nohria said the country has an “amazing moment of opportunity in terms of international business sentiment.” According to him, people are happy with the clear mandate of the new government. Nohria pointed out that China and Japan have become

6 • India Newsletter

less attractive for foreign investors - another factor that makes India a promising investment destination. “But, people will wait for six months to see if the initial excitement translates into direct action. It is guarded optimism,” he said. The interactive session followed last month’s lecture by author Chetan Bhagat, organised by the ministry for “employees with permanent job with no motivation” with the objective of improving productivity and bringing out new ideas to streamline government processes.n

India Inc on fund-raising and M&A spree


ith a stable, seemingly probusiness government at the Centre, a resurgent corporate India is on a fund-raising spree, aiming to raise up to Rs 120,000 crore in the next two years, of which about Rs 71,000 crore will be raised in the next six months, say investment bankers, who are seeing a boom of sorts after five years of slowdown. Companies are raising funds through dollar bonds and euro bonds, apart from launching offers for sale (OFS), qualified institutional placements (QIPs) and selling stake to investors in India and abroad. “This is one of the biggest fund-raising exercises, making companies like ours to hire more,” says Motilal Oswal, chairman of Motilal Oswal Financial Services. “This (the new government) has given the confidence to Indian companies to go ahead and raise funds for projects in India.” Foreign investors are waiting to participate in the action, and Indian companies are making the most of it. For instance, auto parts maker Motherson Sumi is marketing its Rs 3,000-crore Euro bonds to investors, while Vedanta is seeing a good response to its Rs 3,000-crore dollar bond issue. Not only debt, equity is also in demand from investors. On Tuesday, L&T IDPL sold stake to Canadian Pension Plan Fund for Rs 1,000 crore. The fund has agreed to buy

additional stake for Rs 1,000 crore later. On Tuesday, the Anil Ambaniled Reliance Communications raised Rs 3,000 crore by selling new shares to qualified institutional investors. The Centre is making the most of the bull run to sell stake in Hindustan Zinc, following the Securities and Exchange Board of India allowing non-promoter shareholders to offer shares through the OFS route. The sale of government stake will fetch about Rs 20,000 crore. An OFS for Steel Authority of India Ltd is expected to follow. Analysts say as of now, 21 public sector undertakings, among the BSE 500 companies, have freefloat of less than 25 per cent. At current market prices, the market capitalisation of the stake to be sold to meet norms will be $9.6 billion, through three years. Of this, Coal India will account for 63 per cent, or Rs 36,000 crore. “I expect in the next two years, Indian capital markets will see equity fund raising of $15-20 billion,” says Bharat Banka, managing director and chief executive of Aditya Birla Private Equity. “Additionally, the strategic interest of global players will rise considerably and allow private equity investors to get strategic or control premia for their investments,” he said. Deal Street buzzing Bankers say the deal front is buzzing with activity, with companies planning to either go for acquisitions or sell stake. The Birlas are in talks with Jaypee to buy out Jaypee’s cement plant in Rewa in central India, at a valuation of $1.2 billion. Though the Birlas declined to comment, insiders say the group is conducting due diligence on a few Holcim-Lafarge plants in India, which the latter wants to sell after their merger in Europe. The Tatas are also raising Rs 7,200 crore to buy back 26.5 per cent stake in Tata Teleservices from Japan’s NTT DoCoMo by this month-end. Public sector companies have also caught the M&A. A team of International Coal Ventures Ltd, a

venture owned by SAIL, Coal India, NMDC and NTPC, is in Mozambique to buy a coking coal mine from Rio Tinto for about $250 million (Rs 1,500 crore).n

Indian CFOs most optimistic group in Asia: Amex survey


ndian chief financial officers (CFOs) appear a confident bunch. Not only are they more optimistic on the growth prospects of the domestic economy than their peers in China, Hong Kong and Japan, but they also lead the Asian region in terms of their investment and spending plans across business functions, a survey conducted by American Express has found. “India is at par with China in the Asian region with a 17 per cent expected average increase in spending and investment...Indian CFOs lead the Asian region in terms of their plans to spend on transportation and logistics, computer hardware, enterprise IT, labour and headcount, and business and professional services,” American Express said in its ‘Global Business and Spending Monitor 2014’ report. The survey covered 507 senior finance executives at companies with an annual revenue of $500 million or more. Thirty of these respondents are based in India. The survey was conducted in March, 2014. As many as 86 per cent of Indian CFOs expected the domestic economy to expand over the next year, while 79 per cent of them anticipated economic growth to be a key driver for business expansion. In contrast, CFOs in China, Hong Kong and Japan have scaled down their expectations of domestic economic growth compared to last year. “Compared to their counterparts in other Asian countries, Indian CFOs demonstrate highest confidence in their local economy,” the report said. The enthusiasm about the Indian economy was not only restricted to local CFOs. More than 77 per cent respondents expect maximum

growth to accrue from the Indian market followed by 67 per cent respondents expecting growth from the Asian region. While Indian CFOs are not only planning to increase spend, many of them have aggressive investment plans. “Eighty-seven per cent of Indian CFOs will increase spending and investment; 30 per cent will increase spending and investment aggressively while another 56 per cent will increase moderately,” the report said. The reasons to increase spends vary — from remaining competitive to protecting market share, and from pursuing innovation to improving financial returns. Many Indian CFOs also believe they need to spend more to grow through acquisitions and business partnerships. The top business activities cited for investment include improved business intelligence and delivery, adding capacity for production and service delivery, sales and marketing activities, and improving production process efficiency. The survey also showed that Indian finance executives’ importance in their organisations is on the rise. “Eighty-seven per cent Indian respondents agreed that the finance viewpoint carries an influential and determining factor in strategic operations decisions,” the report said.n

India has potential to get $40 b PE investment: PwC survey


rivate equity (PE) investors’ sentiments towards India are turning significantly optimistic. A PricewaterhouseCoopers India report based on a survey of 40 PE firm partners estimates that India has the potential to get PE funding of $40 billion (over Rs. 2.36 lakh crore) by 2025. Future PE investments would be led by India’s continuing consumption story, realistic valuations, globally competitive businesses, rising private entrepreneurship, the ability

to support businesses going global and innovation, said the report. Eager to support solid cos Sanjeev Krishan, Leader — Private Equity PwC India, said, “Investments will see a spurt in the infrastructure and manufacturing sectors over time. PE investors are also eager to support solid Indian companies with proven local presence, to expand in overseas markets.” The next investment cycle would see consolidation in the PE space with 70-80 players forming the universe, said the report. Due diligence on companies would become more rigorous and governance quality would become a differentiator. ‘Clean’ deals — deals where the investee company has promoters with proven quality of managing their businesses coupled with the highest standards of governance — would command premium valuations, said the report. PE firms would use strategic sales more for exiting their investee companies over IPOs/ secondary sales. There would be greater alignment of interests of promoters and PE firms with exits being planned well in advance. Mature forms likely More promoters would be willing to cede control and become open to ideas from external sources (PE investors) in key decision making, such as hiring of CXOs. More mature forms of investment, such as buyouts, would start taking place, with early stage opportunities in angel/venture capital existing simultaneously, the survey said. Investment opportunities would hence see a greater degree of segmentation between the various classes of investing — large buy-out funds, late growth investors, early stage investors and venture capital firms. Change in promoter behaviour is expected to trigger an increase in buy-out opportunities. Indian companies looking out for the next level of growth due to lack of capital, paucity of management skills and India Newsletter • 7

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necessity of a fresh thought process fall in this bracket. Companies where the next generation is unwilling to take over the reins are also potential investees for PE firms. PE firms would focus more on retail/ consumer, IT/ITeS, business services, healthcare, infrastructure and manufacturing in the coming decade, the report said.n

Industry grows at fastest rate in 13 months


fter falling for two months, industrial production grew at a 13-month-high rate of 3.4 per cent in April, driven mainly by electricity generation and manufacturing. The numbers, if sustained, could push up economic growth, stuck below five per cent for two years now. However, economists are still not certain about the recovery in manufacturing, as it is driven by volatile capital goods. The country’s industrial output, as measured by the Index of Industrial Production (IIP), had declined 0.5 per cent in March and 1.7 per cent in February, official data showed on Thursday. Industrial output grew just 1.5 per cent in April last year and contracted 1.3 per cent in April the previous year. Economists said the slow IIP growth rate in April last year magnified the expansion in the month this year — in what is technically referred to as the base effect. Electricity generation in April this year surged at a seven-month-high rate of 11.9 per cent, compared with 5.3 per cent the previous month. Mining grew 1.2 per cent, after contracting 0.3 per cent the previous month. Manufacturing, which has the highest weight of 75.5 per cent on IIP, grew at 2.6 per cent, its fastest in nine months. Had it not been for a revision in the January data — from a 0.5 per cent contraction to a 0.2 per cent rise — manufacturing output would have declined for six months before April this year. Its production grew 1.8 per cent in April 2013 and 8 • India Newsletter

shrank 1.8 per cent in April 2012. However, economists remain concerned. “Manufacturing activity is still a concern, with no significant growth trend evolving within IIP,” said Debopam Chaudhuri, chief economist at Zyfin Research. Economists want to watch the IIP data for a few months more before they can declare a revival, as the index is prone to volatility and is often revised. Volatility is particularly true of capital goods, which spurted 15.7 per cent in April after contracting in the previous four months. “The only caveat to the good news is that all of the upward surprise came from the notoriously lumpy and volatile capital goods sector,” said JPMorgan Economist Sajjid Chinoy. Arun Singh, senior economist, Dun & Bradstreet, said he would look at IIP data for four months to confirm whether industry was recovering. The capital goods segment, with a weight of 8.8 per cent on IIP, was responsible a 1.38 per cent rise in industrial production in April. Most of the push came from electrical machinery & equipment sector, which grew 66 per cent in the month. With investment activity yet to display a broad-based pick-up, it was unclear whether the doubledigit growth in the capital goods index would persist in the ongoing quarter, said ICRA Senior Economist Aditi Nayar. Sustaining momentum in industrial production would depend on the government’s resolve to fast-track stalled projects, revive the investment pipeline and lift consumption demand by improving growth prospects, research firm CRISIL said in an analysis. Fourteen of the 22 industry groups on the index posted growth in April, against 10 the previous month. However, growth skipped consumer goods. Consumer durables have been declining for over a year now and in April non-durables also contracted. Consumer durables

declined 7.6 per cent in April and consumer non-durables fell 3.3 per cent. Overall, consumer goods declined 5.1 per cent in April. “Fast-moving consumer goods have also started bearing the brunt of a persistently high inflation rate,” Singh said. The fall in consumer nondurables may also be due to the base effect of 11.3 per cent growth in April 2013.n

Foreign ships may get more freedom on Indian coast


ith the anti-cabotage lobby getting stronger, the Government has started examining the extent to which the regulation that restricts foreign ships carrying coastal cargo can be relaxed. Over the past couple of weeks, the Shipping Ministry had discussions with shippers, port officials, shipping lines and other stakeholders of coastal shipping to elicit their views on the subject. The Ministry is considering a proposal to allow foreign lines to carry transhipment and empty containers from one Indian port to another, said an official who participated in the discussion. The cabotage provisions in the Indian Merchant Shipping Act do not allow foreign flag vessels to carry local cargo from one Indian port to another. Exemption is granted only when a suitable Indian ship is not available to carry a particular cargo. Shippers and port operators have been lobbying for lifting this restriction which they feel is an impediment for the smooth flow of cargo. Shipping lines have to move empty containers as there is a mismatch between import and export of containerised cargo. But Indian shipowners have been opposing any relaxation in cabotage that ensures them reservation of coastal cargo. A change in the cabotage policy, they feel, will affect growth of Indian shipping tonnage. Their contention is that since 100 per cent FDI is allowed in shipping, foreign lines can bring their ships

under Indian flag and carry local cargo. The Shipping Ministry has been discussing the issue with all stakeholders and it will firm up its view in the next few days, said a Government official. Of late, the anti-cabotage lobby has become stronger with large private ports and foreign terminal operators joining hands with shippers and the Government-owned ports. The Indian Private Ports and Terminals Association (IPPTA) has asked the Ministry to allow foreign lines to carry transhipment cargo from one Indian port to another. Currently foreign lines are allowed to load export cargo or unload import cargo at any Indian port, but they cannot pick up an imported consignment for delivery to any other Indian port or aggregate export cargo from different ports to one Indian port. In the process, Indian ports are losing the opportunity to become hub ports, pointed out the association. IPPTA says it is seeking permission to allow foreign vessels to carry only customs sealed transhipment containers bound for export from one Indian port to other. This will help foreign lines to aggregate export cargo and in turn reduce the logistics cost for Indian exporters. R Kishore, President of IPPTA, says Indian shipping lines do not have the capacity to carry transhipment cargo. Even for carrying bulk cargo, Indian shipowners do not have enough barges or small ships. This is evident at ports like Vizag or Haldia, he said. In 2012 the Government had relaxed cabotage regulation for Vallarpadam container terminal near Kochi, run by DP World Dubai, for a period of three years.n

India becomes the first country to ratify the Marrakesh Treaty


ndia becomes the first country to ratify the Marrakesh Treaty

to facilitate access to published works for persons who are blind, visually impaired, or otherwise print disabled on 30th June, 2014. So far, 79 WIPO (World Intellectual Property Organisation) member states have signed this Treaty. The Marrakesh treaty will come into force once twenty countries ratify this treaty. Shri Dilip Sinha, the Permanent Representative of India to the United Nations, handed over the the Instrument of Ratification to Mr Francis Gurry, Director General, WIPO at a ceremony organized held during the 28th Session of SCCR (Standing Committee on Copyright and Related Rights) in WIPO Headquarters. The main goal of Marrakesh Treaty is to create a set of mandatory limitations and exceptions for the benefit of the blind, visually impaired and otherwise print disabled (VIPs). It addresses the “book famine” by requiring its contracting parties to adopt national law provisions that permit the reproduction, distribution and making available of published works in accessible formats - such as Braille - to VIPs and to permit exchange of these works across borders by organizations that serve those beneficiaries. Once the Marrakesh Treaty comes into force, it will facilitate access to published works for the millions of blind, visually impaired and otherwise print disabled persons in India. It would go a long way in establishing equal rights and opportunities for education and employment for them. The Treaty will facilitate import of accessible format copies from the member states by the Indian authorized entities such as educational institutions, libraries and other such institutions working for the benefit of visually impaired persons. This will also facilitate translation of imported accessible format copies and export of accessible format copies in Indian languages. The Indian Copyright Act, 2012 is in harmony with the Marrakesh Treaty.n

Commerce ministry to completely review free trade agreements


he Commerce Ministry will thoroughly review the Free Trade Agreements with various blocks of countries, the Special Economic Zone and the Companies Act, according to Nirmala Sitharaman, Minister of State for Commerce (Independent Charge). “We intend to revive the economy, the manufacturing sector, exports, agriculture, labour and SMEs. All this make part of an economy. If we want to revive the economy, each of the problems in various sectors need to be addressed,” she told newspersons. She was in Chennai to meet the representatives from various industry associations to understand their demands from the Central Government. “I have instructed my ministry to do a complete analysis of each of the FTAs. There are such agreements with several blocks of countries. There are mixed reactions about the FTAs. Not every FTA is seen completely beneficial to India. The ministry will look at it critically and apprise itself of the benefits that the FTAs have given, because in some cases it seems we have leveraged the FTAs lesser than the other side,” she said. The ministry will soon come with a report on how to leverage the existing FTAs, learn lessons from it so that the newer FTAS will be better made to give us better opportunities. Special economic zones Sitharaman said the ministry will also look at the Special Economic Zones and understand the various issues concerning the sector. There is a complete review happening at the secretary-level on SEZ today with the Prime Minister Narendra Modi taking a keen interest on this, she said. Companies Act On the Companies Act, the minister said it has been one of the things India Newsletter • 9

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that many people have said that there is lot of trouble. It has posed a lot of difficulties for many groups, including the industry. She said a major consultation meeting will be held with various stakeholders in Delhi next Saturday as to why the Companies Act has problems and how best these problems can be sorted out.

India to be Ford’s centre piece for small cars


ith 60 per cent of the cars sold worldwide being compacts and sedans, “India is the centre piece for small cars” for Ford, according to Alan Mulally, President and CEO, Ford Motor Company. More than half the cars sold globally are in the Ford Focus and Fiesta sized segment. So, the Indian customer and the company’s design team here are important. Ford has decided its Indian operations will be the export hub. It now exports to over 50 countries and “we see that increasing over time,” he said in an interaction with media persons. Mulally, who retires in July after eight years at the US-based automobile company, said for the first time, Ford used a single platform in the B-sized segment to offer the Figo and the EcoSport, a hatchback and a small SUV. This flexibility is an inherent part of Ford’s strategy worldwide. Small cars are no longer about being ‘cheap and cheerful.’ Customers expect them to offer safety, quality and fuel efficiency as much as cars in any other segment, according to Mulally. The company has nine basic platforms that can cater to over 85 per cent of the volume of vehicles sold globally covering compact cars to SUVs and wagons. It can bring to India any of its offerings including the largest of sedans in the market, if the customers want it.n

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Kerala startups eye Germany Technopark, says that the uptick in the German economy has also seen a for partnerships


ermany is increasingly becoming the destination of choice for Kerala-based IT start-ups and small and medium companies. Berlin is the country’s capital for start-ups as well, according to official statistics. At least 44,000 start-ups and spin-offs on the city generate a creative climate for doing business. Start-ups here are now able to find German partners to do business, according to Group of Technology Companies (GTech), Kerala. Orisys India, based in Technopark, is the latest on the list. The larger European Union and the UAE are also promising markets, says Arun Raj, Chief Executive. Orisys has domain expertise in communication management solutions, corporate e-learning platform, media solutions, web development and e-commerce. The company has a track record of implementing a number of projects, both in the government and private sector in the State Finding partners “We were on the IT delegation to Europe this year and attended the CeBIT fair in Hannover. We managed to find partners in Germany and have won a few projects,” Raj said. “The German market is really open. They have started to outsource in a big way. There was a language barrier but now the situation has changed,” Raj added. The UAE market is also opening fast ahead of the massive 2020 Expo event. “We expect to win a few projects there in information and communication technologies.” Orisys plans to recruit a minimum of 300 employees to support its international operations, Raj added. Investment climate Industrial growth and investment climate in EU has turned positive – a factor which is complementing IT too, says Binu Jacob, Convenor, Business development Focus Group of GTech. Tina James, Director, 3E IT Solutions,

rise in the number of SMEs. “Most of them are embracing outsourcing for increased profitability. We now see a more open approach from counterparts in the EU.” James said that 3E could close three contracts during the visit of the GTech-led delegation to Germany and Benelux in March. Shihabuddin, CEO of Nuevalgo Solutions, Infopark, Thrissur, is of the view that the West Asian market is more of productoriented where one can pitch in with core products, and later move on to services.n

India, US keen to revive economic engagement


ndia and the US expect to have a “high pace of engagement” in the next three months which would continue till the end of the year. During this period, interactions on commerce and defence are expected to take place, people familiar with the development said. Efforts are on to finalise dates for Prime Minister Narendra Modi’s visit to the US sometime this year, they said. The focus during the next six months will be on a number of processes that have been pending for a while. India and the US have given enough signals in the recent past to indicate that they are keen to engage, move forward and get relations back on track. Modi spoke to President Barack Obama on the day the results to the Lok Sabha elections were announced while Secretary of State John Kerry was the first foreign interlocutor to call on External Affairs Minister Sushma Swaraj. Besides, the fact that the US is keen to engage came through during the recently concluded visit of US Assistant Secretary of State, Nisha Biswal, who came with the message that the US Government is “extremely keen” to engage with the Indian Government at a pace and direction which India will be comfortable with.n

INDUSTRY The Indian Fast Moving Consumer Goods (FMCG) Sector India has been a consumptiondriven economy for the last many decades. Consumer spending in the country is expected to increase about 2.5 times by 2025. Broadly categorised into urban and rural markets, the Indian consumer segment is gaining high attention and pampering from marketers across the globe. Global corporations view India as one of the key markets from where future growth will emerge. The growth in India’s consumer market will be primarily driven by a favourable population composition and rising disposable incomes. A recent study by the McKinsey Global Institute (MGI) suggests that if India continues to grow at the current pace, average household incomes will triple over the next two decades and the country will become the world’s fifth largest consumer economy by 2025, up from 12th at present. The Government of India plays a catalytic role in the growth of Indian consumer segments and their welfare. It has eased key rules on foreign direct investment (FDI) in an attempt to attract foreign firms to boost economic growth. As people are demonstrating an increasing interest in online shopping, future prospects pose a tremendous growth opportunity for retail and FMCG players alike. ■■ Market Size India is likely to emerge as the world’s largest middle class consumer market with an aggregated consumer spend of nearly US$ 13 trillion by 2030, as per a report by Deloitte titled 'India matters: Winning in growth markets'. Fuelled by rising incomes and growing affordability, the consumer durables market is expected to

expand at a compound annual growth rate (CAGR) of 14.8 per cent to US$ 12.5 billion in FY 2015 from US$ 7.3 billion in FY 2012. Urban markets account for the major share (65 per cent) of total revenues in the Indian consumer durables sector. In rural markets, durables, such as refrigerators, and consumer electronic goods are likely to witness growing demand in the coming years. From US$ 2.1 billion in FY 2010, the rural market is expected to grow at a CAGR of 25 per cent to touch US$ 6.4 billion in FY 2015. The growth of internet retail is going to complement the growth of offline retail stores. Online retailing, both direct and through marketplaces such as eBay, will triple to become a Rs 50,000 crore (US$ 8.34 billion) industry by 2016, growing at a whopping 50–55 per cent per year over the next three years, according to rating agency Crisil. With growing consumerism and disposable income, India's used goods market is likely to touch Rs 115,000 crore (US$ 19.18 billion) by 2015 from Rs 80,000 crore (US$ 13.34 billion) at present, according to a study by an industrial body. Whether consumer goods like electronics, durables, automobiles, etc., or industrial machinery in the capital goods sector, the options of reusage are being considered more actively than ever before. ■■ Investments The following are some of the major investments and developments in the Indian consumer markets sector: ■■ Samsung has launched curved televisions in the Indian market priced between Rs 100,000–449,000 (US$ 1,667.63–7,487.65) to tap high-end buyers. Under its curved range, the company is offering a range of 10 television models with ultra-high definition (UHD) and LED technologies. “This technology should get adopted, we feel very strong. It’s a global trend. People

are now looking at much and much better picture quality and immersive nature of the TV, which we do not have till now,” said Mr R Zutshi, Deputy Managing Director, Samsung India. ■■ Kerala-based Paragon, which helped popularise branded rubber chappals in India, is now actively looking at new growth drivers. The Rs 1,400 crore (US$ 233.38 million) footwear maker is diversifying into trendier products such as sports shoes and non-leather formal footwear, before finally stepping into the larger leather footwear market. ■■ Canon India plans to get into the network security camera market. “We have made forays into photo albums, cinematography and medical imaging. Sometime later this year, we will launch our first product in the Indian security camera market,” said Mr Alok Bharadwaj, Executive Vice-President, Canon India. ■■ Amul has clocked its highest ever growth in FY 2014, riding on a sharp rise in exports and entry to new markets. “We have achieved 32 per cent growth in our annual turnover which is the highest ever growth since it was set up in 1973. For nearly five years straight, we had achieved 20 per cent growth in our turnover," as per Mr R S Sodhi, Managing Director, Gujarat Co-operative Milk Marketing Federation Ltd (GCMMF). ■■ Amway India plans to increase its proposed investment in its Tamil Nadu facility, with more production lines to manufacture its complete range of nutrition and beauty products. The company will invest Rs 150 crore (US$ 25 million) over and above the originally proposed Rs 400 crore (US$ 66.67 million) in the manufacturing facility that is coming up at Nilakottai near Madurai. It is expected to start commercial production by the end of 2014, according to Mr Anshu Budhraja, Chief Operating Officer, India Newsletter • 11

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Amway India. ■■ UK-based Reckitt Benckiser, the household goods manufacturer that sells Dettol antiseptic and Harpic toilet cleaners in India, among other brands, has set a target to reach over 200 million people by 2020 to improve their health and hygiene behaviour. ■■ Government Initiatives The Government of India has allowed 100 per cent FDI in the electronics hardware-manufacturing sector under the automatic route. It has also allowed 51 per cent FDI in Multi-Brand Retail Trading (MBRT) and 100 per cent in Single-Brand Retail Trading (SBRT) in order to

bring more foreign investment into the country. Hyderabad will soon have a Rs 100 crore (US$ 16.68 million) National Institute for Footwear Design and Development. The Andhra Pradesh government has apportioned the required land at Gachibowli in Cyberabad. Funds for the national centre have already been approved by the Commerce Ministry. ■■ Road Ahead India is poised to become a substantial market for wearable technology such as smart watches and fitness monitors, driven by keen consumer interests in these latest gadgets and increasing spending on

consumer durables. Respondents from India were most interested in buying fitness monitors (80 per cent), smart watches (76 per cent) and internet-enabled eyeglasses (74 per cent), according to Accenture's Digital Consumer Tech Survey 2014. Nielsen estimates that rural India’s FMCG market will touch US$ 100 billion by 2025. Online portals are expected to play a vital role for companies trying to access these markets. The Internet allows for a cost-effective means to increase a company’s reach by overcoming geographic barriers. Today, with rural India empowered with computers and smartphones, the Internet is slowly gaining a foothold.


LATEST INDUSTRY NEWS Nivea's first India plant


The facility, being set up for Rs. 1,000 crore, is scheduled to be ready by March 2015. Nivea had purchased about 72,000 square metres at Sanand GIDC in February for the plant.

Senior company officials and German representatives, including Reinhard Pollath, Chairman of the Supervisory Board of Beiersdorf AG, and Mishcel Ott, Deputy Consul-General of Germany, were present at the ceremony.

“An important aspect of the plant is the Research and Development centre,” said Stefan De Loecker, Senior Vice President (Corporate), Near East Region, Beiersdorf. “The centre will focus on establishing products according to the needs of the Indian consumers. Secondly, it will be

ersonal care player Nivea India on Monday initiated construction for its greenfield facility, the first in India, at Sanand near Ahmedabad.

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used for innovation in packaging to make it more economical,” he added. Nivea sells around 50 million units of its different products every year in India. The company has to import nearly 5060 per cent of its total requirement, and some of it is met through outsourced production. The new plant would help the company reduce its imports by half. Rakshit Hargave, MD, Nivea India, said, “Accordingly, the prices will also get more attractive and affordable.”



ritannia is one of the favourite and oldest brands in India. It started in 1892 in Kolkata with an initial investment of Rs 295 (US$ 4.90). The Company was rechristened Britannia Industries Limited (BIL) in 1979. Four years later in 1983, it crossed the Rs 100 crores (US$ 16.61 million) revenue mark.

The Company unveiled its new corporate identity – ‘Eat Healthy, Think Better’ - and made its first foray into the dairy products market in 1997. BIL is also known for its innovative approach to products and marketing – it organised the Lagaan match which was voted the country's most successful promotional activity of the year in 2001, while Britannia 50–50 Maska Chaska became India's most successful product launch. In 2002, BIL formed ‘Britannia New Zealand Foods Pvt Ltd’ which is a

joint venture (JV) with Fonterra, the world's second largest dairy company. In recognition of its vision and accelerating graph, Forbes Global rated Britannia 'One amongst the Top 200 Small Companies of the World', and The Economic Times recognised the company as India's 2nd Most Trusted Brand. Britannia’s offerings are spread across the spectrum with products ranging from the healthy and economical Tiger Biscuits to the more lifestyle-oriented Milkman Cheese.n



■■ Penetration of many product categories is still low. Even among those where the penetration is higher, per capita consumption is comparatively low, thereby offering scope for high growth in future ■■ Penetration of products such as toilet soap and washing powder is high in the country, but that of some major products, including fairness cream, antiseptic cream and cold cream, is just 18.6 per cent, 1.6 per cent and 1.1 per cent, respectively India Newsletter • 13

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PERSPECTIVES ON INDIA Insights: Indian Digital Industry 2014


ndia has witnessed tremendous digital expansion in the past decade, experiencing an exponential growth of 100 per cent within a span of three years. Multiple platforms and tools have emerged giving dynamic opportunities for digital to thrive. With the advent of smartphones, last year we saw 14.2 per cent growth of internet traffic through mobiles and tablets. To access the internet, consumers no longer depend on desktops or laptops, they are digitally active 24x7 with mobile devices like smart phones and phablets. The mobile industry has witnessed a 20 per cent quarter on quarter growth in its internet usage. Interestingly, more than 50 per cent of active internet users access internet over their mobile phones. In 2013, out of 110 million mobile internet users’ rural Indians accounted for 25 million and 85 million were from urban areas. Interestingly, across both urban and rural India, over 50 per cent of the active internet users are accessing internet on their mobile, apart from other sources, indicating that there has been a huge uptake in consumption of the mobile internet medium. Due to the increasing demand in ‘Value for Money’ segment, the median price of a handset has fallen which has attributed to the reduction in prices of phones with advanced features. The rural mobile phone market has huge market potential, brands like Monsanto adopted SMS and IVR Solutions to reach such users. Digital Quotient developed a large scale IVR system for Monsanto with outbound calling in multiple languages to overcome the challenge of communicating with the farmers due to connectivity and language barriers. This resulted in generation of more than three million customer 14 • India Newsletter

calls for the brand. The social media growth story is inspiring - given how in the last few years it has emerged as one of the most popular platforms with 100 million active users. According to a recent Forbes article, “84 per cent of India’s Facebook users are accessing the site from their smart phones. Facebook is customising apps specifically for the Indian market. It recently rolled out a missed call capability, something that does not exist in the U.S. Facebook is also working with marketers in India to help businesses understand the word-of-mouth, advertising power of social media.” Twitter is considered as the second most important channel due to the presence of majority of influencers like sportspersons, movie actors, artists and politicians. A trending topic on Twitter is perhaps one of the most coveted benchmark. In DQ, We have done twitter outreach campaigns for more than 20 brands and have trended at both India and Worldwide level which has helped brand not only harness reach but also spike in their brand conversations. Although India is set to become Facebook’s biggest market in terms of users but translating the same into ad dollars may not happen anytime soon. The biggest challenge for Facebook in India going forward would be to convert some of the companies to spend regularly on social media advertisement. Google also faces a similar challenge, it earns revenue around US$ 330 million annually in India. Also, Google is not just a search engine network — it has YouTube for video ads apart from search based advertising and Google Plus - quite established even in a nascent stage. When we look at the evolution of YouTube - the social video sharing platform, it was not as famous as it is today when it was acquired by Google. In 2009, it was a loss making

business for Google due to high operational costs and within a span of 4 years the tables were turned around. It was estimated YouTube would earn ad revenues worth US$ 5.6 billion, by the end of 2013, for Google. The world of digital is increasingly adopting videos as a means of spreading the message virally. Videos consumption of significant proportion of Youth is on a digital device and not on TV. The explosive growth of video advertisements and enhanced internet speed on smart phones has made video streaming convenient for its audience; its Indian audience grew an astounding 27 per cent in the past year. Local content is distributed mainly through the YouTube platform dominated by Bollywood. Currently Web, Mobile, Social and Video are the major drivers of digital space. Indian digital market has a huge online population to cater, which in turn has boosted ad revenues, the total online ad spends for 2012-2013 was Rs 2260 crore which accounts for 10 per cent of the entire Indian advertising budget. The youth in the country are enchanted by the web as they spend maximum time online via social network. Blogs are another fastest growing category on the web. This has scaled up advertisements making India the fourth largest searchers in the world. Social media websites give ecommerce players diverse opportunities for attracting audiences and turning them into friends of brands/loyal customers. Social media today is not just about getting maximum number of likes but is now more inclined towards audience engagement and positive dialogue. Companies are using social media to generate leads for sales and create recalls via targeted ads. Huge population size and demographics are the driving force behind the incredible growth of online retail in comparison with

the traditional brick-and-mortar retail sector. India’s US$ 13-16 billion retail e-commerce industry is currently dominated by the travel sector, which accounts for 70 per cent of e-commerce in India. Online consumer goods have attracted significant media attention as renowned global ecommerce firms such as eBay and Amazon seek to establish a more robust presence in the country. The increasing need to deliver value and ROI will demand more insights and innovation and there

will be more specialisations. Social media initiatives will become more integrated with marketing programs, customer service efforts, or with internal communications programs. Companies need to focus on to support a coherent and sustainable social media strategy inclusive of the right data generating value and empowering employees to engage with communities. With the fast paced technological development, organisations have to be flexible and adopt platforms that consumers are shifting towards.

Businesses will be challenged adapt to customers usage curve and deliver them with the content they want yet generate revenue streams while capturing market share and monetising emerging channels. In the coming years, companies delivering integrated campaigns over multiple platforms will enhance value to marketers. We will witness a lot of mergers and acquisitions as the strategy is towards providing integrated services which is coming up as the mantra of surviving in the Digital market.

INDIAN ECONOMIC SURVEY 2014: HIGHLIGHTS CHAPTER 1: STATE OF THE ECONOMY AND PROSPECTS ■■ Economy to grow in the range of 5.4 - 5.9 per cent in 2014-15 overcoming sub-5 percent growth. ■■ Growth slowdown was broad based, affecting in particular the industry sector. ■■ Aided by favourable monsoons, agricultural and allied sector registered a growth of 4.7 per cent in 2013-14. ■■ Industry and Service sectors also witnessed slowdown. CHAPTER 2: ISSUES AND PRIORITIES ■■ Reforms needed for long termgrowth prospects on 3 fronts- low and stable inflation regime, tax and expenditure reform and regulatory framework. ■■ Survey suggests removal of restriction on farmers to buy, sell and store their produce to customers across the country and the world. ■■ Rationalisation of subsidies on inputs such as fertilizer and food is essential. ■■ Government needs to eventually move towards income support for farmers and poor households. CHAPTER 3: PUBLIC FINANCE ■■ The fiscal policy for 2013-14 was calibrated with two-fold objectives;

first, to aid growth revival; and second, to reach the FD level targeted for 2013-14. ■■ The Budget for 2013-14 followed the policy of revenue augmentation and expenditure rationalization to contain government spending within sustainable limits. ■■ The fiscal outcome of the central government in 201314 was achieved despite the macroeconomic challenges of growth slowdown, elevated levels of global crude oil prices, and slow growth of investment. CHAPTER 4: PRICES AND MONETARY MANAGEMENT ■■ High inflation, particularly food inflation, was the result of structural as well as seasonal factors. ■■ IMF projects most global commodity prices are expected to remain flat during 2014-15. ■■ The RBI with a view to restoring stability to the foreign exchange market, hiked short term interest rate in July and compressed domestic money market liquidity. CHAPTER 5: FINANCIAL INTERMEDIATION ■■ RBI has indentified five sectors -- infrastructure, iron and steel, textiles, aviation and mining as the stressed sectors.

■■ Public sector banks (PSBs) have high exposures to the ‘industry’ sector in general and to such ‘stressed’ sectors in particular. ■■ The New Pension System (NPS), now National Pension System, introduced for the new recruits who join government service on or after January 2004, represents a major reform of Indian pension arrangements. ■■ The next wave of infrastructure financing will require a capable bond market. CHAPTER 6: BALANCE OF PAYMENTS ■■ The India’s balance-of-payments position improved dramatically in 2013-14 with current account deficit at US $ 32.4 billion as against US$ 88.2 billion in 2012-13. ■■ India’s foreign exchange reserves increased from US$ 292.0 billion at end March 2013 to US$ 304.2 billion at end march 2014. ■■ India’s external debt has remained within manageable limits due to the external debt management policy with prudential restrictions on debt varieties of capital inflows. CHAPTER 7: INTERNATIONAL TRADE ■■ World trade volume which decelerated to 2.8 per cent in 2012 India Newsletter • 15

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has shown signs of recovery in 2013, albeit slow with a 3.0 per cent growth. ■■ The sharp fall in imports and moderate export growth in 201314 resulted in a sharp fall in India’s trade deficit by 27.8 per cent. ■■ In April-May 2014, trade deficit declined by 42.4 per cent. CHAPTER 8: AGRICULTURE AND FOOD MANAGEMENT ■■ Record food grains and oilseeds production of 264.4 million tonnes (mt) and 32.4 mt is estimated in 2013-14. ■■ Horticulture production estimated at 265 mt in 2012-13 has exceeded the production of foodgrains and oilseeds for the first time. ■■ Due to higher procurement, stocks of foodgrains in the Central Pool have increased to 69.84 million tonnes as on June 1, 2014. ■■ The net availability of foodgrains increased to 229.1 million tonnes and that of edible oils to 12.7 kg per year in 2013. CHAPTER 9: PERFORMANCE


■■ The latest gross domestic product (GDP) estimates show that industry grew by just 1.0 per cent in 2012-13 and slowed further in 201314, posting a modest increase of 0.4 per cent. CHAPTER 10: SERVICES SECTOR ■■ India ranked 12th in terms of services GDP in 2012 among the world’s top 15 countries in terms of GDP (at current prices). ■■ India has the second fastest growing services sector with its CAGR at 9.0 per cent, just below China’s 10.9 per cent, during 2001 to 2012. ■■ In 2013-14, FDI inflows to the services sector (top five sectors 16 • India Newsletter

including construction) declined sharply by 37.6 per cent to US$ 6.4 billion compared to an overall growth in FDI inflows at 6.1 per cent resulting in the share of the top five services in total FDI falling to nearly one-sixth. CHAPTER 11: INFRASTRUCTURE COMMUNICATIONS


■■ Major sector-wise performance of core industries and infrastructure services during 2013-14 shows a mixed trend. While the growth in production of power and fertilizers was comparatively higher than in 2012-13, coal, steel, cement, and refinery production posted comparatively lower growth. Crude oil and natural gas production declined during 2013-14. ■■ The performance of the coal sector in the first two years of the Twelfth Plan has been subdued with domestic production at 556 MT in 2012-13 and 566 MT in 2013-14. ■■ A total length of 21,787 km of national highways has been completed till March 2014 under various phases of the NHDP. In spite of several constraints due to the economic downturn, the NHAI constructed 2844 km length in 2012-13, its highest ever annual achievement. During 2013-14 a total of 1901 km of road construction was completed. ■■ From the infrastructure development perspective, while important issues like delays in regulatory approvals, problems in land acquisition & rehabilitation, environmental clearances, etc. need immediate attention, time overruns in the implementation of projects continue to be one of the main reasons for underachievement in many of the infrastructure sectors.



■■ Human- induced Greenhouse gas (GHG) emissions are growing and are chiefly responsible for climate change. ■■ The world is not on track for limiting increase in global average temperature to below 2?C, above pre-industrial levels. GHG emissions grew on average 2.2 per cent per year between 2000 and 2010, compared to 1.3 per cent per year between 1970 and 2000. ■■ There is immense pressure on governments to act through two new agreements on climate change and sustainable development, both of which will be global frameworks for action to be finalized next year. ■■ The cumulative costs of India’s low carbon strategies have been estimated at around USD 834 billion at 2011 prices, between 2010 and 2030. CHAPTER 13: DEVELOPMENT


■■ According to HDR 2013, India has slipped down in HDI with its overall global ranking at 136 (out of the 186 countries) as against 134 (out of 187 countries) as per HDR 2012. It is still in the medium human development category. ■■ The poverty ratio (based on the MPCE of Rs 816 for rural areas and Rs 1000 for urban areas in 2011-12 at all India level), has declined from 37.2 per cent in 2004-05 to 21.9 per cent in 2011-12. ■■ In absolute terms, the number of poor declined from 407.1 million in 2004-05 to 269.3 million in 2011-12 with an average annual decline of 2.2 percentage points during 200405 to 2011-12. ■■ During 2004-05 to 2011-12, employment growth [CAGR] was only 0.5 per cent, compared to 2.8 per cent during 1999-2000 to 200405 as per usual status.

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

Following the earlier article citing one of the methods of doing business in India, this article will highlight how different is a distributor from a sales agent in India. When deciding whether the foreign company should use an Agency or sign a Distribution Agreement, the nature of the relationship between the parties needs to be considered primarily: Principal-Agent or SupplierDistributor? Companies rely on Agents and Distributors for selling their products and services. Whilst Agents are not direct sales persons, Distributors are the direct salesmen of the products. As such, they are different in many aspects; primarily in stock holding. There is a fundamental legal difference between agents and distributors and a foreign company should not confuse between the two. An agent negotiates on the behalf of an exporter and may be entitled to create a legal relationship between foreign company and the customer. A distributor buys goods on its own account from foreign company and resells those products to customers. It is the distributor which has the sale contract with the customer not the foreign company. In the case of distributor, the foreign company is free from any kinds of risks associated with the financial aspect of the transaction. ■■ Agents Agents, have actual authority (express or implied), to create legal relationships between another, known as a “Principal” (in the above case, the manufacturer) and third parties. Agents are essentially campaigners of the products and are usually familiar

with their market. As the direct connection to the customer, they must know their customer requirements well. Although, they are responsible for selling the products, they do not have any direct connection with the company. They do not buy the products directly from the companies and are not involved in the delivery or after sales / maintenance services. Agents are usually paid on a fixed commission for their work. ■■ Distributors Moving on to Distributors, they have a direct connection with the company or “Supplier”. Unlike Agents, Distributors purchase the product directly from the company and distribute it in the market. Moreover, Distributors also provide after sales services, which the Agents do not provide. While an Agent can be called the company’s representative, a Distributor cannot be called so, as he buys the product and then resells it. Agents can be direct employees of the companies or self-employed. On the other hand, Distributors are not employed. The legal relationship between the parties is therefore, totally different. An Agent is responsible for finding the target people and negotiating with them to buy the product. Although they do not have the final word regarding sales; the last word is reserved to the company. Conversely, Distributors do not have any role in negotiating with the customers; they only perform the role of distributing the product in the market. ■■ Agent Vs Distributor 1. Agents are not direct sales persons. Distributors sell the products direct. 2. Agents are only responsible for

selling the products. 3. Agents are not involved in the delivery or after sales services. Distributors buy the products directly from the company, distribute it in the market and also provide after sales services, which the Agents do not provide. 4. While an Agent can be called the company’s representative, a Distributor cannot, as he buys the products and then resells them. 5. Agents are responsible for finding the target people and negotiating with them to buy the products. Distributors do not have any role in negotiating with customers; they only perform the role of distributing the product in the market. 6. In simple terms: Agent = Representative; Distributor = Customer ■■ A Company’s Decision A company’s choice between an Agent and a Distributor will depend on certain factors including; the market size, the type of product and the degree of control a company wants to exercise or is able to exercise in the market. As a rule, a foreign company should use an Agency Agreement when marketing of products in a new market. Here are some other considerations: 1. Decide on whether the appointment of an Agent or Distributor is more appropriate in the circumstances. 2. Carry out research on local practices within the territory, if necessary to arrive at a decision. 3. Check local laws on the relative rights of Agents and Distributors, particularly on termination of the appointment. India Newsletter • 17

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

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Embassy of India, Vienna

20 • India Newsletter

INVEST INDIA Federation House, Tansen Marg New Delhi—110 001 0091-11-23765085, 23487278


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

policy and Promotion, Ministry of Commerce & Industry) and State Governments of India (0.5% each), its mandate is to become the first reference point for the global investment community. It provides granulated, sectorspecific and state-specific information to a foreign investor, assists in expediting regulatory approvals, and offers hand-holding services. Its mandate also includes assisting Indian investors make informed choices about investment opportunities overseas.

India Newsletter • 21

Embassy of India, Vienna


Kaziranga -Sanctuary of the Unicorns This medieval European legend is full blooded, lumbering, alive and still very awesome: as we discovered for ourselves. by Hugh & Colleen Gantzer


azzled by the wonders of India, medieval English travellers took back tales of magical fen lands, lowlying and glistening at the foot of blue mountains. In them, wandering wild, were herds of silver beasts with single horns sprouting from their heads. Inspired by those tales, heralds created animals patterned on the horses they knew. They called them, in the lingua franca of the age, Unicorns and emblazoned them as one of the supporters on the escutcheon of the rulers of England. There, to this day, the Unicorn stands. And, to this day, the real Unicorns still trudge through the fen-lands, the wet lands, of their home. We went to the fens of Assam’s Kaziranga to see these living legends for ourselves.

22 • India Newsletter

Our base for our foray into the floodplains of the great Brahmaputra River was the beautiful Diphlu River Lodge. Self-contained cottages rise on stilts, their thatched cladding framing views of the resort’s own rice and mustard fields backed by the lush forests of Assam. On the other side, from our balcony, fishermen on bamboo rafts floated on the Diphlu River and their catch featured on the menu of the two-tiered dining room and lounge in the compound. It was the best of both worlds: secure and cosseted in the wilderness.

We could have driven out to the National Park’s office and taken an elephant ride through the park, as many other visitors did, but we opted for a jeep safari to cover more of Kaziranga’s 430 sq kms. Elephants are slow and stately animals. Jeeps are much faster and our decision

was rewarded when, just off our unpaved jungle trail ... as all good jungle trails should be .... we spotted the first of the Big Five charismatic species listed in the Park. On the other side of a lake, browsing in the grasslands, was a herd of Swamp Deer. These beautiful animals are an endangered species with only about 3,000 surviving. The males had shed their antlers and would grow them again before the rutting season. Then their spread of horns might extend to twelve tines giving them their alternative name of Barasingha. After this, the sightings came thick and fast living up to Kaziranga’s reputation as ‘one of our most impressive wildlife preserves’ , according to the authoritative Bombay Natural History Society. Just after the congregation of the social Barasingha, we spotted a Great Pied Hornbill. They nest in a natural hollow in a tree which the female enters and then plasters the entrance with her excreta and mud, leaving a small slit for the male to feed her. This protective wall is broken only when the chicks are ready to fly. Spotting wildlife in their natural

habitat is exciting but an even greater reward comes with learning more about their lives and survival strategies. The family of Elephants we saw, almost concealed by the tall grass, was probably communicating with other elephants many kilometers away. Naturalists have known for years that elephants pick up deep, sub-sonic rumbles through their feet. Only recently, however, have they discovered that these ground-vibrating rumbles are made by special folds in their throats. This family was, obviously, not very happy with us. The ambled away, shielding their calves protectively. We ticked off the second animal in our list of Kaziranga’s Big Five. Elephants are great recyclers and they leave behind enormous piles of fibre-rich debris. Two Red Junglefowl were busy scratching in a mound deposited by elephants. The cock was brilliant, his spouse dowdy, and their ancestors were the forebears of all the domesticated chickens in all the farmyards of the world. Their eggs are particularly relished by reptiles and our keen-eyed spotter sighted one of their predators. The Monitor Lizard was stretched on a fallen log, ist mottled coat merging perfectly with its background. This one could have been looking for a place to lay her own eggs. Hollow logs or piles of brush are their preferred nesting sites.

We had, in our drive, spotted many interesting species in this rich Park but we had sighted only two of the likely Big Four, since we had excluded the tiger. In the last half hour of our morning round we were returning on a road that skirted a green floodplain stretching to the horizon. Our jeep slowed, stopped, and our spotter pointed without saying a word. There, grazing undisturbed

a short distance off the road, was a family of Wild Water Buffalo: the adults with wide, curved, horns and dark, muscled bodies, their calves still wearing their youthful dun-grey liveries. They looked very serene and inoffensive and, but for the outward curving horns, we could have mistaken them for a domesticated village herd. In the distant past, when our huntergatherer ancestors settled down and became agriculturists, they must have domesticated the water buffalo and bred them to have less lethal backward or downward sweeping horns. We photographed them from our jeep and then did not even look at us. About five minutes after we had spotted the herd wallowing, we drove round a bend in the forest road. And stopped. There, a short distance away, standing in a field of ferns and grasses, was a magnificent wild buffalo. His head was down when we first saw him, but then he raised it and gave us an irritable look. The sweep of his horns was sharp and impressive and he seemed to be thinking about seeing us off the premises. Our driver must have sensed the beast’s anger because he started our jeep and the buffalo lowered his head threateningly. Our cameras buzzed and then our jeep lurched forward, speeding out of the danger zone. “ I know him,” gasped our driver, “He has been turned out of the herd. He is very dangerous..” He certainly looked it but we were in no mood to check him out. Dark clouds were roiling over the sky and a cold front swept through the trees promising rain. There was a light splatter just after lunch and then the wind shredded the clouds and whisked them away. The light was gentle as if it had been filtered through a gelatin screen and the Hog Deer decided that this was just what they wanted. They appeared in ones and twos, in families and once in a herd, though they don’t generally assemble in herds. They’re gentle creatures with a rather startled look as if someone had just said BOO! to them and they weren’t sure how to

react. We have no idea why they’re called Hog Deer. They don’t look like any swine we’ve ever seen. Possibly the naturalist who named them had had a bad morning! We didn’t have time to dwell on that line of thought because there, on the road in front of us, blocking the passage of another jeep driving towards us, was a Rhinoceros. . Rhinos, in their natural environment, look like ancient Jurassic creatures. In fact they are the direct descendants of a small horse-like animal that lived on the earth about 50 million years ago. They evolved to the earth’s largest land mammals: the gigantic, 6-metre high, Baluchitherium. But though our own Rhinoceros unicornis is not nearly as monstrous, it’s still a fairly formidable creature. Adults can weight up to 2070 kgs and stand 160 cm at the shoulder with snoutmounted horns that are, normally, between 15 and 45 cms long. They can also charge at speeds up to 25 kmph, and turn round surprisingly fast. We had learnt all this before we came to Kaziranga and so we treated rhinos with great respect. This one had just emerged from a wallow in the lowlying ground to the right and was covered in the glistening silver mud brought down by the Brahmaputra in its passage through the Himalayas. He was followed by another, and another, their bodies and single horns glinting in the soft light. We held our breaths, delighted at capturing these images of one of the rarest and most celebrated animals in history. They paused, looked at us as if speculating whether we were worthy of an attack with their piercing horns and armour-plated bodies. Decided we weren’t. Lumbered like living tanks down the other side and got lost in the shimmering wetlands of their ancient home. So we’re happy to report that the Unicorn, the legendary singlehorned and silver-plated animal, is still alive and thriving, and still very awesome, in the protected fens of Kaziranga. India Newsletter • 23

Embassy of India, Vienna

24 • India Newsletter

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

Chokher Bali | Sandkörnchen im Auge ■■ Synopsis: Mahendra is a doctor circa British rule in India, who lives a comfortable life in a city in Bengal. He is friendly with a young man, a bachelor named Behari. Both Mahendra and Behari are of marriage age, and do get a lot of proposals. One day they receive a proposal of a young woman named Binodini along with a photograph. Neither of them shows any interest nor even take a look at the photograph. They get news that Binodini has got married. Shortly thereafter, they receive another proposal without a photograph, for a young woman named Ashalata. Behari is asked to check her out for Mahendra - he ends up consenting to marry her, but subsequently let’s Mahendra be the groom. A few months later Ashalata gets pregnant, and the family gets the news that Binodini has been widowed only after a year’s marriage. Then things get complicated when Ashalata befriends Binodini - and both Mahendra and Behari get attracted to her - so much so that Mahendra is considering separating from his bride - and Behari separating from his bachelorhood - but both in quandary over the social taboo of marrying a widow - and of the present agitation aimed against the British to quit India. ■■ Director: Rituparno Ghosh ■■ Stars: Aishwarya Rai, Prasenjit Chatterjee, Raima Sen ■■ Genre: Drama ■■ Duration: 167 min ■■ Release Year: 2003 ■■ Language: Bengali ■■ Subtites: German

Showtime Friday, July 25th, 17:30


Indian Embassy Business Centre (1st Floor, Kärntner Ring 2, 1010 Vienna) India Newsletter • 25

Embassy of India, Vienna

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

BUSINESS CENTRE ■■ The EMBASSY’S Business Centre is opened DAILY from 10am to 1pm. NEW OPENING HOURS! ■■ For scheduling an appointment outside the opening hours, please contact the commercial wing under the contacts given below. ■■ Marketing Officer: or 01 505 8666 30 ■■ Marketing Assistant: or 01 505 8666 31

STUDENTS WELFARE OFFICER ■■ Mr. Pawan T. Badhe, Third Secretary in this Embassy has been designated as Officer to look after welfare of Indian Students in Austria and Montenegro. ■■ His contact details are: 0043 1 505 866 15 and

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

FACEBOOK ■■ Our Facebook page targets the India-Austria community and covers subjects such as Business, Culture, Embassy News, India-related events and programmes in Austria, and much more. ■■ We have reached the 1300 followers mark! ■■ ‘Like’ our facebook page and be the first to know! 26 • India Newsletter

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

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

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

India Newsletter • 27

India newsletter 07 2014  

India Newsletter published by the Indian Embassy, Vienna

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