BIZ INDIA @
Issue No. 9, Special OECD Forum 2012
Lowest Saving Rates
Human Health Debt Debt, Eurozone Crisis, Unemployment, Deficit
Global Imbalance of Power
Economic Exclusion and Political Instability
Inequality, Inflation & Corruption
Food Imbalance Rise of New Power
Lack of Credit and Unemployment
Governance challenges in 2012
From Indignation & Inequality
to Inclusion & Integrity UK 4 GBP - EUROPE 8 € UAE: 18 AED - KSA: 18 SAR INDIA: 200 INR - CAN: 9,95 CAD DOM: 7,20 € - A: 7,50 € Oman RO: 1.8 USA: 8 USD OTHER COUNTRIES 9 € ISSN: 1950-3482
Media India G
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he last few meetings of the Organisation for Economic Cooperation & Development annual Forum have been held under the shadow of global economic and political upheavals. Each year, one hopes or gets the feeling that one can spot the end of the tunnel and that may be the next yearâ€™s meeting would be held in a better global environment. But for the last four years running, the scenario seems to have only worsened increasingly. For the OECD, which only last year celebrated its Golden Jubilee, the scenario looks specially challenging as many of its members are going through the worst socio-politico-economic challenges in living memory. Five decades ago, when OECD was born, Europe was right in the middle of the famous Marshall Plan for reconstruction and development and the OECD became a sort of watchdog and ideas exchange platform for these countries, ringing the alarm bells whenever it saw signs of fiscal indiscipline or other challenges for it member states. Now it seems that we are back at the starting blocks of 1960s. Europe is rocked by unending social and economic crisis with the current political leadership unable to get a grip over the situation, leading to civil strife and more uncertainty. The elections held in Europe over the last year have seen a change in the government in every single country that has gone through elections, reflecting the widespread delusion and anger about the mess that Europe finds itself in. Secretary General of OECD Angel Gurria does not mince his words in his piece for Biz@India when he says that it is now a question of governments and institutions focusing on regaining and restoring the trust amongst their citizens. The years of crisis have eroded to a very large extent this trust and if the EU has come out of the difficult times it cannot do so without having full participation and cooperation of the citizens and for them to participate in any revival efforts, it is key that the governments win them over again.Over the five decades, the OECD has certainly grown in terms of members and the resultant clout that it has in the international fora. It is now set to add other members as well notably Russia and is engaging to a greater degree with Brazil, China, India and South Africa. These new partner countries will definitely play a key role in helping the revival of Europe by buying more European goods and services and expertise as Indian Minister Kamal Nath tells us that for India to meet the needs of a rapidly urbanising society, EU and OECD members and companies have an important role to play. The best way to ensure jobs creation is by changing the way business has been done. This would be by fo cusing on innovation, making sustainable or environment-friendly the core of all businesses and ensuring gender equality. These changes, may seem as challenging to some, are essential to provide new opportunities and open new doors at a time when the world so desperately needs to create the new global business platform. As Achim Steiner of UNEP puts it companies around the world need to adopt green business as its basic mantra if they are to stay competitive. By looking for ways in which they can engage in green business practices, the corporate world will promote innovation as the focus shifts to energy efficiency, new technologies, ease of use and of course as less harmful to the earth and the environment as possible.The challenges for India are pretty much the same â€“ jobs creation, widening of social security net, innovation and gender equality. The government and the private sector seem to be moving in that direction with numerous policy initiatives, but the task ahead is huge and would need a lot of political will, fiscal discipline and commitment in order to meet the challenges.The Indian IT industry is definitely well placed to play a role here, both in helping Europe and the OECD become more efficient and in helping India overcome the challenges that it faces. We hope that you enjoy the Forum this year and when we meet the next year, the world and the EU would have emerged from this crisis.â–
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BIZ@INDIA Issue No:9 May - June 2012
Interview Kamal Nath, Union Minister of Urban Development..............................p6 Achim Steiner, UNEP Executive Director and Under-Secretary-General of the United Nations...............................................................................p18 Phiroz Vandrevala, Vice Chairman & MD, Diligenta, a TCS subsidary....................................................................................... p24 R V Kanoria, President, FICCI.................................................................p28
Som Mittal, President, Nasscom............................................................ p34 Dr Mukesh Aghi Chairman & CEO, Steria India.....................................p40
Dossier Facing similar challenges.....................................................................p46 IT industry shows the way....................................................................p50 And now Y2.1K bug! Is Indian IT ready?.............................................p54
TCS Cheers the Industry,Crosses $10bn; Infosys, Wipro Disheartening.............................................................................p58
Briefs Biz Brief..................................................................................................p62 IT Brief....................................................................................................p66
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Angel Gurría, Secretary-General of the OECD
Regaining the trust of citizens The OECD plays a key role in providing analysis and policy advice to help its member governments and other partners within the G20 address the major global challenges we all face. With the OECD’s own annual Ministerial meeting and public Forum taking place from 22-24 May 2012, the Organisation’s Secretary-General Angel Gurría explains why gaining the trust of citizens is crucial to good governance. Why sound institutions make a difference for effective economic policiesThe global crisis and its aftermath have seriously challenged the relationship between citizens and government. The public finances are in a perilous state in many countries, unemployment is still stubbornly high, and the recovery has been in general slow and fragile. In parallel, income inequality has soared, with the gap between rich and poor reaching its highest level for over 30 years among OECD countries. Against this backdrop, people are taking to the streets: the indignados in Spain, the Occupy Wall Street Movement in the United States and the March for Jobs in the United Kingdom are just a few alarm bells for change that are resonating around the world. Governments and central banks have taken bold action at the national and international levels to regain the trust of their citizens. They have adopted supportive macroeconomic policies to buttress activity during the recession, they have committed to consolidation to restore the sustainability of the public finances, where needed, and they have embarked on structural reform programmes to revive the growth potential of their economies. These endeavours often entail difficult decisions that require the support and trust of citizens to succeed. We have argued that governments need to “go structural” and “go social” with a bold reform agenda in different policy fronts, fostering new sources of growth and investing in people, skills and education. However, confidence and trust cannot be regained through economic and social policies alone. “Going institutional” is a precondition for economic policies to work! Policy action to strengthen institutions needs to be comprehensive and multi-faceted; we need to tackle lobbying, improve procurement systems, deal with conflict of interest and improve political party financing. To do so, governments need to adopt clear and transparent principles for public integrity in their legal frameworks. For example, lobbying is estimated to “cost” $3.3 billion a year at the federal level in the United States and to occupy the time of an estimated 1500 professional lobbyists in Brussels. Though it is a legitimate element of the political process, allowing governments to make informed and balanced decisions, lobbying is not always perceived as fair and transparent. Implementation of OECD principles that help governments in areas such as setting up registers of lobbyists and mandating the disclosure of monies received from lobbyists would give citizens greater confidence in the lobbying process. This also applies to OECD principles on public procurement to ensure fair and open contracting decisions. In addition to more comprehensive legal frameworks, regular monitoring of compliance is also required to persuade citizens that the law and regulations are being observed. For example, an increasing number of countries are legislating against conflict of interest in public life. In fact, disclosure of outside income by public officials is a requirement in all OECD countries. However, our analysis shows that in most OECD countries top officials do not have to disclose either previous employment or current unpaid employment. Another issue is the financing of political parties, which has long been a taboo and is perhaps the area that has received the least attention and analysis. It has often been argued that political party financing is so closely tied to specific political, administrative or cultural contexts that it is impossible to identify good practice. Yet, financing of democracy is a crucial element in the trust equation. Citizens need to be reassured that the huge amounts of money raised during political campaigns do not buy undue influence on public policy. We need to take a hard look at what works across countries and try to promote reform efforts. Let’s be clear: public integrity is not only about honesty and morality, it is also about laying the foundations for long-term sustainable growth. We will not successfully emerge from the crisis without the trust of our citizens and the confidence of markets. Good national and global governance depends as much on integrity and trust as it does on choosing the right policies. World leaders would be wise to add these important issues of governance to their national and international agendas. The OECD stands ready to support them in their efforts.■
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Interview: Kamal Nath, Union Minister of Urban Development
Lessons from development of OECD nations
At the time of independence nearly 65 years ago, India was a rural country with 85 percent of the population in the 500,000 villages. Lack of employment, development and poor farm output has seen large scale migration towards the cities and today urban India counts over 450 million people living in hundreds of mid-sized cities that have sprung up in an entirely haphazard and unplanned manner.This is the challenge that Kamal Nath faces as the urban development minister of India. Acknowledging the enormity of the task, Nath remains unfazed and tells Ranvir Nayar in an exclusive interview about measures being taken by his ministry to tackle the problems of urban India & how it offers an excellent opportunity for companies from the OECD nations to participate in this major renewal effort.
Minister, what would you say were the key achievements of your ministry in the last year? Well, Indiaâ€™s been urbanizing rapidly and urban population
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has increased from 285 million in 2001 to 400 million in 2011. Most important thing to remember is that India has a young age profile. With the young age profile, there is greater
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mobility. Youngsters are much mobile than those who are much older, so the pressure on urbanization only increases. And we expect that in the next decade, next decade and a half, it will be 600 million people in the urban areas. We have seen a successful implementation of the Urban Renewal Mission Program, the first phase of which lasted five years and which has come to an end. And, lots of lessons have been learnt from there. So, while we frame the Part 2 of the Urban Renewal Mission, we will be able to enlarge it and give it more focus to areas which, in percentage terms, have heavy urbanization i.e. medium size cities are going much faster in percentage terms.Similarly, there is a greater need for capacity building. How do we train urban planners, how do we provide good urban governance? So we are putting a big focus on urban governance also. The Government of India has decided to support DPR preparation (50% of the cost of DPR preparation will be met by Centre) for Metro Rails for all cities having a population of more than 2 Million.The Government has also â€˜in-principleâ€™ agreed to a Regional Rapid Transport System (RRTS) in Delhi NCR. (i) Delhi-Meerut RRTS corridor (90.2Km) (ii) Delhi- Alwar corridor (180 Km) (iii) Delhi- Panipat RRTS corridor (111.2KM)
What were your targets when you took over this ministry and how far have you come? My main aim was to remove the bottlenecks in release of funds to the States and expedite pace of implementation of projects and reforms. We have achieved it by releasing nearly
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Rs. 55 bn to the States in the last financial year. In addition to the sanction of new projects, I have laid stress towards achievement of reforms particularly those which will increase the internal revenues of the local bodies and also increase the pace of interaction with the States, local bodies and elected representatives. While preparing the road map for JnNURM Phase II, we would like to have a vision of next 20 years along with a focused plan of action for next 5 years. There will be greater emphasis and funding for capacity building, which will focus on strengthening institutions as well as human resources. Building capacity of the cities to implement reforms and leveraging funds for projects and structuring projects on PPP will be necessary. What are the needs of India in terms of urbanisation?
Please share some sectoral details viz. transport, utilities civic amenities etc.? Our urban population grew from 286 million in 2001 to 377 million in 2011 and is expected to reach about 600 million by 2030. India's economicg row t h m o mentum cannot be sustained if urbanisation is not actively facilitated by increased investment and a comprehensive capacitybuilding programme for urban governance. There is need for creation of quality urban infrastructure with assured service levels and efficient governance and to provide a balanced and integrated multi-modal transportation system that gives priority to transit and pedestrians but also contributes to the efficient movement of urban citizens, like Delhi Metro, Ahmedabad BRT, Bangalore Metro.All the important components of sustain-
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able urbanization like improved governance, financing planning, reforms, capacity building, PPP are covered under the JnNURM Mission. Under JnNURM, projects worth Rs 813 bn have been sanctioned with Central Assistance of Rs 424 bn. This covers 1367 projects spread across 739 cities. Under UIG component, that covers the mission cities coverage of sectors include - 158 water supply, 106 roads, 112 sewerage, 73 drainage, 45 solid waste management,21 MRTS , 45 other amenities. Talking of Urban Governance, you know, the civic bodies in India, the municipalities, are they capable today, of handling the challenges, how can your ministry play a role here? That is what I see as the biggest challenge. Because as I said the biggest challenge again we have is of governance issues so we talk of capacity building, and we are setting up, setting aside huge amounts of money for capacity building- to train those in our smaller municipalities, medium size municipalities and the larger ones. So, capacity building is going to form the core. In fact, we are saying that to avail any funds from the central government, theyâ€™ll have to have a guaranteed level of municipal services provided. Most of the urban bodies (municipalities/municipal Corporation etc.) are in very weak financial health. How does this impact the delivery of essential services to people? How can this be overcome to ensure that the civic bodies can perform their role? Is your ministry initiating something to strengthen the civic bodies financially? Under the Mission, our aim has been to make the ULBs self-sufficient. JnNURM reforms clearly lay down the steps to be taken for property tax reform and user charges, the main sources of revenue for ULBs. It is mandated that 100% cost recovery in the case of Water Supply and Solid Waste Management shall be achieved by the ULBs during the Mission Period. Further, 85% coverage of property tax and collection efficiency of 90% shall be achieved by the Mission cities. The ULBs need to be strengthened as local governments with ownâ€™ sources of revenue, predictable formula-based transfers from state governments as part of revenue-sharing arrangements, and other transfers from the Government of India and state governments to help them discharge the larger responsibilities assigned to them by the Constitution. To enhance the credit worthiness of the
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ULBs and to attract funds from the market to leverage the share of ULB, the Mission Directorate of JNNURM conducted the credit rating exercise for 69 ULBs (in the 63 JNNURM cities). Apart from this, the Ministry has established Pooled Financing Mechanism to leverage funds, but a few states established this. Another effort is to promote PPP model in service delivery. In order to supplement the effort of State Governments/ Urban Local Bodies, the Government of India launched Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in 2005 with a view to provide infrastructure facilities including drinking water supply, sewerage, storm water drainage and solid waste management etc. for all the cities in the Country with a reform oriented agenda. Is the government encouraging the participation of the private sector and what kind of incentives /models has your ministry developed to involve both Indian and foreign companies? The Ministry has been consistently trying to push private sector involvement in urban sector projects in the form of public private partnerships (PPPs) structured around a robust revenue model (including user charges, targeted subsidies, and viability gap funding). • To streamline the system and strengthen the capacity of the ULBs, the Ministry has been issuing detailed guidelines and sector specific toolkits, especially in the areas of water supply, sanitation and solid waste management, to state governments and ULBs for arming
them with model financing proposals for PPP, model contract documents etc. • In addition to this, sector-specific model concession agreements would now be put in place for sectors such as water distribution, wastewater management, solid waste management, and urban transportation. • Implementation of reforms such as property tax collection is being done under the JnNURM to improve the financial health of the cities, which would enhance private sector interest and confidence. • In the days to come, contractual and financial arrangements such as buildoperate-transfer (BOT), annuity, and viability gap funding (VGF) mechanism would be more widely used proliferated in the delivery of urban services. • Hyderabad Metro Rail • Ahmedabad BRTs • The Government would advise state governments to either amend their Municipal Acts or enact overarching Acts to facilitate PPPs on the lines of states like Gujarat and Karnataka. States who are able to leverage funds through PPP would be incentivized. India’s Urbanization levels are still very low compared with the most OECD countries. What lessons can we learn from OECD countries’ experience in this? What are the pitfalls in rapid urbanization? Most of the OECD countries have policies to implement national development through central programs. The Central governments have a large impact on urban living conditions through a variety of policies, programmes and projects that are being implemented by a wide range of national ministerial departments and agencies. In most OECD countries, the central government plays a role in enhancing local capacities.Unplanned urban growth can cause many problems, such as insufficient infrastructure and public services, and traffic congestion which we are facing in our country. Rapid urbanisation tends to priorities short term land development and economic growth over long term strategic spatial planning results in valuable farm lands into urban uses. Hence an efficient land policy with a focus on long term sustainable development is required, which could be learnt from the various urban land
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related policies followed and legislative measures taken by OECD countries. Efficient urban transport and clean cities are few more areas where we can take lessons from the development process of the OECD countries.
disposal, sewage; projects which are on line there.
And how are you communicating this need of India especially overseas? Yes. It’s moving onwards. I have just come back from What role do you see for operation and Hanover, we had this meeting in Germany, and you collaboration of India and the OECD The Indian know we are growing this. We are going to have a nations in the urbanization of India? urban sector provides MOU with France on this, which,when the new Well, I see a huge role and I was at the great opportunities for government comes in, I’ll come to Paris too. We program in Brussels, where all the overseas infrastructure have also had interactions with government Mayors from Europe were present, and and urban service and private entities in countries like Singapore, for first time they had somebody from delivery firms who Japan, UK, Belgium, etc. The Indian urban outside EU to address them and are looking to expand sector provides great opportunities for obviously the scale is different at the OECD. their horizons. overseas infrastructure and urban service There we talk about large numbers and larger delivery firms who are looking to expand their horiscale. France today is working on water. We have zons. Our in frastructure gap has been a PPP Project with a French company. Other French estimated to be around US$ 871 billion for the next 20 years. companies are also active in India. We are holding a semiClearly, this gap cannot be fulfilled with public nar with French companies on this. Similarly, there are other resources alone; and would require tapping private sources of financing. We would love to explore public private German companies that are interested, Italian companies partnerships (PPP) in all areas of urban infrastructure. The are interested. There is a lot of scope at the OECD to reach external funding agencies /institutions such as JICA, ADB out and participate in the huge; Water, waste
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and World Bank are providing financial support to the Govt. of India for creating urban infrastructure in different cities in the country. What place have you accorded to ecological preservation and energy conservation in the various schemes/initiatives of your ministry. As we are still developing our cities, would it be your effort to ensure that we get the most energy –efficient, eco –friendly, sustainable and long term solutions? We are looking at this as a priority, because with the pressure of urbanization of a new product, whether it’s in transportation, urban transportation, whether its energy; our focus will be on sustainability to ensure that these urban bodies that we have, are completely in sync, with the best practices of sustainability. My Ministry has launched ‘The National Mission for Sustainable Habitat’ thatwould aim at creating improvements in energy efficiency in buildings, management of solid waste & shift to public transport. The major focus of the scheme includes: • Greening of cities: Increasing green cover as part of the
urban and regional planning exercise; • Building byelaws/building regulations focusing on environmental standards that contribute to sustainability and simultaneously address GHG mitigation; • The National Mission will include a major R&D programme, focusing on bio-chemical conversion, waste water use, sewage utilization and recycling options, plasma conversion of waste of biological origin to liquid fuels that can substitute for petroleum based fuels wherever possible; DMRC is registered with the United Nations Framework Convention on ClimateChange for Carbon Credit. DMRC is earning carbon credit of the value of Rs. 12 mn per annum for re-generative braking and secondly due to modal shift from road to rail for which the annual earning expected is of the order of Rs. 340 mn.The Ministry is propagating a number of viable options under JNNURM for ecological preservation and energy conservation such as development of technology for producing power from waste and gas captured from sewerage treatment plants, waste water recycling, rainwater harvesting etc.
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Report card of 2011-2012 JnNURM • The Government will be launching the next phase of JnNURM – II with an outlay of 0.25 percentage of GDP, amounting to nearly Rs. 17.5 trillion (USD 38 billion) during the 12th Plan period. JnNURM-II will have an enhanced focus on the small and medium towns. • Under JnNURM, projects worth Rs 813 bn have been sanctioned with Central Assistance of Rs 424 bn. This covers 1367 projects spread across 739 cities. • 44 new projects in UIDSSMT at an approved cost of Rs 11.79 bn and 26 new projects in UIG at an approved cost of Rs 19.69 bn have been sanctioned last financial year. • On the reform part of the mission, MoUD has achieved 24% of overall reforms achievement in last one year only.
Urban Transportation • Government of India is giving a major thrust to Urban Transportation including Metros. • Delhi MRTS Phase-I, Phase-II, extensions to Gurgaon, Noida, Vaishali and Airport Express Link with a total network of 190 km. is in operation with current average ridership of 1.73 mn per day. • Phase III of Delhi Metro for 103.5 Km has also been approved at a total cost of Rs. 353 bn. The Metro extension to Faridabad has also been sanctioned which is targeted for completion by March 2014. Other extensions to the Delhi metro are likely to be cleared this year. • Also preparatory work has commenced on the following lines - Dwarka Sector 21 to IFFFCO Chowk, Shiv Vihar to Mukundpur and from Rithala to Bawana. • Initial work including DPR preparation has commenced for Phase IV (104 km). With the completion of Ph –IV by 2021, Delhi Metro will have a network of about 440 km. • Government has approved Jaipur Metro project stage-1 with 100% financing from State Government and its agencies. • In order to further encourage use of public transport, Ministry has launched the brand name, logo and design of the Common Mobility Card on 6th December, 2011 across all operations of all modes including parking across all Indian cities. • The Government of India had approved the implementation of the Bangalore Metro Rail Project of 42.3 km length by Bangalore Metro Rail Corporation Ltd. (BMRCL). The project commenced on 20 January 2007 and is targeted for completion by 31st March 2013. First leg of 7
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Km. has been commissioned on 20th October, 2011. • Metro Rail projects commissioned since January 2011include - Sarita Vihar - Badarpur under Delhi MRTS Phase-II 14.01.2011 - Airport Express Link- New Delhi Railway Station to IGI Airport 23.02.2011 - Airport Express Link - IGI Airport to Dwarka Sector 21 23.02.2011 - Extension of Delhi Metro to Vaishali, Ghaziabad 14.07.2011 - Kirti Nagar – Ashok Park under Delhi MRTS Phase-II 27.08.2011 DPR of Metro Rail projects are under preparation for the cities of Bhopal, Indore, Nagpur, Navi Mumbai ■
How to go from indignation and inequality to inclusion and integrity?
Paris, 22-23 May
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NBCC Tower- Okhla
NBCC: Your Partner in India
stablished as a Government of India Enterprise in the year 1960, National Buildings Construction Corporation Ltd.(NBCC), under the Ministry of
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Urban Development, Govt. of India, has been executing many a landmark projects in diversified areas both at home & overseas. Presently, its operations can be categorized into
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Advertorial Vibgyor Tower, Kolkata
three main segments i.e. (i) Project Management Consultancy (PMC), (ii) Real Estate Development & Construction Business and (iii) Civil Infrastructure for Power Sector. The PMC Works of the Corporation account for more than 90% share in the total Turn Over of the Company as has been witnessed in the past. The company intends to continue to focus on performance & quality execution in order to seek maximum customers satisfaction in PMC services, Civil Infrastructure for Power Sector & Real Estate Development & Construction Business. As on January 2012, the Corporation has 141 ongoing & 78 forthcoming projects in PMC segment and 14 ongoing projects in civil infrastructure for power sector segment. NBCCâ€™s income from operations increased from Rs.19,503.23 Million to Rs.31,267.72 Million during FY 2009 to FY 2011. It is a certified ISO 9001:2008 ESIC Hospital, Manesar, Haryana
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Cooling Tower & Chimney, Simhadri STPP (AP)
company in respect of Project Management & Consultancy Division. NBCC has, as on January 2012, land reserves of approximately 125.245 Acres. Till January 2012, NBCC’s Order Book for the PMC and civil infrastructure stands at Rs.106136.82 Million. NBCC, a schedule ‘A’ CPSU, is presently operating in diversified areas that include sectors such as Real Estate-both Residential & Commercial, Power, Environment, Health Care, Transportation, Institutions, Roads, Border Fencing, Mass Housing, Office Complexes etc. The Corporation has also earned a niche for itself recently, by constructing a Green Building named Indian Institute of Corporate Affairs, Manesar in the State of Haryana. The building has achieved the prestigious Gold Rating under
CBI HQ Buidling, New Delhi
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LEED India for new construction awarded by Indian Green Building Council (IGBC). This is the first Government Green Building in the millennium city of Gurgaon to receive IGBC’s Gold Rating and also the first certified Green Building ever executed by NBCC. NBCC’s excellent performance in various financial parameters over the last 5-6 years, led the Government of India to go ahead with the company’s offer for sale and accordingly, NBCC’s Disinvestment of 1.20 Crore Shares or 10% of its Paid Up capital was on sale during March 22-27, 2012. Healthy response from the investors by way of over 5 times subscriptions of NBCC’s IPO has resulted in fixing the prize of IPO by the Government at upper band and garnering Rs.125 Crore from the sale. ■
IICA Manesar_Campus view
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Achim Steiner, UNEP Executive Director and Under-Secretary-General of the United Nations
Green economy can generate growth These are challenging times to head the United Nations Environment Programme as the world tries to recover from one of the worst-ever economic slumps. Has this taken the attention away from environment and ecology? Achim Steiner UNEP ED does not think so. Steiner is fully aware of the uphill task facing him and his team, yet he seems unfazed and ready to take whatever action may be needed to ensure future that the worldâ€™s ecological balance is maintained and brought back from the edge where it finds itself today. In an interview with Biz@India, Steiner shares his vision of the recent developments in the world. How has the global economic crisis since 2008 impacted issues like ecology and environment? Has the focus on economic crisis pushed environmental issues on the backburner?
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In response to the economic and financial crisis, UNEP launched the Global Green New Deal arguing that the multi-trillion dollar stimulus packages being lined up at the time should be used to kick start a transition to a low
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carbon, resource efficient Green Economy.Some countries took the opportunity to invest in future, clean tech industries and their ecosystems such as forests and freshwaters. China for example invested over a third of its stimulus in broadly environmental sectors such as renewable energies and high-speed rail.The Republic of Korea invested around 90 per cent of its stimulus in such areas. Since then UNEP has provided the analysis and the case studies underlining that a transition to a Green Economy can generate growth and jobs but without pushing humanityâ€™s footprint through planetary boundaries.A Green Economy in the context of sustainable development and poverty eradication is one of the two overarching themes for Rio+20 in June.So far from pushing environmental issues onto the back burner, the crisis has served as a spark for reflection on real progress and action on a far more sustainable and forward-looking economic model that in many places has resonated with societal and environmental concerns.
It depends where you look. In 2010 the global cement industry invested some $3.5 billion and is planning to spend $5 billion annually by 2015 in emissions controls.By some estimates, the air quality control market in the United States contracted between 2008 and 2010 whereas in Asia it expanded.In the end there will be many factors at play ranging from government policies and regulation to whether a country is in a programme or upgrading or expanding its infrastructure.While some countries and companies may perceive investing in environmental technologies as a cost, others may deem it either a responsibility to its citizens or international agreements and an investment in a more efficient future and competitive economy.When UNEP was asked in 2005 to spearhead a final, global phase-out of lead in petrol, some queried the costs and the benefits.But a recent scientific paper has put the economic benefits at several trillion dollars a year globallyâ€”ranging from benefits such as improved IQ and reduced hospital costs to even cuts in criminality.
Are the CEOs reluctant to invest in domains like pollution and emission controls? Is lack of resources also forcing them to pull back from buying new equipment that may be more energy efficient and eco-friendly?
Have the governments been forced to abandon /significantly drop the investment in renewables and other forms of ecology-friendly energy sources? Has the private sector begun to participate in the necessary R&D in this domain?
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the gross misallocation of capital—for example up to $600 UNEP, working with Bloomberg New Energy Finance, billion is spent annually on fossil fuel subsidizes conducts an annual survey of investments in versus around $70 billion on renewables.So the renewable energies. The latest report, focusing money is there, it is a question of government on 2010, shows that investments in The Green policy in terms of where private sector capital renewable rose by over 30 per cent to some Economy report will flow. $211 billion—more than in new fossil fuels.Government research spending in suggests that investing 2 per cent of global How will the current high prices of crude terms of R and D in renewable energies GDP in ten key and other forms of fossil fuels impact the was also up 120 per cent to $5 billion adoption of green energy sources? globally between 2009 and 2010. Over the sectors can benefit the economy In the past high crude prices was a same determining factor in terms of renewables investments. But in the past few years investments in What role has UNEP played in the above three renewable energies has grown irrespective of the oil price areas. How have you ensured that the focus on economic because of the multiple benefits—combating climate and social issues does not mean lack of attention to the change, a faster way of electrifying rural areas, reduced air environment? How do you entice companies to continue investment in new technologies and to continue to pollution and health costs and less water demand than say support R&D for green technology? coal or nuclear in terms of cooling. UNEP’s main contribution has been the coordination of the Green Economy report, which is supporting the What kind of development do you see in this preparations for Rio+20 happening in June—20 years after domain? Which countries/regions are leading the surge the Rio Earth Summit of 1992 that set the course of and where could more effort be put in? What role can contemporary sustainable development.The Green UNEP play in giving a nudge to the laggards? Asia, led by China, is trailblazing ahead. In 2010, China Economy report suggests that investing 2 per cent of global invested $48 billion in new renewables. Renewables GDP in ten key sectors can benefit the economy but without investment in India grew almost as strongly but from a far the increasing shocks and rising scarcities linked with the lower base, up 25% to $3.8billion, and the country ranked old ‘brown’ economy.Part of this work is stressing some of
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eighth in the world.Wind projects were the biggest single item, at $2.3 billion, followed by $400 million each for solar, and biomass and waste-to-energy.Meanwhile Germany led the way in Europe. Large scale new investment in renewables was $6.7 billion in 2010, up 18%, but this was dwarfed by its $34.3 billion growth n small-scale projects such as rooftop Photo Voltaics.By highlighting these transformations, UNEP is many ways is alerting those behind the curve to the opportunities they are forgoing now and in the future. This year marks two landmarks - Stockholm+40 and Rio+20. Please give your view and analysis of how the world has changed since these two events and what are the challenges facing the world in these two areas? How would these two agreements go down in the history of modern world - as failures or partial success or really exemplary successes? Both events led to increasing awareness of environmental concerns and the link between environment and development. The intervening years have witnessed an evolving landscape of treaties ranging from ones on the trade in endangered species and trade in hazardous wastes up to those on climate change, biodiversity loss and persistent organic pollutants.However the sheer scale and pace of environmental change has outstripped the response
including the ability of existing institutions such as UNEP—a result of the Stockholm conference in 1972—to make a fundamental difference. So the world of 2012 is markedly different— economically, socially and environmentally. The challenge of Rio+20 is to take the ideas, ideals, agreements and progress of the past 40 years and now implement the policies to accelerate and scale-up positive environmental change.Rio+20 has also the opportunity to reform and re-focus the international institutions charged with realizing sustainable development including strengthening UNEP to make it fit for the 21st century challenges and opportunities. Do you see any resolution of the climate change issue? Where are the blocks and how can they be overcome? What is UNEP's role in this? Well there has to be. The world cannot keep muddling and prevaricating through given the science and the economics of what is likely to happen to the planet if temperatures rise by 2 degrees C, even 1.5 degrees C.There are multiple reasons for reducing greenhouse gas emissions from climate change to energy security to reducing vulnerability to oil price shocks, air pollution and crop damage.If the world’s nations can be convinced of the imperative to act and
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can be convinced that one country is not going to secure some competitive advantage over other by acting, then a way can be found through.UNEP’s role is to continue to support the work of the Intergovernmental Panel on Climate Change, which along with the World Meteorological Organization, was established by UNEP in the late 1980s to produce the essential risk assessments in respect to climate change.UNEP has also been for two to three years coordinating climate modeling centresworld-wide on the ‘emissions’ gap—the gap between scientific reality and current ambitions of nations. This work is serving to ‘keep the negotiations honest’ by getting back to basics—what needs to be done, how far away is the world from bridging these emissions gaps and what are the policies and actions available to bridge this divide— from renewable energies and energy efficiency to the carbon capture and storage potential of the world’s ecosystems such as forests, mangroves and wetlands.For example, UNEP along with UNDP and the Food and Agricultural Organization of the UN, is preparing some 12 countries for Reduced Emissions from Deforestation and forest Degradation including developing safeguards so that local communities benefit.Analysis of the carbon capture potential of coastal ecosystems such as salt marshes, mangroves and sea grasses is also illuminating the urgency to invest and re-investment in these natural assets. A combination of reducing defor-
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estation on land, allied to restoring the coverage and health of these marine ecosystems could deliver up to 25% of the emissions reductions needed to avoid 'dangerous' climate change. Indeed these ‘Blue carbon’ sinks and estuaries capture and store between 235-450 Teragrams (Tg C) or 870 to 1,650 million tons of CO2 every year - or the equivalent of up to near half of the emissions from the entire global transport sector which is estimated annually at around 1,000 Tg C, or around 3,700 million tons of CO2, and rising.These ecosystems are also important for coastal defenses, fisheries and tourism—so a dollar spent on their restoration and renovation delivers multiple, Green Economy benefits. Meanwhile the Green Economy analysis is opening eyes in terms of economic, social and environmental returns.For example, investing about one and a quarter per cent of global GDP each year in energy efficiency and renewable energies could cut global primary energy demand by nine per cent in 2020 and close to 40 per cent by 2050, it says. • Employment levels in the energy sector would be one-fifth higher than under a business as usual scenario as renewable energies take close to 30 per cent of the share of primary global energy demand by mid century. • Savings on capital and fuel costs in power generation would under a Green Economy scenario, be on average $760 billion a year between 2010 and 2050. ■
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Interview: Phiroz Vandrevala, Vice Chairman & MD Diligenta, a TCS subsidary
Not enough skilled IT manpower in EU As the Vice Chairman and Managing Director of Diligenta, a subsidiary of Tata Consultancy Services (TCS) focused on the Life & Pensions industry, Phiroz Vandrevala is responsible for driving the business strategy and operations of the organisation and opportunities globally. Phiroz is also a Director on the Board of Tata Consultancy Services, the global leader in IT services, consulting and business solutions and part of the Senior Leadership team. With over 25 years of consulting and leadership experience with TCS, including as an executive director of the company since 2007, Phiroz had been involved with TCS' foray into the life and pensions industry from the outset. In an interview with Biz@India, he outlines the strategies for TCS in European markets and the challenges facing the Indian IT industry. Is it becoming more and more difficult for India IT to do business in Europe due to the Eurozone crisis ? Our business in Europe is continuing to do very well. In the
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financial year 2011-12 our combined UK and Continental European operations grew by over 26% in dollar terms and now account for 25.3% of our global revenues of US$ 10.1
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billion. We have been localizing our operations and investing in our growth in Europe over the past few years, enabling us to be positively placed in the market to take advantage of all growth opportunities. How do you foresee the performance of the Indian IT in 2012. The first results have been rather disappointing? Overall the Indian IT Industry is set for a landmark year in 2012 - with the aggregate industry revenues crossing the symbolic US$ 100 billion mark. The sector added 230,000 jobs and now provides employment directly to 2.8 million professionals. As the Industry leader, TCS has seen good momentum, and great traction in several businesses; we are confident about beating the NASSCOM ( Industry association ) guidance and predict stable pricing in the year ahead. What are the challenges for TCS in 2012? While our business is expanding well, we are always watchful of the macro-economic situation. The macro economic uncertainty has been going on for 3 to 4 years now and we are getting used to the fact that it is going to take a while for the situation to stabilize. Hence companies need to
operate in this new normal and focus on business growth with technology as an enabler. A key challenge in European markets is going to be the shortage of skills in IT. The European Commission announced in March that per estimates there could be a shortfall of 700,000 IT professionals in Europe by 2015 this is both a challenge for TCS as we step up our local hiring but also an opportunity for our global delivery model to be part of the solution. Manpower issues â€“ lack of skilled staff and fast turnover â€“ have been hurting Indian IT for many years. What steps are you taking in this domain? What can a leader like TCS do to retain talent? To attract and retain the best talent available we have announced a hike in salaries this year (double digits for high performers). We are recruiting talent from campuses across the globe and adding people both at the trainee level and lateral level. We have been successful in nurturing and retaining the best talent through the best training and incentives programme. These factors go on to prove why our attrition is at a healthy low of 11%, a leading figure in the industry.
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A lot of multinationals like IBM, HP etc are bagging big deals in India. Is it because the Indian companies had ignored the domestic market? What steps are you taking to reinforce your presence in India? TCS has always been committed to the domestic market and building critical infrastructure in the country such as the core systems for the National Stock Exchange(NSE), Bombay Stock Exchange,(BSE) National Security Depository Limited (NSDL) as well as many other Institutions. Around 10% of TCS revenue comes from the Indian market. Besides building the financial infrastructure of the country we have been involved in government’s most mission critical project such MCA 21 and Passport Seva Kendra to help provide world-class public services in the country. The Indian market is expanding fast ( IT services were valued at over INR 589 crores last year) and we intend to keep a strong focus on it as it grows. Where do you see the growth for the company coming from? Which geographies and which verticals look most promising? Are Indian companies today innovative enough? Are they able to compete with the best of the world and in all domains? Or are there verticals/ segments where we need to catch up still? We see growth coming in from both mature markets ( US, Europe) and Emerging markets – it will be well distributed. BFSI, we expect to grow well this year. We see Telecom sector picking up as well as a number of other verticals like Retail, Manufacturing, Hi-Tech, all driving growth. From a
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technology point of view, we are investing heavily in Mobility, Big Data, Multi-Channel and Cloud Platforms. How do you rate the performance of Diligenta? Is it going to remain focused on the insurance BPO business or are you scouting other opportunities? What are your plans for the company? Are you looking at other markets than the UK for Diligenta? Our BPO business has done well and has recorded good revenue numbers. The recent deal that Diligenta signed with Friends Life in 2011 is a testimony for the focus on the Insurance BPO sector. In size it represented our second largest deal worldwide historically. We are always looking out for the best opportunities in the market. How is France & Germany shaping up for TCS? Has crisis made more CIOs here open and amenable to looking at Indian IT? Both Germany and France represent focus growth markets for us. We have been focusing over the past 2-3 years in significantly strengthening our local models in both countries and have set up strong front office teams ( sales, customer relationship, delivery operations personnel) to cater to the unique language and business considerations in each country. This puts us on a good path to growth in these markets and we have built up a strong roster of clients from the CAC40 and DAX30. Incidentally, recently we won an award for innovation and investment in France, given by the Greater Paris Investment authority - in recognition of our major expansion in the market. ■
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Interview: R V Kanoria, President,FICCI
We need to focus on growth R V Kanoria, Chairman and Managing Director of Kanoria Chemicals, is also the President of the Federation of Indian Chambers of Commerce and Industry (FICCI). In an interview with Ranvir Nayar, he outlines the challenges for the industry today, including the inconclusive negotiations for an EU-India Free Trade Agreement and also the role that businesses could play in the current global crisis. How you think theEU-India FTA negotiations will finally fall in place? It would have been good, if the FTA could have been signed at the EU-India summit held in India recently. I always believe that the deadlines are the best negotiators because deadlines then make sure that one concludes whatever one desires and the fact that they are not happening now, I really donâ€™t know what it means for a new deadline. I would like to
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see it happen as fast as possible. From whatever contacts that we have had, I believe that there is desire on both sides to conclude these negotiations there is a possibility that during the year the FTA would be signed. But, for that to happen, one side has to giveinterest, which will show that interest? See, any negotiations are give and take. Ultimately what we
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are trying to achieve is benefits for both countries. When we are negotiating, it feels like a lot of pain. So, there are pains on both sides and at the end of it I think there will be gain on both the sides. Do you see flexibility on European side on India’s key issues and if you can enumerate what are our key issues? One of the key issues that we have is apparently in the service sector and that is the free movement of our nationals in European Union and that is mode 4 negotiations. I am using ‘mode 4’ in the WTO terminology. It’s not in the context of the India-EU FTA. Negotiations are always difficult and create an environment more difficult. If we look at the success of world trade negotiations, even at multi lateral negotiations, most successful period was in mid 90s and entire world was facing an economic boom and the worst experiences have been in the time of economic crisis. In 2001 when there was a crisis then it was thought that the trade would actually lift the sentiment and in 2001 very clearly, the Doha development round was born. When all the wisdom in the political circle in the world thought that the right thing would be to give a boost to trade and development and as a result of that take the world out of economic problems. We don’t see that sense of urgency any
more and seems that trade has gone onto the back burner. I feel that one is the economic problem, secondly out of the five permanent UN Security Council members; four will undergo changes in government this year. So as long as there is political agenda there is bound to be more attention to the issues that are more domestic in nature. So, I think at mosphere right now is difficult. As far as give and take from India and EU point of view, from the EU side the major issue is the automotive industry where there is this talk of reduction in tariff from 60% to 30% and for small automotives, as far as I understand India has already agreed to reduce from 50% to 40%. We probably see some kind of hybrid solution coming out in the sense that there will be reduction in tariffs, there will be a phase out over a period of time to afurther lower level. We form ourTRQ which is “Tariff Rate Quota” where number of automobiles allowed and lesser duty will be limited and that could be as country wise and the EU as a whole. As far as wines and spirits are concerned, there seems to be some kind of understandings. I don’t see any serious main points other than services. Now, beyond that there is obviously this concern, even though trade issues might get resolved, there are large numbers of non-trade issues and very rightly so India is concerned that some of these non-trade issues are
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personally believe that it is a durable and definitely becoming more important than the trade issues.Whether achievable objective. it isthe environmental standards or labor I wish the standards and some products of Indian origin Then why it was not done so far, because the have faced lot of problems because of government revisited this entire social same issues have been on the table? technical barriers to trade. So, I think on the expenditure and I See, the issue of the free movement is very table the non-trade issues have become wouldn’t like to see contentious right now because this whole more critical than the trade issues and I moves of fiscal issue of domestic jobs being exported that think they need to be addressed. I feel that needs to be addressed and as I said if I am even in general, even for the multilateral consolidation resulting in an increase going in for election. It’s not an idea which you systems non-trade issues will start in either in direct can sell. So, when I said during this year, I meant dominating because we are kind of bundling or indirect tax later this year and by that time all this will be over all the tariff issues into a quantitative number and all the elections will be finished and the last one and the fact that the tariffs are no longer there happens to be in USA. So, this entire psychology is likely is means all the issues become negotiable on an independent under going a change. At least, I think that so. But, by that basis. So, I think that needs to be kept in mind. time we will be ready with our elections here.For our You just expressed your optimism or hope that the FTA election, I don’t think any of the issue dealing with the will be settled this year, but there is crisis, which is not India-EU FTA is politically sensitive and if you look at the getting better definitely, but getting worse. France has automotive, it is industrially sensitive topic not a politically elections, so isn’t that being a bit optimistic for this year? sensitive topic. It’s good for the consumer. So, what is good I still think that the threats in this entire FTA are very for a consumer is actually politically a better thing to do.I limited. So, even if we have an economic crisis or even if we would like to see the India-EU getting through. Business is have political compulsions due to elections. I think threats interested because it is for the benefit of business, in terms of technology transfers and engaging with a set of countries for the India-EU FTA are very limited,from a strategic point from which there is a lot to gain. of view because it’s good for both nations (if I am allowed to But, if we want free movement of people, then EU keep use this terminology, though EU is not a nation in a sense, saying that we are 27 different countries and we have to but it is an economic block which is acting in unison). I
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check immigration with each country. These issues of security concern will remain. Within the EU you can move from one country to another. Thus cause some amount of concern at the same time. Let’s take the world at 2030, I believe 2 billion people will be added to which only the 150 million will be added in the developed world. So, the demographic profile of the world is going to look very different. There will be many more Indians and Africans. So, this whole demographic profile of this world will change, I think the world need to be well prepared for that and by denying movement of natural persons, they are not really preparing for it. It is just not migration, it is also immigration. Indian economy, where are we? We are seeing fairly mixed signals. I think, this external focus requires a deeper internal focus and if we are to engage ourselves with rest of the world, we need to be prepared to be able to engage. There is a need to take some bold decisions to set the economy back on track. Unfortunately as a country our reactive power has been reduced considerably because we are faced with fiscal problem, current account deficit with high rates of interest, inflation, and not much control on our social spending. All these problems have to be addressed. If we talk about inflation, it leaves us little room in our monetary policy to actually reduce interest. But some countries, let’s take Brazil for example has actually reduced the interest four times in the last three months at the cost of inflation and fiscal deficiency because they have chosen the path of growth and I think India also needs to look at that aspect as to whether we will continue to talk about inflation and restrict growth or whether we can take some bold initiatives to actually bring growth back on track.So, it’s a choice that has to be made and I personally from the business community point of view would like to see the choice in favor of growth.
indirect tax and I would like to see the expenditure side of the budget addressed. I do believe there is need of social programmes, but there is also need to ensure that the delivery mechanism are proper and the target for whom the social programmes are meant are the only recipients of that. Hence, there have been some issues that we have mentioned. One of which is subsidy in hydrocarbons. I am using the word hydrocarbons because if I say diesel then there is a reaction to it. But I believe hydrocarbons in general have been subsidisedin the country. So, is there a need of hydrocarbon subsidy for people who can afford to pay for it? One is obviously the social aspect of it, the other one is environmental part of it. By subsidising hydrocarbon we are
Any bold moves in the budget? I wish the government revisited this entire social expenditure and I wouldn’t like to see moves of fiscal consolidation resulting in an increase in either in direct or
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also creating this issue of climate change. I think this is certainly one area that needs to be relooked at. I also feel that the issue of food security needs to be tackled by takingbold stepson the agricultural sector and sometimes it is not understood that the agricultural sector is directly related to the land holding and the manner in which transactions are taking place.I feel that agriculture has to be given a huge boost and for FICCI one of the priority that we haveduring this year is to build a comprehensive plan for the agricultural sector,so that we can atleast kind of look at something that happened during the early 70s during the green revolution. There is a dire need of another green revolution. Finally, Rio+20is taking place later this year, where is India in this, are we taking backseat on those issues? Again, we get into the debate of growth. We should be conscious about the language change, I just spoke about hydrocarbon therefore we need to put a policy, which does not encourage emission. But at the same time I don’t think we could sacrifice our growth to the extent that we stifle it. No, but my question was, that at the international fora, are we putting our points clearly and well or we sitting more behind? As far as India’s engagement in the international fora is concerned, from whatever feedback we get is that our negotiators are well prepared and good. They have a point of view, whichmay be different but then one is always allowed to have a different point of view. It does not mean that we are not engaging ourselves, they may not engage themselves in the manner that the rest of them want us to. But, people who are representing us are doing a good job. Would FICCI have a special agenda for Rio+20? I will be very frank with you. No matter what agenda we prepare from international point of viewI think we need to have the domestic agenda for that. The agenda is essentially domestic.The international agenda is only the manifestation of the domestic agenda and from the domestic front I can tell you the key issue that the FICCI is working is whole lot of renewable energy systems. For e.g. we talk about the development of the solar energy industry in India, whether the government has used the method of reverse billing and subsidies, which I don’t think is the right way to go about it. There is also a scheme which exists within the frame work of the government of the renewable purchase obligations which is akin to carbon trading. So schemes which are more participative in the nature and do not
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burden the exchequer are much better schemes as long as they are properly enforced. So, I think we need to revisit this entire concept. You go and commit yourself to taiffs that are ridiculously low and then it continues to burden the government because they have to keep rolling out money. So that’s one area we are certainly working on and hydro carbons I have already talked about and we have these kinds of paradoxical, oxymoronic type situation in our framework of subsidies. So we will give subsidy on kerosene and diesel and then also subsidise the renewable energy. So we need to carefully study these from a strategic point of viewand come up with a conscious policy of handling climate change that also covers issues of cost to the government and ultimately cost to the taxpayer. ■
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Interview: Som Mittal, President, Nasscom
Economic environment could improve in Q3-Q4
The year 2012 does seem challenging for the Indian IT industry as it grapples with political and economic uncertainty around the world and at home. But Som Mittal, President of Nasscom remains confident that the year 2012 would end on a better note for his members than it has started. In an interview with Biz@India, he outlines the challenges and opportunities for Nasscom and the Indian IT.
We are here at the NasscomSummit again and the economic forecast for the country has been going awry. Have you had to relook at your own projections for 2012 and what impact do you see on IT industry for domestic economic slowdown?
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Well I think, in country like India, we are of course integrated with the global economy and but currently we would probably grow at 7%,and given the economic environment around I think7% is a good growth rate but it cannot sustain the kind of investment that we need to make into social
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schemes and hence it is also important that India goes up the chain. In the last year, almost every economy was one percent or two percent lower to what wasforecast. Given the fact, we still grew our exports last year at 16.3% which I think establishes the fact that fundamentals of the industry is very strong and the reasons that the customers buy continue to be very strong. What are the principal challenges for the Indian IT in 2012, besides revenue and the profitability? While our fundamentals are strong and our customers are doing reasonably well, it is shown from their balance sheets, given so much talk about the uncertainty, there are elections
in the USA; there are elections in France, India, and Russia. There is change in political leadership in China. Due to the uncertainty, people tend to hold backtheir investments and that has a certain impact on the revenues. We have forecast that in spite of the current environment, our growth will be between 11%-14%. But, we think in next two quarters many of these clouds will go away and then we will review our performance and probably have a new forecast in October. I hope that this time we will be taking it upwards. But, having said that we are still going to add net 200,000 people in India and I think itâ€™s important to understand why we continue to grow in spite of these uncertainties and I think it is because of what our customers are doing. With the new developments,
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customers are transforming their businesses, they are adopting mobile platform, and they are getting on to the cloud. They are also looking at how social media can beleveraged. They are also looking at how new emerging markets have to be developed. So I think these are the areas that are leading to investments in IT. You outlined factors that could be negative, but these are external factorsthat could be negative. What about inherent factors, internal weaknesses that you think need to be addressed for the IT industry? Well, there are surely a lot of things that we have got used. We do spend a lot of effort and money in training and reskilling people. India infrastructure is improving but you know at this point of time, I would say, energy crisis in terms of not enough supply of coals and fuels and due to this we need a 100% back up for everything we do and again we hope that there are no disruptions that happen because of elections. We
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have had severe bottlenecks in the past. We do think that the government needs to spend some more time in improving the business environment here, make it easier; there is too much tax litigation. Laws need to be simplified, direct tax code and GST, which was a very important input, hasnâ€™t been passed by the parliament yet and I think these are important changes in the policies that we would expect. What are the major issues on NASSCOMâ€™s table for 2012-13 and do you see trends of increased protectionism in Europe impacting IT industry? Well, if I look at Europe in particular, Europe is generally a higher cost economy than the USA is and I think if Europe has to maintain its competitiveness and markets that are growing like India, the cost pressure on them are higher. If you look at Europe, at least in the tech sector there is a huge shortage of people and technology is only one, which can make the governments more efficient. While there may be
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noises around we donâ€™t think protectionism can come. So, we will have to work harder and one of the big agenda point for us in 2012 is going tobe to ensure that we have our view points on the table and no untoward legislation can get passed which could be detrimental toour industry but also detrimental to those economies in the long run. India and EU has been negotiating at the FTA for long time, now they say, they might close the deal this year. How will NASSCOM ensure that it gets what it wants in the deal? I think there are major issues that are very major and important for both the EU and India and these are around mobility and how data protection is seen. Data protection and data privacy is a major topic right now across the world and we think if EU comes in with the dramatic restrictions on this, then I thinkthe cost to EU will be pretty great. So, these are few issues that are on the table in EU and I think discussions have gone well and hopefully as you said it will be the largest FTA that EU and India will sign and I think it will be good for both. Given the fact, that France is ready for the elections and the Eurozone the crisis are not getting any better. Do you really see a political will that is necessary to sign the FTA? We must get this clear that European markets are traditional markets andEurope companies or French companies are not the companies whose economy is not growing. So, if growth is in countries like India then you would look into how the market gets opened up for you and hence the FTA is very important. It should be a feather in the cap of the current political dispensation or anyone else who comes in because itâ€™s a forward looking thing rather than giving in. So, itâ€™s a give and take, which actually should be a win-win for both. How you think cloud will impact the global sourcing market and will it become challenge for Indian IT? Every time there has been a technological disruptions and I
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go back to people raisingissues when ERP was coming in and they said now that there is ERP there will be no IT industry left in the world. Actually, the emergence of SAP, Oracle Financials and ERP helped grow the overall market. Cloud we think, there will be something that may be reduced but on other hand overall market will increase. Because there are some issues related to the small and medium sized businesses, which the traditional solutions are unable to address. They can’t afford it but they need it and the cloud allows it. So, I think overall market will increase. Also our initial analysis of large corporations shows that there are many technologies that were not adopted because they didn’t think it was worthwhile but if it’s in the cloud, where the risk is not there, they will probably be adopting it. I think cloud will be a major game changer and it will overall change the market seemingly to some time or some places for those companies who did not ride the cloud wave if it would be negative. But, the trajectory,that we have seen is most of the service provider have adopted the cloud strategy. How is the consumerisation of the IT impacting NASSCOM members? If you look at India, our biggest issue right now is connectivity. 2G has come in and 3G still has to really roll out and it has to be at an appropriate price point. But the government has committed that in next two and a half years they are going to connect 2,50,000 villages on broadband using fiber optics and the last mile with the Wi-Fi. So , that I think it is going to be a game changer because that will connect those villages and the power of Internet will be used and I think its going to be major and new platforms like UID emerging which will again provide companies to develop applications which we have thought of. So, there are many things that are happening at the stage which would in fact increase and make people inclusive in this. You heard the minister speaking this morning about making electronic service delivery mandatory and it means that over next four to five years every service that the common citizen gets will be electronically delivered. If that happens then there is a
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whole lot of stuff would have happened between now and then, which is about proliferation of IT at a consumer level. Finally, what is the new or final frontier for NASSCOM? For us, it is to open up new markets. Two of the second and the third largest global economies combined, China and Japan, give us less than 3 percent of our revenues. They have a need and we have to break through their difficult markets. But, for next few years we need to crack them and closer here we have a very large opportunity emerging for small-scale industries in the product space where on the internet and the mobile platform they will introduce innovative products. We have at this point almost 3000 companies that need to find early stage funding, they need to be nurtured and they need to get a market place and I think that’s going to be a major focus for us.■
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Interview: Dr Mukesh Aghi Chairman & CEO of Steria India
Taking Steria to new heights
He likes running marathons and climbing peaks. Clearly not the one to step back from challenges of any kind. And overcoming them. This is precisely what Dr Mukesh Aghi seems to be doing at Steria India, a company that he heads. His ambition is to take Steria India to new heights, not just within the Steria Group, but also as a player in the Indian IT sphere. So far, he seems to be keeping the pace and meeting his targets, as he explained in an interview with Ranvir Nayar.
Mukesh, let us start by looking at 2011 for Steria in India? Did you reach your targets? What were the real challenges that you faced in this? I think financially, we achieved all our targets, met all our KPI’s for the year. We also, basically, had a great delivery environment where we renewed every contract which was about to be renewed in 2011, all were renewed. Attrition was down, our utilization was up and we added few hundred net employees into the environment. I think our challenges were more from the perspective of how do we bring transform ation into our services line. Because as the model is shifting,
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it’s shifting into cloud. It is shifting into shared services. So we need to start positioning ourselves to provide better & efficient services to our customers. So I think that’s what the challenges were. Domestic market was successful for us. We added a dozen new customers domestically. They range from telecom companies down to consumer electronics companies, our government business, we feel that we’ve built a platform in 2011 to drive in 2012 much more effectively. Let’s talk a little bit more about the domestic market and your domestic customers. First of all, how do you place
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them in terms of the deal size and the margins that you have in India compared to your French margin? The deal sizes have always been smaller in India as compared to what happens in Europe. I think from margin side, because its domestic market, we are competing much more aggressively, head on with the Indian pure plays also, so margins were also lower. But the key thing is that, we are gaining market share. To me, that’s important. And more important is that we are bringing solutions which were built for European customers, European markets, into the Indian domestic market. And that’s our go-to-market strategy here. So for 2011, what’s the percentage of domestic vs. international customers for you? Still very small.Very small. I think less than 5%. But its growing, you know, exponentially.
What figure will you be happy with? What is the optimum figure for you? Well, you’re never happy! (laughs) with any number! I think you just want to grow growgrow. What’s a good balance between domestic and overseas customers? Well I think, in the next few years, we can have 50-50. That will be optimum balance for me. Oh! That means you need to see a dramatic jump in your domestic business? Yea, we need to, we need to. How will you get there? Well both organically and in-organically. So, we’re seeing
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grow th coming in organically. We are looking at opportunities to see if there is something that fits in with our needs, from acquisition perspective, we are looking at that also.Well, that also puts severe pressure on the margins, because Indian margins can’t be compared with overseas markets.No, but see, it also helps in your bench. So what happens is if you create a better bench, you can train that bench in a domestic market and then use it in international market for a higher billing also. So it works in your favor. How important is India for Steria? Oh, very important. If you look at it, today, Indian market is 40+ billion dollar market from a services perspective and it is growing at about 18%. So in the next few years, the size of the market will be the same as France. So it becomes very important for us to position ourselves. So that’s one.Two, there is a growing business between France and India. We just placed an order for, or selected, French fighter planes Raffale for $20 billion and I believe that’s going to drive more business. So I think the trade between India and France will grow, and from that perspective, it is important that Steria has a strong position in Indian domestic market. And, besides looking at the Indian market, as Steria India also caters to overseas customers, where would you place Steria India within Steria Global?
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Well, from headcount perspective, we are roughly 30% and we would like to see this go up to almost 50% in next three years. So that’s one aspect. I think Steria India also is a launch pad for us into rest of Asia- Pacific. So with the solutions that we have developed, we would like to go into Singapore, into Hong Kong, into Malaysia, into Thailand and into other geographies also. Ok. And when do you get on that work? We’ve already started that. You know we have a small office with 70-80 people in Singapore. We are looking at providing solutions in Malaysia, in Korea, in Vietnam. So, that process started last year. How badly has Steria been impacted by the Eurozone crisis and the general slowdown in the world? I think business wise we have not been impacted. But, I think, psychologicallyor mentally, we have prepared a budget process, which is quite conservative, for 2012 and so I think I believe that Eurozone crisis is an opportunity for Steria. We feel, that the company will have to become leaner and meaner and more efficient and off- shoring is an answer for it.But are you seeing, I mean, France and Germany have been rather reluctant to go for off- shoring. Do you see that changing now? And percolating beyond the top 30-40 companies in these countries…
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No, we are not seeing resistance, I am seeing more interest, I am seeing more visits by French customers, I am seeing more visits by German customers, looking into India from off- shoring perspective. But I think, if you look here from a technology perspective, the off- shoring concept will go away in next few years; because with the cloud coming in, you’ll have services on a cloud. It just doesn’t matter where it is coming from. It could be India, it could be Germany, it could be France, it could be Poland; it doesn’t matter as far as it provides cost- effective services to the customer. Is that advantage for Steria? And is that a challenge for the Indian IT players? I think it’s an opportunity for Steria because our customers have been with us for 42 years, so there is an intimacy with the customer so I see it as an advantagevis a vis the pure plays. What do you feel about the Indian IT industries growth? Do you think they have finally found a mark in Europe or are they still struggling? I think, in continental Europe, they are still trying to find their mark. It’s a complex market, the customer is saying I want intelligent solution;it’s not about just cheaper and faster, it’s more than that. They want local facing professionals, so you got to convince the talent locally to work for them. And that is going to be a challenge for Indian pure plays because, you know, a good talent will want to work for French company orGerman company. And so, we have that advantage.We also come with the pedigree of building one of the best solutions for the customers. So there is a trust, which has been there for the customer from all the time. Yes, we have our challenges also. We need to respond to our customers in a much more effective manner, in a flexible manner. So, I think, when I look at it, there’ll be challenges for pure plays, there’ll be challenges for Steria also, but we do have some advantages, and one of them is our relationship with the customers. The Indian domestic scenario, both political and economic, is it beginning to worry you? Well, I think we have to understand, we, as a nation, have to grow our economy, almost 10% a year, because we add roughly 10 million new entrants every year, so we have to create 10 million new jobs every year, so we have to maintain that momentum. I think what is worrying is that we have a policy paralysis because of politics in decision-making and that is hurting the momentum. And if
we don’t fix that, I believe, it will be very challenging, very difficult for the country to kick start the momentum in an immediate fashion. Do you see that paralys is going on? What would cause it to go on? Obviously, I think, if you have a clear majority of a single party in the centre. But if you look at it for catharsis, we are in here for coalition government for long long time. We have states under different political leaderships andI don’t see that going away. And I believe that for India to take off, we need to make bold decisions. So, bold decisions like when United States made a decision to send a man to the moon! We need to think out of the box! Ina coalition government, we can’t do that. So, I see lot of changes in the next 5-10 years in the country. You mentioned that you could look at some acquisitions to grow in India. What kind of acquisitions? What is the size of the deal you are looking at? Which vertical? Well, I think it’s not the size of the deal. For us, we are looking at acquisitions that can help us drive growth for us in India. It could be footprint on a customer basis, it could be on the Intellectual Property or IP basis, it would be on a recurrent revenue basis. So, size is not the issue. I think there are multiple issues that make a difference for us. Were you surprised by the 2G decision of the Supreme Court and what do you think are the implications of that? Though it’s not related to your industry but does it give you a cause to worry? Well it’s positive and its negative both. One: yes I was
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surprised to cancel 122 licenses. I think it corrected the behavior of the previous telecom minister. So, it sent a message to the current government and future governments: if you misbehave, then you have the Supreme Court, which will come and step in, and correct you. I think it also sent a wrong message to external investors. What guarantee they have, when they come into a country, that their investment will be protected. We need to find a solution for companies such as Telenor or Etisalat, so their investments are protected. And we will find some solution to it. But, more important is, that within four months, they will have the auction once again, which I think will bring in more transparency, and which is normal. I think, you know, at times you got to boil the environment to purify the environment; obviously. And currently that cleansing process is taking place. And, finally, a little about the OECD countries, and that, what kind of economic situations do you see there, and does that represent an opportunity for India? Well, I think, if you look at it, there is a fantastic opportunity for companies from OECD countries to come into India. Let me tell you one thing. Next 10 years, roughly 400 million Indians will migrate from villages to the cities. We need very smart transport systems, we need intelligent health care systems, we need to think something different about education system, security. We cannot build enough infrastructure, highways to accommodate all that. So, we need the technology, we need the renewable energy of the OECD countries to come in as partners. We don’t say help us, we are saying come and make money! Absolutely! But bring a technology which is going to help us; because this migration is not justIndia’s issue; it becomes a global environment issue because today, roughly those 400 million are almost zero carbon contributors. So, once they have access to electricity, refrigeration, television, cars, scooters etc, they will start contributing carbon dioxide to this environment; and that will not be just India’s problem, it will be a global problem.So, I think, it’s a partnership that we need to explore and it has to be a win-win partnership. So, I think it’s a fantastic opportunity for the OECD countries to come in and explore India from that aspect. You talked of carbon emissions and pollution. Do you think that the IT industry is playing its due role in controlling or curbing pollution and protecting the environment? It’s tough to say. And I’ll tell you why because the laptops we
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produce, the I-pads we produce, you know after 6 months, 12 months, they become irrelevant. And they become a waste. The electricity we consume. But I think, at the other side, we are. If we look at Steria France headquarters, it is positive generating building. We contribute from that building to he local grid. So, I think, that’s a trend which is taking place, and we, Steria, are very conscious about that. We basically, for example, for every time we take a flight, we contribute towards plantation of trees. Our mission is that we will be a zero carbon contributor. And we have been certified as one of the best green companies in Europe from that scenario. But from alone IT perspective, I hope we still have lot to do and hopefully other companies will do that also. But do you think that IT could be used in a better way to make the earth green or, I mean, all the business processes, all the production processes, can be more efficient and less polluting? Oh yea. Absolutely! If you look at it from our connectivities, we are using less paper, cutting fewer trees; so, I think IT is stepping in from that perspective. I think IT is coming with intelligent grids, smart grids. So you know we are able to reduce the wastage of electricity, we are connecting cities, we are connecting people, we are connecting schools, hospitals, which is generating less CO2 also. So I think from that perspective, I think IT is playing a role. It could play a better role, which is always, you know, we can go in that direction ■
BIZ@INDIA The International Magazine on Indian Business
This is aimed to create awareness amongst the business community in the world about the opportunities that exist to either develop business with India or to make investments here. Address: Suite 302, 3rd floor, A/7 Sector-10 Noida 201301, Tel: 0120-6498490-95, Telefax: 0120 4281628, www.mediaindia.eu
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Facing similar challenges EU and India share history and historical links and today they also face similar sets of challenges. The leaderships in both regions need to take some hard decisions to set their house in order. writes Frank-J端rgen Richter.
uriously India and the EU have suffered a similar history over the last 2000 years. Their kingdoms have been ransacked by armies of occupation, even the Romans captured the north India regions so supporting easier trading from distant UK through to India; religious
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strife was common place in both regions; and while around the coasts in the many ports local people met and mingled with a myriad of others the people in land hardly saw a foreign person during their lives. The more and more insular village people travelled little, with only a few
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herding their livestock to a local market bringing back news of the 'wide world'. It is only in the recent past that the nations of Europe and the many regions of India have achieved peace. Peace is important to maintain trade, prosperity and growth. As noted above, the Roman armies conquered 'the world' and, having conquered, they imposed a common set of rules and laws sub duing local customs and often mini-wars. The main effect of this control was the opening up of trade. Stability and consistency of rules and knowledge of trading partners and their needs are the bedrock of trade. Modern trade is dependent on standards applied through common software packages run by ports, shippers, and by the freight forwarders to ensure doorto-door tracing and tracking both for the physical product and for the payment of dues and taxes on the products with all transcripts being digitised and with the goods' protection guaranteed by insurance clauses. Trade increases in line with national wealth, and there is a 'chicken and egg' situation for traders as ports and hinterland services have
to be developed to allow largerships to berth and beloaded in a timely fashion. The services have to be considered, planned and implemented as part of a 'trade agreement' which take some time to beagreed. Not with standing any private trade arrangements between parties in Europe and India their governments have held formal meetings to forge 'relations' from in the mid-1960s. Then in 1994 there was a Cooperation Agreement; in 2004 was the 'Strategic Partners' plan, which was upgraded by the 'Acti on Plan' of 2008. Now there is the EU's Country Strategic Paper for India 2007 - 2013 having a focus on mutual aid on education, health, energy, environment and trade assistance as well as on joint anti-terrorism planning. But this succession of accords does not imply good progress. On the contrary, formal agreements have been slow to beagreed as India seemed quite reluctant to acknowledge the 'EU' preferring instead to forge bi-lateral deals with individual nations rather than a wide FTA (free trade agreement) as desired generally by the World Trade Organisation, and as hoped for in the Doha round of meetings, but which stalled. During the early months of 2012 the EU and India have failed to agree on their duty and tax levels - for instance, the Indian tariff on European car imports is about 10 times greater than the reverse EU barrier, and the EU views Indian software houses as potentially overwhelming the software workers of the EU. Of course it was recognised that this agreement would create the world's largest FTA with a population over 1.8 billion, more than a quarter of the world's people. Even so, India has kept the EU at arm'slength over some five years of
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negotiation while trade mounts. In 2010 the EU goods exports to India were EUR34.7 billion, in reverse was EUR33.2 billion; services trade EU to India were EUR9.8 billion, in reverse EUR8.1 billion; and Foreign Direct Investment (FDI) from EU to India was EUR3.0 billion, and in reverse EUR0.6 billion. There are many political agenda behind the accords. In Europe we know that its internal Accord rests on the people's agreement within each of the 27 nations, and that many do not like the impression of rules from Brussels over their own national parliaments. The situation, in practice, maybe similar in India, as the enforcement of Indian laws set by the parliament in Delhi is not enjoyed by leaders in the regions, nor by the mass of people in these regions, but there are far more people in India swaying local as well as national opinion. Progress in Europe in comparison to India seems to more effective. Let us consider transport again (as itis the carrier of trade, growth, and thus wealth). The European road and rail system once was mess - national systems had grown incrementally over many years with individual nations deciding not to provide interlinks to the next country to protect their own nation in times of war. That idea did not work in practice. The EU gradually formed the opinion that if it wished to proceed to the 'EU Single Market' (for the free exchange of goods, services and people) it needed to have an integrated road and rail system across the whole Union. It decided by the end of the 1980s on the construction of the multi-modal Trans-European Network for Transport (TEN-T). This plan also encompassed the ports of Europe as they was seen as multi-modal points of exchange to both short-sea shipping (so reducing load on the in land freight networks) and to oceanic shipping (increasing external trade). While TEN-T was beginning in Europe the same
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integration concept was being pressed by the EU in Central Asia, and with the help of the Asian Development Bank the concept was extended into eastern Asia. The TEN-T development was materially aided by EU structural fund ssupporting, in fact, transport, energy and telecoms and by the European Investment Bank (EIB). There was an integration of national as well as pan-Europe progress which allowed the Schengen Accord for the free passage of goods and people across national borders without hindrance and the inconvenience of halting for passport or other paper checks. One TEN-T report say the EU 27 comprises 5.0 million km of paved roads which is slightly more than the of Indian's 4.42 million km total (which only comprises about 250,000 km of highways and paved roads). The Indian government was a slow to redevelop its roads (and railways), onlypressing ahead in the late 1990's. In fact the Indian system still has too many unpaved roads supporting too much heavy traffic - thus the density of paved roads in India, while increasing, may be some 10 - 15 times lower than in the EU. The flow of vehicles on all roads is hampered by overcrowding, by too large a mix of users (from bullock carts to huge trucks) with most engaged in poor road manners like driving contra to the correct flow on dual carriageways that causes many avoidable deaths of man and beast. Surely this hampers its economy? A 2009 report by Goldman Sachs suggests that India will need to invest US$1.7 trillion on its infrastructure projects by 2020 to meet its economic needs. This is a lot of cash in a country that has just suffered a downgrade by Standard & Poor's to BBB- (negative outlook) that also implies a 1 in 3 chance of a further downgrade. However other rating agencies
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maintain their BBB- (stable) rating - but this is only one grade above junk bond rating (ie not advisable as an investment). While Europe carries grave concerns about its financial cohesion it still maintains a high rating overall. However S&P look gravely upon Europe saying it carries too many stresses and it is not moving fast enough to remove these difficulties - legislating for austerity is not a route to growth - but the banks and governments face many and conflicting demands. For instance, banks need to increase their lending to stimulate growth, but they are told also to increase their margin of cover by new Banking rules: it is a global problem affecting India as well. Recent agitation in several countries does not reduce the stresses according to the ratings agencies, though they may make the people happier in the short term by their voting away of reformist policies. But the people conflate their woes with the effects of globalization as well as the need for freer movement of goods, services and people - they fight against 'everything' while also wishing to benefit from the social welfare that has reached quite high levels over the past decades. One can't enjoy 'free' gifts without working and returning taxes to the governments. In India, over the first 50 years of its independence little drastic has occurred except perhaps for its explosion of population due to reducing mortality without a decrease in the birth rate. It chose early to be an independent nation so
did not benefit from much inwards investment after the last world war as the big economic blocs sought economic colonialism. Therefore India funded its own growth from savings rejecting inwards investors. It invested well, but forgot to police its fund flows. As a result too little cash flows to the project targets - as little as 17 percent of funds according to some government spokespersons. And while local investors deplore its high and steady corruption there is a lack of government will to pursue anti-graft laws. Therefore inwards investment has been restricted by policy inactions-the desire to be independent and letting corruption run rife to the highest levels of government: its governance needs to become clear and transparent. If it could introduce these social reforms it would free cash and by enabling structural support for investors would increase growth through breaking its government paralysis. As it is, many point disparagingly to recent policy setbacks, such as a failed plan to open the retail market to foreign investment, as well reneging on proposed changes to India's tax laws and to cleaning-up corruption scandals. In this globalized world we must be pluralistic and open to competition, but Indian negotiators fail to address these issues - as noted by the EU in its pursuit of wide accords and FTAs with India. In Europe one cannot fail to notice the very different stances of member states - there is a strong north/south divide that affects social, public and management life and there is an east/west divide as each adjusts their historical norms to the needs of the whole: always the management of the EU looms over us. Yet the EU must also learn - it is late in coming to a firm stance on foreign policy for instance that India knew from its early days was to be one, not of isolation, but of independence. India has the benefit of being a single democratic country - yet it often behaves as though its regional governors were in fact independent presidents not beholden to the national government, and the latter seem unwilling at times to exert due control. Soon the EU, India and other nations must relinquish their soft ideals of "see the world in all its magnificent variation" and instead accept the hard facts of finance, that "... money does not grow on trees". Each of us must nurture our specialties, growing our 'trees and seeds' for our mutual benefits - that means with good governance, transparency and ecologically correct. Dr Frank-JĂźrgen Richter is founder and chairman and Horasis, a global business community. Horasis hosts the annual Global India Business Meeting, the 2012 edition will he held in Antwerp, Belgium, 24-25 June. â–
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Corporate Social Responsibility
IT industry shows the way
There is a rapid adoption of CSR in India's burgeoning IT industry. Managers and CEOs see that CSR is not only helping Indian society but their businesses too. By giving members of the community training, skills, techniques and tools to create social and economic opportunities, CSR programs can transform communities and allow business to grow as Roopinder Oberoi writes.
n a society still riddled with disparities, wide economic gaps, stereotypes, caste system and rituals we need continuous intervention of a force that is non-political, non-judgmental, non-denominational and rational to empower people. Technology is that force which can be
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effectively canalized to achieve this. Technology is a great social leveller and an enabler. It brings access to modern tools and methods to increase productivity and efficiency at reduced costs. It is an entry point to distribute the effect of economic growth to the rural hinterland, create an
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IT Dossier grow at 16-18% and aggregate revenues of $68-70 billion. The domestic market is estimated to grow by 15-17% with revenues of about INR 920 billion. Apart from existing growth areas, a vibrant start-up ecosystem, cloud, SAAS, analytics, mobile and products for India will additional drivers. The prediction is that the domestic BPO market would reach US$ 1.69 billion in 2012 and increase to US$ 2.47 billion by 2014. With the first quarter of the new fiscal year offering positive business outlook, hiring sentiments for sectors like IT, ITeS and telecom have risen by over 20 per cent, says a study by TeamLease Services Pvt. Ltd. The Employment Outlook Report for the period April-June 2011 says that the hiring intent from IT and ITeS was the highest in cities like New Delhi, Mumbai, Hyderabad and Pune. Telecom Regulatory Authority of India (TRAI) is targeting a 10-fold increase in broadband subscribers to 100 million by 2014. The country has 10.29 million subscribers now. "We will have 100 million broadband subscribers by 2014," J.S. Sarma, Chairman, TRAI said at the fifth India Digital Summit 2010 organised by the Internet and Mobile Association of India.
inclusive growth model.Poised to become a US$ 225 billion industry by 2020, the Indian information technology (IT) industry has played a key role in putting India on the global map. The IT-BPO sector has become one of the most significant growth catalysts for the Indian economy. In addition to fuelling Indiaâ€™s economy, this industry is also positively influencing the lives of its people through a dynamic direct and indirect contribution to various socio-economic parameters such as employment, standard of living and diversity. The industry has played a major role in transforming Indiaâ€™s image from a slow moving bureaucratic economy to a land of innovative entrepreneurs and a global player in providing world-class technology solutions and business services, according to National Association of Software and Service Companies (NASSCOM). India is a preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is a financially attractive location when viewed in combination with the business environment it offers and the availability of skilled people. For FY2012, the software and services growth is expected to
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Infosys training centre
The penetration of the internet in rural areas saw an all time high in 2011. In a survey conducted by IMRB for the Internet and Mobile Association of India (IAMAI), the total number of active internet users in rural area rose by 98 per cent to touch 24 million by the end of 2011 from 12.1 million in December 2010.
Initiatives by Industry The business community is being challenged to be more innovative and competitive, more productive and profitable, and more responsible and sustainable. There are pressures to deliver more value for shareholders, more security and opportunity for employees, and more collaboration and transparency with stakeholders on the solutions for issues such as those relating to corporate governance, environmental protection, corruption, human rights, human resource management practices, consumer protection, supplier relations, health and safety, and others. Businesses have in many instances recognized the
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challenges and opportunities that are being placed upon them and have embraced a variety of related approaches for response. Corporate social responsibility and related concepts such as corporate accountability, corporate sustainability, and corporate citizenship are being used to more effectively integrate the economic, environmental and social objectives of society into corporate structures and processes, more creatively innovate and bring value-added goods and services to solve societal demands, and more meaningfully collaborate and engage key stakeholders to improve public credibility and confidence. In today's scenario, the companies are adopting CSR as a strategy; the involvement and approaches show how IT companies' concerns with waste management and supply chain have transformed the Indian IT industry and the environment in which they operate. IT plays an important function in improving the companies environment credentials. Right 'people' and right 'Infrastructure' drives the IT sector. Thus, IT sector is an upright consumer of
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utmost vital resources; human and capital.It was observed that education as a CSR initiative has become very popular with many of the IT giants. Waste management as an activity is gaining momentum under the blanket of responsibility towards the entire globe with respect to the alarming global warming crisis. IT companies like TCS and Wipro have developed software to help teachers and children in schools across India to further the cause of education. The adult literacy software has been a significant factor in reducing illiteracy in remote communities. According to another study, the Indian corporate sector spent Rs300 bn on social expenditure during the 2010-2011 financial year, up from Rs175 bn in the previous year.On studying the top IT companies we observe that IT companies are very serious about their CSR activities, their ratings, their area of focus on CSR activities and their disclosures about their budget allocation towards CSR and disclosure on websites and annual report. Several foundations run by corporate houses plan to devise a common strategy to ensure transparency in their social and community development operations, such as tracking spending in and progress of such projects in their annual reports. The transparency in disclosure of the CSR budgets is the highest in the IT companies, which make this information public both on their websites and on annual reports. All the top five companies talk at length about their CSR on both their websites as well as the annual reports. The information disclosed is not only explicit but effective in communication as the use of pictures, videos and audios is also done. Further, three of the five companies have a separate CSRsustainability report as well.The IT sector distinctly emerges as a champion in not only adopting CSR but also in effectively managing it. It stands out and ranks among the top in all the four parameters selected for judging the CSR performance of the various sectors. This clearly depicts that CSR is well integrated as a part of the business strategy of the IT sector because of which it enjoys the reputation of being a CSR champion. Several institutionalized attempts by bodies like NASSCOM have helped to promote CSR activities and encourage young corporate houses in adopting it. It acts as a facilitator in furthering CSR within the sector and ensures effective communication as well.
the study it was synonymous with corporate philanthropy. For others it meant an alignment of business operations with social values. Yet for others CSR was about operating in a manner that had positive impact on stakeholders. In order to make CSR a more meaningful activity for its member companies, NASSCOM suggests: • CSR initiatives need to become more strategic and aligned with the core business interests of organizations. • Companies need to review all activities that could be classified under CSR to identify the stakeholders they addressed, how strategic they were and the impact they would have. • Companies need to have a greater awareness about some of the broad global CSR standards and guidelines that help develop policies, toolkits, systems and processes to boost the CSR cause. • Companies need to set up a support infrastructure within their domains or work with external intermediaries to lead the process and play the role of CSR mentors. In its final analysis, the study indicated that by and large member companies give serious thought to CSR and implement strategies that lift up society through its impact on the financially and physically challenged citizens of the nation.■
Recommendations for Implementing CSR NASSCOM Foundation recently initiated a study on Corporate Social Responsibility and its importance for member companies. According to the findings, CSR manifests itself in a variety of ways. For some companies in
TCS employee in CSR activities
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And now Y2.1K bug! Is Indian IT ready? The Indian IT industry owes its first revolution to Y2K phenomenon, which saw a 100-fold rise in revenues. Since then, the industry has had to settle for more modest, yet a double-digit growth each year. However, now the industry might be facing yet another immense opportunity – the Millennium Development Goals. But as Rajendra Shende asks is the industry ready for it?
he “Y2K” episode was indeed the tipping point for Indian Information Technology industry. Not long ago, practically the entire brainpower of the IT industry around the world was engaged day and night in trying to stave off the famous Year 2000 issue. Also known as the “Millennium Bug’, it resulted in the steep rise of revenue for Indian IT Industry. There were indirect benefits as well, like gaining confidence and acquiring much needed expertise in working with the global companies. Many call
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it as windfall gifted by the closing 19th century. Y2K created Business Processing Operations many of which were outsourced. They became growth catalysts for the Indian economy and influenced the lives of its people. It did alter India’s speed-image from elephantine walk to tiger leaps and from land of bureaucratic-babus to land of meritocratic brains. It is estimated that world spent about $1 trillion to address the Y2K. However, calling Y2K as the sole factor behind the success of Indian IT sector is certainly a mistake.
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There were technology and policy pulls and pushes too, that contributed to the shining saga. The genesis and enabling factors of the excellent performance of the IT industry for last two decades, apart from Y2K are quite evident. The younger demographical features, extraordinary engineering talents, English language advantage, growth of the private engineering colleges in rural area, opening up of the Indian economy, a push by former Prime Minister Rajiv Gandhi the enabling role played by NASSCOM are the major facilitating factors that took the IT sector to new heights of revenues and profits. ‘Rise and rise of the IT industry’ is how we can describe this saga of India Shining. However rising numbers in revenue and profits of this sector do not convey the real story. It was sheer power of people in Indian IT sector that provided hitherto unknown dimension to India’s economic performance. It made a difference and was widely recognized by the global community as ‘scholarly brain power’ and not just a cheap work force from the developing countries. However, there is no denying that 100 fold increase in the revenue in 1990s to early 2000s to reach USD 12.5 billion by 2005 was attributed mainly to direct and indirect benefits of Y2K affair that dominated the scene around that time.Very few anticipated this ‘ grey revolution’ like the ‘green revolution’ of 1970s. The heavy weight and family industrialists were busy dodging and tricking the license Raj nearly overlooked these IT Lilliputians crisscrossing the globe it early in the game, some times hood
winking them as ‘ body shoppers’. But then once IT sector got cranked, mainly by the new and young entrepreneurs, there was no looking back. Now that IT sector revenues have touched USD 75 billion, is it ready for Y2.1K challenge? There is a hidden and not yet fully visioned potential to take IT through another revolution that would see a 100-fold rise. What was probably missed by many of the IT brains in India was that parallel to Y2K, there were similar global efforts to address another “Millennium Challenge”, one that affected whole of humanity, a challenge brought forth by the rapid industrialization that has been on for the last two centuries and which has to be addressed urgently by the United Nations and its 193 member States.That exercise resulted in what is now called as the United Nations ‘ Millennium Declaration.” In September 2000, the eight chapters of Millennium Declaration with its eight goals –called as “Millennium Development Goals” (MDGs) with 21 targets, along with a series of measurable indicators for each target. These were time-bound targets, to be achieved by 2015. There were also quantifiable targets related to eradicating extreme poverty, reducing child mortality rates, fighting disease epidemics such as AIDS, primary education for all, women’s health, environmental sustainability, and developing a global partnership for development. Formulating the declaration is sort of regular business in United Nations. Many even call it as pass time of the diplomats. But this declaration was and has been different. It included goals, targets and indices for the
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UN MDGs Conference
monitoring and verification. It was almost like fixing the target for solving the Y2K problem. Today, the world has just over 3 years to achieve the final goals. The progress in meeting the targets is mixed. Many of these goals and targets are getting nearer to their final numbers but lot of efforts are needed. And here is where the skills, experience and commitment of IT Industry in India would be of paramount importance, at least where relevant to India. In my Paris office of United Nations Environment Programme I have been host, several times over during last 20 years, to my IIT friends who shuttled between India and USA since 1992 for their IT work. The stopover in Paris was a sort of welcome break for these geeks heading westwards. I had seen their ‘rise and rise’ of confidence in what they were doing in IT sector. The simple stories of how they gave power point presentation in the office on 121st floor of the World Trade Centre, how the convincing case was made for capability of just-floated company X for BPO start up and how the to the Board-room discussion on take over of a USA IT company in Silicon Valley was won, I could see the overflowing enthusiasm and limits of the business-possibilities of the Indian capabilities. That cannot be captured in numbers. It was a very contended feeling.My rather disappointing moment would arrive when some time at the end of sojourn of my IIT-geek-friend, I would be asked, ” by
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the way, how is environmental protection going on in United Nations? Are you able to do anything at all about climate change? And what about that Ozone layer? ” And before I would start responding, the geek would either start gathering his papers or restart his discourse on new SAP, Hybrid -SAP and his Verticals! Those Tech-masters looked like a sky-glider who is so detached from the ground realities. I always used to think that these tiny ‘dotcoms’ have such a planetary potential to address the most pressing environmental issues of our times, but unfortunately are unaware of the global storms gathering on the horizon that would one day prove to be catastrophic. Back in my village on vacation in Rahimatpur in India, where I had my education, I have experienced IT revolution reaching in the rural areas in quite a different way. I would meet in the evening my farmer friend returning after a day’s work in the field. Having just returned from California where his son was working in IT sector, he proudly said “My son calls me every week from America and tells me all the good news about his family and rise in his salary and even sends me money in dollars. So, it does not matter if the monsoon this year is not good and harvest will not be as expected”.That was strange flip side of the India-Shining. The rising income in the servicing sector could emerge as a threat to the food security. Even as the younger generation
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in the rural population gets attracted to avenues other than farming, the productivity improvements that should have come in the agriculture has so far not been witnessed.But the Indian IT Industry is certainly in a position to recognize these challenges. In fact, it is all set to go beyond them and contribute to achieving MDGs. Many IT industries are already doing a lot, m-Krishi of TCS, and Choupal of ITC are good examples. A report by NASSCOM on “Sustainable Tomorrow: Harnessing ICT Potential” aimed at creating a cleaner and greener future by identifying opportunities for IT sector to reduce Green House Gases emissions makes a good start. However, the time has come to commit to the goals and targets and performance indicators for the tomorrow’s sustainability, the way MDGs have done. For example, can m-Krishi of TCS take a challenge of taking up pilot region and commit to contribute enhancing the agricultural productivity by a certain amount? Can ITC accept the challenge of leveraging the chaupal to contribute tin reducing farmers suicide? Can they extend their CSR to commit to such goals targets? Can UID take challenge of time targets for reduction in people leaving below poverty line and reducing number of malnourished children? Yes, we are the third largest economy in the world on the PPP basis. In our ‘rise and rise’ mood that we presume to make us shine, let us not forget that we are 129th as far as GDP per capita on PPP, 132nd in the world in terms of ease in doing business doing and 134th in terms of the human development index (HDI) of UNDP, which assesses long-term progress in health, education and income indicators. The UN report said that India had the world's largest number of poor people in the world, more than half of the population, at 612 million.The Y2K bug started pinching the world very late in the 20th century. Y2.1K bug that by end of year 2100 or even earlier, will bring the climate change into the catastrophic zone, threaten the natural ecosystems, put our forest cover to the dangerous level, imperils our energy, water and food security has already started shaking us very early. Many even predicted that Y2K has potential to cause catastrophes. Y21.K has even more potential to cause irreversible and permanent damage to human society there by wakening the IT industry itself. To address the Y2.1K challenge, IT in India must develop a technology road map for new service models for energy efficiency, agricultural productivity, healthcare, education and public services. Fortunately the young demography of India is an advantage for facing Y2.1K problem. Steep increase in connectivity, social networking, cloud
computing, mobile interface, are all turning to our advantage. And IT sector’s confidence in dealing with global challenges through its brainpower house makes it perfect leader. Y2K was a time-targeted obituary of 20th century written by IT Industry. Y2.1K should be the charter for 21st Century written by Indian IT that is aimed at that should prove to be as a game changer that undertakes time targeted inclusive and sustainable growth. With India’s phenomenal GDP-Grey Domestic Power, solving Y2.1K bug would take India to higher green heights. ■ Rajendra Shende, is a former Director United Nations Environment Programme and Chairman, TERRE Policy Centre and lives between Paris & Pune.
Computer education in rural sectors
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TCS Cheers the Industry,Crosses $10bn; Infosys, Wipro Disheartening
The irrepressible performance of TCS in the March quarter and the robust order momentum for FY12 tends to highlight the gap in the growth strategy of their close peer Infosys and Wipro, which has shown relatively slow growth in the past few quarters. Rajeev Suman, Senior Analyst, APAC at Pierre Audoin Consultants, a leading European IT consultancy firm, presents a comparative study of the top three players in the Indian IT industry.
hile TCS leads the league with its $10bn revenue, becoming the first Indian IT company to cross the magic mark, Infosys and Wipro lag behind with
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big margin. Wipro however managed to deliver financial growth higher than Infosys, but lower than that of TCS. An uncertain global economy and rising US rhetoric against
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Key Metrics for FY Ended March 31, 2012
Reporting currency: USD
TCS World Wide Revenue (In Milion)
Revenue per WW Employees (in’000)
Operating Profit ( In Million)
OP per WW Employee (in’000)
The numbers represent the company’s IT services business only
1 INR = 0.02080 USD
shipping of jobs to low-cost locations ahead of the November presidential election remain concerns for the sector that gets half its evenue from the world's largest economy. TCS, Infosys, and Wipro are also facing increased competition from bigger global rivals such as IBM and Accenture for a bigger share of the outsourcing business. However, despite these uncertainties, each of these companies performed
© PAC April 2012
very differently, giving much food for thought.Here’s how each company has performed on certain key parameters and their respective outlooks: Expectations on revenue: Investors were disappointed with Infosys’ poor results and even poorer forecast. It missed its own revenue guidance for 2011-2012, even after downgrading it twice. At the same time TCS delighted its
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Q1FY12 Q2FY12 Q3FY12 Q4FY12
investors with positive results and outlook and became first Indian IT services provider to cross $10bn revenue. Wipro roughly met expectations and forecast muted revenue growth for its key IT services unit due to a fragile global economy. Wipro had just a 0.8 percent increase in volumes on a sequential basis, which was much lower than the 2.3-2.9 percent managed by TCS, but better than Infosys. Hiring and wage hike plans: TCS plans to hire 50,000 people in FY2012-2013. The company has announced an average hike of wages by 8 percent in India. In contrast, Infosys plans to hire 35,000 people in 2012-2013, has suspended wage hike in the current financial year. At most, it would revisit the idea of hiking salaries every quarter. This brings low level of commitment in the employees and may hurt Infosys even badly. Wipro's IT Services segment added 13,535 people in the last year and has announced an average hike of 6 percent to 8 percent effective June 2012. Growth rate: There has also been a wide variation in the growth rates of the three players. TCS's results reinforce that a large proportion of the weakness in Wipro’s/Infosys's operational performance is company-specific and that rest of the sector may be slowing down, but only gradually. The results could bring back some confidence on the demand scenario and therefore act as a catalyst for the stock. The PAC VIEW PAC believes that TCS' prudent investment in SG&A (selling, general & administrative) and human resources is enabling it to post decent growth and earnings and we expect the momentum to continue. Higher investment in SG&A mainly
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due to higher employee base explains the lower operating margin of TCS as compared to Infosys. The others still have the time to learn from TCS to increase their growth rate. TCS’ increased focus on domestic market has let them reach a considerable level of domestic revenue close to $1bn. Infosys and Wipro are far behind and they need to reinvent their domestic heritages to compete efficiently. We believe that the offshore model on which the Indian IT companies rely upon for majority of their revenue, has reached a point where incremental growth is going to be lower, and there are 8 to 10 established players competing for the same growth opportunities. So players have to innovate and look for more diversified portfolio of offering. TCS’ venture into cloud for SMBs is a welcome step and worth following for other players in the market. Although TCS lags behind in revenue generated per employee as compared to Infosys and Wipro, but there is a huge difference in the global employee base figures between the three companies. (Refer to key metrics table), and this explains the lower per employee revenue for TCS. To conclude, despite the differences in performance, PAC agrees that they continue to reinvest in the business and they definitely have a strong competitive position in the market vis-à-vis the other players. Apart from that, TCS has focused on large transformational outsourcing deals over the past few quarters, which may have resulted in its faster growth. ■ Report by Rajeev Suman, Senior Analyst, PAC India
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Rapid urbanisation of India A recent study by Morgan Stanley has found that India continues to urbanize at a strong pace, driven by a combination of increasing consumption, robust job creation and growing financial penetration.The study showed that India's urban population has grown by 2.8pct annually over the last decade. Urbanization is driven by job offerings and infrastructure creation that lead to population growth. With this growth, it creates income, savings and consumption. "The findings will form the basis for medium-long term sector trends," says Ridham Desai, Head of India Research at Morgan Stanley. "These growth drivers will play a key role in forming investment views at the sector and stock levels."The research notes that at the aggregate level, the Morgan Stanley's proprietary AlphaWise City Vibrancy Index reported growth of 5 percentage points. Within the top 50 cities, consumer services like retail book stores, restaurants (including fast-food chains) and multiplexes have seen the fastest growth during the past six-month period within the consumption component of the vibrancy index. To us, this reaffirms the underlying growth in discretionary consumption.Among other key findings of the
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report, all three vibrancy index components (consumption, job opportunities, and financial penetration) reported sequential acceleration pointing that urbanization trends are still intact in India. Also, the pace of growth of each of the components has been 8%, 4% and 3%, respectively. Of the three components, job opportunities index has grown the fastest. The report reveals that Bangalore, Chandigarh, Hyderabad, Pune and Chennai are the top 5 vibrant cities. The relative vibrancy score for cities like Ludhiana and Meerut is inching close to scores of cities like Mumbai and Delhi respectively.
India launches farm satellite India's first indigenous all-weather Radar Imaging Satellite (Risat-1) was launched successfully on board the Polar Satellite Launch Vehicle (PSLV)-C19 from Sriharikota in Andhra Pradesh, on April 26. Its images will facilitate agriculture and disaster management.In a textbook launch, the 1,858 kg spacecraft, the country's first microwave remote sensing satellite was injected into orbit from Satish Dhawan Space Centre, Sriharikota, around 90 km from Chennai.RISAT-1, a result of 10 years of effort by the Indian Space Research Organisation (ISRO), has the capability to take images of the earth during day and night as well as in cloudy conditions. The heaviest satellite ever lifted, RISAT-1 through its microwave image sensing technology would assist in crop prediction."I am extremely happy to announce that the PSLV C-19 mission is a grand successâ€ŚIt injected precisely India's first radar imaging satellite into the desired orbit," as per K Radhakrishnan, Chairman, ISRO.
Indiaâ€™s largest processed food plant
Himalaya Industries Ltd has launched India's biggest food processing plant set up at an investment of Rs 1700 mn at Vadnagar, the home town of Chief Minister Narendra Modi.Branded as â€˜Himalaya Fresh' the products will be manufactured at the company's plant at Sultanpur near Vadnagar. This is the first industrial project in this unindustrialised area, Modi said while inaugurating the facility set up by the Himachal Pradesh-based Himalaya International. The plant will process eatables such as mushroom, yoghurt, milk cheese and potato chips, French Fries etc.
High-speed rail for Karnataka?
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Karnataka is exploring high speed rail connectivity between Bangalore — Belgaum, and Gulbarga.Addressing a press conference to announce the Global Investors Meet (GIM) to be held during June 7-8 in Bangalore, Murgesh R. Nirani, Karnataka's Minister for Large and Medium Industries, said:“During our investment road show in Japan, we invited the Japanese to invest, especially in high speed rail connectivity, and welcomed Japanese expertise in consultancy and execution of rail and road projects.”“The high speed rail projects on public-private partnership (PPP) mode is being explored to connect Bangalore – Belgaum along the existing National Highway 4 there by linking Tumkur, Chitradurga, Davanagere, Hubli-Dharwad and Belgaum and another rail project linking Bangalore and Gulbarga,” he added.During the road show, the delegation met Dr Diazo Nozawa, who is associated with the first Bullet Train in Japan (since 1964) and Japan International Consultants for Transportation which provides technical consultancy for projects.“There is a possibility of high speed connectivity between Bangalore-Belgaum, Bangalore-Gulbarga in future and this would reduce the travel time to the state capital significantly from these Tier II cities,” Nirani said.For better connectivity to Mangalore port from Bangalore, Hassan and Mysore, Japan International Consultants has been approached to construct a tunnel from Sakleshpur to Mangalore to avoid going up the Western Ghats.Nirani said the tunnel can reduce the travel time sharply and cut down the distance by 30 kilometres.
MRF sets up new plant Tyre-maker MRF has started
production at its new plant at Tiruchi in Tamil Nadu. The company has invested around Rs 9 bn on the 200-acre plant, which will manufacture a full range of tyres, including truck tyres and radials. It will cater to both domestic and export requirements.The plant has just begun rolling out tyres, for both commercial and non-commercial vehicles. This facility has been developed as the existing six manufacturing units were operating at full capacity.MRF's other manufacturing units are in
Arakonam, Tiruvottiyur (TamilNadu), Medak (Andhra Pradesh), Goa, Kottayam (Kerala) and Puducherry.The company has posted a 25 per cent increase (year-on-year) in net sales at Rs 32.64 bn. Net profit rose 68 per cent to Rs 1500 mn. Company says that the driver of growth this quarter has been the replacement market. According to an analyst, the after-market sales give pricing power to companies, enabling them to post high margins.
Oragadam on Wednesday. It will manufacture the BharatBenz trucks and all commercial vehicles there. The Rs 44 bn facility will have an initial capacity of 36,000 units, including 24,000 units for heavy duty trucks and 12,000 for light duty trucks under the BharatBenz brand.The capacity could be raised to 70,000 units per annum, said Dieter Zetsche, chairman of the board of management of Daimler AG and head of Mercedes-Benz cars. The facility is spread over 400 acres.Zetsche said India was not just emerging, but thriving. The exceptional role of the economy was a matter of fact — not next decade, not next year, but today. “If India’s economy were in Mercedes, it would have to be an SLS AMG super sports car.“If you don’t make it here, you won’t make it at all. Because a strong position in the global market requires a strong position in India and at Daimler, we always go for the leading position in our industry. That’s why India will play an increasingly important role in our business”.The Oragadam facility can roll out one heavy duty vehicle every 11 minutes and one light duty vehicle every 22 minutes. The new plant will make light and heavy duty trucks in the 7-49-tonne range and is meant for both domestic and international markets, including Asean and Africa.
Daimler to consolidate Indian truck operations German auto maker Daimler AG has decided to consolidate its truck manufacturing operations in India. As part of the plan, it will shift the production of Actros from Pune to Oragadam in Tamil Nadu.The company launched the facility in
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India to be Nissan export hub
Japanese auto major Nissan Motor wants to become the largest car exporter from India. The second largest carmaker in Japan is also planning to make India the launch pad for its entry level low-cost brand Datsun.Nissan is the fastest growing exporter of cars from India, in a country where South Korean Hyundai Motor and Maruti Suzuki India are now the leading car exporters. Nissan exports have doubled to 1,00,909 cars in the last fiscal driven by strong demand for compact cars from Europe and Latin American markets.Nissan began to export cars in 2010 from Chennai and currently ships 85% of its production to overseas markets. Its wholly-owned Indian subsidiary, Nissan Motor India (NMIPL), has now started shipping its sedan model Nissan Sunny after the huge success of its 'made in India' Micra hatchback, which is now sold in over 100 countries.It exports fully-built cars such as Micra from Chennai, its strategic production hub for Africa, Europe and other Western markets. The company has now started exporting completely knocked down kits of its sedan, Sunny, to Egypt. These kits from India would be assembled by the local Nissan
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subsidiary abroad. NMIPL Managing Director Takayuki Ishida told media recently, "We have ambitious plans for India. Exports from India have been a huge success so far, and we want to increase it with new models, as transcontinental markets post stronger demand for smaller cars. We plan to increase our production to over four lakh cars, most of which would be meant for exports."Currently, the company produces three lakh units under the Renault-Nissan global alliance joint plant in Chennai. About 85% of the production is meant to be exported to markets in Europe, Asia and Africa. It eventually aims to pip South Korean carmaker Hyundai as the largest exporter from India, which has shipped 2.37 lakh last fiscal. Analysts say that many car companies in India have great potential to tap overseas markets. "India enjoys tremendous advantages of cost competitiveness due to cheaper labour. The added advantage of huge volumes enjoyed by Hyundai and Maruti Suzuki allow them to export more and take competitive advantage in overseas market. Likewise, Nissan also has a huge product portfolio and eventually would become a major player in exports market," said a Mumbai-based auto analyst with a brokerage firm.
$30 bn for airport development in India Buoyed by the success of implementation of PPP model in airport development, the Government of India plans to invest US$ 30 billion in next 10 years with more existing airports being opened up for modernisation, according to a top official.“In 10th and 11th five—year plans, the government has invested $10 billion. The airports developed
under the public—private—partnership model are presently handling 60 per cent of the passenger traffic in the country. The Government has planned to invest $30 billion in next 10 years,” S N A Zaidi, Secretary, Civil Aviation, said while addressing the third International Aviation Economics Conference in New Delhi.Stressing on the need for more airports in India, Mr Zaidi said the number of passengers was likely to go upto 260 million and cargo by five million tonnes (MT) by 2020.“Some new airports may come and if needed, a second airport would also come up in those cities where there is a need,” he added.
Easier foreign borrowing for airlines After clearing the implementation of re l a x e d e x t e r n a l c o m m e rc i a l borrowing (ECB) norms to meet capital requirements in the power and road sectors yesterday, the finance ministry today paved the way for i m p l e m e n t i n g t h e m e a s u re s announced in the Budget for the airline sector.Keeping in mind the immediate financing concerns of the civil aviation sector, Finance Minister Pranab Mukherjee, in his Budget speech, had announced companies in the aviation sector would be allowed to avail of ECBs for one year for working capital and refinancing of
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tion.” The civil aviation ministry has already demanded this limit be raised to $2 billion.
Diamonds go younger
working capital rupee loans.ECBs under this provision would have a ceiling of $1 billion for the entire civil aviation sector. The cap for individual airline companies has been fixed at $300 million. This may be availed either in a lump sum or in tranches, depending upon the utilisation of the limit during a particular financial year.Saying the Reserve Bank of India (RBI) would come out with the relevant circulars and notification for implementing these measures within a week, Joint Secretary, (capital markets), Thomas Mathew, said the proposals of individual companies would be considered by RBI under the approval route, based on parameters such as cash flows and the capacity of individual companies to repay these loans from their foreign exchange earnings.To increase access to ECBs, RBI would consider relaxation in the average maturity period for ECBs above $20 million from five to three years, he said, adding the central bank would also keep a tab on the utilisation of the funds.“Working capital loans are short-term and attract higher interest rates. Raising these through ECBs would reduce costs by 200 basis points,” said an Air India official, on condition of anonymity.On the possibility of raising the $1-billion limit, Mathew said, “We will answer this issue when we reach such a situa-
A bunch of jewellery makers in India are targetting the youth for diamond jewellery, turning some long-held notions on their head.With a price point at under a thousand rupees – cheaper than a pair of denims – these companies are attempting to find the ‘rock’ newer resting places. They are eyeing a new class of patrons that prefers to dress in denims, offering them diamonds for as little as Rs 499.Realising that college students are
not too keen on wearing traditional gold, the Tata Group-owned jewellery chain Tanishq has rolled out FQ diamond for teens.Rival Gitanjali Group too launched Amore-branded rings starting at Rs 2,500 at a college festival in Mumbai last month.De Beers, the world’s largest diamond group, has forecast India, China and the Middle-East becoming as important as the US, the world’s largest diamond jewellery market, in three years. Jewellery demand in India grew 13% to Rs 13.4 trillion in 2011, the World Gold Council said in a report last month.Gitanjali, the world’s largest branded jewellery retailer,
expects its ‘young adult’ range to add 7-8% to its revenues in two years. It plans to extend its Gili and Asmi range to this age bracket. ‘Teenagers and young adults are moving from costume and junk jewellery to light gold, silver and diamonds since it adds value to their lifestyle and fashion,’ says Mehul Choksi, Gitanjali’s chairman and managing director.
Luxury jewellery for men India has overtaken the US to become the third-largest men's luxury jewellery market in the world this year, according to researcher Euromonitor International. The researcher estimated the country's men's jewellery market at $194.4 million in sales and it is projected to grow 36.4% next year.The figure may look insignificant in the more than Rs 12 trillion Indian jewellery market dominated by women buyers, but more and more jewellers are paying attention to this growing set of consumers."Although it's a niche market, it is growing. Nobody can ignore it now," says GR Radhakrishnan, MD of GRT Jewellers, which pegs the share of men's jewellery in its total sales at 20-25%.It plans to launch a new line of men's jewellery in collaboration with designers from Italy and Bangkok.■
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A tale of three firms The results announced by the three largest Indian IT companies could not have been more diverse. While the biggest player, Tata Consultancy Services (TCS), beat all expectations and churned out a solid increase in profits and turnover, its two rivals, Infosys and Wipro ended up disappointing the market. First the good news. TCS became the first IT services company in the country to cross the $10-billion mark in revenues for the year ended March 31 and also had a 22.6 per cent increase in its net profit for the last quarter of the year. The firm also gave an upbeat outlook and reiterated it was better placed to manage growth compared to its peers, especially Infosys.The better than expected numbers also put to rest some of the concerns over the demand environment for IT services.“We have good momentum. We have a good pipeline and the traction in business is positive. We do see a good year ahead and we are sure growth for the next fiscal will be even across quarters,” said CEO & MD N Chandrasekaran. In contrast,India’s No 2 Infosysslipped on several performance parameters. There was a reduction in volumes (person-months billed), weaker
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pricing, lower employee utilisation and to top it off, lower revenues from the key US geography as well as the Banking and Financial Services (BFSI) vertical.Infosys now expects to grow at a lower rate than the industry's growth of 11-13 per cent projected by Nasscom for software and services companies in FY13. And the third placed Wipro also belied the market expectations of beating the upper end of its forecast and delivering growth above its peers. CEO T.K. Kurien attributed the underperformance to delays in deal closures during the quarter, and a decline in business provided by one of its largest customers.
Publicis acquires Indian firm
Global communications giant Publicis Groupe has acquired Indigo Consulting, a leading dig ital marketing and web development firm in India.While Indigo will operate as a unit within the Leo Burnett Group in India and will retain its name, its founder, Vikas Tandon, will remain as MD and would report to Arvind Sharma, chairman of Leo Burnett for the Indian Subcontinent, according to Publicis. "All the 150-plus people (size
of Indigo) are happy and rich, is all I can say," said Sharma.An alumnus of the Indian Institute of Management, Ahmedabad, Tandond founded Indigo in 2000 and has clients like Thomas Cook, HDFC Bank, Tata AIG General Insurance, Asian Paints and DSP Blackrock Mutual Funds. Jarek Ziebinski, President of Leo Burnett Asia Pacific said in the press release, "Our growth strategy for Leo Burnett in India and Asia Pacific is based on two core pillars: digital and shopper-marketing" We want to make sure Leo Burnett has the right infrastructure in place to meet the needs of tomorrow. I also see Indigo Consulting developing beyond India, to become an important player within our network in Asia Pacific and globally."Publicis is the third biggest advertising network in India and has been aggressively trying to take the second spot, in fierce competition with its global rival, Omnicom, which recently increased its stake in Mudra from 10 per cent to 51 per cent. Publicis has been restructuring operations at group agency Saatchi & Saatchi in a bid to grow the latter’s business in India.Besides Saatchi & Saatchi, Publicis Groupe is represented by flagship Publicis Capital, Publicis Ambience and Leo Burnett. Together with interests in other verticals such as public relations, healthcare, digital and media, the group is estimated to have a total turnover of Rs 5 bn in India.
Mobile banking norms for Indian telcos India has over 900 million mobile subcribers, but less than one third of them have individual bank accounts.In view of an increasing number of banks offering mobile banking solutions in India, the
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incentive package. The package includes reimbursement of indirect taxes and a subsidy of 20 per cent on capital expenditure made by high-tech manufacturers in SEZ units. Investments made in non-SEZ units could get a subsidy of 25 per cent. The Ministry of Finance has agreed to the proposal with a ceiling of Rs 100 bn during the 12th Plan.The subsidy may be linked to the project outcome in a bid to ensure that companies invest in cutting edge technologies that's marketable.For example, in the case of semiconductor wafer fab, 75 per cent Telecom Regulatory Authority of India has laid rules for telecom companies offering mobile banking services. Under the new rules, mobile companies have to enable banks to complete a transaction within ten seconds. The telcos will have to give banks and customers the option to transact using either SMS, Interactive Voice Response, or Unstructured Supplementary Service Data (USSD). All the operators are already using these platforms and hence do not have to make additional investments.The regulations are aimed at ensuring that mobile operators offer good services to banks that launch mobile banking services. “Mobile banking consists of banking transactions and the use of mobile networks for communicating through mobile phones by the customer for such transactions. The entire transaction depends on the capability of the mobile network to deliver a fast, reliable and cost-effective method of communication,” TRAI said.
A push for electronic goods manufacturing In order to encourage manufacturing of electronic goods, the Indian government is preparing a special
of the overall subsidy could be linked to production milestones.In order to raise the initial corpus for the project, the DEITy has proposed to levy a cess on all electronic products sold in the country. The revenue earned from the cess will be put into the National Electronics Mission fund. According to estimates made by DEITy, the Government will end up being a net revenue earner by 2020.The department has presented three scenarios with different production targets. If the production reaches $400 billion by 2020, then the Government subsidy will amount to $32.85 billion while the revenue accruals will be
$58.52 billion according to the projections made by DEITy.
Health in the cloud With vast amounts of medical data generated each year, many small and medium-sized healthcare enterprises are opting for cloud technology to store, access and share data, to reduce operational costs and increase efficiency.Unlike large super-speciality hospitals that have in-house technology for managing data, SMEs in the healthcare space – mainly 25-50-bed hospitals – are opting for cloud technology.Hyderabad-based Razi Healthcare, which has 50 primary care hospitals across India, has adopted iON – a branded on-demand cloud computing offering from Tata Consultancy Services – to digitise patient-care profiles with electronic medical records (EMRs) for easy access and more accurate treatment.“Hospitals are using technology and cloud service for maintaining patient medical records, monitoring of patients, billing and payroll, to maximise resource utilisation at low cost and to improve doctor-patient understanding through electronic health records (EHRs), electronic medical records
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year over the next 10 years.
Global CIOs depend more on India
(EMRs), healthcare management and information systems (HMIS), picture archiving and communications systems (PACS), and point of care systems,” said Suresh, chief information officer, SevenHills’s e-health.e-health is a part of Visakhapatnam-based SevenHills Healthcare Pvt Ltd, a web-enabled hospital management solution (HMS) that provides end-to-end solutions to medical players, where doctors and staff can access the stored data from anywhere through the web.e-health is the country’s first paperless hospital model, where every patient is allotted a unique health identification card (UHID) at the time of registration. UHID provides complete details of the patient’s medical history as recorded in SevenHills’s e-health suite. “Currently, there are only five or six full-fledged paperless hospitals in India, and seeing the high storage cost, more hospitals are looking to go paperless (which saves Rs 3 lakh storage cost for a 150-bed hospital),” Suresh said.The Indian healthcare industry was estimated at $40 billion in 2010, and is expected to reach $280 billion by 2020. According to Frost & Sullivan reports, spending on IT by Indian healthcare players was estimated at $244 million in 2010 and is expected to grow at 22 per cent a
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The percentage of global CIOs (chief information officers) preferring Indian IT vendors for new contracts has moved up to 18% now, from 14% in August 2011, a Barclays CIO survey says.The report attributes this increase to Indian IT's wellrounded knowledge in multiple domains, wide delivery capabilities across onsite, near-shore and offshore locations, quick understanding of client requirements and effective communication (English) skills."These attributes work as an open invitation to Indian providers, to compete on a global scale," said K Raman, practice head at Tata Strategic Management Group. Clients, he said, are increasingly finding comfort with Indian providers."These are the fruits of the hard work and learning that desi providers have put in. Going forward, the global customer confidence will only increase,'' he said.Ankita Vashistha, director for strategy & growth at offshoring advisory Tholons, said that in the last 20 years, Indian providers have worked with more than 90% of the Fortune 500 companies, gaining a huge amount of domain exposure.The Barclays survey finds that the cost-cutting nature of outsourcing projects will continue to drive the strength in the sector amidst tough macro conditions. Responses indicate that overall IT budgets have shown little change over the past 3 months, with 86% falling in the flat to +/-5 % deviation range.
eClerx buys US firm eClerx Services Ltd has acquired US-based Agilyst Inc, a knowledge process outsourcing company
through its overseas subsidiary eClerx Investments Ltd.Agilyst Inc will operate as a fully-owned subsidiary of eClerx. Amarchand Mangaldas, which acted as the Indian legal advisor to eClerx Services, said in a statement. The transaction will be funded from eClerx's internal resources and there is no intention to raise any incremental capital. The deal value is confidential.Founded in 2007, Agilyst is a back-office operational and analytics company focused on the North American media industry.
Branding of Indian drugs market
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Despite a low share in the Indian pharmaceutical market, foreign multinational drug companies have inched past their domestic counterparts in terms of brand sales. Of the 25 top medicine brands by sales last year, 13 were from the stables ofglobal drug majors such as GSK, Pfizer, Novartis and Ranbaxy a subsidiary of Japan’s Daiichi Sanky). This is more significant because multinational companies (MNCs) account for just over 20 per cent share of the Rs 650 bn Indian drug market.A recent market research reportreveals that the brand-building exercise is fast becoming more evident in a predominantly generic Indian medicine market.“MNCs’ efforts in brand building clearly stand out in comparison to those of Indian companies,” Hari Natarajan, head, Pharmatrac said.The top-three brands by sales in the domestic pharmaceutical market in 2011 were antibiotic Augmentin (GSK), cough syrup Corex (Pfizer) and anti-diabetic Human Mixtard (Novo Nordisk).The Indian Pharmaceutical Alliance (IPA), the association of 18 leading domestic players, however, felt the brand dominance did not mean increasing
MNC share in the domestic drug business. Ranbaxy, which has been listed among MNCs, continues to be an IPA member, despite Daiichi holding a majority stake in it.“In the last five years, foreign multinational drug companies had been trying to build their business through the limited number of brands they have, while domestic drug makers were focusing on introducing new generics into the market. Since the focus was different, Indian companies might not have had too many brands in the top list; but on the basis of product introductions, they were much ahead of MNCs,” IPA Secretary General D G Shah said.Experts differ on the view that the Indian drug industry is moving towards a brand-dominated market. “As the Indian market has intense competition, with many similar products selling, as well as many different tactics being explored to procure prescriptions from prescribers, a good brand-building environment based on proven branding principles becomes a challenging task,” Interlink Consultancy Managing Director R B Smarta said.
Piramal focus on R&D The cash-rich Piramal Group has begun making serious investments in pharmaceutical research and development (R&D). Piramal Healthcare Ltd (PHL) recently acquired the worldwide rights to the molecular imaging research and development portfolio of Bayer Pharma AG. Financial details of the acquisition were not disclosed, but the move is significant, as the company would get rights to florbetaben that may help detect signs of Alzheimer’s disease. Since the Rs 170 bn sellout of its domestic formulation business to US
drug maker Abbott in September 2010, Piramal Healthcare has been on an investment spree across verticals —financial services, defence,
telecom, and now, pharma R&D. Earlier this year, Piramal Healthcare picked up an additional 5.5 per cent in telecom service provider Vodafone India for $618 million, raising its total stake in the telco to 11 per cent. Last year, it had also set up a financial services subsidiary, Piramal Finance, for the purpose of housing two non-banking financial companies (NBFCs) with a combined corpus of Rs 10 bn as well as a private equity venture. Again in 2011, the group floated a new company, Piramal Systems and Technologies (PST), to make a foray into the defence security space. More recently, earlier this month, the group's real estate arm, Piramal Realty, bought a property in Mumbai from Hindustan Unilever for Rs 4.53 bn.Ajay Piramal, the Piramal Group chairman, said, “We plan to build a promising portfolio in the pharma space, including our newly acquired molecular imaging assets, which will help us create a global branded pharma business.”■
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