Gulf business | the India review 2013

INSIDE

AUGUST 2013

the India review

Power play The UAE’s most influential Indians Currency woes A rough ride for the Indian rupee Gold crush India’s love affair could lose its shine

In search of new India

Foreign firms ventured billions on India before the global economic crisis. Where has it gone?

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In search of new IndIa In 2008, foreign investors ventured billions of dollars on India. The mood is more sombre following the global recession but there is still reason to hope. Gulf Business looks into the country’s rising middle class and burgeoning industries, and asks ‘what next’?

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INDIA TODAY Numbers, news and people

BRIEFING Page 9 Home trutHs Is it the right time to invest in India’s property market?

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Page 13 tHe great gold CrusH Bullion imports are plunging as an increase in tax on financing shipments boosts costs for jewelers. But can the move really save the country’s economy?

Page 15 tourism bounCes baCk India’s tourism sector has had a rough time lately, but it’s still one of India’s most powerful economic drivers.

Cover photo Getty images

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c o n t e n ts

Editor-in-Chief Obaid Humaid Al Tayer

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Managing Partner and Group Editor Ian Fairservice Editorial Director Gina Johnson Group Editor Guido Duken Editor Alicia Buller alicia@motivate.ae Reporter Aarti Nagraj aartin@motivate.ae Reporter Neil Churchill neil@motivate.ae Picture Researcher Hilda D’Souza hilda@motivate.ae Art Director Tarak Parekh tarak@motivate.ae Designer Charlie Banalo charlie@motivate.ae Contributors Ryan Harrison

Page 19 The baTTle for IndIan forex Around 70 per cent of Indians in the UAE send money home. The war for their wages is hotting up.

OPINION Page 21 Gaurav Kashyap It’s been a rough ride for the rupee

Page 34 10 IndIans who shaped The uae Gulf Business reveals the country’s most influential Indians.

Page 42 TradInG places Between 2011-12, the UAE was India’s largest trading partner with bilateral trade reaching up to $75 billion. And it’s only the beginning.

Page 46 InTervIew: sunny varKey, Gems ceo The founder of the world’s largest private schools company takes on his critics, and reveals his ambition to save the world from bad education.

DOWNTIME Page 49 Reviewed: The Oberoi, Dubai

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FEATURES Page 32 exclusIve InTervIew: sanjay verma, consul General of IndIa How can the UAE and India step up their budding friendship for mutual benefit?

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A Motivate Connect Publication 4 the India review / August 2013

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INDIA TODAY PEOPLE, NUMBERS AND EVENTS

ILLUSTRATIONS: TARAK PAREKH

Pro-pro partnership THE UAE AND INDIA’S relationship spans myriad areas of mutual interest and cooperation.

Bilateral trade between India and UAE has mushroomed from $180 million per annum in the 1970s to a colossal $72 billion in 2012, crowning India as the UAE’s largest trading partner.

The UAE and India’s Bilateral Investment Promotion Agreement is now finally in place after stalled talks. This will only encourage increased foreign investment in India and corroborate the ambitions of both sides to impact trade on a large-scale global level.

While other GCC countries, such as Kuwait and Saudi Arabia, push nationalisation drives and close up to expatriate labour, the UAE’s open door policy for expats, particularly Indian expats, has only served to strengthen 6 the India review / August 2013

the partnership between these long-term allies. It is telling that the UAE Forbes billionaire list 2013 includes three Indian-born businessmen, in addition to four Emirati national businessmen.

Expatriate Indian remittances, especially from within the UAE, have helped to boost India’s foreign capital reserves and continue to do so.

The real estate and construction industry in India has been strengthening with sizeable investments from UAE-based NRIs, while Dubai real estate remains a popular choice with Indian buyers.

A diplomatic visit of the Indian prime minister Manmohan Singh to UAE, due in August this year, is expected to cement this relationship further and forge a diplomatic stronghold for both countries globally.

30%

The percentage of the UAE population that is Indian – forming the largest expatriate community in the UAE at 1.75 million residents.

$8 bn The amount the UAE has invested in India, consisting of both portfolio and foreign direct investments (FDI).

M AY 2 0 1 3

NEWS

$2.3 bn The amount of FDI the UAE has invested in India. The Gulf country is the tenth largest investor in India globally.

60%

The percentage of UAE-based Indians that are blue-collar workers. Around 20 per cent of UAE-based Indians are white-collar workers and 20 per cent are managing professionals.

$8 bn

The total amount of annual remittances from Indian expatriates in the UAE in 2012.

64%

The percentage of total flights that the three UAE national carriers operate on the India-UAE route.

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INDIAN PROPERTY MARKET

HOME TRUTHS

Is it the right time to invest in India’s property market?

TEXT BY HILDA D’SOUZA

INDIAN DEVELOPERS LEVERAGED a weak rupee to lure visitors to Dubai’s largest non-resident Indian (NRI) property showcase in June. The event witnessed around 17,500 visitors over three days.

There were nearly 112 developers at The Indian Property Show, pushing various schemes to draw NRI investors.

Jignesh Mashru, business development director, Deva Enterprises Ltd, said: “At present, the stock market is almost dead in India, gold prices are fluctuating,

fixed deposit income is also down, so there are very few options left for investors. If buyers enter into the Indian real estate market in the right places where prices are not too high, then they could get very good returns.”

Market expert Ashutosh Limaye, head of research & REIS, India, at Jones Lang LaSalle is positive on India’s real estate market: “It’s a good time to invest in property in India for two reasons: the value of the Indian rupee has depreciated considerably so

property prices in dollar terms have fallen, and India offers a wide range of real estate options for various budgets, with improved quality and property features. Currently, some of the cities are witnessing a slump in sales, which forces developers to offer good deals.”

“There is a possibility of twofold benefits for the NRI investors – the current weakening of Indian rupee is expected to be a short-lived phenomenon and once the rupee starts appreciating, the investor will get more gulfbusiness.com 9

BRIEFING

INDIAN PROPERTY MARKET

dollars for the same investment in rupees and secondly in mid-long term (three to five years), property prices in India will appreciate considerably, thus giving good returns to investment,” he advised.

To lure in the longer-term investors, developers are coming up with attractive schemes that reduce the investor’s risk profile and assure fixed returns, such as the 20:80 subvention scheme and buyback plans that offer buyers a chance to resell the property to the developer for up to 18 to 25 per cent profit over a couple of years.

Mumbai-based developer Sushil Raheja, who says he derives up to 30 per cent of his sales from Dubai-based NRIs, said: “Property is at a decent pricing right now, compared with last year. There is now a bigger end-user demand for homes and we’ve introduced the 20:80 plan to cater to their demand.

We are seeing a good response for this new scheme because the buyer’s risk factor is low.”

But while the attractive exchange rate and profitable home schemes are a clear draw for Indian expats, NRIs are still being cautious and buying with the understanding that there will be a long gestation period before their investments start to generate returns.

According to Dixit, sales manger at Bluejay, a Bangalore-based company, said: “Buyers are cautious and want to check the developments before they buy the property. They are even willing to

It’s a good time to invest in property in India for two reasons: the value of the Indian rupee has depreciated considerably so property prices in dollar terms have fallen, and India offers a wide range of real estate options.”

10 the India review / August 2013

Anshuman Magazine, chairman and managing director of the South Asia region for CBRE

forgo the 10-20 per cent discounts that we are offering for registering at the show. So, in that sense, home buyers are being careful not to fall into a trap.”

Anshuman Magazine, chairman and managing director of the South Asia region for CBRE, advised investors to be prudent: “The residential market has witnessed stagnancy for the past couple of months, which has slowed down price appreciation in most of the leading urban centres. This makes for an attractive scenario for NRIs to put in money in prominent residential projects by established developers. The steep decline of the rupee against the dollar as well as other currencies also augurs well for NRIs to look at investing in residential property.

“However, NRIs should also remain cautious about dubious payment schemes, developer profile and the ability of the developer to deliver the project on time” he cautioned.

Are attractive schemes and relatively low property rates targeted at mid-long term investors in danger of fuelling a market bubble?

Jones Lang LaSalle’s Limaye doesn’t think so “Investors are playing a greater role than before and that is keeping the prices high in a way, particularly in cities and areas where investors are very active. However, one must accept that input costs have increased a lot too. Land costs, construction costs and finance costs all have gone up and naturally the total price has gone up.

However, the current prices would not be sustainable if end-users were the only buyers. The prices are floating where they are because of investors.”

CBRE’s Magazine is confident that the strong end-user pipeline will eventually balance the Indian property market.

“Speculation-based investment exists in most fast developing residential markets across the globe and the same holds true for India as well. However, the country also has a strong enduser interest guiding demand for new housing in the country. It is in fact the end-user interest and demand from the mid-income populace that has fuelled housing sale and construction activity in most of the country’s emerging suburban residential markets.”

NRIs are still being cautious and buying with the understanding that there will be a long gestation period before their investments start to generate returns.

GOLD

BRIEFING

THE GREAT GOLD CRUSH Bullion imports are plunging as an increase in tax on financing shipments boosts costs for jewellers. But can the move really save the country’s economy?

INDIA OPENED UP a can of worms in January when it raised duty on gold to adjust imports in an attempt to bring down the country’s current account deficit.

The government had initially raised the import duty on gold from four to six per cent, and in June, it further raised it by two per cent to eight per cent.

Gold’s slump to a two-year low in April boosted demand for jewellery from its own 1.2 billion domestic population and in the rest of Asia. Such demand contributed to a $32.6 billion currentaccount gap in the last quarter of 2012, equivalent to a record 6.7 per cent of gross domestic product.

But a remarkable backlash followed as attention turned to the negative impact on the various segments of the gold and jewellery industry, from manufacturing to retail. Uses range from wedding jewellery to a hedge against consumerprice inflation.

There has been evidence that making gold more expensive for the consumer has crippled consumer sentiment and hit gold sales.

Meanwhile, more recently gold smugglers looking to by-pass what some see as extortionate levies have dragged the industry into the mire. Overseas travellers, especially those returning from countries in the Gulf, are also trying to sneak in gold bars and undeclared jewellery to profit on the margins.

According to Indian media reports customs officials in Mumbai and Delhi confiscated about 35 kilograms of gold worth Dh5.5 million in the month of June alone.

However, for India, the world's largest consumer of gold jewellery, this could just be the beginning of the bad news.

There are growing fears that India could be inflicting serious damage on its wider economy for the long term.

Getty Images

TEXT BY RYAN HARRISON

Karim Merchant, CEO & MD of Pure Gold Jewellers in Dubai, says it suggests deeper, more worrying issues. “This will affect the livelihood of millions of people employed by the gold and jewellery and it will cause a ripple effect on other industries as well.

“What is next depends on what the government decides, if the government pulls back the restrictions the industry may stabilise again if not I expect major downsizing by leading retailers.

Merchant says the government has also instructed all banks not to provide finance against domestic gold sales, which is like “pulling the plug for major Indian domestic retailers and manufacturers”.

In June, the government sold inflationlinked bonds for the first time in 15 years, to provide investors with an alternative to gold as a buffer against inflation.

Finance Minister P Chidambaram also recently requested Indian citizens to resist the temptation of buying gold in order to improve the fundamentals of the Indian economy.

There is now a growing sense of unease about this so-called gold crush taking place after so many years of growth and prosperity.

India will find it hard to back-peddle

out of the mess it has created, and if it does the process will be a long one.

Perhaps most worrying is that so far despite the drastic measures to curb demand for bullion, consumer appetite is as strong as ever.

OFF THE LEASH The thirst for gold seems to be insatiable in India, a country of 1.2 billion that buys even more bullion than China.

The Indian government has been trying desperately to reign in the spending to cool the economy.

In January, policymakers increased import duty dramatically and surprisingly gold imports dipped marginally by 15.7 per cent to 215 tonnes in the JanuaryMarch quarter. However, in the April-June quarter, total gold imports once again jumped to 336 tonnes.

This figure was 56 per cent higher than the figure reported in the previous quarter. Interestingly, a major chunk of the gold was imported in April (142 tonnes) and May (162 tonnes). In June 2013, gold imports were down by 81 per cent to 31.5 tonnes on monthly basis after the government increased import duty to eight per cent.

gulfbusiness.com 13

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BRIEFING

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I N D I A TO U R I S M

BOUNCING BACK

The tourism sector has had a rough time of it lately, but it’s still one of India’s most powerful economic drivers.

TEXT BY RYAN HARRISON

WHILE INDIA HAS a lot to offer foreign tourists that come and visit, there are those that say tourism has even more to contribute to the country’s economy.

Earlier this year, industry body the CII said the growth of tourism and hospitality sector is critical owing to the immense potential to generate jobs and circulate the economy.

But although the Indian government has registered some success with its visa on arrival scheme for foreign tourists, which sparked a 63 per cent spike in visas issued in March, more needs to be done, says the CII. Ensuring the safety of tourists tops the list at the moment. There have been some high-profile attacks on

holidaymakers since December, although figures show that tourist numbers have remained resilient.

According to data compiled by India’s Ministry of Tourism, the months of January and February 2013 saw 1.38 million foreign tourist arrivals, representing a growth of 2.1 per cent over the same period last year. Foreign exchange earnings from tourism during that period were $3.8 billion, or an 11.4 per cent increase over the same duration in the previous year.

To build momentum and create awareness of the country’s appeal, India’s tourism department has launched an Incredible India campaign. The initiative’s regional director for West Asia & Africa

Vikas Rustagi says sheer choice sets it apart from other destinations.

“India is witnessing a rapidly developing tourism infrastructure which is modern, meets international requirements and is backed by qualified, trained and experienced manpower. You can find these in luxury hotels, spas and wellness centres which are spread across the length and breadth of the country.”

Perhaps the most unique attribute is India’s range of hotel brands, with many catering to the luxury hospitality sector.

Increasingly popular are the palace and heritage hotels, which tap into so called heritage tourism where the cultural connections of a place matter. This could be temples, forts, gardens, religious gulfbusiness.com 15

BRIEFING

I N D I A TO U R I S M

IN GOOD HEALTH Health tourism has emerged as a critical driver of economic growth, owing to India’s skilled healthcare professionals and the lower cost of medical facilities in the country. Wellness tourism is regarded as a sub-segment of medical tourism and it involves the promotion and maintenance of good health and wellbeing. India, with its widespread use of Ayurveda, Yoga, Siddha and Naturopathy, complemented by its spiritual philosophy, is a well-known wellness destination.

Amber Fort in Jaipur attracts visitors from all over the world.

monuments, museums, art galleries or urban and rural sites.

“Some old palaces have been converted into hotels with the most modern and luxurious amenities while the heritage hotels consist of only old buildings such as forts, palaces, hunting lodges and so on,” says Rustagi.

Built prior to 1950, often these old constructions have been converted into hotels while keeping the originality, ambience and décor to capture the culture, tradition and cuisine by re-living the old heritage of the earlier times.

He adds: “India is truly an inexpensive tourism destination which is becoming popular as a year-round destination for all seasons and all reasons for tourists of all ages and interests.”

The urge for new experiences and

Vikas Rustagi, regional director for West Asia & Africa

desire to be entertained coupled with affordability are the major triggers for tourism in India at the moment. Indian states have started to promote tourism in a more professional way than was ever previously thought possible. For instance, Gujarat has launched Gujarat tourism and Maharashtra with its Maharashtra tourism campaign recently. Meanwhile,

West Bengal is expected to come up with its tourism programme ‘Bengal leads’ very soon to attract tourists and investors into the state of West Bengal.

And with young generations needing more privacy for them and their families, boutique style hotels are becoming popular.

Eco-tourism is also flourishing in India, reflecting a global trend. It is considered the fastest growing market in the tourism industry, according to the World Tourism Organisation with an annual growth rate of five per cent worldwide and representing six per cent of the world gross domestic product, 11.4 per cent of all consumer spending.

Ultimately, what will keep momentum up in India’s tourism sector is its sheer variety. There may still be a lot to do to repair some of the image issues on the international stage, but early signs show that tourists are regaining confidence.

The faster this builds, the faster the government will see results in the wider economy.

NEW ‘QUICK’ VISAS BOOST UPTAKE The Indian government’s visa on arrival scheme for foreign tourists registered a growth of 63 per cent during March.

This was seen as a major triumph given the challenges involved in repairing confidence after some negative headlines since last year.

A total number of 2,107 visas were issued on arrival as compared to 1,287

16 the India review / August 2013

visas issued on arrival during March last year.

Japan topped the list with 848 nationals being issued visas on arrival, according to the tourism ministry.

Other nationals from 11 countries in the list of visas issued included New Zealand (332), Indonesia (312), the Philippines (225), Singapore (214), Finland (109),

Luxembourg (32), Vietnam (20), Myanmar (8, and Cambodia (7).

During the first three months of the current calendar year, a total number of 5,744 visas were issued on arrival as compared to 3,905 during corresponding period of 2012, registering a positive growth of 47.1 per cent, according to the ministry of tourism.

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FO R E X

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THE BATTLE FOR INDIAN FOREX Around 70 per cent of Indians in the UAE send money home.

The war for their wages is hotting up.

TEXT BY RYAN HARRISON

THERE ARE CURRENTLY around 2.2 million Indians living in the UAE, making up almost 30 per cent of the entire expat population in the country.

Their huge appetite for sending money home has helped fuel an intense battle between foreign exchange companies in the Emirates.

It is now estimated that on average, UAE-based Indians save about 70 per cent of their disposable income, which makes them high potential money senders. And with more than 130 exchange houses in the UAE, competition is intense and the profit margins of smaller players are often squeezed.

Apart from some unwanted ‘major regulatory violations’ recently in the UAE, the gruelling fight for forex is still capturing the headlines.

All this has contributed to India becoming the world’s biggest inbound remittance market with over $66 billion received in 2011.

Y. Sudhir Kumar Shetty, UAE Exchange’s chief operations officer for global operations, says: “Today, India is the largest receiver of remittances in the world and we are happy that 10 per cent of the total inflow to India is through UAE Exchange, thanks to our global network of 700 branches spread in 30 countries, of which 125 branches are in the UAE.” Every day, expatriates from the subcontinent use the UAE’s network of more than 750 exchange outlets to support their loved ones back home.

Competition is fierce, but if the past is any guide to the future it shows no sign of slowing down.

Marc Aubry, vice president of marketing for the Middle East and Africa at Western Union, one of the UAE’s largest firms, says: “India for centuries has established strong ties with its Gulf partners and this reflects in the

market growth through the development of its infrastructure, retail and realestate projects, India is seen as a key source for driving this growth through the supply of the labour market, cross border investments, SMEs and regional trade – to name but a few.

“India is a key geopolitical and socioeconomic partner along with many other countries and a testament to that is the growth over the past decade of NRIs in the region,” adds Aubry.

The annual remittance made by the large Indian community in UAE amounts to over $8 billion, according to the latest figures from 2012. There are strong suggestions from currency exchange firms that this momentum has carried on through into the first half of 2013.

It seems then that the battle for a share of the local Indian population’s wallet still has some way to go.

INDIANS SHAPING UAE FOREX MARKET region’s demography, business cycle and eventually the remittance industry. If we look at the labor market specifically from India, many of our customers form the backbone of this market – remitting diligently monthly savings to support friends and families back home.

“Globally, Western Union has recently launched our retail to account service – allowing our Indian customers to remit funds directly into a bank account. The service will be available in the UAE in the near future. This is a key milestone as we see the banking penetration and reliance on an account, growing in India.”

So what evidence is there that India will continue to be a critical remittance destination?

Aubry says the evidence couldn’t be clearer. “As the UAE continues its

The sheer volumes of transactions undertaken by the Indian population is shifting the sands of forex in the region.

According to the UAE Exchange, this year it expects to increase by up to 10 per cent the remittance inflows into Indian.

This will mean growth on top of an already staggering level of remittance, which last year totalled $69 billion into the country.

In 2012, UAE Exchange remitted over $5.8 billion through its GCC corridor to India. UAE Exchange has grown three times faster than the global growth rate of remittance. According to a World Bank report, in 2012 global remittance grew at five per cent worldwide whereas UAE Exchange expanded by 15 per cent during the same period.

gulfbusiness.com 19

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INDIAN RUPEE

A N A LYS I S

Text by: Gaurav Kashyap, head of futures at Alpari Middle East.

Rough Ride foR the Rupee A record low for India’s currency stems from weakened domestic data and uncertainty over when the Fed will pull the plug on its billion-dollar asset-buying programme.

The IndIan Rupee is trading in uncharted territory. Since May 1, the currency has shed more than 11 per cent against the Greenback, with the USDINR pair touching an all time high of 61.21 during this period. With such a large Indian expat population residing in the Gulf, it’s no surprise that local exchange houses have been kept busy trading dollar pegged dirhams to Indian rupees and cashing in on these record remittances back home.

The Dubai Gold & Commodities Exchange’s (DGCX) popular Indian rupee contract has also kept futures brokers and traders busy, with speculators and hedgers alike capitalising on the recent Indian rupee weakness. With deep liquidity in this particular contract (the Exchange averages $1.5 – $2.0 billion in Indian rupee turnover per day) along with the fact that investors can first ‘short-sell’ the currency in anticipation of further depreciation, investors have been piling onto the recent weakness.

With the pair now finding a channel of consolidation, investors are wondering what’s next for the Indian rupee? When an asset breaches all time records, technical studies have little use. Having said this, two key fundamental factors will determine the fortunes of the Indian rupee – the upcoming plans of the Federal Open Market Committee with regards to their asset purchase plans, and the performance of the Indian economy.

uS eCOnOMIC pOLICY If we begin with the former, much of the recent volatility in global markets has hinged on speculation as to when the Federal Reserve will reduce their record $85 billion a month asset purchase programme. During their most recent meeting, which concluded on June 19, the Fed stated that the pace of the recovery was improving. It further hinted that a taper was on the cards as early as September if this momentum continued. As a result, the US Dollar Index rallied from a three month low of 80.49 to peak at a three year high of 84.75. Then, with the release of the meeting minutes in mid-July, it was evident that there was a clear split amongst the board with several calling for an extension of the programme. As a result, US equities marched to record highs with the US Dollar paring some of its gains.

With so many mixed signals coming from the Fed, it’s clear that future Fed policy is tied to the performance of the US labour market, which forms the backbone of the recovery. June’s Non-Farm Payroll Report showed some signs of improvement – coming in at 195,000 new jobs while May’s number was revised upwards to 195,000 new jobs. The unemployment rate was unchanged at 7.6 per cent, but this was largely due to an increasing labour participation rate.

Ben Bernanke and the Fed have consistently maintained that future

tapering plans would hinge on the unemployment rate (they are targeting a rate of 6.5 per cent) and with the next FOMC meeting taking place on September 17-18, July and August’s NFP reports will be the most crucial yet. It won’t be so much about the number of new jobs added, but more

The continuous weakening of the currency has seen more foreign direct investors dump their Indian assets in search of a safer haven — US dollar denominated assets — and this has continued to pile pressure on the Indian currency. In a risk-off climate, a narrowing of the yield spread between 10 year US treasuries and Indian bonds will see a continued unwinding as the flight to safety will be on the rise. gulfbusiness.com 21

A N A LYS I S

INDIAN RUPEE

importantly the condition of the unemployment rate.

When studying the unemployment rate, it is important to note that the drop in the figure, from 10 per cent in Q4 2009 to 7.6 per cent at present, is largely a result of a decline in the overall participation rate, which fell from 65 per cent to 63.5 per cent during the same period.

With less people actively looking for jobs and, as a result, falling out of the labour force, the recent improvements in the overall unemployment rate can be misleading. To put this in perspective, assuming the participation rate in July’s report remains unchanged at 63.5 per cent, then it would take approximately 115,000 new jobs in July’s report to maintain an unemployment rate of 7.6 per cent.

Assuming the average of 204,000 per month that we have seen thus far in

22 the India review / August 2013

2013, that would mean the overall unemployment rate could be around 7.3-7.4 per cent the next time the Fed convenes in September. If, however, the participation rate were to improve by a basis point to 63.6 per cent, it would take more than 220,000 jobs per month to maintain the unemployment rate at 7.6 per cent. Therefore, when considering the upcoming job reports, improvements in the number of new jobs added would be meaningless if there are noticeable variations to the participation and as a result the overall unemployment rate.

WEAK INDIA DATA Also weighing in on the rupee is the deteriorating economic data emerging out of India. The once roaring tiger is slowing down – growth is on the wane (Indian GDP has cooled from 9.9 per cent in 2011 to 4.8 per cent in 2013),

price pressure is slowing (from 7.38 per cent at the start of the year to 4.86 per cent in June), a widening trade deficit, and a rather helpless central bank all weigh negatively for the Indian rupee.

The continuous weakening of the currency has seen more foreign direct investors dump their Indian assets in search of a safer haven – US-dollar denominated assets – and this has continued to pile pressure on the Indian currency. In a risk-off climate, a narrowing of the yield spread between 10 year US treasuries and Indian bonds will see a continued unwinding as the flight to safety will be on the rise.

The RBI’s hands are tied. They are sitting on enough foreign reserves to cover the next six months of imports.

After briefly interrupting the slide towards 60 levels, the RBI does not have enough in their reserves to stem further slides and will no doubt introduce indirect measures to halt any further slides in the short term.

First, the RBI imposed limits on banks to reduce their FX exposure and this was followed by measures by the regulator to raise margin limits and curtailing speculative FX positions in the derivatives markets. These moves were followed up when the central bank announced that it was ramping up short-term interest rates and conducting a bond sale of 120 billion rupees in mid-July.

While such measures will positively impact the current account deficit in the short-term and temporarily halt immediate slides in the currency, it will do little to address the underlying structural issues hindering the Indian economy.

In analysing the future prospects for the Indian rupee, the picture looks quite bleak. Domestic concerns don’t bode well for the currency and it would take a significant improvement in US data to halt the slide in the Indian rupee. All eyes will remain on July and August’s US Nonfarm payrolls report – and the trick will be in the unemployment rate and the participation rate to gauge the action timing of a Fed taper.

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C OV E R STO RY

IN SEARCH OF

NEW INDIA New India, long buried since the crash, may see 2013 as its resurgent year. Can India overcome corruption and political hurdles to embrace greater global liquidity and a pick up in investor sentiment? Ryan Harrison reports.

ECONOMISTS ARE BEGINNING to talk about a return to form for India in 2013 after years out in the wilderness following the global crisis.

The fact is that India was hit hard, especially by capital flight from the country, and has been struggling to regain its balance and credibility ever since.

The idea of a New India, long buried since the crash, is beginning to rear its head again, it seems.

This year, real GDP growth is forecast

by Euromonitor International to rebound to 5.4 per cent, from 3.8 per cent in 2012, which was its slowest rate of growth since 1991.

The 2013 output growth will be an improvement over 2012 but still slower than recent years and also decidedly below the nine per cent real GDP growth required to keep the economy operating at capacity.

24 the India review / August 2013

Between 2003 and 2008, real GDP growth averaged 8.6 per cent a year in India. And between 2008 and 2013 the figure was 6.6 per cent real growth. This, says Hilary Walsh, economy, finance and trade manager at Euromonitor International, puts the Indian economy at a distinct disadvantage.

“The global economic crisis of 20082009 has most certainly left a mark on the Indian economy, changing the country’s growth trajectory and negatively impacting its external market.

As one of the BRIC (Brazil, Russia, India and China) economies which were synonymous with high real GDP growth rates and abundant investment opportunities over the last decade, India has seen growth rates slow since the crisis began, exports have dropped, the current account deficit has widened and inflation has risen significantly.”

gulfbusiness.com 25

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C OV E R STO RY

With the passenger car penetration rate at around two per cent, the number of vehicles to be sold is expected to triple by 2020 from 2009 levels.

According to Euromonitor forecasts, as the second most populous country in the world in 2012 and the 12th largest consumer market in dollar terms, India is a key emerging economy yet its structural imbalances, teamed with the legacy of the global financial crisis is preventing it from fulfilling its potential.

Matching the pre-crisis levels of capital from foreign institutional investors (or FIIs) is where India has really struggled to gain ground.

It has made solid progress in recent years though, but this seems to have tailed off recently.

Research from the Economist Intelligence Unit found in 2012 net inflows from FIIs into Indian equities reached $24 billion, the largest level since 2010, and the second-biggest inflow in 14 years.

Greater global liquidity, the depreciation of the rupee and the pick-up in investor sentiment following the government's bout of reforms in September 2012 all contributed to the rise in inflows.

However, in recent months FII inflows have fallen, perhaps deterred by the uncertain domestic political environment.

Paritosh Tripathi, CEO of the State Bank of India

India’s population is young, with a median age of 25.7 years in 2012, while in China the median age in 2012 was 39.7. As such, it’s estimated that India won’t face problems of an aging population until at least 2050.

In April 2013 net inflows from FIIs into Indian stocks fell to $980 million, from $1.9 billion in March and more than $4 billion in each of the first two months of the year.

Paritosh Tripathi, CEO of the State Bank of India, said: “The immediate impact of the crisis was felt through large capital outflows and consequent fall in the domestic stock markets on account of sell-off by foreign institutional investors and steep depreciation of the Rupee against US Dollar.”

So are there any bright spots in the search for New India?

Well there are several fundamental aspects of the Indian economy that are still highly attractive to prospective investors. The population is young, with a median age of 25.7 years in 2012, while in China the median age in 2012 was 39.7. As such, it’s estimated that India won’t face problems of an aging population until at least 2050.

Around six million of the country’s households are considered to be ‘rich’ and spend more than $28 billion per year.

According to latest estimates, by 2015 India’s consumer market could match gulfbusiness.com 27

C OV E R STO RY

Banking is returning to form as the middle class borrows for real estate and automotive purchases.

There is a buzz about the industrial heart of India, which is growing rapidly as a direct response to the rising middle class.

that of Italy’s in absolute terms and by 2025 it will trail only those of the USA, Japan, China and the UK. Meanwhile, the real value of private final consumption grew by 3.2 per cent in 2012 and gains of 4.7 per cent and 6.2 per cent are expected in 2013 and 2014 respectively, according to Euromonitor.

And it doesn’t stop with the rising middle class. In fact, there is buzz about the industrial beating heart of India, which is growing rapidly as a direct response to this rising middle class.

Shrikanth S, a team leader in the business and financial services practice at Frost & Sullivan says there are some leading lights of industry emerging outside Information technology (IT) and related services, which are widely considered the backbone of the Indian economy.

“In the aerospace and defense sector, the Indian military is expected to spend around $80 billion over the next four to five years. The country currently imports 65-70 per cent of its defense requirements,” says Shrikanth.

“In the automotive industry, major 28 the India review / August 2013

INDIA AT A GLANCE India is the second most populous country in the world, with more than 1.2 billion people in 2010. Its economy is the 11th-largest in the world measured in nominal US dollars, but it is the third-largest when measured at purchasing power parity exchange rates. The large and inefficient public sector co-exists with a sizeable and diversified private sector.

Real GDP growth is forecast to average 6.4 per cent a year in 201230, making India the fastest-growing large economy in the world during the period. Long-term economic performance is predicated on changes in the best- and worstperforming sectors: the fast-growing information technology industry will need to move up the value added chain, while the slowly expanding agricultural sector, which employs the majority of the population, will need to increase its efficiency and improve its performance.

global OEM’s (Original Equipment Manufacturers) have increased their production capacities over the years in India. With the passenger car penetration rate at around two per cent, the number of vehicles to be sold is expected to triple by 2020 from the 2009 levels. The automotive components sector is set to grow from current a $30 billion to $110 billion over the same period.”

Meanwhile, banking is returning to form as the middle class borrows for real estate and automotive purchases.

Although critics say the banking sector is too fragmented with nearly 16 and 21 listed players from the private and public sector, respectively.

Shrikanth adds that healthcare is also one to keep an eye on. “The domestic pharmaceutical market size stood at $12.7 billion in 2010 and is expected to expand at a compound annual growth rate (CAGR) of 9.5 per cent until 2015.

The medical equipment market size was $3.6 billion for 2010 and is expected to reach $6.4 billion by 2014 with a CAGR of 15 per cent.”

But ongoing political instability may derail the search for New India.

The country also struggles with capital flight due to problems with corruption, tax evasion, political intransigence and

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C OV E R STO RY

India’s ongoing political instability may derail the country’s economic recovery and social progress.

supply bottlenecks, which all deter foreign investors.

Politically though, it is precarious at present.

With less than a year left before the current parliamentary term ends, the embattled Indian National Congress-led United Progressive Alliance coalition government is keen to counter the perception that it is corrupt and inept.

There is growing speculation that Congress may choose to call elections early, in the hope of capitalising on friction within the opposition National Democratic Alliance – a centre-right coalition headed by the Bharatiya Janata Party.

The country also struggles with capital flight due to problems with corruption, tax evasion, political intransigence and supply bottlenecks, which all deter foreign investors.

30 the India review / August 2013

if all the analysis is to be believed.

There is a growing opportunity for the country to build momentum from within its booming industrial assets to create confidence and ultimately attract investment to regain some lost ground.

POVERTY AMID THE POTENTIAL

Shrikanth S, a team leader in the business and financial services practice at Frost & Sullivan.

Shrikanth says political uncertainty is one of the “major problems” in India’s future.

Ultimately, as has been discovered in the revolutions in the Arab world, political instability is no good for future prosperity in any country or region.

India seemed to have turned a corner,

The spotlight has been on India in recent decades to tackle its chronic poverty levels, which for such a rich nation have been heavily criticised.

But poverty in India is reducing, and officially fell from 42 per cent in 200405 to less than 34 per cent for 2010.

Some say this can put some pressure on the government to allocate more funds and subsidies towards eradicating it, although this will inevitably increase the fiscal deficit and the government will have to borrow more funds. This would trigger rising interest rates.

Ultimately, this can affect companies and individuals, as well as their cost of borrowing.

PROFILE

Ties ThaT bind Between 2011-12, the UAE was India’s largest trading partner with bilateral trade reaching $75 billion. How can the two countries further their relationship for mutual benefit? Gulf Business asked Sanjay Verma, Consul General of India.

32 the India review / August 2013

PROFILE

How can tHe Uae benefit from its long-term trade relationsHip witH india?

The size of the Indian GDP is about $2 trillion. The Indian economy has many fundamental strengths and is the third biggest in the world in terms of purchasing power parity.

Our long-term growth prospects are positive. It is also a fact that the component of international trade as a proportion to our GDP has increased significantly since the liberalisation of our economy in 1991.

The Indian domestic market is also one of the biggest in the world.

We are also the closest largest economy to the UAE. India also recognises the great advantage the UAE, and Dubai in particular, holds as a window for trade with the MENA region. All these facts add up to a promise of a long-term trade partnership between our two countries. wHat are tHe areas of common interest for botH coUntries?

At the most obvious level, the biggest commonality of interest between India and UAE is in the economic and commercial sector. The bilateral trade and investments numbers speak for themselves. Shared culture, history and long tradition of people-to-people relations are also uniting factors. At a philosophical level, both countries share a vision of respecting diversity. India is probably the most diverse country in the world as is the UAE in terms of different nationalities that reside there. in wHicH areas of trade do yoU expect increased cooperation bilaterally?

I would like to suggest that the prospects of bilateral trade in the area of manufactured goods, especially machines, automobiles and automotive parts, renewable energy and food

stuffs appear to be bright in the days ahead. Trade in services also appears to have good prospects. India is a major consumer of oil from the UAE and we will continue to be an important customer for oil in times to come. witH saUdi and KUwait focUsed on localisation efforts, Has tHe Uae’s welcoming policy of indian expats strengtHened its statUs as a gUlf ally for india’s fUtUre trade ties?

The visionary leadership of the UAE has always had a special place for Indian expatriates, many of whom have been partners in the fantastic development and economic growth of the UAE. The UAE continues to be a great host to Indian entrepreneurs, professionals and skilled & semi-skilled workers.

As long as the Indian expatriate is considered to be hardworking, honest, law abiding and respectful to the local traditions and sensibilities, they will continue to be recognised for adding value to the great UAE nation.

How Has india been benefitting from tHe large nUmber of non-resident indian bUsinesspeople in tHe Uae? Increasing migration and globalisation are irreversible facts of life. Fear of the brain drain is a thing of the past.

Great developments in transport and communication have shrunk the world.

Indian businesspeople who have a stake in the India-UAE economic partnership are increasing the GDP in both these countries by promoting trade, investments, technology transfers and exchange of skills and knowhow. wHicH trade sectors Have been sUbject to tHe most cooperation in all tHese years?

In the last decade the top items of trade between India and the UAE have been crude oil and products, gold, gems and jewellary, machinery, transport equipments, and food stuff. tHere Has been increased foreign investor confidence in india dUe to tHe economy’s sHeer potential.

Has tHere been a strong interest in india from Uae investors recently?

India is a leader among the emerging markets. The recent economic reforms were aimed at boosting FDI into the retail and aviation sectors which possess huge potential. Abu Dhabibased Etihad is set to acquire stakes in Jet Airways and UAE–based retail giants like EMKE group and Landmark Group are already expanding their presence in India. wHat are tHe fUtUre prospects for tHe india-Uae trade relationsHip? The India – UAE trade relationship is robust and poised to grow even further. The UAE is strategically located in between the big emerging markets of Asia and Africa. The UAE can play a key role in increasing India’s trade and commercial relationship with the GCC, Africa and Central Asia.

How can botH tHe coUntries mUtUally benefit eacH otHer witHin tHe global trade environment?

India was the second fastest growing major economy last year, after China.

Given the proximity and familiarity, India’s large domestic market will be an ideal destination for UAE traders. On the other side, Indian traders will continue to leverage the UAE’s trade and logistics advantage in the region.

gulfbusiness.com 33

S P EC I A L R E P O R T

10 INDIANS WHO SHAPED THE UAE ILLUSTRATIONS BY PAUL STERRY

RAM BUXANI YEARS IN THE UAE: 54 AGE: 72 PLACE OF ORIGIN: HYDERABAD DESIGNATION: PRESIDENT, ITL GROUP SECTOR: DIVERSIFIED THE 72-YEAR-OLD self-made businessman, who has twice published his ‘rags to riches’ autobiography (Taking The High Road), is famously known to have entered Dubai as a penniless young man, before the city had an airport, roads, electricity and oil.

More than half a century has passed since then, during which time Buxani’s fortunes have grown along with those of Dubai. The president of the ITL Group has overseen the company’s rapid expansion into consumer electronics, textiles, banking, IT and hospitality.

The veteran is also known for his contribution to the Indian community in the UAE, and is currently the chairman of India Club in Dubai and a board member of Al Noor Training Centre for Children with Special Needs.

He was also the founder chairman of the erstwhile Overseas Indians Economic Forum – UAE, and the chairman of the Indian High School in Dubai from 2000 to 2004.

34 the India review / August 2013

THE UAE’S SUCCESS IN SUCH A SHORT TIME IS OFTEN CREDITED TO ITS CITIZENS. MANY OF THE COUNTRY’S HIGH-FLYING ACHIEVERS AND FUTURE-MAKERS HAVE HAILED FROM INDIA. FROM COMPUTERS, TO TELEPHONES, TO SCHOOLS AND HOSPITALS, PROMINENT INDIANS HAVE SHAPED AND ENRICHED THE EVERYDAY LIVES OF ALL WHO LIVE IN THE UAE. HERE GULF BUSINESS REVEALS TEN OF THE COUNTRY’S MOST INFLUENTIAL INDIANS. SUNNY VARKEY YEARS IN THE UAE: 55 AGE: 56 PLACE OF ORIGIN: KERALA DESIGNATION: FOUNDER AND CHAIRMAN, GEMS EDUCATION SECTOR: EDUCATION SUNNY VARKEY is the mastermind behind the world’s largest private schools company. Having founded GEMS Education from a single school in Dubai in 1969, the business now operates across 19 countries with 100 schools teaching 130,000 students.

Varkey has also set up the Varkey GEMS Foundation, which boasts former US president Bill Clinton as honorary chairman, and is a UNESCO Goodwill Ambassador. Having arrived in Dubai with his parents in 1959, Varkey took over the family business at 20-years-old.

Earlier this year, he helped launch the annual Global Education and Skills Forum in Dubai in partnership with the UAE Ministry of Education. Private equity firm The Abraaj Group bought 25 per cent of GEMS in 2007.

In an exclusive interview with Gulf Business, Varkey revealed he hopes to launch an initial public offering in the future. gulfbusiness.com 35

S P EC I A L R E P O R T

YUSUFFALI MA YEARS IN UAE: 40 SECTOR: RETAIL DESIGNATION: FOUNDER, LULU GROUP INTERNATIONAL PLACE OF ORIGIN: KERALA AGE: 57 THE RECIPIENT of numerous awards, including the prestigious Padma Shri, bestowed by the Indian President in 2008, the ambitious and philanthropic Yusuffali has established himself as one of the foremost NRI businessmen in the UAE. His LuLu Group International (earlier called EMKE Group), currently employs over 30,000 people from 29 different nations and operates over 100 Lulu retail outlets across most of the Middle East and parts of Asia and Africa.

Started by Yusuffali in Abu Dhabi in the early 1990s, the group now reports an annual turnover of $5.1 billion globally.

In recognition of his contribution to the emirate, he became the first expatriate to get elected to the board of the Abu Dhabi Chamber of Commerce & Industry (ADCCI) in 2005.

Along with his strong business acumen, Yusuffali, with a personal wealth of $1.5 billion, is also credited with being a generous donor, and has worked extensively to help Indians in the UAE.

TONY JASHANMAL YEARS IN THE UAE: 57 DESIGNATION: EXECUTIVE DIRECTOR, JASHANMAL GROUP SECTOR: RETAIL HAVING STARTED from humble beginnings in Iraq in 1919, the Jashanmal Group expanded quickly across the Middle East during the middle of the twentieth century.

Store openings in Bahrain in 1935, Dubai in 1956 and Abu Dhabi in 1964, served as a solid bedrock for what is today one of the most popular and recognised business names in the region.

Employing over 2,000 staff across 100 stores, the Jashanmal Group owns the franchise rights to some of the world’s most famous fashion brands including Calvin Klein, Burberry and LK Bennett.

As executive director, Tony Jashanmal oversees retail and wholesale trading.

The company has also branched into the media, publishing magazines, newspapers and books through its stores.

36 the India review / August 2013

DR. BAVAGUTHU RAGHURAM SHETTY YEARS IN THE UAE: 40 AGE: 71 PLACE OF ORIGIN: KARNATAKA DESIGNATION: FOUNDER, NMC GROUP SECTOR: DIVERSIFIED DR. B R Shetty is a man of many hats – he is the MD and CEO of Abu Dhabi-based healthcare provider NMC Group, and the boss of money transfer firm UAE Exchange, which he co-founded in 1980.

Dr. Shetty arrived on the UAE’s shores soon after the country was born, and has risen to the top along with the nation.

The New Medical Centre (NMC), which he established in 1975 as a one-room clinic in Abu Dhabi, has now grown to become the UAE’s largest private sector healthcare provider.

Last year, NMC Health even became the first Abu Dhabibased company to list on the London Stock Exchange, and it currently runs five specialty hospitals.

Dr. Shetty, who owns two floors of the world’s tallest building, Burj Khalifa, was also one of the first expatriates to receive the Order of Abu Dhabi, a government honour for his contribution to the community.

LT PAGARANI YEARS IN THE UAE: 39 DESIGNATION: CHAIRMAN, CHOITHRAMS SECTOR: SUPERMARKETS FOUNDED IN Africa by Thakurdas Choithram Pagarani, the supermarket empire was spread across the region by his three sons, including LT Pagarani, who leads the business today.

Having first established a store in the UAE in 1974, the popular and distinctive supermarket chain now has 27 locations across the emirates, with further expansion expected in the near future.

LT Pagarani has been largely credited with the group’s success and rapid expansion in recent years, as the brand now stretches across all corners of the GCC. As well as taking a leading role in educating its customers on reducing waste and improving their carbon footprint, the group has not forgotten its roots, funding humanitarian initiatives in Africa and India.

gulfbusiness.com 37

S P EC I A L R E P O R T

MICKY JAGTIANI YEARS IN THE UAE: 25 AGE: 61 PLACE OF ORIGIN: MUMBAI DESIGNATION: FOUNDER AND CHAIRMAN, LANDMARK GROUP SECTOR: RETAIL ANOTHER CLASSIC example of a self-made billionaire who went from driving taxis in London to currently having a personal wealth of around $4 billion, according to Forbes, Micky Jagtiani is the man behind the retail behemoth, Dubai-based Landmark Group.

Having lost his family in his early twenties, Jagtiani single-handedly started the company in Bahrain in 1973 with one store and $6,000. Today, the Landmark Group spans across fashion, children’s products, home furnishing, electronics and cosmetics and employs over 40,000 people across 19 countries. Along with homegrown brands such as Babyshop and Home Centre, the company operates over 30 international franchise brands including New Look, Steve Madden and Kurt Geiger.

But even as the company continues its aggressive expansion plan, Jagtiani has remained vocal that his greatest passion lies in social work, and he works closely with LIFE (Landmark International Foundation of Empowerment) to help underprivileged children in India.

YOGESH MEHTA YEARS IN THE UAE: 23 AGE: 51 DESIGNATION: OWNER AND MANAGING DIRECTOR, PETROCHEM MIDDLE EAST SECTOR: ENERGY YOGESH MEHTA’S story may not quite be a rags to riches tale, but it is every bit as inspiring. Arriving in Dubai aged 29 with no job and no money – his first business attempt collapsed – Mehta was determined to be an entrepreneur and lead a company, rather than work for someone else.

Setting up Petrochem, in cooperation with Petrochem UK, Mehta has taken a three-man fledging enterprise and turned it into an international company with a $1 billion annual turnover.

With a state-of-the-art chemicals distribution terminal in Jebel Ali Port and offices across Asia, Middle East and Europe, Mehta has achieved his dream of running a global business.

Such is his profile, Mehta became a judge on reality TV show The Entrepreneur – a surefire recognition of professional success.

38 the India review / August 2013

S P EC I A L R E P O R T

VIDYA CHHABRIA PLACE OF ORIGIN: MUMBAI DESIGNATION: CHAIRPERSON, JUMBO GROUP SECTOR: RETAIL VIDYA CHHABRIA has spearheaded Dubai-based Jumbo Group's global operations since 2002, following sudden death of her husband, Manu Chhabria.

Starting out as a radio-parts trader in Mumbai, the late Manohar ‘Manu’ Chhabria was nicknamed the ‘takeover tycoon’ for his aggressive acquisition of brands such as Shaw Wallace, Dunlop India, Hindustan Dorr-Oliver, Mather and Platt.

He established Jumbo Electronics as a single store in Dubai in 1974, with a capital base of Dhs50,000. Its success story began when he signed a deal with Sony Corporation in 1975 and became its distributor in the Gulf. Jumbo Electronics has since become Sony’s biggest distributor worldwide.

Now a $2 billion conglomerate, Jumbo has operations in 50 countries across the world, and along with retail, also offers enterprise products catering to sectors such as hospitality, education, healthcare and finance.

Jumbo Electronics, with over 30 retail stores, also offers products from global international brands including HP, Blackberry, Nokia, Dell, and Samsung at its outlets.

K KUMAR YEARS IN THE UAE: 41 PLACE OF ORIGIN: CHENNAI DESIGNATION: CHAIRMAN, INDIAN COMMUNITY WELFARE COMMITTEE SECTOR: COMMUNITY THE INCIDENT that sealed K Kumar’s role as ambassador and do-gooder for all Indians in the UAE is a famous one. In 1998, Kumar and some associates raised Dhs75,000 in blood money to help free a young Indian from jail who had found himself caught up in an accidental death.

The selfless deed inspired Kumar to start a group that would look after the welfare of poor Indian workers in the UAE. After approaching the Indian embassy, Kumar formed the Indian Community Welfare Committee (ICWC) – a group of volunteers who provide legal advice, financial help and guidance on a range of matters to labourers, hospital patients and workers caught up on the wrong side of the law. In extreme cases they provide shelter, food and a chance for rehabilitation. Kumar has been commended for his altruistic endeavours, and has received numerous awards and certificates from both the UAE and India.

40 the India review / August 2013

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T r a d e : I n d I a– Ua e

stronger together The UAE and India have strong ties built up over generations of trading and commerce.

With trade reaching $75 billion, how will recent developments pave the way to the future?

Countries in the Middle East have had strong political and economic relationships with India for centuries. This included people-to-people contacts, as well as barter of textiles and spices from India for dates and pearls in the region. Sharjah and Dubai were the main hubs for trade with the Western coast of India and, in particular, the Malabar Coast.

42 the India review / August 2013

Dubai has traditionally served as an entrepôt for trade between the Middle East and the Indian subcontinent, with trade largely dominated by merchants in the gold and textile sectors.

“The discovery of oil brought with it an influx of workers from India in the 1960s. Indian migration to the UAE increased significantly in the 1970s and 1980s, with the expansion of the oil industry and the growth of free trade in Dubai,” says Dr. Ashraf Mahate, head of export market intelligence at Dubai Exports.

But the nature of this relationship has evolved, changing more in the last 10 years than in the past hundred.

“Until the beginning of the 21st century, India was largely credited only for being a source of cheap and abundant labour. In the last ten years or so, the profile of the average Indian in the UAE stands changed. The increasing number of entrepreneurs, investors and skilled professionals is the new face of the relationship today,” says Sanjay Verma, the consul general of India.

Historically, pearls, semi-precious stones and precious metals comprised the majority of trade and that is still the case today. Currently, major Indian exports include gems and jewellery, petroleum products, machinery and instruments; while major imports include gold, precious stones & gems, machinery and electronics. High gold prices have benefitted Dubai as the Indian market is a major source for exporters.

With such a strong and historical influence it is no surprise that India is the largest trading partner with the UAE. Annual bilateral trade between the UAE and India, including oil, now stands close to $75 billion.

In 2012, India was Dubai’s largest export destination accounting for 20 per cent with a value of Dhs32 billion.

It was also the largest re-export destination at 15 per cent with a value of Dhs51 billion, and the third largest import destination with 9.3 per cent at Dhs68 billion.

“Today, India is Dubai’s number one trade partner, with goods worth almost Dhs206 billion traded in 2011.

During the first quarter of 2013, DubaiIndia total trade was valued at almost Dhs40 billion,” said Hamad Buamim, director general of the Dubai Chamber of Commerce.

For example, as of 2011, Dubai Chamber had around 21,000 Indian companies registered with them. The Sharjah Chamber had 9600, Ajman Chamber around 2600, Ras Al Khaimah over 1700, and the Jebel Ali Free Zone around 700.

AGREEMENTS GALORE All UAE free trade negotiations are carried out within the framework of the GCC. A Framework Agreement on Economic Cooperation between India and the GCC was signed on 25th August, 2004. In this agreement both parties considered ways and means for extending and liberalising trade relations and initiating FTA feasibility.

The first round of trade negotiations were held in Riyadh in March 2006.

During this round, GCC agreed to

Until the beginning of the 21st century, India was largely credited only for being a source of cheap and abundant labour. In the last ten years or so, the profile of the average Indian in the UAE stands changed. The increasing number of entrepreneurs, investors and skilled professionals is the new face of the relationship today.

include services, goods, as well as investment and general economic cooperation in the GCC-India FTA. The second round of negotiations were held in Riyadh in September 2008. The Proposed Tariff Liberalisation Schedule was discussed during this round.

There have been further discussions between the GCC and India regarding free trade.

“A Double Taxation Avoidance Agreement was signed between the two countries in 1992. A high level task force on investments was set up to increase investments from UAE to India. The first meeting of the task force was held in February 2013. A Bilateral Investment Protection Agreement is also on the anvil,” says Verma.

COMMUNITY DEVELOPMENT Dubai has traditionally been a popular base for many enterprising Indian

Hamad Buamim, director general, Dubai Chamber of Commerce. gulfbusiness.com 43

T r a d e : I n d I a– Ua e

Sanjay Verma, Consul General of India.

Important BIlateral treatIes In the last 40 Years IndIa has sIgned the followIng treatIes wIth the Uae: • MoU on Manpower Sourcing signed in December 2006 • Defence Cooperation Agreement: Signed in June 2003 in New Delhi, for cooperation between the two countries in matters related to security and defence and for annual meetings of 'Strategic Dialogue'.

• Channel Carriage Agreement: Signed on 24.09.2000 at Abu Dhabi between the Directorate General of Doordarshan Broadcasting Corporation of India [Prasar Bharati] and the Emirates Cable TV and Multimedia LLC [E-Vision] provides for the down-linking and distribution of DD World signals in the UAE through E-Vision's cable network.

• Information Cooperation Agreement: Signed in New Delhi in April 2000 between the Emirates News Agency (WAM) and the Press Trust of India (PTI), provides for cooperation and exchange of news.

• Agreement on Juridical and Judicial Cooperation in civil and commercial matters: Signed in New Delhi in October, 1999 and provides for Juridical and Judicial Cooperation in Civil and Commercial Matters, came into force on 29.5.2000.

• Extradition Treaty, Mutual Legal Assistance Treaty in Criminal Matters & Mutual Legal Assistance Treaty in Civil Matters: Signed in New Delhi in October, 1999 provide for Extradition and Mutual Legal Assistance in Civil and Criminal Matters and came into force in May 2000.

• Agreement to Combat Trafficking in Narcotic Drugs and Psychotropic Substances: Signed in New Delhi on January 6, 1994, for exchange of information through nodal agencies on smugglers, suspects, financiers, organisers and those involved in trafficking of narcotic drugs and psychotropic substances.

• Civil Aviation Agreement: Signed in March 1989, for establishing air services between and beyond India and the UAE • Cultural Agreement: Signed on January 3, 1975 for Cultural Exchange Programmes. The last Cultural Exchange Programme under this agreement covered the years 1994 to 1996. *Data according to the Indian Embassy, UAE

44 the India review / August 2013

businessmen and traders. The Indian community is the largest in the UAE, in terms of population as well as business.

In turn, Indians have contributed significantly to the economic fabric and business community of Dubai.

The Indian Embassy based in Abu Dhabi estimates that the Indian community in the UAE numbers 1.75 million people, constituting around 30 per cent of the total population.

Rough estimates suggest that 50 per cent of these are skilled and semiskilled workers, and the other half are entrepreneurs, professionals, and service industry support staff.

“The first private hospitals and schools in the country were owned and managed by Indian businessmen. They have also played a role in the arts and culture through their patronage and financial support,” says Dr. Mahate.

The first private hospitals and schools in the country were owned and managed

by Indian businessmen.

They have also played a role in the arts and culture through their patronage and financial support.

For instance, between 2009 and 2012 Dubai Chamber’s Indian membership rose 41 per cent, to 24,566 in 2012, after rising around 12 per cent each year.

“In terms of Dubai Chamber, our Indian membership is one of our largest nationalities. As of May 31, 2013, we have a total of 25,972 Indian partnerships and full-ownership companies among our members,” said Buamim.

“The Indian community has been active in all sectors of the business community, working both to create the physical landscape of the country, as

T r a d e : I n d I a– Ua e

well as behind the scenes. This will be the case for many years to come,” he adds.

Riding on the fact that India-UAE trade is now touching over $1.3 billion a week, with Indians among the biggest investors in the UAE, a new crop of Indian entrepreneurs are adding to the competitive edge that the UAE has begun to enjoy in the region and the world at large.

“Indian entrepreneurs can justifiably take credit for world class business models operating out of the UAE, the areas of private school education, health sector, the retail space and trade. The other areas of excellence brought in by Indian professionals is in

INDIA’S IMPORTS FROM UNITED ARAB EMIRATES 37.8

billion dollars (US)

35.5 30.9

VALUE IN 2010

VALUE IN 2011

VALUE IN 2012

banking, education and accountancy,” says Verma.

WAY FORWARD The UAE and India have a multidimensional partnership. While trade and oil continue to lead the economic ties between the two countries there exists emerging synergy in the new investment areas like infrastructure, ICT, and food processing.

With the liberalisation of key sectors in India like telecommunications, housing and real estate, construction, petroleum and natural gas, there are increasing opportunities for UAE investment into India.

“Now India and the UAE have a huge opportunity to expand on their economic synergies to build even stronger growth momentum. The opportunities extend beyond the buyer seller relationship to a partnership level, involving joint ventures and transfer of technology arrangements, which can benefit both economies immensely,” says Buamim.

This is despite India’s current challenges posed by its fiscal and current account deficit. “We expect the RBI to continue with its calibrated easing of monetary policy and reduce repo rates

Dr. Ashraf Mahate, head of export market intelligence at Dubai Exports.

by 50 bps over the next six months,” says Tim Fox, chief economist and head of research at Emirates NBD. The recent reforms in India to boost FDI into the retail and aviation sector also offer huge potential for the UAE. Abu-Dhabi based Etihad Airways is already in the process of acquiring stakes in Jet Airways. Additionally, UAEbased retail giants like the EMKE Group and Landmark Group are expanding their presence in India.

Dubai (pictured) exported Dhs 32 billion worth of goods to India in 2012. gulfbusiness.com 45

PROFILE

School’S In In a rare interview, Sunny Varkey, the founder of the world’s largest private schools company takes on his critics, and reveals his ambition to save the world from bad education.

46 the India review / August 2013

In a flat-roofed office just off Dubai’s central motorway, lies a nerve centre for educating 130,000 children around the world.

On the top floor of this otherwise non-descript building resides the regal, mahogany-panelled office of Sunny Varkey, the founder of GEMS Education, the world’s largest private schools company.

An enigma to many, rumour has it that it is easier to get in contact with former US president and GEM’s not-for-profit ambassador Bill Clinton, than it is to get hold of the low-profile Varkey himself.

And judging by the office walls, adorned with photos of Jordan’s Queen Rania, former British PM Tony Blair, and Dubai’s Ruler HH Sheikh Mohammed, Varkey’s arguably got more important friends.

Smoothing down his impeccable double-breasted suit, the chairman seats himself for the photo shoot. “I have a thing for clothes,” he says.

Varkey leans back, with an inscrutable

smile, and it’s not difficult to see why this multi-millionaire Indian entrepreneur has swept the global corridors of power with seeming ease. He has the natural charm and easy statesmanship of a leader.

“I’m not a saint, but I believe you’ve got to pray, be focused, and work hard for your success,” the chairman says. gloBal ventures Varkey’s teacher parents arrived in Dubai from Kerala, India, in 1959 and, 10 years later, they bought Our Own English High School, the beginnings of a pedagogy mega-empire. In his twenties Varkey bore a heavy weight on his shoulders as he took over the family business.

Today, the chairman runs close to 100 schools across 19 countries, from the UAE, to the US, Azerbaijan, Uganda and the UK. These days, Varkey’s mobile phone rings constantly. Often, it will be an emerging market country inviting GEMS to set up shop. The education firm has had 20 business-related enquiries from 19 countries in the last three months.

“We are in a profession where there are over 130 million children who are deprived of quality education and the need for institutions like ours is immense,” says Varkey, slowly, deliberately.

“That’s both on a commercial and noncommercial basis. It’s very important that we are innovative and aggressive as a global brand.”

As well as being the world’s largest provider of across-the-spectrum Kindergarten to grade 12 (K – 12) education, Varkey has a bigger mission, and that’s to save the world from bad education or no education.

“Education is a problem everywhere, it’s a global phenomenon. Any government that cares for its citizens must make education a priority,” Varkey says.

In 2010, the chairman decided to take this problem into his own hands with the launch of the Varkey GEMS Foundation, a not-for-profit initiative chaired by Bill Clinton. The initiative has already raised $40 million to date for underprivileged children.

“For every single student we enrol, GEMS endeavours to help 100 poor children. We use our base of thousands of teachers and students to help us do this,” he says.

This year Varkey helped launched the annual Global Education and Skills Forum in Dubai, in partnership with UNESCO and the UAE Ministry of Education. With typical ambition, Varkey says he wants the conference to be the ‘Davos’ of education.

These are all, unquestionably, noble and vital initiatives that are changing and improving lives across the world.

But that’s not to say that Varkey hasn’t come under regular fire for being viewed

If Bill Gates was not a successful business person, he would not have been able to do the charity that he is doing today. In our own case, even more so because we don’t collect donations, we take loans and borrow from the banks. We take money from there and we reinvest back into the CSR as profit-seeking, particularly in light of regular maximum fee hikes at GEMS’ schools and the threatened closure of schools that aren’t making enough profit, even as he launches around 13 new schools this year.

He says, simply: “If we are not sustainable as a business, we can’t build more schools to help children.

“If Bill Gates was not a successful business person, he would not have been able to do the charity that he is doing today. In our own case, even more so because we don’t collect donations, we take loans and borrow from the banks.

We take money from there and we

reinvest back into the CSR.” It’s clear that money is unlikely to be an issue for the burgeoning education firm going forward. GEMS is seeking to raise up to $1 billion to expand before considering an initial public offering, Bloomberg has reported.

Building Bridges Education, like health care, is a counter cyclical sector, performing well even in a recession. With the world’s population currently growing at a rate of 1.14 per cent each year, the school-aged population alone grew at 22 per cent between 1991 and 2011 according to the UN. Today, Varkey finds himself at the fulcrum of a very fine global industry.

“It’s not like any other sector, you have to have a passion for what you’re doing because it’s the world’s most important industry,” he says.

He brings me back to the Global Education and Skills Forum. “It could change things,” he says.

“At Davos, no one talks about education!” he adds, in disbelief. “It makes a difference to get everyone in one room talking.”

“They want to make the UAE a knowledge hub, a knowledge economy, and for that to happen the government has to play a very important role in laying down the framework of how schools should be run.”

Make no mistake, Varkey is deeply intertwined with the UAE’s powerbrokers, and the fabric of the nation.

GEMS Education is already training up many of Abu Dhabi’s local teachers and Varkey himself acts as an education advisor at the highest government level.

Not many businessmen can say that Dubai’s Ruler HH Sheikh Mohammed personally dropped in on the occasion of their fiftieth birthday. It is fine testament to the appreciation that lingers in high places for Varkey’s persistent dedication to the betterment of the UAE and the rest of the world.

This interview is an abridged version of an interview that appeared in Gulf Business in July 2013. For the full version of the interview, visit gulfbusiness.com gulfbusiness.com 47

CORPORATE SERVICES

RETAIL BANKING IN INDIA (NRI SERVICES)

Branch Office: Dubai International Financial Centre Level 02, Unit No. 206, ETA Star - Liberty House, DIFC, P.O. Box 506844, Dubai, UAE Tel: +971 4 325 7727, Fax: +971 4 325 7256 Email: pnbdifc@pnbdubai.com

Representative Office: M-04, Al Sharaifi Building (Opposite Post Office), Al Karama, Dubai, UAE Tel: +9714 397 8024, Fax: +971 4 397 8025, Mob: +971 50 529 6017 Email: pnbdubai@pnb.co.in , pnbdubai@gmail.com

D OW N T I M E

REVIEWED:

THE OBEROI, DUBAI Dubai has welcomed a flood of international luxury hotel chains in the last decade, but The Oberoi Group is the first high-end Indian hotelier to hit the UAE’s shores with its new Business Bay offering in June.

FAMOUS FOR INTRODUCING five-star hospitality to India in the 1960s, The Oberoi has since become known for its unique blend of high-glam luxury and authentic Indian hospitality.

The hotel group founded The Oberoi Centre of Learning and Development, which is open to all hospitality trainees across India – Oberoi or not – so we had high hopes for Oberoi’s new hotel. After all, Dubai’s customer service can be hit-and-miss at the best of times.

We were not disappointed. The first thing we saw upon walking into the Oberoi’s sweeping entrance was a line of smartly dressed and exquisitely mannered staff, exuding just the right balance of efficiency and courtesy. Each of the hotel’s 252 rooms comes replete with its own personal butler, with the aim of answering your every wish.

While it may seem that every hotel in Dubai has some kind of service gimmick, the Oberoi stands apart with its offering. Our butler was the real deal, even to the

gulfbusiness.com 49

D OW N T I M E

point of being able to wirelessly fix up our iPod with the room’s sound system or, even more impressively, guiding our guests to the hotel while speaking to their taxi driver. This is no mean feat, considering that the Oberoi hotel sits

RAI BAHADUR M.S. OBEROI: A TOURISM TYCOON Mr. Oberoi became the first Indian hotelier to enter into an agreement with an internationally renowned hotel chain to open the first modern, five-star hotel in the country. The Oberoi Inter Continental in New Delhi opened in 1965. The I-Con, as it became popularly known, was India’s first luxury hotel.

Another landmark was the establishment in 1966 of the Oberoi School of Hotel Management, recognised by the International Hotel Association in Paris. Considered India’s premier institute, the school is now known as The Oberoi Centre of Learning and Development and continues to provide high quality professional training in hospitality management.

Other firsts were the decision to employ women in his hotels and to establish a chain of ancillary industries producing and supplying items like consumables and stationery to ensure high quality products.

Mr. Oberoi converted old and dilapidated palaces, historical monuments and buildings into hotels such as The Oberoi Grand in Calcutta, the historic Mena House Oberoi in Cairo and The Windsor in Australia. It was in the face of severe opposition from the State Government of Victoria that Mr. Oberoi was awarded the lease of The Windsor, a heritage building in Melbourne, and gave it a transformational facelift.

in the centre of the poorly signposted construction maze that is Business Bay. While it does feel as if the Oberoi is currently languishing in a remote sandpit, the location will be a major asset for the hotel once the surrounding construction is completed. The hotel overlooks the Burj Khalifa, the world’s tallest building, and all rooms and suites have floor-to-ceiling windows that offer great views of the city’s skyline.

The hotel is a few minutes’ drive from downtown Dubai and the Dubai Mall.

In addition to the pampering services of a 24-hour butler, the hotel also offers

Stunning city views.

Inside the Dubai-Premier room.

50 the India review / August 2013

seamless in-room check-in and top-notch concierge services. Nothing is too much trouble. That same sentiment extents to the customer service in the hotel’s dining outlets – Umai, a contemporary Pan Asian restaurant, Nine7One, an all-day world dining restaurant, and Ananta, an Indian specialty restaurant.

Umai offers a stunning lunchtime buffet that can be complemented with a’la carte fare. We tasted modern twist variations on Indian, Thai and Arab cuisine, all personally recommended by the waiting staff dressed in royal blue traditional Indian dress.

The rooms themselves are the hallmark of luxury. The deluxe room we stayed in looked to be more the size of a suite, with its huge bed, bathroom and sofa set.

The room was dressed with personal touches, such as flowers, chocolates and commissioned artworks by famous artist Mrinmoy Barua, while the upholstery is bold coloured and high-quality. One of our favourite touches was the automated full black out blinds – a sure fire hit with business folk.

Another favourite for business people will be the 24-hour spa, offering roundthe-clock authentic Ayurveda therapy, just the ticket for frayed travellers. All treatments can be rounded off with a swim in the waiter-serviced pool, which offers soothing sounds and epic views of the Burj Khalifa.

The Oberoi, Business Bay Tel: +971 44441444. Web: Oberoihotels.com

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