India, US envision a new business climate

US President Barack Obama shakes hands with India’s Prime Minister Narendra Modi (L) at the conclusion of a CEO Roundtable and Forum at the India U.S. Business Summit in New Delhi

Visiting US president Barack Obama and American business leaders on Monday raised concern over a lax intellectual property rights (IPR) regime and unpredictable tax system in India, prompting Prime Minister Narendra Modi to offer an open business climate and stable tax polices.

Obama also announced $4 billion worth of investment in India, including $1 billion for financing exports of made-in-US products. Both Obama and Modi pitched for the ‘make-in’ programmes of their respective countries.

At the India-US CEO Forum, the US president said exporters of his country were “very concerned” about issues like IPR as the US was increasingly becoming a knowledge-based economy.

He said the “absence of effective IP protection” in India was affecting business.

“We tend to operate at the higher ends of the global value chain,” he said at the meeting, which included Honeywell CEO Dave Cote, Indira Nooyi of Pepsico, Harold McGraw, chairman of McGraw Hill Financial, Ajay Banga, CEO of Mastercard, and Bob Iger, CEO of Walt Disney Company.

The Indian side included Tata Sons chairman Cyrus Mistry, who along with Cote was co-chair of the CEOs’ forum. Others who attended included HDFC chairman Deepak Parekh, RIL chairman Mukesh Ambani, ADA group chairman Anil Ambani, Adani group chairman Gautam Adani, ONGC CMD Dinesh K Saraf, SBI chairman Arundhati Bhattacharya, Jubilant group head Hari S Bhartia, BHEL head B Prasada Rao, Biocon CMD Kiran Mazumdar-Shaw and Sunil Mittal of Bharti Enterprises.

Mazumdar-Shaw later said US companies complained about counterfeiting and piracy in India, which she hoped would be resolved through a bilateral mechanism.

Parekh said Iger raised the issue of film piracy. Even Modi acknowledged that there was piracy in IT software and films. Finance minister Arun Jaitley, also incharge of information and broadcasting, said the issue would be looked into.

After the US Trade Representative (USTR) last year had said in its much-awaited annual special 301 report that India’s IPR laws and enforcement would be closely monitored by initiating an out-of-cycle review, the two countries tried to narrow down their differences through the trade policy forum. The department of industrial policy and promotion has put a draft on IPR policy in the public domain to revise the policy in general.

Indian companies expressed their worries over visa restrictions and restrictions on gas exports from the US to India.

Obama sought “consistency” and “simplicity” in the regulatory and tax environment in India to significantly increase trade and business between the world’s two largest democracies.

Seeking more US investment into India, Modi said at the India-US Business Summit, organised just after the CEOs’ meet by the US India Business Council, the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (Ficci), that his government had removed some of the “excesses of the past” and promised the visiting US dignitaries “we will now soon address the remaining uncertainties”.

The Modi government has repeatedly said retrospective amendment of the Income Tax Act had scared investors away and declared in this financial year’s Budget that all fresh cases arising out of the amendment would be scrutinised by a high-level committee of the Central Board of Direct Taxes before any action was initiated.

Pledging $4 billion in lending by US banks, Obama said his country was ready to help India grow by working with it in development of infrastructure such as railways, ports, roads and clean energy power plants. The $4-billion programme includes $1 billion for financing exports from the US, the same amount for small and medium industries and $2 billion for renewable energy projects.

At the meeting with CEOs, Modi said he would personally take charge of implementation of big projects and monitor them.

“You will find an environment that is not only open, but also welcoming. We will guide you and walk with you in projects. You will find a climate that encourages investment and rewards enterprise. It will nurture innovation and protect your intellectual property,” he said.

“There are still barriers,” said Obama, adding there was a need to streamline regulations, cut the red tape and jump through bureaucracy.

Appreciating Modi’s reform initiatives to bring investments, he said, “We need to incentivise trade rather than stifle. We need to be transparent, consistent and protective of intellectual property rights.”

“We can work together to develop new technologies to help India leap forward and partner in next-generation clean energy projects and upgrade railways, roads, ports, airports and broadband connectivity to provide the best connectivity to the world,” he said.

He also referred to the three smart cities –Allahabad, Ajmer and Visakhapatnam — that the US would help in upgrading infrastructure.

Reviewing his visit, Obama said the two countries had “a number of concrete” steps for more investments and referred to the breakthrough in civil nuclear agreement, defence cooperation, renewable energy and bilateral investment protection treaty (Bipa).

“When leaders make agreements, our agencies and bureaucracy will follow through,” he said. “We can grow and we can prosper together.”

Obama referred to the current bilateral trade of $100 billion and compared it to the US-China trade of $560 billion, saying, “It can give you an idea of what potential India can unleash.”

India only accounts for two per cent of US imports and 1 per cent of its exports, Obama said, expressing wonder that 1.2 billion people consumed such a small proportion of US exports. Notably, merchandise trade between India and the US was much less at $61.6 billion in 2013-14.

Listing the achievements of his government, Modi said the business sentiment in India was one of the strongest among major Asian markets and consumer confidence had turned positive after three years.

“Growth in eight core sectors of economy has increased sharply. Inflation is at a five-year low; 110 million new bank accounts have been opened in the last four months. Investments from the US have jumped by 50 per cent in the first six months of my government,” he said.

Obama said US companies could help India digitise the accounts opened under the Prime Minister’s financial inclusion programme.

Referring to the 50 per cent jump in investments from the US in India, Modi said, “I know that some of the pledges made in September in Washington have begun to flow in. Yes, I do keep track of these things.” The audience cheered his remarks.

India-Australia should build relationship beyond business: Modi to Robb

Looking forward to extending India- Australia ties beyond the ambit of business, Australian minister for Trade and Investment Andrew Robb said on Tuesday that New Delhi and Canberra were both eager and willing to take their relations to the next level.

Following a meeting with Prime Minister Narendra Modi, Robb said, "I was honoured to meet with Prime Minister Modi. We talked about how Australia and India can take our relationship, which has always been strong, to another level because of the ambitions he has, and because his agenda that excites the world." Robb also said Modi wanted the relationship to be much broader than just business, extending into cultural, the arts, theatre, music and sports. "Australia is a great sporting nation and Modi said one of the things he was concerned about was that many Indians did not have the opportunity to play the sports that are available," he added.

Robb also participating in the signing of a memorandum of understanding between Infrastructure Leasing and Financial Services Limited (IL-FS) and Sports Education and Development Australia (SEDA) for skill development and infrastructure in sports.

Speaking of the great sporting traditions of Australia, Robb said that his nation's athletes have benefitted from a strong infrastructure in place, adding that Prime Minister Modi wants a similar structure to come up in India. "India plays cricket very well and that has been a sport of great competition, but the Prime Minister and I spoke of sport more generally and he said that he would love to see many of the skills that we have had the benefit of in Australia made available to young people in particular across India," he said.

"Sport gives hope to one and all; it gives them fitness. It gives them teamwork and teaches them about losing. India is at the cusp of great things, and not only in business but in the social sciences, in education, health and so on, but also in sports and culture. This is a country with such a rich history and I do feel that if you look back over the past 20 centuries, India was part of the centre of gravity of the world for 18 of those. And now, I think, India and China are returning to that stature," he added.

Beautiful time for India and China to do business, says Alibaba's Jack Ma

[caption id="attachment_289" align="alignnone" width="208"] Jack Ma, the founder & executive chairman of Chinese giant Alibaba[/caption]

Jack Ma, the 50-year-old founder & executive chairman of Chinese giant Alibaba, on Wednesday promised higher investments in India, without specifying the quantum or timeline. Addressing an India-China summit, organised by business chamber Ficci here, Ma said he was inspired by Prime Minister Narendra Modi and this was a beautiful time for India and China to do business.

Ma also said Indian sellers were the largest suppliers on Alibaba’s e-commerce platform after Chinese ones. “We have been doing B2B (business-to-business) for the past 15 years and, surprisingly, the second-largest suppliers to us are Indian sellers.” Indian suppliers were so smart they had caught the right opportunity, he said.

Ma’s visit, of less than 24 hours as part of a 100-member Chinese delegation, is the second India tour this year by a global e-commerce chief executive — the first being Amazon CEO Jeff Bezos’ in September. Among non-e-commerce global internet giants, Facebook founder & CEO Mark Zuckerberg had come to India last month.

Unlike both Bezos and Zuckerberg, who had multiple engagements in India, including meetings with the prime minister, Ma’s visit to India was a low-key one. The PM is currently in Nepal to attend a Saarc (South Asian Association for Regional Cooperation) summit.

Ma’s Alibaba has been in the news for its recent blockbuster $25-billion initial public offering on the New York Stock Exchange.

The Alibaba founder did not make specific announcements on investments in India, but the India-China summit on Wednesday resulted in signing of 12 memoranda of understanding, worth $2.4 billion, among companies from the two countries. Alibaba’s American rival Amazon had recently committed itself to investing $2 billion in India.

While Amazon entered the Indian market last year under a marketplace model, Alibaba is yet to start e-commerce operations in the country; at present, it only has a sourcing business here.

Speaking at the summit, Ma said Alibaba’s focus area in the coming years would be globalising and helping small businesses grow. “I was inspired and moved by PM Modi and this is a beautiful time for India and China to do business... Alibaba plans to further enhance technology for Indian sellers,” Ma said, adding he was keen to make more investments here.

A former English teacher, Ma spoke about how 400,000 Chinese were buying from India. He had no idea so many Chinese loved chocolates and tea from this country.

Alibaba has 8.9 million active sellers on its marketplace platform. By comparison, Flipkart, Snapdeal and Amazon have a little over 50,000 sellers each in India. Flipkart is aiming to get 100,000 sellers over the next 18 to 24 months.

In what could be an indication of its scale, Alibaba Group websites accounted for 60 per cent of the parcels delivered in China by March 2013 and 80 per cent of that country’s online sales by September 2014.

Ma’s visit to India generated all-round curiosity, including speculation on potential deals in the e-commerce market. There also was a buzz that Ma might meet Snapdeal co-founder & CEO Kunal Bahl, but the company said no such meeting was scheduled. In fact, Bahl has often referred to Snapdeal, the four-year-old company that became a marketplace player soon after launch, as the “Indian Alibaba”. There are existing synergies, too.

Recently, Snapdeal got a $627-million funding from Softbank, a Japanese telecom and internet corporation that also holds the biggest stake in Alibaba. Masayoshi Son, 57-year-old founder & CEO of SoftBank, had visited the Snapdeal office last month and addressed the company’s employees. Also, Snapdeal is one of the three e-commerce companies where Ratan Tata has put in money.

Indian e-commerce is still only about one per cent of the size of Chinese e-commerce market. But the sector here has become a favourite for investors.

Ma said internet could help transform lives in the current era. “Internet is a young business for young people, and India has a lot of young people. I was a teacher earlier and internet changed my life,” the Alibaba founder said.

Jack Ma in India:

* Indian sellers are the second largest on Alibaba’s B2B platform.

* Alibaba chairman Jack Ma said he is inspired by PM Modi and keen to invest more in India.

* About 400,000 Chinese people are buying from India; Alibaba has 8.9 million active sellers on its platform

* Flipkart, Snapdeal, Amazon and Ebay have in excess of 50,000 sellers each.

* Alibaba wants to enhance its technology for better service to Indian sellers.

* Ma vouched for mutual engagement between India & China as this is beautiful time to do business in India.

* Alibaba Group websites accounted for over 60 per cent of the parcels delivered in China.

* Chinese have been buying chocolates, tea among others from Indian sellers, claimed Ma.

* Recently, it created history of sorts when it recorded single day sales of more than $ 9 billion

 

Make in India

During 2004-05 and 2011-12, when India’s GDP rose annually by 8.3 per cent on an average, its manufacturing sector grew at an even higher rate of 9.25 per cent. The next two years saw average GDP growth slump to 4.6 per cent and manufacturing to a mere 0.2 per cent. It follows, therefore, that a genuine economic recovery is almost impossible without a turnaround in manufacturing. A manufacturing revival is also important from an employment perspective. The period between 2004-05 and 2011-12 witnessed, for the first time, a reduction in the country’s agricultural labour force by almost 40 million. This was enabled by an estimated 50 million-plus jobs being created outside of farms. Without a strong manufacturing sector — which has forward as well as backward linkages to construction, transport and related service industries — there just won’t be jobs for the 10 million-odd people entering our workforce every year. This would force a distress reverse migration back to farms and other low-paying rural jobs.

It is in this context that the thrust on manufacturing, underlined by the ‘Make in India’ campaign to be launched on Thursday, is welcome. Given that the manufacturing sector is still in the doldrums — the measly 2.3 per cent year-on-year growth registered in April-July is proof of this — Prime Minister Narendra Modi is aware of the dire need for getting our factories to roar back to life. The planned high-profile initiative at marketing India to both overseas and domestic corporates represents, if anything, a concerted effort to attract investments into manufacturing. India’s large and growing market — for everything from mobile phones and LED TVs to steel, chemicals and power equipment — no doubt makes it a compelling place for producing stuff that can be directly sold here. Modi has gone a step further by imploring investors to “sell anywhere (including abroad), but manufacture here”. Rising labour costs in China only reinforces such optimism about India emerging as the world’s next big factory.

It will, however, take more than simple slogans to convince a Samsung, Hitachi or Haier to make things in India that they are largely importing now. There are two broad sets of impediments here. The first is the lack of reliable power, roads, water and other infrastructure, which nullifies much of the inherent competitive advantages in manufacturing out of India. The second is the web of domestic regulations pertaining to labour, taxation, land acquisition, environment and other statutory clearances. Navigating through these is both time-consuming and costly, which also explains why India ranks 134th among 189 economies in the World Bank’s Ease of Doing Business ratings. Realising the Make in India dream would require the Modi government to address both the ‘hard’ infrastructure and ‘soft’ regulatory issues. The fact that many of these fall under the domain of the States poses an even harder challenge.

Business confidence up in Modi regime

[caption id="attachment_262" align="alignnone" width="300"] Prime Minister Narendra Modi. Business confidence is up after the Prime Minister Narendra Modi’s new government took office,[/caption]

Business confidence is up after the Prime Minister Narendra Modi’s new government took office, according to the Business Outlook Survey by the Confederation of Indian Industry (CII).

“Indicating a sharp improvement in investors’ sentiments amidst heightened expectations that the new government means business along with some improvement in basic macro indicators, the CII Business Confidence Index (CII-BCI) for the April-June 2014 quarter has moved up to 53.7 from 49.9 in the previous quarter,” the CII said on Sunday.

The number 50 is the dividing line on the survey’s index between positive and weak business confidence.

Mr Modi took oath May 26 at the head of a BJP-led government.

The survey, based on responses from over 150 industry members distributed over large, medium, small and micro firms, and almost equally between manufacturing and services, exuded confidence about prospects of economic growth based on decline in price-rise and deficits, export recovery, buoyant foreign capital inflows and strengthening of the rupee.

“We expect the index to gather momentum in the coming days, riding on improved sentiments and business confidence,” the CII director general Chandrajit Banerjee said.

According to the survey, while growth is expected to pick up from 4.7 per cent in 2013-14 to between 5.5 and 6 per cent in fiscal 2015, wholesale price inflation is expected to moderate to between 5.5 and 6 per cent in the current fiscal.

The CII cited economic uncertainty, low GDP growth and high inflation as its priority concerns, highlighting the need for stepping up efforts to improve business sentiments and removing supply bottlenecks.

“We are pleased to see that the new government is already working in this direction and it is only a matter of time when fundamentals of the economy will start falling in place,” Mr. Banerjee said.

Reflecting upward trends in demand, the survey found most businesses have started experiencing a rise in capacity utilisation, which augurs well for a turnaround of the economy.

As much as 56 per cent of respondents expected sales and new orders to increase in the first quarter of 2014-15, which is much higher than the previous quarter where only 35 per cent of respondents expected a rise in sales.