Archive for January, 2015

India’s FDI increased by 26% in 2014: UN

January 31, 2015

Notwithstanding the decline in global foreign direct investment inflows, India’s FDI increased by 26 per cent in 2014 to an estimated $35 billion with maximum growth in the services sector, a UN report said today.

China toppled the US in 2014 as the world’s largest recipient of FDI — a position that the US had been holding almost consistently since the 1980’s — though with a modest increase of 3 per cent, the latest ‘Global Investment Trade Monitor’ report released by United Nations Conference on Trade and Development said.

The propping up of FDI in China is mainly due to an increase in FDI in the service sector, even as FDI in manufacturing sector particularly from Japan and in industries sensitive to rising labour costs fell.

The manufacturing sector in terms of net cross border mergers and acquisitions (M&A) sales recorded a decrease for India from $4,604 million to $4,172 million, the report said.

FDI flows to India increased by 26 per cent in 2014 to an estimated 35 billion, with maximum growth in services sector especially in electricity, gas, water, waste management and information and communication, the report said.

This figure is one of the highest in recent years, though in 2008 FDI peaked in India with $47 billion investment followed by $35.6 billion in 2009.
James Zhan, Director of Investment and Enterprise, at UNCTAD said, “India is still a bright spot for FDI despite a global decline. It is at a significant historical high though not at the highest level of investment.”

“If policy trends encourage liberalisation then we can expect more FDI in China despite a slowdown in economic growth,” said Zhan referring to new draft for full foreign investment law that was proposed last week in Beijing.
The top five FDI hosts in 2014 were China ($128 billion), followed by Hong Kong ($111 billion), the US ($86 billion), Singapore ($81 billion) and Brazil ($62 billion).

“In 2014 global FDI inflows declined by 8 per cent to an estimated $1.26 trillion due to fragility of the global economy, policy uncertainty and geo-political risks,” the report said
The drop in FDI in the US has been primarily due to a fall in cross-border M&A sales, particularly due to the Verizon-Vodafone deal and stood at $10 billion in 2014 from $60 billion in 2013. It had exceeded $222 billion in 2008, the report said.
Source: The Economic Times


Defence Compendium 2015

January 29, 2015

We are pleased to inform you that ASSOCHAM has very successfully concluded its annual 7th International Conference on Aerospace, Defence & Homeland Security with the Theme ‘Defence: A Quest for Self Reliance’ on Monday, 5th January, 2015 at Hotel Taj Mahal, Mansingh Road, New Delhi.

We were privileged to receive the Hon’ble Raksha Mantri, Shri Manohar Parrikar, who released the DEFENCE COMPENDIUM-2015,prepared by the ASSOCHAM, in the presence of the Industry and Media on the occasion.

This DEFENCE COMPENDIUM-2015, will serve as a ready reference Handbook for the global Defence industry for promoting “Make in India” in the Defence Sector.

The Plenary Session was Inaugurated by Maj. Gen. (Retd.) Shri B. C. Khanduri, AVSM, Hon’ble Member of Parliament & Chairperson, Parliamentary Standing Committee on Defence in the presence of Shri G. Mohan Kumar, IAS, Secretary (Defence Production),Ministry of Defence, Government of India and H. E. Shri Daniel Carmon, Ambassador Extraordinary and Plenipotentiary, Embassy of Israel,

The DEFENCE COMPENDIUM 2015 is available at the ASSOCHAM Secretariat, 5, Sardar Patel Marg, Chanakyapuri, New Delhi- 110021, Ph: 011-46550555 for Rs. 4,000/- (Rupees Four Thousand Only).


Indian processed food industry 5th in terms of export, expected growth

January 29, 2015

The processed food industry is one of the largest in India. It is ranked fifth in terms of export, expected growth, production and consumption. As a matter of fact, increasing incomes are  accompanied by changes to our food habits.

Fuelled by large disposable incomes, a marked change is seen in the food consumption patterns. A significant part of this consumptional change is enhanced by the processed food market, which accounts for at least 30 per cent of the food market.

Industry sources claimed that the food processing industry would attract investments to the tune of $33 billion spread over ten years and get employment for a massive group of the currently employable group.

The government, on its part, has formulated and implemented several plans and schemes to provide financial assistance, initially to set up food processing units and later to modernise as well. There is excellent support with regard to infrastructure, research and human resource development, in addition to other promotional aspects, to encourage the food processing industry.

The processed food industry can be broadly classified as:

  • Grain processing;
  • Fruit, vegetable and dairy processing;
  • Fisheries;
  • Meat and poultry processing, and
  • Packaged food

Grain processing
It refers to the processing of grains and grain flours that have been significantly modified from their natural composition. The modification process generally involves the mechanical removal of bran and germ, either through grinding or selective sifting.

However, in case of some grains, the removal of fibre, coupled with fine grinding, results in a slightly higher availability of grain energy for use by the body.

Primary milling of grains is the most important activity in the grain processing segment of the industry. However, primary milling adds little to shelf life, wastage control and value addition.

Around 65 per cent of the rice produced is milled, mostly in modern rice mills. However, the sheller-cum-huller mills in operation give low recovery.

Wheat is processed for flour, refined wheat flour, semolina and grits. Dal milling is the third-largest segment in the grain processing industry, and has approximately 11,000 mechanised mills in the organised segment.

Indian rice, especially basmati rice, has gained international recognition, and is a premium export product.

Branded grains and grain processing are now gaining popularity.

Fruit, vegetable and dairy processing
The fruit and vegetable processing industry is highly decentralised, and a large number of units are in the cottage or household and small-scale sector, having small capacities of up to 250 tonnes per annum.

Since 2000, such segments as ready-to-serve beverages, fruit juices and pulps, dehydrated and frozen fruits and vegetable products, pickles, processed mushrooms and curried vegetables have shown significant growth, and units engaged in these are largely export-oriented.

A significant thrust can be given to this sector by strengthening the linkages between farmers and processors.

The weak linkage between farmers and markets, as well as, farmers and processing companies has brought about inefficiencies in the supply chain and encouraged the involvement of middlemen.

The government of India’s National Agriculture Policy envisages the participation of the private sector through contract farming and land leasing arrangements, which not only assures supply of raw material for processing units, but also a market for agriculture produce, accelerate technology transfer and capital inflow into the agriculture sector.

The domestic industry is yet to change its preference in favour of processed foods. The consumption of value-added fruits and vegetables is low compared to the primary processed foods and fresh fruit and vegetables. The inclination towards processed foods is mostly visible in urban centres.

India has one of the highest livestock populations in the world, accounting for about 50 per cent of its buffalo and 20 per cent of its cattle population, most of which are milch cows and milch buffalo.

India’s dairy industry is considered as one of the most successful development programmes in the post-Independence era. Dairy cooperatives account for the major share of the processed liquid milk marketed in India.

Milk is processed and marketed by 170 milk producers’ cooperative unions, which federate into 15 state cooperative milk marketing federations.

Over the years, several brands have been created by cooperatives like the Gujarat Cooperative milk Marketing Federation (GCMMF), which markets its products as Amul; Vijaya (Andhra Pradesh); Verka (Punjab); Saras (Rajasthan); Nandini (Karnataka), Milma (Kerala) and Gokul (Kolhapur, Maharashtra).

India is the second-largest producer of fish in the world, contributing to 5.43 per cent of the global fish production. India is also a major producer of fish through aquaculture. It ranks second in the world after China.

The total fish production during 2010-11 is at 8.42 million metric, tonnes with a contribution of 5.20 million metric tonnes from the inland sector and 3.22 million metric tonnes from the marine sector respectively.

The processing of marine produce into canned and frozen forms is carried out almost entirely for the export market.

The infrastructure facilities for processing of marine products include 372 freezing units with a daily processing capacity of 10,320 tonnes and 504 frozen storage facilities with a capacity of 138,229.10 tonnes. Apart from these, there are 473 pre-processing centres and 236 other storages.

Aquaculture is one of the fastest-growing food producing sectors in the world, with an annual growth of around seven per cent.

India is the second-largest producer of fish, both overall and from aquaculture. Fish and fishery products would be mostly sourced from aquaculture and culture-based capture fisheries in reservoirs as capture fisheries’ growth the world over is stagnant.

Meat and poultry processing
Today, India’s free-ranging, steroid and fat-free meat is winning worldwide acceptance. About 40,000 veterinary centres and numerous research stations ensure that India’s meat and poultry products meet the most stringent quality checks worldwide.

The production of meat and meat products has shown an impressive growth. The total meat production in the country is four million tonnes, which includes beef, buffalo meat, mutton, goat meat, pork and poultry meat.

However, only about one per cent of the total meat is converted into value-added products like sausages, ham bacon, luncheon meat, kababs and meatballs.

The current level of exports of meat and meat products from India is $190 million, the major destinations being the countries in the Middle-East and South-East Asia.

The meat processing sector has attracted a total investment of $471.1 million in the last six years (i.e. since the initiation of the liberalisation process, including foreign direct investment [FDI] of $116.1 million).

The poultry industry is among the fastest-growing sectors rising at a rate of eight per cent per year. The vertical integration of poultry production and marketing has lowered the costs of production, marketing margins and consumer prices of poultry meat.

There are eight integrated poultry processing units in the country, which hold a significant share in the industry.

While the production of agricultural crops has been rising at a rate of 1.5 to two per cent per annum, that of eggs and broilers has been rising at a rate of eight to ten per cent per annum.

As a result, India is now the world’s fifth-largest egg producer and the eighteenth-largest producer of broilers.

Packaged food industry in India
The year 2013 was a good for food manufacturers in India. Packaged food in India grew at a slightly faster pace than in 2012.

Changing lifestyles and convenience were the major factors which led to double-digit growth rates. Despite challenges like food inflation and increases in taxes, value sales continued to grow.

Healthier food options started to become more prominent on retail shelves, and attracted consumer attention.

Many low penetrated packaged food categories, such as cheese, pasta and ready meals, have gained greater popularity and increased shelf space.

Independent small grocers continued to dominate the distribution of packaged food over the review period.

Factors such as convenience because of proximity to homes, as well as free home delivery to consumers, worked to their advantage.

However, supermarkets and hypermarkets also saw an impressive increase in sales during the review period, because of such benefits as discounts, freebies, loyalty programmes and a wider range of products to choose from.

Factors driving the sector
The consumption patterns in India have been undergoing a visible shift. Earlier, the share of cereal products was the highest, followed by milk and milk products; vegetables, edible oil and meat products.

However, in recent years, the growth rates for fruit, vegetables, meat and dairy products have been higher than cereals and pulses.

This shift, in turn, implies that there is also a need to diversify the food production base to match the changing consumption preferences.

The key aspects which needs to be looked into are:

  • Lack of adequate quality control;
  • Supply chain inefficiency and middlemen’s involvement;
  • Increasing inventory carrying costs;
  • Higher taxation;
  • Higher packaging costs, and
  • Cultural preference of fresh food


Vibrant Gujarat Summit: Indian, foreign companies announce huge investments

January 29, 2015

Large conglomerates from India and abroad on today announced huge investment and job creation plans at the three-day Vibrant Gujarat Summit, which kicked off this morning in presence of Prime Minister Narendra Modi and leaders from across the world.

While Reliance Industries chief Mukesh Ambani said his group would invest Rs 1 lakh crore in 12-18 months across businesses, Kumar Mangalam Birla of Aditya Birla Group announced investment plans for Rs 20,000 crore in the state. Among foreign companies, Australian mining giant Rio Tinto’s CEO Sam Walsh said the group would add 30,000 jobs in diamond cutting industry in Gujarat, adding that Australia is looking forward to the state as a promising business destination.

Vibrant Gujarat Summit (VGS) is a biennial global business summit, being held since 2003, when Modi was Chief Minister of the state, and has always seen huge investment commitments running into billions of dollars being announced by business leaders from India and abroad.

Speaking at the seventh edition of VGS, Modi said there is a need to work for sustainable and inclusive growth and fluctuations in the global economy is the biggest concern. Modi said various countries are coming forward to work with us and India also wants to work with global leadership on issues ranging from poverty to ecology.

On the first day of the VGS 2015, various leaders and experts from across the world also called for greater reforms in the country. World Bank President Jim Yong Kim, who was also present, said tax and subsidy reforms are essential for inclusive growth in India.

US-India Business Council President and Mastercard CEO Ajaypal Singh Banga said American investors want to be in India and he is here to bridge the gap between what can be done and what they are capable of doing. “The world is awakening to the promise of a resurgent India,” he added.

Japanese auto giant Suzuki Corp’s chairman Osamu Suzuki said Gujarat is superior in terms of infrastructure and administration, adding that he sees “India becoming consolidated into one economic identity under the able leadership of Prime Minister Narendra Modi.”

Gujarat Chief Minister Anandiben Patel said the state has become a global business hub and everyone would benefit from the three-day summit. Among Indian business leaders, Mukesh Ambani invited the companies from across the world to invest in the state, while Birla said, “We have a personal bias for Gujarat and our ambitions are woven with the state.”

Singaporean Minister S Iswaran said “Singapore companies have strong commercial interests in Gujarat”, while British Trade and development Minister Lord Livingston said they will open a deputy High Commission in Gujarat in a few weeks. Netherlands’ Foreign Trade Minister Simon Smits said India should focus not only on ‘Make on India’, but also on ‘Research and Design In India’. UN Secretary General Ban Ki Moon lauded Indian government’s efforts in using more renewable energy, while US Secretary of State John Kerry said he is “highly inspired by Prime Minister Narendra Modi’s slogan of ‘Sabka Saath, Sabka Vikas’. Macedonia Prime Minister Nikola Gruevski expressed interest for collaboration and mutual economic empowerment for the countries. –

Source: The Indian Express

IMF applauds India for cutting fuel subsidy

January 29, 2015

Christine Lagarde said the drop in oil prices provides a golden opportunity to cut energy subsidies and use the savings for more targeted transfers to protect the poor.

The International Monetary Fund (IMF) has lauded India’s efforts to cut fuel subsidies, saying the fall in global crude oil prices provides a golden opportunity to reduce energy subsidies.

While speaking about the outlook for the global economy in 2015, IMF Managing Director Christine Lagarde said the drop in oil prices provides a golden opportunity to cut energy subsidies and use the savings for more targeted transfers to protect the poor.

“We have recently seen a successful decrease in fossil fuel subsidies in countries such as Cameroon, Cote d’Ivoire, Egypt, Haiti, India, Indonesia, and Malaysia,” she said.

The government, in October last year, deregulated diesel prices. Following the decision, retail prices of the fuel now reflects international movement in oil prices.

In 2013-14, government provided Rs 70,772 crore by way of cash subsidy while upstream firms Rs 67,021 crore towards subsidising fuels such as diesel, LPG and kerosene.

Aided by global crude oil price plunge – the lowest since 2009 – government expects the oil subsidy bill to be dropped by 60 per cent in 2014-15.

On infrastructure investment, Lagarde said India needs to focus on removing bottlenecks in transportation and energy sector that constrain the growth prospects.

Lifting quality infrastructure investment is a major part of the G-20 growth agenda, which is estimated to add more than $2 trillion to the global economy over the next four years, she said.

“IMF research shows that increased public infrastructure investment raises output in the short term by boosting demand; and in the long term by raising the economy’s productive capacity.”

“India and Brazil, would need to focus on removing bottlenecks – in transportation and energy – that constrain their growth,” she said.

Source: Business Standard

RBI rate cut effect: FIIs pump Rs 21,000 cr into Indian markets in Jan

January 29, 2015

Overseas investors have pumped in a staggering over Rs 21,000 crore in Indian capital markets since the beginning of the month owing to easing inflation and rate cut by the Reserve Bank of India (RBI).

Foreign institutional investors (FIIs) have bought shares worth Rs 5,992 crore ($977 million) until January 23, while bought debt worth Rs 15,336 crore ($2.5 billion) taking the total investment to Rs 21,328 crore ($3.45 billion), latest data with Central Depository Services Ltd (CDSL) showed.

These investors got re-christened as FPIs or foreign portfolio investors last year under a new regulatory regime that promises to make it easier for them to invest in India.

Market analysts attributed the huge inflow to low inflation levels and rate cut by the RBI. The central bank on January 14 surprised market participants with a 25 basis point rate cut.

Besides, foreign investors are betting on Indian capital markets on expectations of more rate cuts by the apex bank.

In 2014, the net investment by overseas investors into the debt markets was Rs 1.16 lakh crore, while in the equities it stood at Rs 98,150 crore. Overall, net investment by foreign investors stood at Rs 2.58 lakh crore in 2014.


Obama in India: Foreign funds flow set to skyrocket for renewable energy projects in India

January 29, 2015

Big-ticket announcements involving American loans for renewable energy projects, green bonds, venture capital and pension funds are on the cards after US President Barack Obama and Prime Minister Narendra Modi pledged to collaborate in the area of clean energy and combat climate change.

Officials at the renewable energy ministry said deals would be negotiated at a high-profile event next month, when Modi will kick off a gathering of industry leaders, bankers, investors and central bank officials from the US, India, Europe and other regions.

A team of senior US officials and executives from funding agencies, ministries and companies will interact with Indian officials from the finance ministry, Reserve Bank of India and other agencies to help India meet its ambitious target of adding 1 lakh megawatt of clean energy, which is 40% of the country’s total generation capacity now, at a cost of Rs 6 lakh crore.

Officials said Power, Coal & Renewable Energy Minister Piyush Goyal is determined to ensure that new renewable capacity is built with innovative and sustainable funding, not subsidies and handouts.

“The subsidy model has resulted in 30,000 mw over decades. We now want a dramatically bigger and faster capacity addition. This is not possible in the traditional model of giving subsidies,” a government official said.

Already, the Adani Group and New York-listed SunEdison hav .. have announced plans to invest $4 billion to set up India’s biggest solar equipment plant.

The solar energy sector has so far imported huge amounts of low-cost Chinese equipment, drawing criticism from local manufacturers.

“There will be more such investments in India. The government is determined to attract companies and make it easier for them to do business in the country. India already allows 100% FDI in renewable energy, and encourages technology transfer,” a government official said.

He said US companies and officials are keen to fund Indian projects in the renewable energy sector. The US is looking for a ‘government-to-government’ meeting in addition to business meetings next month. He said India had requested large American pension funds and venture capitalists to participate in the country’s renewable energy sector
Renewable energy accounts for 33,791 mw out of India’s total generating capacity of 255,000 mw at the end of December. In addition, another 1,123 mw of renewable capacity operates independent of the grid.

India offers several incentives for clean energy. Distribution companies are mandated to source a part of their electricity from clean sources under the system of ‘renewable purchase obligation’. Further, the government also wants developers of large power projects to build a part of their generation capacity from renewable sources.

The ministry of new and renewable energy has prepared a Cabinet note, breaking up installation of 100 gw into yearly targets till 2022. This includes projects ranging from ultramega solar parks to rooftop installations and, therefore, requires involvement of finance, revenue, power, urban development as well as agriculture departments.

The Indian industry has welcomed statements on climate by Obama and Modi. “The announcement that the US and India will collaborate closely to fight climate change through clean energy projects, low gas emissions technologies, and efficiency solutions will help India achieve its goal of becoming a low-carbon economy over time while fulfilling its developmental objectives of lifting millions out of debilitating poverty,” said Chandrajit Banerjee, director-general

Source: The Economic Times

Why India will Keep Growing Faster than China

January 29, 2015

The economic growth race between India and China started in the late 1940s, around the time India gained independence and adopted democracy and China turned to communism. Given the sheer size of their populations, each has the potential to dominate the global economy but until recently, it’s been no contest. In 2013, China’s per capita gross domestic product (GDP) was 4.5 times larger than India’s. The latest forecast suggests that the tide may be turning in India’s favour, possibly for good. The World Bank anticipates that, by 2017, India will be growing faster than China. This is a short-term forecast based on some very specific circumstances. India, for example, now has a credible central banker doing sensible things like tackling inflation. The country’s popular new government is finally building infrastructure and cutting the red tape that held the economy back for so many years. If India keeps it up, the World Bank expects its economy to grow 7% in 2017, up from 5.5% in 2014. Meanwhile, the forecast calls for growth in China (see chart) to slow as its government reduces spending, tightens credit, and unwinds its housing bubble. The bank expects China’s growth to fall from 7.4% in 2014 to a modest 6.9% in 2017. There are reasons to believe that the slowdown isn’t a temporary blip and that, over the long term, India’s economy will ultimately overtake China’s. At the moment, both countries are growing so quickly because they’re catching up to richer economies. They are shaking off the effects of market isolation, under-educated populations, limited access to technology, poor infrastructure, and regulations that stifled business development. Eventually, when these economies catch up, adding machines won’t increase productivity. It’s impossible to predict exactly how long this will take. Writing in The Financial Times, Martin Wolf predicts that China and India’s fast-growth convergence phase will run at least an additional 20 years. At that point, they—like the current powerhouse economies in the developed world—would be lucky to grow more than a steady 3% per year. Once that happens, growth will depend on demographics and each country’s ability to innovate. India has a better outlook on both fronts. Its population is growing; China’s is shrinking. It’s harder to predict which country will be better at innovation. Signs point to India because democracies, with their secure property rights and general stability, tend to be better at fostering successful entrepreneurship. China’s authoritarian capitalism is a new model, and it’s not clear whether it can produce the sort of environment in which people take chances, form businesses, and invent things. India still faces many hurdles. It needs to build lots of infrastructure, improve access to quality education, and remove the bureaucracy that has existed for years under many vested interests. This is an area in which China’s more authoritarian system has an edge. Its leaders have greater liberty to make hard choices and smooth out rough patches. China’s may prove to be a better model for catch-up growth. But managing a thriving, mature economy requires entrepreneurship and innovation. So far, India has the edge.

Source: Livemint

JBIC Survey Ranks India as No. 1 Destination for Future Investments

January 29, 2015

In July 2014, Japan Bank for International Cooperation (JBIC) conducted a survey of 1000 companies for Japanese manufacturing sector. Based on this research, India has been ranked as the No.1 destination for future investments followed by Indonesia (ranked No.2) and China (ranked No.3).

In October 2014, the number of Japanese companies in India had reached 1209, which is 13% higher over the same period last year with a CAGR of 13.67% (for the last five years (2010 to 2014)).

Some Japanese companies are seriously contemplating their future investment plans in India amounting to about Rs 75,000 crores (approx. US$12 billion) in next 2-3 years.

During the period June 2014 to September 2014, FDI inflow from Japan amounted to US$ 618 million against US$ 273 million for the corresponding period in 2013. FDI inflow of US$103.14 million took place in October 2014.

The Government has set up Japan Plus, a special management team, to facilitate Japanese investors. The team is actively interacting with Japanese companies and handholding them through various approval processes, as and when required. Also, the issues related to the State Government of Rajasthan concerning Sojitz, working for Dedicated Freight Corridor (DFC), has been resolved.

One of the mandates of Japan Plus is to help develop Japanese Integrated Industrial Parks. For this, discussions are going on with Japanese companies and the State Governments concerned.

Source: Press Information Bureau , Government of India, Ministry of Commerce & Industry

Investing in India’s Emerging Wine Industry

January 29, 2015

India’s expanding wine industry is in the midst of a vital transition. Last year, the country’s wine production hit a record 17 million liters, with export sales rising 40 percent year-on-year to reach US$4.4 million in the first 7 months. With a rapidly growing export sector, expanding domestic consumer market and increasing industry support in major wine-producing States, the Indian wine industry has potential to be a global market competitor.

This year, the Indian Government, in conjunction with the newly formed Indian Grape Processing Board (IGPB), is aiming to finalize the harmonization of Indian wine standards with the International Organization of Vine and Wine (OIV) guidelines. Set to be a catalyst for state reform, the new standards are good news for producers, investors and traders alike, who have eagerly anticipated the industry’s rise for the past decade.

A Decade of Success

Since the early 2000’s, India has been hyped as an important emerging market for wine. The country has the optimum climate for grape cultivation and its main wine-producing states, Maharashtra and Karnataka, are leading producers of world class high-quality grapes.

Source: India Briefing