Archive for February, 2015

Government may soon take a decision on relaxing FDI norms for NRIs

February 28, 2015
The government may soon take a decision on liberalizing foreign direct investment norms for NRIs and overseas citizens of India as it aims to increase capital flows into the country.

A decision in this regard is expected to be taken at the highest level soon, sources said.

In order to encourage more overseas investments into India, the government had last year set up a committee to look into the possibility of treating non-repatriable NRI funds as domestic investment.

The Committee has also looked at issues pertaining to streamlining the process for NRI investments into India and strengthening the reporting system of such investments by the non-resident Indians.

The government wants to channelize the funds of NRIs, who now have set up large businesses abroad by treating non-repatriable investments by NRIs as domestic investment.

NRI is defined as a person who is residing outside India but has Indian citizenship.

The Narendra Modi-led government, which has liberalized the FDI policy for sectors such as defence, railways, construction development, medical devices and insurance is keen to tap both NRIs and foreign capital.

As per the current FDI policy, NRI investors enjoy special treatment in certain sectors such as civil aviation.

In scheduled air transport service, 49 per cent FDI is allowed but for NRIs, 100 per cent investment is permitted. Similarly in non-scheduled air transport service, 74 per cent FDI is allowed but for NRI’s 100 per cent is permitted.

Further a non-resident Indian or a PIOs outside India can invest in the capital of a firm on non-repatriation basis provided the amount is invested by inward and the firm or proprietary concern is not engaged in any agricultural/ plantation or real estate business or print media sector.

During the April-December period of current fiscal, FDI rose by 27 per cent to $21.04 billion as against $16.56 billion in the same period last fiscal.

Healthy inflow of foreign investments into the country help in balancing the country’s balance of payments and stabilize the value of rupee.

India is estimated to require around $1 trillion over five years to overhaul its infrastructure sector, including ports, airports and highways to boost growth.

Source; The Times of India


Latest GDP data makes India fastest growing economy: President Mukherjee

February 27, 2015

Announcing it as the Narendra Modi-led government’s most significant achievement till date, President Pranab Mukherjee on Monday said the latest estimates of India’s gross domestic product (GDP) growth makes it the fastest growing large economy in the world.

“As a result of my government’s sustained efforts and series of policy initiatives, our economy is again on the high growth trajectory,” Mukherjee told the joint sitting of parliament on the opening day of the budget session.

“According to the latest estimates, our GDP is growing at 7.4 per cent, which makes India the fastest growing large economy in the world,” he added.

Earlier this month government statisticians came out with GDP data calculated with a new base year, which makes it harder for Finance Minister Arun Jaitley to assess the size of the fiscal stimulus required to help boost the economy.

The government said it expects the annual gross domestic product (GDP) to grow at 7.4 percent in the current fiscal under a new method for computing national accounts, thereby resulting in the upward economic growth rate.

Shifting the base year from 2004-05 to 2011-12, the Central Statistical Office last week estimated GDP growth during 2014-15 at 7.4 percent as compared to 6.9 percent in 2013-14. It has also revised the growth rate for the first half of 2014-15 to 7.4 percent from the 5.5 percent it had earlier reported under the old method.

“Real GDP at constant (2011-12) prices in the year 2014-15 is likely to attain a level of Rs.106.57 lakh crore, as against the first revised estimate of GDP for the year 2013-14 of Rs.99.21 lakh crore, released on Jan 30, 2015,” the CSO said in its advance estimates of national income 2014-15.

While the growth rate calculated under the new system for the second quarter has been revised to 8.2 percent, that for the first quarter has been pegged at 6.5 percent.

Commenting on data procedures, Reserve Bank Governor Raghuram Rajan said last month: “We may be reaching the outskirts of the woods but we are not out of the woods yet. So I don’t think any data that suggests we are out of the woods at this point, we would put too much weight on it.”

Under the new method, CSO measures GDP by market prices instead of factor costs, to take into account gross value addition (GVA) in goods and services and indirect taxes.

Source: India Today


India’s tea market estimated to be worth approximately Rs 10,000 crore

February 27, 2015

Today, India is one of the largest tea producers in the world, with over 70 per cent of the tea being domestically consumed. The Indian tea industry has grown to own many global tea brands, and has evolved to one of the most skilled tea industries in the world.

The market size of tea is estimated to be approximately Rs 10,000 crore, with a penetration of more than 90 per cent in the domestic market.

With an export of approximately 210 million kg of tea, India stands as the fourth-largest exporter of tea in the world, with China at the top. About 72 per cent of the country’s tea sector is organised.

The global consumption of tea jumped 60 per cent between 1993 and 2010, and significant growth is forecast, as more people become consumers of tea.

The total tea production in the world has exceeded four billion kg, with India producing about one billion kg of tea.

Between 2008 and 2013, black tea production in India increased at a compounded annual growth rate (CAGR) of 1.6 per cent, while consumption rose at a CAGR of 2.3 per cent.

Currently grown in 35 countries, the tea industry provides a source of employment and export earnings for the developing and underdeveloped nations.

It also has an ancient heritage, dating back 5,000 years, revealing a rich cultural history. In China, tea is not only a way of celebration, but also a religion.

In Japan, the tea ceremony (or Chado) is revered for its connection with Zen Buddhism. The preparation and serving of matcha tea, for example, is elevated to performance art with an emphasis on aesthetics and harmony.

The Russians drink strong, black tea from a Samovar. In Morocco, the nationals prefer mint tea. In England, taking afternoon or high tea is still a celebrated occasion.

Tea in India is mainly cultivated in the southern, eastern and north-eastern parts. A number of renowned teas, such as Assam, Darjeeling and Nilgiri, grow exclusively in India and are exported.

Tea is also grown in the Dauladhar region in Kangra. There was a time when tea from this part of Himachal Pradesh ranked among the best in the world.

Between 1886 and 1895, Kangra’s tea won gold and silver medals for quality in London and Amsterdam.

In 1883, the Gazetteer of the Kangra District noted that tea produced in the region was “probably superior to that produced in any other part of India”.

Yet, it slipped virtually into oblivion, caused by the devastating earthquake of April 4, 1905, which reduced the entire valley to rubble, crippling the industry.

Happily, the worst seems to be over for Kangra’s tea. In the past two decades, the acreage under tea has started increasing, production is up, the quality of tea is much better, earnings are higher, even the estates are now a sight to behold.

In 2006, Kangra also won recognition as a geographic indicator for tea. Today, Kangra tea has its own significant symbol – two leaves and a bud.

Flavour is the unique selling proposition of Kangra tea. The Chinese hybrid variety grown here produces a very pale liquor, the very reason Kangra does not produce any crushed, turned and curled (CTC) tea (the staple tea of India).

Assam continues to lead the nation’s five growing regions with an April-December harvest of 607 million kg, up by five per cent as compared to previous year.

West Bengal tea growers increased yield by 11 per cent to 290 million kg, according to the Tea Board.

The southern growing regions regions of Tamil Nadu, Kerala and Karnataka showed a 16 per cent increase for the period to 196 million kg.

The tea production grew by 6.5 per cent last year (to a record 1.2 million metric tonnes), and the domestic consumption reached 856 million kg in 2011 and 875 million kg in 2012.

The Tea Board estimated that consumption would top 880 million kg. The growth continues at two to three per cent annually, which would mean that India would have to begin importing tea to meet its domestic demand and maintain export targets.

Per capita consumption rose to 718g (1.58lb) in 2011, which was about triple the domestic consumption in the United States. It rose steadily from a per capita count of 654g (1.44lb) in 2001.

We can see the diversity in the consumption pattern in India, the way in which tea is consumed and embraced by both the rich and influential and commoners, with variations depending on regional and cultural affiliations.

Tea is consumed every day, in all types of varieties, including CTC, orthodox and Oolong. CTC is highly consumed, with the concept of anti-oxidants emerging as the true superheroes of today’s world.

We see a shift in the consumption pattern, from the everyday chai (which kick-starts the day with the essential caffeine [and is sometimes made with added spices such as basil, cardamom and pepper, which is called masala chai or chai tea in the United States]) to black tea.

The English prefer orthodox black tea variants, such as Orange pekoe tea (a graded leaf which is taken with milk added separately).

Lately, green tea has become relatively widespread, where black tea was traditionally consumed. It is the normal tea, which has not been oxidised much to retain the anti-oxidants.

Vikram Grover, vice-president and marketing head, Tata Global Beverages, which owns the tea brand Tetley, said, “The green tea category has been growing at around 60 per cent year-on-year, compared with black tea that is growing at around two per cent.”

Green tea is now a brand in itself. It has established a segment of tea drinkers, who are more health-conscious, and also those who lead a lifestyle where a routine diet cannot be followed.

With nutritionists touting it as the elixir, the market for green tea has been growing phenomenally, and has become quite a fad. It is slowly but steadily becoming famous in the US market, where a switch from coffee is seen.

A survey of American tea consumers found that the increased consumption of tea in the United States was attributable to the use of single-serve tea capsules.

This growing craze for green tea has also made space for white tea, the least processed tea, which has the highest antioxidant levels. Japan, Korea and China are its largest consumers.

It is a status symbol for a certain class of the English to drink only special varieties of white tea, like Silver Needle.

White tea has been sold by many supplement manufacturers as a fat-burner and a prescription drug for years, due to this plant’s ability to speed up the metabolism rate.

In addition to its fat-burning qualities, white tea may also help prevent cancer. Flavonoids, a class of antioxidants, inhibit the growth of cancer cells and prevent the development of new ones. It comes in varieties such as Silver Needle and White Peony, depending on the quality.

Rooibos tea, native to South Africa, is reprocessed roasted tea, which can be had hot or iced. Other varieties include artisan or flowering teas, called blooming teas, which are beautiful to look at as they actually bloom as they steep, and have a flavour or scent with the design.

People are now looking for more than just a tea with a flavour or aroma. The opportunity is ripe for the tea entrants focussed on developing new varieties.

The Tea Board of India is taking steps at every level to support the organised and unorganised growers to promote tea and to make India one of the leading producers and suppliers of quality tea in the global market by developing effective management strategies to facilitate competence and innovation in tea plantations; innovative processing technology for producing good-quality teas; augmentation of high-value tea exports; capacity-building for human resources at all levels in the tea industry, and strengthening of research and development (R&D) efforts on all aspects of tea husbandry and technology.

The government of India is also taking initiatives by providing institutional support to grassroots innovators and outstanding traditional knowledge-holders from the unorganised sector of the society.

Yuvan Longlife has entered a joint venture with the National Innovation Foundation (NIF), an autonomous body of the government of India’s Department of Science and Technology.

It is focussed on development production and marketing of nutraceutical ingredients and consumer products, and based on a decade of research by NIF, has launched six variants of health teas, addressing such lifestyle conditions as stress, ageing, obesity, diabetes, inflammation and hypertension.

These teas were inaugurated by India’s president Pranab Mukherjee in New Delhi, and were among the 41 innovations of NIF.

The tea market has seen strong growth right across the globe, but the way tea is produced and consumed has changed radically compared to the 20th century. Tea is now traded on the futures market, and is truly a commodity product.

Other initiatives like Tea 2030 (by some of the key players in the tea sector, including the Ethical Tea Partnership; Fairtrade International; Finlays; IDH [The Sustainable Trade Initiative]; Rainforest Alliance; S&D Coffee & Tea; Tata Global Beverages; Twinings, Unilever and Yorkshire Tea) explore the future of the brew in a collaborative project are being taken by working jointly to identify the key challenges, forecasting the issues that need to be addressed and combining their knowledge and expertise to deliver new solutions that would overcome the issues facing the sector, creating a shared vision for what the global tea industry can do together to ensure it has a prosperous and sustainable future.


Four reasons why the scales are tilting towards India

February 26, 2015

Global investors should turn their attention to India. Here’s why

Stock prices have soared over the past year and the bellwether indices have gained more than 40 per cent. But earnings of Indian companies are faltering.

Have stock markets rallied too early and is there a strong case for prices to decline from these levels? While the turnaround in the profitability of India Inc is taking time, there are a number of factors that are in favour of the Indian economy at this juncture.

These will eventually translate into better financial performance of Indian companies and better returns on investor holdings over the next couple of years.

Fall in commodity prices

Commodity prices have been trending lower for almost three years now as global economic growth slowed and China re-balanced its economy. The Thomson Reuters core commodity index, one of the gauges to measure global commodity prices, is down 38 per cent since its peak value in mid-2011.

But the sharper decline took place from June 2014; the index has lost 27 per cent since then. This is largely due to the halving of the price of crude oil since last June. Petroleum-based products contribute to 33 per cent of the index weight.

The fall in commodity prices is a blessing for Indian companies that are net importers. The impact was already felt in the December quarter earnings with raw material cost as a proportion of sales recording a decline over the same period a year ago. Unless companies decide to pass on these benefits to customers, this will help them improve their profitability in the coming quarters.

Strong economic growth

According to the IMF’s world economic outlook report, India is set to report one of the highest GDP growth rates in 2016, thanks to “the boost to the terms of trade from lower oil prices and a pick-up in industrial and investment activity after policy reforms.” Indian growth is expected to reach 6.5 per cent in 2016. This is higher than China’s 6.3 per cent and the global average of 3.7 per cent growth.

Many of the other emerging economies that were vying for a share of the global investment pie have been hit hard by the plunge in commodity prices, since they are commodity exporters. Growth in Russia, Brazil and South Africa is expected to contract by -2.5, -0.7, and -0.3 in 2016. With India set to record a far superior growth when compared with other economies, foreign investors, both foreign portfolio investors as well as those bringing money into FDI, are likely to prefer investing in India, thus supporting the Indian stock market and the economy.

Real rates turning positive

The decline in commodity prices has been a godsend for India’s inflation too. Consumer price inflation is down to 5.1 per cent in January 2015. Fall in inflation is good for companies since it means saving on input costs and higher demand due to larger surplus in the hands of the consumer.

From an investment perspective too, the declining inflation spells good news since some of the surplus will be ploughed into savings. Again, with the Reserve Bank of India going slow with its policy rate cuts, the real rates in the economy are currently more than 2.5 per cent. These rates are among the best in the world and are certain to act as a draw for global investors in debt securities.

Foreign investors have already purchased close to $4.7 billion of Indian debt since the beginning of 2015.

The positive real yield will also result in household savings — which was moving into physical assets such as real estate and gold over the last few years — moving into financial assets. With the RBI announcing its intention that the rate cycle has reversed downward, stocks are likely to generate greater interest than fixed income.

Rupee on a strong wicket

Despite intense volatility in foreign currency market in recent months with dollar surging and euro caving in, the rupee has proved quite resilient, moving between 60 and 64 against the dollar. With the decline in crude prices, the current account deficit is no longer a threat. While declining growth in exports is adding some pressure on the currency, healthy interest from foreign portfolio investors as well as foreign direct investment is helping keep the rupee stable. FDI flows in the period between April and November 2014 are up 22 per cent over the same period a year ago.

The recent monetary policy statement of the RBI indicates that the central bank is expecting the fund inflow to continue in the months ahead, thanks to the €1.1-billion stimulus announced by the European Central Bank to shore up European economies. Foreign investors searching for a country with good economic growth and positive real rates are likely to continue pumping money into India. With interest rate cycle reversing downwards, debt-laden companies in India are expected to get a reprieve. The joker in the pack is the implementation of policy reforms that is needed to get stalled projects going, make fuel available for our power sector and encourage foreign investment into the country.

If the Modi government delivers on this front, India can exceed the growth projected by the IMF in 2016.

Source: The Hindu Business Line

FIIs pump Rs 16,500 cr in Indian capital markets in Feb

February 26, 2015

Foreign investors have poured in a little over Rs 16,500 crore in Indian capital markets in this month so far on hopes of a pro-growth Budget and rising expectations that government will accelerate reforms.

The latest inflows take the to Rs 50,205 crore ($8.2 billion) since the beginning of 2015.

In January, had pumped in Rs 33,688 crore in Indian debt and equities.

Foreign institutional investors (FIIs) have bought shares worth Rs 6,850 crore in February so far.

In the debt segment, they invested funds to the tune of Rs 9,667 crore, taking the total investment to Rs 16,516 crore, the Central Depository Services’ data showed.

FIIs were rechristened as foreign portfolio investors or FPIs last year under a new regulatory regime that promises to make it easier for them to invest in India.

Market participants attributed the robust inflows to positive investor sentiment driven by the government’s announcement of several reform measures in recent months and expectation of more announcements in the Union Budget, to be presented on February 28.

Investors are keenly focused on the new government’s first full-year Budget, looking at it as a gauge to measure the government’s reform momentum.

“The upcoming Budget could be the most important one for the stock market after the early 1990s, when India launched economic liberalisation,” Morgan Stanley said in a report.

Of the total inflows, a lion’s share came into debt markets, which analysts attributed to measures taken by Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) to attract long-term overseas investors.

In 2014, the net investment by overseas investors in debt markets was Rs 1.59 lakh crore, while the figure for equities stood at Rs 97,054 crore. Overall net investment by foreign investors stood at Rs 2.56 lakh crore last year.

Source:Business Standard

Foreign private banks plan India headcount boost.

February 20, 2015

Foreign private banks are bulking up in India once again after downsizing in the past few years, anticipating new opportunities to advise Indian millionaires eager to cash in on an Internet start-up boom and on signs of an economic revival.

Bankers and consultants surveyed by Reuters said foreign private banks will hire wealth managers this year and increase their headcount by a fifth, compared to a 10-15% fall in each of the past two years.

Barclays, which runs one of India’s top private banks, said its headcount could rise by 15-20% in 2015.

Wealthy Indians are looking to put money in new-age technology companies after they watched savvy foreign investors such as Singapore’s Temasek Holdings and Japan’s SoftBank Corp scramble over the past few years to get a piece of Indian e-commerce companies, including Flipkart, valued by industry at around $11 billion, and Snapdeal.

The start-ups offer a new investment route for the millionaires, who are using wealth managers to guide them on these investments.

So far, the rich in India channelled funds into traditional products such as equities, bank deposits and government bonds. And an annual cap of $250,000 on overseas remittances by onshore Indians effectively rules out significant investments overseas.

To tap into this demand, venture funds are being launched that seek to raise money from high networth individuals (HNIs) for investments in start-ups. At least two venture funds are currently raising a combined $160 million from Indian investors including wealthy individuals, to invest in start-ups, people involved in the matter said.

“In the first round, it was mostly foreign investors who were chasing the start-ups. Now the Indian HNIs are waking up to this opportunity,” said Atul Singh, India head for wealth management at Bank of America Merrill Lynch.

India’s e-commerce firms last year attracted more than $5 billion in investment, the bulk of it from overseas investors, compared to less than $2 billion in 2013.

“The return from these investments could be double that of the public equity markets,” said a wealth manager at an European bank, declining to be named. “Of course, the risk is also higher and that’s why the clients need advice.” Another reason for the enthusiasm among affluent Indian investors is the economy, which is expected to grow 7.4% in the year ending March and at a faster pace than China’s in the years ahead as a new government kickstarts economic reforms. Stiff competition For foreign private banks, whose Indian ambitions have so far been held in check by intense competition from local players and sluggish revenues, the developments are welcome.

They are drawn to the long-term potential of the market, where individual financial assets are expected to more than double from last year’s level to $5 trillion by March 2019, according to local wealth manager Karvy. While more than half a dozen foreign private banks operate in India and employ about 300 wealth managers, they are saddled with higher operating costs and struggle with a limited branch network compared with their local rivals.

As a result, the Indian units of some banks, including Credit Suisse Group AG , slashed headcount in the recent past. Others, such as Morgan Stanley and UBS AG, exited altogether. The business landscape is changing now, bankers said. A regulatory move last year for private banks to separate client advisory services from transactions carried out on their behalf will make wealth managers focus on advice and give them an edge over local rivals because of their global network, boosting fee income and stabilising revenues, bankers said. “As a market, we are coming closer to the reality that if you want impartial advice you will have to pay a fee,” said Satya Bansal, head of India wealth management at Barclays, which employs 40 wealth managers and plans to add more.

Source: Livemint/Reuters

India calls for foreign investment in exploration and mining

February 17, 2015

India’s Government has invited foreign companies to invest in the country’s exploration and mining opportunities.

Union Mines and Steel Minister Narendra Singh Tomar said at Mining Indaba 2015 exhibition: “Indian mining sector is open for business.”

Addressing the India Day session at Mining Indaba in South Africa, Tomar highlighted legislation changes that have been introduced by the government.

Under the new law, all mining concessions will have to be granted through auction, ensuring a transparent and fair process and preventing allocation by discretion or bias. It is also expected to reduce project delays.

According to Tomar, the country’s mining sector is on experiencing high growth.

In his address, Tomar said that mining processes will not only satisfy domestic requirements, but also meet growing international demands.

Going forward, as a key industry, mining is expected to draw major investments from domestic and foreign firms, while creating more jobs.

Companies have been invited to invest in India’s exploration projects, as the country is rich in mineral resources, which are largely unexplored.

India has increased the lease life to 50 years and introduced transferability of mineral concessions, the minister said.


India to remain investors’ choice despite hike in remittances

February 15, 2015

If you had invested in equities in Denmark, New Zealand or the US in early 2010, you would have enjoyed returns of about 100 per cent or more by now. So, when the Reserve Bank of India on Tuesday effectively allowed individuals to buy assets overseas for up to $250,000 a year (about Rs 1.5 crore in current prices), the investment choice would have seemed obvious.

In reality, the really moneyed Indian’s obvious immediate investment destination now will be: India.

True, as an S&P Dow Jones Indices report of Jan. 30 indicates, equities in developed countries outperformed those in emerging markets (roughly 72 per cent to 19 per cent). But in the last one year, Indian equities have topped all others with over 50 per cent returns.

Anil Rego, CEO of investment management company Right Horizons, said the decision of the central bank augurs well for the long run, making it possible for investors to diversify their investments across countries. “It helps manage risk very well,” he said. But, in the short run, he said, “India’s doing well.”

A similar sentiment prevails in the real estate industry. Anuj Puri, Chairman and Country Head of real estate management firm JLL India, said, “The current signals strongly favour investment into Indian real estate, so we are not going to see an exuberant flight of capital to foreign shores. Quite the contrary, in fact.”

He said, “The right question to ask would be not ‘which foreign cities compare with Indian cities for real estate investment’, but ‘does investing in foreign markets provide a good rationale to Indians who have ample opportunity to grow their investments in their own country’.”

High net-worth Indians have traditionally preferred purchasing properties in London, Singapore, Dubai, as well as in some US cities.

“The current signals strongly favour investment into Indian real estate, so we are not going to see an exuberant flight of capital.”

Source: The Hindu

Spain keen to increase investment in India

February 15, 2015

Spain is keen to increase investments in India as business sentiment has revived after the formation of the new government last year. “There is enormous room for an increase in Spanish direct investment in India,” Jamie Garcia Legaz, Spanish minister of state for commerce said on Monday. He was speaking at a meeting organized by the industry lobby Confederation of Indian Industry (CII). Foreign direct investment (FDI) from Spain stands at $4 billion in the fiscal year ended 31 March.

The minister said Spain is interested to invest in areas such as railways, roads, renewable energy, pharmaceuticals, agro-food and ports. A Spanish delegation met the chairman of the railway board on Monday to discuss greater cooperation between the two countries in railways, especially in the area of high-speed rail. “In the energy sector, Spain is looking to work with India mostly with renewable energy sources. In addition, we are also looking at cooperation to create electric networks in transport lines,” Legaz said.

He said India and Spain are keen to remove barriers to encourage trade

Source: Livemint

China’s Huawei makes $170 million “Make in India” investment

February 14, 2015

Chinese telecom company Huawei Technologies Co Ltd has invested $170 million to open a research and development centre in India as it ties itself to Prime Minister Narendra Modi’s “Make in India” campaign, the company said on Thursday.

The campus in Bengaluru, previously called Bangalore, is the first such investment made by a Chinese company in India and will be used to develop software components, Huawei said.

It is also the company’s biggest R&D center outside China.

Modi has been making a push to lure foreign investors to the country and boost its manufacturing capacity.

“This center can accommodate nearly 5,000 software engineers, and we are confident that it will play a bigger role in the innovation journey of Huawei,” said Wilson Wang, Chief Operating Officer of Huawei’s India research and development.

Source: Reuters