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NEWS FEATUREIndia larger than Japan in PPP terms, says WBIndia replaced Japan as the world’s third largest economy as far back as 2011.

India to play key role in Asian growth: USDeclaring that she was “bullish” on India-US ties, a senior US official says the two countries will play a keyrole in advancing prosperity and stability in Asia.

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French companies to continue investing around $1 bn in IndiaExpressing confidence in the Indian economy, French companies that are engaged in India will continueto annually invest nearly $1 billion here as they see long-term future in the country’s growth potential, atop diplomat has said.

FDI inflows in February up 12% at $2 bnForeign direct investment into India grew for the second consecutive month in February this year to $2.01billion, up 12.29 per cent.


OVERSEAS INVESTMENTS

ITP Division Ministry of

External Affairs Government of India

Issue no 568 I April 22-April 28, 2014

p. 02/03

TRADE NEWSOver 90% of telecom gear in India’s Rs 50,000-cr market is importedIndian companies will constitute 6.6 per cent of the global demand for telecommunication equipment in 2014-15, according to research agency Ovum. The industry expects it will spend Rs 46,000 crore on buying gear, ex-cluding handsets.


p. 06/11

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SECTORAL NEWSSpanish brewery enters India with total acquisition of subsidiaryTaking a big step in its “long-term vocation” in India, Spanish brewing company Mahou-San Miguel an-nounced the total acquisition of its Indian subsidiary Arian Breweries & Distilleries.


NEWS ROUND-UPNew Companies Act eases concerns over high payIn the past few weeks, institutional advisory firms have been vocal against salary increase to companyheads, especially firms undergoing financial stress or under corporate debt restructuring (CDR).


WEEKLYECONOMIC BULLETIN

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WEEKLYECONOMIC BULLETIN >> NEWS FEATURE


India larger than Japan in PPP terms, says WBIndia replaced Japan as the world’s third largest economy as far back as 2011.

“India was now (2011) the world’s third largest economy, moving ahead of Japan,” said the World Bank in a report. Theranking is based on purchasing power parity (PPP) in dollar terms.

PPP is adjustment of exchange rates to find the purchasing power of one unit of a currency in a foreign economy. Forexample, if the price of a hamburger in France is €4.80 and in the US is$4.00, the PPP for hamburgers between the two economies is $0.83 tothe euro from the French perspective (4.00/4.80) and €1.20 to the dol-lar from the US perspective (4.80/4.00). To compare the cost of ham-burgers purchased in the two economies, the expenditure on it inFrance can be expressed in dollars by dividing it by 1.20 or the expendi-ture on hamburgers in the US can be expressed in euros by dividing by0.83.

While India’s gross domestic product (GDP) on this basis was $5.75trillion in 2011, Japan’s was $4.37 trillion. In contrast, this country wasonly the world’s 10th biggest economy in 2005, when the World Bankhad issued an earlier report under its International Comparison Pro-gramme. At the time, India’s economic size was $2.34 trillion; Japanwas at third rank, at $3.87 trillion. America and China came first andsecond, respectively.

India went ahead of Japan because its currency was valued at 15.11a dollar on a PPP basis in 2011, while the East Asian nation’s currencywas pegged at 107.45 to a dollar. In 2005, Japan’s currency was 129 toa dollar, while the rupee was 14.67 a dollar.

Two years earlier, the International Monetary Fund came out with a similar prognosis. It had put India slightly ahead ofJapan in PPP terms, valuing India’s GDP at $4.46 trillion in 2011, marginally higher than Japan’s $4.44 trillion. In con-trast, the World Bank report says on per capita GDP, India is 129th among 177 nations in PPP terms. Our per capita GDPwas $4,735 in 2011.

National Statistical Commission Chairman Pronab Sen said the latter measure was the important one. “PPP is a costof living index. What matters more is the per capita GDP, on which the real conditions depend.”

In terms of per capita GDP, Japan was at 33rd position. China was at the 99th rank. Even America did not have thehighest per capita income; it was 12th in the ranking. Qatar had the highest per capita income, at $146,521 in 2011,around 31 times that of India.

Source: Business Standard

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WEEKLYECONOMIC BULLETIN >> NEWS FEATURE


Declaring that she was “bullish” on India-US ties, a senior USofficial says the two countries will play a key role in advanc-ing prosperity and stability in Asia.

Asia, “a region with tremendous promise and potential”faces many challenges ranging from economic developmentto defeating terrorism and counter violent extremism, NishaDesai Biswal, assistant secretary of state for South and Cen-tral Asian Affairs, said on April 25.

“Despite these challenges, we’ve never been more opti-mistic about the future of Asia - and the role the UnitedStates and India will play in advancing prosperity and stabilityin the region,” she said at 2014 FICCI-IIFA Global BusinessForum in Tampa, Florida.

The business forum was a joint event of the Federation ofIndian Chambers of Commerce and Industry (FICCI) and the International Indian Film Academy (IIFA) ahead of the firstever IIFA Awards event being held in the US Saturday.

“One reason is India’s growing economic connectivity - eastward with Bangladesh, Burma, and Southeast Asia,”Biswal said speaking on the “US and India: Global Partners in the Global Economy.

“And we see promise in links westward with Pakistan, Afghanistan, and Central Asia,” she added.Describing these linkages as vital to the prosperity and stability of Asia, she said the US was “committed to support-

ing economic linkages that will cultivate new markets and knit these countries even closer together - and make themmore integrated with the global economy.”

Since “prosperity in South Asia hinges on dynamic growth of its economic powerhouse,” India, Biswal said the US “iscommitted to working with India to fully unlock the true potential of our economic ties.”

“India needs a transparent, straightforward way of attracting foreign investment, offering private capital a way toshare in India’s opportunity,” she said.

“There must be a welcoming business environment that allows every dollar of investment to work efficiently.”“India’s future prosperity will also depend on one of our shared strengths - innovation,” Biswal said. “That’s why we

are so excited about the US-India Technology Summit and Expo in November of this year in Delhi”.India-US relationship is also flourishing at the state and city level, Biswal said noting “our cities and states are part-

nering more extensively than ever before, helping plant even deeper and stronger roots for our partnership.”“A growing number of states and cities are tailoring their international outreach efforts for India, with delegations from

Arizona, Iowa, Indianapolis and San Francisco visiting the subcontinent over the last year,” she said.Declaring that she was “bullish on this relationship because I believe in the strength and vibrancy of our two coun-

tries,” Biswal said: “I know there is no challenge that we can’t address, no problem that we can’t solve when we bring ourtwo societies together.”

Source: Indo-Asian News Service

India to play key role in Asian growth: US

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WEEKLYECONOMIC BULLETIN >> OVERSEAS INVESTMENTS


French companies to continue investingaround $1 bn in India

Expressing confidence in the Indian economy, French companiesthat are engaged in India will continue to annually invest nearly $1billion here as they see long-term future in the country’s growthpotential, a top diplomat has said.

“I expect the investment trend of nearly a billion dollars to con-tinue as the French companies are here for the long-term and aresetting up their base here and expanding production,” French Am-bassador Fran ois Richier told IANS in an interview.

According to the ambassador, the co-operation between thetwo countries is of utmost importance and exchange of know-howbetween the two sides is growing.

“Till now French companies have invested nearly $19 billionhere; they have also provided know-how and technology and gen-

erated jobs. The companies are here for long term and not just to make profits and leave.”On the long-pending Indo-EU Free Trade Agreement which is in the works for the last seven years with no sight of closure,

the ambassador was optimistic the deal will be expedited once a new government is formed in New Delhi.“I don’t know if it is going to be a new government or the old government but the deal needs to be expedited as it is in

favour of all. It’s already been three years and I expect that the negotiators will soon reach common ground,” Reicher added.Negotiations on the FTA, officially dubbed the Broad-based Trade and Investment Agreement (BTIA) between India and the

28-nation EU, were launched in June 2007 but have been facing hurdles with both sides having differences on crucial issues.Negotiations entered an intense phase following the EU-India Summit in February 2012.Important issues include market access for goods, the overall ambition of the services package and achieving a meaning-

ful chapter on government procurement.The EU wants India to open up its banking and insurance sectors and significantly cut duty on automobiles, wines and spir-

its and dairy products and enforce a strong intellectual property rights (IPR) regime.India, on the other hand, wants liberalised visa norms for its professionals and market access in the services and pharma-

ceuticals sector.However, the Indian automobiles industry has raised an alarm over the sector being included in the FTA, claiming it will kill in-

vestments and technology flow into the country, resulting in under-achievement of the government’s automotive mission plans.The EU is India’s largest trading partner. The value of EU-India trade has grown from 28.6 billion euros ($38 billion/Rs.2.3

trillion) in 2003 to 79.9 billion euros in 2011.According to French embassy data, the volume of bilateral trade between France and India slowed down in 2011 to 5.8

percent at 7.46 billion euros.Major French companies like Alstom have been present in India for the last 100 years, while others like hotel chain Accor,

public transport solutions major Keolis, automobile manufacturer Renault, insurance firm AXA, aircraft manufacturer Airbusand utility company PR Fonroche have a presence in India.

The envoy further elaborated that Europe’s fiscal health is improving thanks to efforts being made by EU countries for resolvingthe debt crisis, including the use of two major instruments like the European Stability Mechanism (ESM) and the Fiscal Compact.

“Europe is improving and it is still very attractive for Indian companies. The potential for trade and growth is enormous,”Richer told IANS.


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WEEKLYECONOMIC BULLETIN >> OVERSEAS INVESTMENTS


FDI inflows in February up 12% at $2 bn

FII inflows hit $10-bn for 2014; cumulativenears $200-bn mark

Foreign direct investment into India grew for the secondconsecutive month in February this year to $2.01 billion, up12.29 per cent.

In February 2013, FDI was at $1.79 billion according todata from the Department of Industrial Policy and Promo-tion.

However, for the April-February period of last fiscal, FDIinflows dipped 0.6 per cent to $20.76 billion, from $20.89billion during the first 11 months of 2012-13.

The highest FDI came in services ($2.18 billion), fol-lowed by automobiles ($1.28 billion), pharmaceuticals($1.27 billion) and construction development ($1.05 billion)in the 11 months of 2013-14.

Mauritius led the inflows into India with $4.48 billion, fol-lowed by Singapore ($3.91 billion), the UK ($3.21 billion) and the Netherlands ($2.20 billion).

In January 2014, FDI had increased 1.5 per cent at $2.18 billion.The country needs foreign investment to help regain its growth momentum. India’s economic growth slowed to a

decade’s low of 4.5 per cent in 2012-13.India is estimated to require about $1 trillion between 2012-13 and 2016-17, the 12th Five-Year Plan period, to fund in-

frastructure projects.Source: Press Trust of India

Net investments by foreign institutional investors into India so far this year has reached USD 10-billion level, while theircumulative total inflows into the country is nearing USD 200-billion mark.

According to the latest data compiled by capital markets regulator Sebi, the net investments by FIIs into Indian equitymarkets since the beginning of 2014 have crossed USD 5 billion over Rs 30,000 crore), while the same for debt marketsalso stands near USD 5 billion (about Rs 29,000 crore)-- taking the total to close to Rs 60,000 crore.

This includes net investments of about Rs 1,500 crore so far in April. This is despite a net outflow of about Rs 7,000crore from debt markets, as equity markets have seen a net inflow of over Rs 8,500 crore this month till April 25, the lat-est trading session.

FIIs, the main driver of the equity market, have helped pushed up the benchmark BSE Sensex by over 7 per cent so farin 2014 and is now being seen as moving closer to 23,000 mark.

They invested Rs 20,077 crore in Indian stocks in March, compared with Rs 1,404 crore in February and Rs 714 crorein January.

There were over 1,700 registered FIIs in the country, along with close to 6,400 sub-accounts.The strong inflows in the recent months have taken the cumulative net investments of FIIs into India to close to USD

197 billion, while their investments in rupee terms is a bit away from Rs 10 lakh crore level.Source: The Financial Express

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WEEKLYECONOMIC BULLETIN >> TRADE NEWS


Indian companies will constitute 6.6 per cent of theglobal demand for telecommunication equipment in2014-15, according to research agency Ovum. The in-dustry expects it will spend Rs 46,000 crore on buyinggear, excluding handsets. The bulk of this money will,however, be spent on buying imported equipment,mainly from Europe and China.

According to the Telecom Systems Design and Man-ufacturing Association (TSDMA), Indian firms that de-sign and manufacture and also have intellectualproperty, had a three per cent share of the nearly-Rs50,000-crore telecom equipment market in 2012-13. Adding foreign companies that have factories in India raises theshare to 10-12 per cent.

But the value added in India is less than 11 per cent. The work here is limited to system integration and packaging.The design and the intellectual property, which constitutes a large part of the value addition in telecom gear, residesabroad.

The Telecom Equipment Manufacturers’ Association paints an even more grim picture. Its chairman N K Goyal saysthe Indian market for core network equipment, excluding towers and batteries, is worth around Rs 25,000 crore but localfirms do not contribute more than Rs 1,000 crore.

Attempts to coax foreign equipment manufacturers to set up facilities in India were made a few years ago throughclauses in Bharat Sanchar Nigam Ltd’s (BSNL’s) orders that required domestic production. Of late, these clauses are notinsisted upon.

In February 2012, the government announced a preference policy in which 30 per cent of the orders of governmentdepartments would be reserved for local telecom gear makers, which would have to undertake a minimum value addi-tion of 25 per cent. The policy extended the quota to the private sector, too, asking it to source sensitive equipment fromlocal manufacturers.

But the government had not factored in lobbying by groups like the US-Indian Business Council against what they de-scribed was a violation of India’s commitments to the World Trade Organization. Succumbing to pressure, the Cabinetcleared a watered-down policy. Telecom service providers, which account for the bulk of the market, do not need to buysensitive gear from local vendors. Telecom equipment manufacturers from Israel, South Korea and Taiwan decided todrop plans for joint ventures in India after the government flip-flop.

Also, government orders requiring local sourcing did not materialise. Indian manufacturers complain tenders by thegovernment and state-owned telecommunication companies spell out restrictive clauses, such as earlier experience indelivery of similar equipment or networth rules, that keep them from bidding.

“Many government tenders impose restrictive clauses. For example, they insist on a track record. But if we have de-veloped a new technology, how can we show a track record, unless we are given a chance,” asks Sanjeev Kakkar, advisorto TSDMA.

BSNL has put out an order for routers to cater to the Rs 15,000-crore national network for spectrum project with thecondition that the manufacturer should have deployed a substantial number of similar products (like routers) in thecountry. No Indian manufacturer can meet this condition.

In contrast, when the South Korean government decided to adopt the CDMA technology, it followed it up with a policy

Over 90% of telecom gear in India’s Rs 50,000-cr market is imported

7



to back local manufacturers. Seoul identified five South Korean companies and gave them an initial order of one millionhandsets each.

The rest is history.It is also more costly to make telecom gear in India because of the scale of the global manufacturers. “Indian manu-

facturers face a (cost) disadvantage of between 20 per cent and 27 per cent against foreign companies that import,”says Goyal of the Telecom Equipment Manufacturers’ Association. Finished telecom equipment can be imported at zeroduty, but components bear a duty ranging from 10 per cent to 15 per cent. Indian telecom gear makers pay 16-18 percent interest on loans, far above their Chinese rivals. Infrastructure costs like power are higher here as well.

While most global telecom gear companies declined to comment on their imports, a source in Huawei said only afourth of its $800 million worth of equipment sold in India was made locally. He added importing from China was 30 percent cheaper.

The telecom equipment business is controlled by five companies - Huawei, ZTE, Ericsson, Nokia Siemens, and Alcatel- which have financial muscle to heft in big deals. With managed services, where equipment companies build and main-tain networks for telecom service providers, it has become a high-roller’s game.

These companies get support from their governments. Chinese banks have billions of dollars in credit lines for com-panies buying Chinese equipment. The banks offer credit at two per cent interest, payable in 15-20 years and the interestbecomes due only from the fifth year. “Which Indian manufacturer can compete against that? We are looking for the bestdeal. Why should we bother whether the gear is homemade or foreign? We pass the benefit to the consumer in low tar-iffs,” says a senior executive at a telecom services company that buys most of its equipment abroad.

It is a fair call for telecom services companies fighting a bitter battle for subscribers. Unless, of course, the govern-ment steps in to boost local production. That would mean changing the inverted duty structure, charging lower licencefees if telecom companies buy Indian, providing funds for research, and raising import duty on products made in India.Some say India should learn from China, which asked foreign companies to transfer intellectual property if they wantedto sell equipment.

Some tentative steps have been taken. State-owned Railtel and Power Grid Corporation have local sourcing in theircontracts. And Indian companies have outbid international competitors for contracts by the new special-purpose vehicleset up by the government to implement the national fibre-optic network. The government intends that by 2019-20, only20 per cent of telecom equipment in the country should be imported. At the moment, that seems like a pipe dream.




The new Foreign Trade Policy will focus on ways to boost India’s exports and reduce dependence on imports, a govern-ment official said on April 28.

“India — being part of WTO — cannot only think in terms its export promotion without equally supporting import sub-stitution.

“Therefore, the focus of the new policy would be to vigorously promote both exports and imports with significantlysubstantial focus on exports,” industry body PHDCCI said, quoting Additional Director General of Foreign Trade (DGFT)Sumeet Jerath.

Mr. Jerath said the policy (FTP 2014—19), to be announced by the new government post general elections nextmonth, will lay greater thrust on engaging with the rest of the world particularly in sectors such as pharma and engi-neering.

He said old procedures and regulations governing exporters will be trimmed and pruned to suit the export require-ments of the modern times so that the realistic targets are made achievable.

India’s overall exports fell short of the $325 billion target in 2013—14. They touched $312.3 billion.Mr. Jerath said: “It would be the attempt of the policy makers to take India ‘s share in global trade to over 5 per cent

from current level of 2 per cent in the next five year period.”He also informed the industry chamber’s members that the DGFT’s second committee report on reducing transaction

cost is ready.He said, “...(it) suggests a way forward as to how the new government should tackle the issues relating to higher

transaction cost to enable exporters achieve the desired level of exports to both developed and developing economies.”On the pharma sector, he assured the industry that new government will make sure that the domestic industry gets a

fair deal in other countries.Source: Press Trust of India

GAIL (India) has drawn up a plan to invest an estimated$7.57 billion for hiring a fleet of sophisticated LNG shipsto ferry gas from the US to India for 20 years from 2017.The PSU will soon float tenders to award contracts byNovember. The cost excludes fuel, canal and port callcharges, which, again to be borne by GAIL, will be $30million.

The public sector firm has tied up 5.8 million tonnesper annum (mtpa) of LNG imports from the US starting2017.

“It’s been decided to charter ‘new build’ ships totransport gas from the US. Step-in right (to GAIL) in theownership of LNG ships would only be possible for new build ships. Since fuel and other charges are to the charterer’saccount, GAIL is looking at chartering fuel-efficient ships,” said an official.

New Foreign Trade Policy to focus onways to boost exports

GAIL outlines $7.8-bn fleet-hire strategyto import LNG from US

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India’s exports to West Africa for the period April 2013 to February 2014 totalled around $6 billion, recording a 22.55percent growth over the past year, a foreign trade performance analysis by the department of commerce under India’sministry of commerce and industry has revealed.

Nigeria topped the list with Rs.14,526.49 crore as against Rs.13,416.91 crore over the previous period and registered agrowth of 8.27 percent. Ghana followed with Rs.4,651.73 crore as against Rs.3,591.09 and registered a 29.54 percentgrowth.

Benin registered Rs.4,384.08 crore as against Rs.2,276.32 crore and recorded a growth of 92.60 percent over the pe-riod. Exports to Togo were worth Rs.2,524.91 crore, a growth of 67.25 per cent of the previous year’s figure ofRs.1,509.68. Senegal recorded a 0.64 percent growth over the previous year’s figure of Rs.1,964.35 crore to Rs2,396.30crore for the period from April 2013 to February 2014.

Exports to Cote d’Ivoire did not fare well as it registered a minus 13.14 percent fall from Rs.1,964.35 crore toRs.1,706.30 crore.

Cameroon showed a slight increase from Rs.1,235.49 crore to Rs.1,470.65 crore. Liberia performed better registeringa growth of 149.59 percent which saw exports rising from Rs.580.92 crore to Rs.1,449.91 crore.

Guinea also saw a slight increase of 14.19 percent recording Rs.1,124.07 crore from a previous figure of Rs.984.40crore. Similarly, Mali also registered an improvement over the previous year recording a 70.92 per cent growth fromRs.350.38 crore to Rs.598.86 crore.

GAIL is considering taking up equity stakes of up to 10% in the ships with a seat at the owners’ table to facilitate thecompany to have an insight into on-board happenings (the cost of this equity is included in the GAIL’s estimated totalbudget for the LNG contracts). There is also a plan to partner Shipping Corporation of India in the venture with the optionof the state-run entity taking up stakes (up to 26%) in the ships.

The ministry of petroleum and natural gas, the sources added, had suggested to GAIL to consider awarding one-thirdof the contracts to Indian ship makers. However, this is unlikely to materialise as Indian shipyards don’t have any trackrecord of building large ships. Guarantee for performance of LNG ships for a 20-year period is part of the contracts andinducting Indian ship makers at this stage might not be viable, sources said.

Currently, about 379 LNG ships are operating globally and another 105 ships are being built/ordered. The specialisedcarriers are built mostly in South Korea and Japan by companies such as Samsung Heavy Industries, Daewoo Shipbuild-ing and Marine Engineering, Hyundai Heavy Industries, Mitsubishi Heavy Industry, STX and Hanjin Shipyard. In recentyears, China has also started making LNG ships.

Domestic players such as L&T and Pipavav had expressed interests in taking orders to build LNG vessels. GAIL ap-pointed Lloyd’s Register to carry out assessments if Indian shipyards have the requisite capability of building LNG car-rier. The consultant, however, said both L&T and Pipavav would need to create new infrastructure to build these vessels.

Moreover, the Indian firms would require six to seven years to deliver the first LNG ship, which does not meet GAIL’srequirement. Generally, it takes 30 months for Japanese and Korean companies to deliver an LNG ship.

Building an LNG ship in an Indian shipyard would involve technical risks in terms of design and integration of the shipsystem. Moreover, Indian-built ships may be rejected by US terminals, according to consulting firm Integration.

In December 2011, GAIL signed a deal with Cheniere Energy Partners to buy 3.5 mtpa of LNG from the Sabine PassTerminal in Louisiana on FoB basis. Deliveries would start between March and August 2018. In April 2013, GAIL bookedanother 2.3 mtpa capacity to export LNG from the Dominion Cover Point terminal in Maryland, delivery of which is ex-pected from September 2017.

Source: The Financial Express

Indian exports to West Africa record high growth


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New Delhi is pushing for easier visa norms and work permits from Canberra while the latter wants greater market ac-cess in the Indian higher education space as part of the ongoing free trade agreement (FTA) talks.

According to commerce ministry officials, the two sides are yet to agree on tariff lines (merchandise) to be broughtunder the purview of the pact though each wants easier access to the other’s services markets.

“The FTA talks are in progress right now and we have not yet reached a meeting point on tariff lines. We would like toexport services where we are good at besides seeking easy visa norms and work permits. We want visa relaxation in cer-tain areas and they want to sell more agri products to us,” said a commerce ministry official involved with the FTA nego-tiations.

On the other hand, Australia is willing to export its education services in the form of teaching and universities to India.The India-Australia FTA talks began in 2011 and five rounds of negotiations have already taken place with the sixthround set to happen in New Delhi later this year.

In 2012-13, India’s merchandise exports to Australia stood at $2.3 billion and imports were $13 billion while in 2013-14 (April-December), the exports were $1.6 billion as compared to imports of $7.7 billion in the period.

India has so far implemented free trade pacts with Singapore, Korea, Japan, Malaysia and Asean and is negotiatingsimilar pacts with Australia, Canada, European Union and New Zealand.

Trade with Australia has been hit this year due to restrictions imposed on import of gold in the form of higher importduty and the 80-20 rule of the Reserve Bank of India.

“An increase in export of services depends on the visa norms and work permits and both sides want as many com-modities as they can to be included in the FTA. Hence, it is very difficult to put a timeline for the completion of the FTA,”the official added.

Source: The Financial Express

Burkina Faso recorded a growth of 38.82 percent moving from Rs.406.18 crore to Rs.563.86, whilst Sierra Leonerecorded a negative 40.26 growth by registering Rs.512.87 crore as against a previous figure of Rs.858.44 crore.

Niger registered a 73.97 percent growth increasing its Indian imports from Rs.287.42 crore to Rs.458.85 crore whilstGambia recorded an increase from Rs.266.27 crore to Rs.458.85 crore. Guinea Bissau recorded a 210 percent growthwith a figure of Rs109.85 crore from Rs.35.44 crore in the corresponding time last year.

The total Indian exports, including re-exports, up to March 2014 were valued $9.57 billion (Rs.180,469.82 crore) whichwas 3.15 percent lower in dollar terms (8.61 percent higher in rupee terms) than the level of $30.54 billion(Rs.166,159.46 crore) during March 2013. Cumulative value of exports for the period April 2013 to March 2014 was$312,355.45 million (Rs.1,892,892.23 crore) as against $300,400.69 million (Rs.1,634,318.84 crore) registering a growthof 3.98 percent in dollar terms and growth of 15.82 percent in rupee terms over the same period last year.

Overall imports for the same period were valued at $40.08 billion (Rs.244,579.27 crore) representing a negativegrowth of 2.11 percent in dollar terms and growth of 9.79 percent in rupee terms over the level of imports valued at$40.94 billion (Rs.222,774.70 crore) in March, 2013.

Cumulative value of imports for the period April 2013 to March 2014 was $450.9 billion (Rs.2,719,206.15 crore) asagainst $449.07 billion (Rs.2,669,161.96 crore) registering a negative growth of 8.11 percent in dollar terms and growthof 1.87 percent in rupee terms over the same period last year.


FTA with Australia: Push for easy visa, noconsensus on tariff


11


India’s $360 million imports of synthetic butyl rubber, usedmainly to make tyres, may soon be rendered unnecessary aftera Russian joint venture with Reliance Industries starts produc-tion end-2015, a top official has said.

Russian gas processing and petrochemicals major Sibur hasa 25:75 joint venture with Reliance and the upcoming plant atJamnagar is set to commence production by the end of nextyear, said Evgeny Griva, chief executive of Sibur PetrochemicalIndia.

“Sibur believes that once production begins at Jamnagar,India will stop importing butyl rubber,” Griva told IANS, addingthe current imports were estimated at 60,000 tonnes perannum as against the plant’s capacity of 100,000 tonnes.

The $7.6-billion Sibur’s projections for India are based on a conservative medium-term growth in demand for butylrubber at around 6.3 percent per annum, thanks to India emerging as a major hub for small cars.

“Production of small cars in India increased eight percent last year and is expected to maintain the same growth rateover the next there years. We anticipate a similar growth in demand for butyl rubbers as in tyre production,” Griva said.

According to him, Russia has a leading position as a supplier of butyl rubber to the global market. “We at Sibur areamong a few companies with technology to produce butyl rubber and the practical experience to produce and sell ourproduct,” he said.

“We are using a unique solution polymerization technology in Jamnagar. It is consistent in product quality and is alsoeco-friendly since it uses non-toxic solvents,” the Russian chief executive said.

The technology is currently only being used at at Sibur’s Togliattikauchuk plant in Togliatti in the Samara region ofcentral Russia which has been operating since the early 1980s.

India’s tyre output is expected to expand rapidly, with the credit ratings agency ICRA estimating growth at 8-10 per-cent a year to drive the Indian synthetic rubber industry forward.

“Once domestic demand is being satisfied in India, Reliance Sibur Elastomers may export its remaining output toneighbouring countries. But our joint venture’s prime focus will be India”, Griva said.

Sibur Petrochemical India, the group’s subsidiary since in 2012, is also conducting detailed research on the country’spetrochemical market and the related business development to tap the demand.

“India’s per capita consumption of polyolefins lags well behind that in other countries in Southeast Asia and furtherbehind Western Europe or North America. The demand will only grow as personal incomes are rising and consumptionpatterns changing,” Griva said.


Russian joint venture promises to endIndia’s butyl rubber import


WEEKLYECONOMIC BULLETIN >> SECTORAL NEWS

Taking a big step in its “long-term vocation” in India, Spanish brewing company Mahou-San Miguel announced the totalacquisition of its Indian subsidiary Arian Breweries & Distilleries.

The Spanish group entered into a joint venture with the Indian company in 2012 and so far owned half of it. “This acquisition confirms the long-term vocation of Mahou-San Miguel in the nation, where good initial results and

encouraging perspectives for market expansion predict a future of growth,” the company said in a statement. According to the European venture, Mahou-San Miguel has 60 professionals and a beer production factory unit situ-

ated in the western Indian state of Rajasthan with an annual production capacity of 250,000 hectolitres. The Spanish group is currently present in five states of India with a local brand, Dare Devil, and after learning “more

about the Indian market”, it will expand in the Asian nation with Mahou Cinco Estrellas and Alhambra Reserva 1925. “Now we have the knowledge and experience to step forward and take total control of our business in India”, Alberto

Rodr guez-Toquero, the director general of Mahou-San Miguel, said. The per capita consumption of beer in India is one of the lowest in the world (1.5 litres per year), although it is equiva-

lent to half the beer market of Spain, where the per capita consumption is 47.5 litres. “However, with a population of 1.2 billion, growth prospects for the Indian beer industry are very positive and it is esti-

mated that in the next three years will increase by 11 percent,” the statement said. Also, on producing beer in the South Asian nation, the Mahou-San Miguel group will avoid taxes on the final price of

the product, as tariffs on imported foreign alcoholic beverages are very high in India. These tariffs, that can triple the selling price of the product, have not prevented other Spanish breweries, such as Es-

trellas Galicia and Estrella Damm, from exporting for the Indian market. The local distributors of Estrella Galicia and Estrella Damm, B liquid and Cerana respectively, told EFE Monday in New

Delhi that in addition to a cumbersome bureaucracy, heavy tariff is a main problem for commercialising their beer inIndia.

“We are selling Estrella Galicia since 2012 in western India (Mumbai, Pune), while due to bureaucratic problems salesin northern cities, such as New Delhi and Gurgaon, are delayed by four months”, Rajesh Irani, representative of B Liquid,said.

However, Cerana affirmed the sale of Estrella Damm since the beginning of 2012 in the main Indian cities. Cerana’s spokesperson Ankur Sharma said despite “taxes and bureaucracy”, the beer “is being very well received by

the Indian public”. Source: Indo-Asian News Service

Spanish brewery enters India with totalacquisition of subsidiary

12


13



An NRI-founded hotels company plans to set up 100 eco-friendly hotels in India in the next eight years, its founder andChief Executive said here last night.

Noting that the Eco Hotels UK Plc has developed the world’s first carbon neutral hotel brand, The Eco and Ecolodge,Suchit Punnose, the CEO of Red Ribbon Asset Management said: “The first market we are targeting is the growth marketof India which has one of the largest demands for hotel rooms in the market.”

“It is the intention of the company to develop an inventory of 10,000 rooms by 2022 which will amount to 100 hotelswith 100-room average,” he said.

Red Ribbon Asset Management, the owners of Eco Hotels UK, is setting up India’s first steel modular buildings factoryin Indapur, Pune, which will commence production in 2015 with an annual capacity to roll out 40 hotels with 100 roomseach per annum.

“The ability of the steel modular technology to deliver a hundred room hotel completed in 24 weeks on a fixed costand time guarantee is a powerful tool for Eco Hotels UK Plc to achieve its roll out target,” said Punnose.

The Eco and Ecolodge will represent premium value budget pricing across all properties. The properties will have solar roof top and wind turbines to generate green energy and the buildings will have high

LEEDs rating as it is built on modular technology thereby significantly reducing the carbon footprint, he said. “We are planing to increase our operating inventory levels to 300 rooms in FY 2014/15 and rapidly scale up the roll

out of the franchises across the country this year. “We have identified issues related to Indian hotel sector and have definitive plans to mitigate them to deliver uniform

guest experience and value for money in a professional manner across all our properties,” said Jay Krishnan, CEO of EcoHotels UK Plc.

Eco Hotels IndiaBSE 4.62 % will create employment for nearly 12,000 people over the coming years. “We will be setting a clear and committed target to ensure that there is responsible and sustainable development of

our hotel properties and lead the way to setting a genuine commitment to tackling the environmental impact of hotelswhich is one of the most polluting industries in the world,” Punnose said.

Source: The Economic Times

UK firm plans to set up 100 eco-friendly hotels in India

The National Agricultural Innovation Project (NAIP) has led to an increase in the annual income of farmers in 500 vil-lages in India from Rs.15,000 to Rs.200,000, an official said here Tuesday.

NAIP director Rama Rao said the project has further created a Rs.150 crore horticulture market owned by erstwhilestreet flower vendors by helping them use technological innovation to increase the usability of flowers from a day tothree days.

The NAIP will be organising an “Agri-Innovation Conclave” May 18-19 in New Delhi, and it will be preceded by a KisanParivartan Yatra May 11-18 from Hyderabad to New Delhi via Nagpur, Bhopal and Mathura.

“The yatra and the conclave will serve as vehicles where farmers who have benefitted from the NAIP will share waysand means of converting technologies and innovations into successful business enterprises,” said S. Ayyappan, directorgeneral of the Indian Council of Agricultural Research (ICAR), which launched the NAIP in 2006.

‘Agriculture project helped farmers’ income reach Rs.200,000’

In the past 10 months, 81 power projects, worth Rs 3.2lakh crore, have taken off and seen actual investmenton the ground, show data available with the centralsecretariat’s project monitoring group (PMG). Now, thegroup is planning to facilitate investments in 212 addi-tional projects, worth Rs 10.57 lakh crore.

No action is expected to be taken in the case of 58projects (worth Rs 4.5 lakh crore), which have beenheld up due to litigation.

During the past 10 months, the power sector alonecontributed to 98 per cent of the actual investment ofRs 3.35 lakh crore into the economy; the rest was ac-counted for by the coal and petroleum sectors. Actualinvestments in the petroleum sector stood at Rs2,634.14 crore, while for the coal sector, it was Rs9,732.34 crore.

Currently, the PMG has data on 113 of the 153 projects it helped clear in the past 10 months. So far, Rs 3.25 lakhcrore has been invested in projects, against the planned investment of Rs 3.66 lakh crore.

Since its inception in June 2013, the PMG has helped clear 153 projects, worth Rs 5.2 lakh crore. “As far as 58 proj-ects are concerned, these are held up due to various reasons such as court cases and other disputes, and there is noth-ing much the PMG can do about those. As far as the actual investments go, a lot of it had already happened and somemore investments were held up due to clearance issues, which we have been able to address,” said Anil Swarup, head ofthe PMG.

As of April, the overall value of projects before the PMG stands at Rs 21.63 lakh crore.“The PMG has been instrumental in ensuring clearance and these have helped in move a number of projects. But at

the ground level, there is a lot of work to be done and projects are yet to take off. The power sector has been grapplingwith bad assets since the past few years,” said Vishwas Udgirkar, senior director, Deloitte.

In a report last month, Credit Suisse said even after a new government came to power, the power sector would con-tinue to face hurdles. “Two-thirds of the projects awaiting central approvals are in power and steel sectors, both seeingmassive overcapacity, obviating new investments. True utilisation in thermal power generation is below 60 per cent,

14



“By facilitating research on production, processing, value addition, marketing, resource use, pilot scale testing of de-veloped technologies etc, the NAIP has gone a long way in improving the livelihood of poor people in rural areas,” headded.

The NAIP, which is partly funded by the World Bank, has ensured that Re.1 spent in agriculture is bringing back Rs.13for rural farmers, Rao said.

“Our aim is to bring strategic research in the field of agriculture and related areas and develop indigenous technolo-gies so that we do not have to depend on foreign technologies,” he said.

Rao further said that NAIP innovations have led to the development of 82 production technologies and 137 processingtechnologies that were adopted by rural farmers.

The NAIP is currently spread across 364 centres in India with 203 sub-projects.Source: Indo-Asian News Service

81 power projects take off in 10 months

15



near 20-year lows. Of the litany of problems in the sector, two are crucial — state electricity board reforms and coal avail-ability. We disagree with the consensus view that elections can revive the investment cycle.”

The PMG says states such as Odisha and Chhattisgarh lead others in the number of projects to be set up, including inthe power, roads, mines and petroleum and natural gas sectors.

The PMG was set up last year by the prime minister to monitor and fast-track clearances for infrastructure projectsthat required investment exceeding Rs 1,000 crore. While the group has facilitated clearances to 91 projects in the powersector so far, it has also been able to fast-track investments in seven road projects and six shipping projects. Projectsworth Rs 9.3 lakh crore in the power sector are before the PMG; steel projects worth Rs 4.9 lakh crore are pending with it.


16

WEEKLYECONOMIC BULLETIN >> NEWS ROUND-UP

In the past few weeks, institutional advisory firms havebeen vocal against salary increase to company heads,especially firms undergoing financial stress or undercorporate debt restructuring (CDR). Giving specific ex-amples, the advisory firms advised against the remuner-ation increase for chiefs of Educomp and Suzlon Energyand said salary increase should be backed by improve-ment in financials.

The problem, however, will be resolved to a great ex-tent with the new Companies Act making it mandatoryfor firms to make additional disclosures and limit salaryincrease when a company is staring at a weak balancesheet.

The Companies Act, 2013, which came into effect recently, says the board of directors of every listed company andsuch other class or classes of companies shall constitute the nomination and remuneration committee. This committeehas to ensure the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate direc-tors of the quality required to run the company successfully.

Further, the Act says the committee should ensure the relationship of remuneration to performance is clear and meet-ing appropriate performance benchmarks. Also, remuneration to directors, key managerial personnel, and senior man-agement should involve a balance between fixed and incentive pay, reflecting short- and long-term performanceobjectives appropriate to the working of the company and its goals.

“The remuneration payable to any one managing director; or whole-time director or manager, shall not exceed five percent of the net profit of the company. If there is more than one such director, the remuneration shall not exceed 10 percent of the net profit to all such directors and manager taken together,” the Act says.

In March, Tulsi Tanti, chairman of Suzlon Energy, was re-appointed by the company’s shareholders as managing direc-tor for three years. The decision was taken via postal ballot from the company’s shareholders who also voted an increasein his salary to Rs 3 crore from Rs 2 crore a year. However, proxy advisory firm Institutional Investor Advisory Services(IiAS) advised against the appointment due to weak performance of the company.

“Despite the tough times, the company has managed to retain its prized customers and he remains sanguine aboutbringing a positive turnaround for Suzlon in the future,” Suzlon said in a press release announcing the re-appointment ofTanti. However, in mid-2012, Tanti had taken a voluntary pay cut of Rs 1.46 crore in compensation. In fact, his annualtake-home reduced to Rs 53.7 lakh, while he was entitled to Rs 2 crore.

However, IiAS was against the pay hike to Tanti as it believed any increase in remuneration should be linked to im-provement in performance. “Under Tulsi Tanti’s leadership, the company’s performance has continued to falter and thecompany is now under a corporate debt restructuring programme. IiAS believes that promoters’ interests will also beserved by bringing in new management,” the advisory firm said in a press release.

Shriram Subramanian, founder and managing director, InGovern Research Services, explained there were many in-stances where the company has gone into CDR in recent times, yet the chairman or managing director’s salary is raised.He pointed out that in companies such as Hindustan Construction Company (HCC), Jindal Stainless and Hotel Leela Ven-tures, the chairman and managing director’s salary was increased in FY13 compared to FY12.

For instance, in HCC, the annual salary was raised to Rs 10.66 crore in FY13 from Rs 5.88 crore in FY12. Similarly, inJindal Stainless, the chief’s annual salary stood at Rs 10.08 crore in FY13 compared to Rs 8.99 crore in FY12. In Hotel


New Companies Act eases concerns overhigh pay

17


WEEKLYECONOMIC BULLETIN >> NEWS ROUND-UP

India will push for early conclusion of an economic accord with Indonesia to achieve the bilateral trade target of $25 billionby 2015, with cumulative Indian investments of $20 billion into this country, the Indian envoy here has said.

“Indian and Indonesian companies need to build partnership, especially in sectors like infrastructure, services and manu-facturing,” Indian Ambassador Gurjit Singh told a meeting of business chamber members of the two sides in Jakarta.

“Such a partnership can be in the form of joint partnership in each other’s countries, ASEAN or third countries,” the envoysaid, adding the focus areas can be pharmaceuticals, agriculture, SME sector, capacity building and human resource devel-opment.

He said as a strategic partner, India offered opportunities to young Indonesians for capacity building by way of 125 schol-arships per year. He also hoped the comprehensive economic cooperation agreement will be signed soon.

“India has also provided assistance to set up vocational training centres here and at Banda Aceh. We are now planning toopen another vocational training centre in Papua,” he disclosed.

The interaction was organised by the embassy of India between the members of the India Business Forum and KADIN In-donesia (Indonesian Chamber of Commerce). KADIN chair Suryo Bambang Sulisto was among those who addressed theevent.

Sulisto acknowledged India’s fast development and said it has lot to offer Indonesia in areas like IT, education, health andpharmaceuticals. He also called for ties among universities, and scientific, research and technology institutions of the two sides.

The India Business forum, an initiative of the Embassy of India in Jakarta, was set up in 2012 to bring together Indian and In-donesian entrepreneurs and professionals so as to facilitate economic engagement, new investment and technology infusion.


Leelaventures’ case, too, the salary was raised to Rs 2.42 crore compared to Rs 2.01 crore in FY12. While HCC and JindalStainless declined to comment, Leelaventures did not respond to emails sent by Business Standard.

Subramanian said the public shareholders were also affected as CDR often involves conversion of debt into equity andfunds infusion from promoters, which result in significant wipe-out of public stake. “However, it seems the least affectedparty is the promoter, who, although being mandated to provide additional funding, is seen to take cash out throughhigher salaries, while also retaining control and ownership of the company. The lenders as well as the public sharehold-ers should hold the promoters and the board more responsible in such cases,” he said.

The international practice in such cases is for the shareholders to take a stronger stance. In the case of Citi, its former chiefexecutive, Vikram Pandit, was being paid $1 for the previous two years before his proposal of raising his salary to $15 million.The shareholders voted against the proposal. However, the company went forward with the proposal on the grounds that sayon executive compensation was a non-binding vote. A few months after getting the raise, Pandit left the company.

While the Companies Act has stipulated certain limits on salary during financial stress, it also says the limits can beexceeded if the company makes a request to the Centre after obtaining approval through a special resolution from theshareholders. Hence, Subramanian said the onus is on shareholders to vote against such proposals and not let the com-pany further drain its funds on increased remunerations.

Amit Tandon, founder and managing director of Institutional Investor Advisory Services India, said, “Pay should belinked to performance. Executives should refrain from taking pay hikes when there is a fall in performance/profitability ofthe company. The remuneration should also be in line with industry peers and must not be higher than the remunerationpaid during years in which the company made adequate profits.”


Indian envoy for early economic accord with Indonesia

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