News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of December 2015
Ease Of Doing Business Report & Relaxation In Fdi Norms
We Are More Friendly Now. (Are We?)
Looks like the Narendra Modi-led government’s attempts for making India a business-friendly nation, has started showing results. In a sign that Modi’s reforms are working, India has jumped four positions in the World Bank’s 2016 report on ‘Ease of Doing Business’. India has been ranked 130th among 189 countries in terms of doing business, as compared to its 134th rank in the 2015 edition of the report. Initially, India was ranked 142nd, however, after the World Bank’s mid-year revision, the country’s spot was recalculated and adjusted to 134. The improved ranking was on account of two major factors – ‘ease of starting a business’ and ‘getting electricity’. India moved nine steps up from 164th last year to 155th this year in terms of ease of starting a business which was essentially attributed to the removal of a paid-in minimum capital requirement. While India climbed up the ladder, Pakistan fell 10 positions to 138th from 128th last year.
To further position India as an improved, new-age destination for foreign investments, the Centre also announced a relaxation in FDI rules across 15 sectors like defence, real estate, banking, civil aviation, retail, broadcasting, etc. While in some cases the government has increased the cap on FDI through the automatic route, in others, it now permits Indian companies (manufacturing in India) to sell their products through the e-commerce channel without the Centre’s approval. Nirmala Sitharaman, MoS (IC) for Commerce and Industry, GoI, while talking about the announcement tells The Dollar Business that, “Reforms were brought in to get some buoyancy in sectors that are cash-starved. Relaxation of the rules governing FDI in such sectors will also generate more employment opportunities for Indian youth.”
It is to be noted that PM Modi wants to see India amongst the elite top-50 club of the ‘Doing Business’ ranking. While it is arguable if India will be able to leapfrog into the desired spot by 2019, it is for sure that government’s small steps in encouraging FDI and governance may fetch an improved position for the country in the 2017 report.
Ban Lifted
Back on the menu
The many months of wait for Maggi lovers is finally over. Nestle India relaunched its Maggi noodles in the second week of November just before the festive season. Five months after they were banned due to alleged presence of high levels of lead, Nestle resumed the sales of instant noodles, rolling out the masala version of the popular brand. The Swiss food major has also partnered with Snapdeal for online sales. Nestle India, however, said that the noodles wouldn’t be available in eight states that had banned its sales. The relaunch couldn’t have come at a better time as it coincided with the Diwali festival in the country. Food Safety and Standards Authority of India (FSSAI) had in June this year banned Maggi noodles stating that its consumption was “unsafe and hazardous” due to the presence of high levels of lead and taste-enhancer monosodium glutamate (MSG). While the Bombay HC had lifted the ban in August, it had mandated Nestle to test the product again in labs before relaunching the product. Finally, the worst seems to be over for Nestle India.
SPECIAL NOTIFIED ZONE
Diamonds in the rough, shine bright!
Here’s a reason for diamond traders to rejoice! In an effort to facilitate participation from the global diamond mining companies and make India a global trading hub for precious stones, the government has allowed the display of rough uncut diamonds in the Special Notified Zone (SNZ) without tax. The government announced that the “income from rough diamonds displayed in Bharat Diamond Bourse’s (BDB) Special Economic Zone (SEZ) from April 1, 2015 will not be taxable under the Income Tax Act, 1961.” At the same time, an SNZ has been set up in the Bharat Diamond Bourse in Mumbai for carrying out trade of uncut diamonds. Once functional, the SNZ would be a big help to Indian diamond traders as it would enable them to deal with international miners directly. India polishes about 85% of the world’s total rough diamonds, but only 15% are imported directly without the help of middlemen.
RUBBERWOOD
Threat from the East
The domestic rubberwood industry, which has so far held steady notwithstanding falling prices, is under pressure. Thanks to the rising imports of rubberwood and furniture made from it from China and other countries. With South Asian countries and China having already overtaken India in the rubber industry, their growing exports of rubberwood has come as a setback for India’s domestic players. Apparently, imported rubberwood and furniture from countries like China, Malaysia and Vietnam is finding more takers in India because of the variety, style and price-factor, and that has hit the domestic industry hard. To add to the burden of domestic players, Indian growers are unwilling to cut rubber trees, which is likely to affect the availability of rubberwood in the local market. Whichever way you look at the situation, it’s bad news for the Indian industry.
EXPORT HUB
Expanding footprints
The story of India becoming a global export hub for small cars appears to be inching closer to reality. After global behemoths like Ford, Toyota, Volkswagen and GM announcing to manufacture in India with an export focus, Nissan’s budget brand Datsun has hinted at using India as a manufacturing base to augment the company’s footprint on the world map. The Japanese car manufacturer will soon be commencing exports from India to Africa, Southeast Asia and SAARC countries. At least a third of Nissan India’s net sales are expected to come from the said exports, out of which Chennai port may export to 10-20 countries including markets in African, Southeast Asian and SAARC regions. The push comes as the relaunch of the brand fell short of expectations. By making India an export hub, the company is expected to reduce the market risk, making the situation work in its favour.
INDIA AFRICA FORUM SUMMIT
Friends with (business) benefits
Pitching for deeper trade ties, India offered a concessional credit of $10 billion to Africa in the next five years, which is double of the existing commitment. This apart, a grant assistance of $600 million was announced by India at the India-Africa Forum Summit held in the national capital. India had, during the first IAFS in 2008, given Africa a $7.4 billion soft loan, along with a grant for $1.2 billion, which was used in nearly 140 projects across 41 African nations. Prime Minister Narendra Modi during the inaugural session said that “India will give high priority to increase trade and investment flows between the two sides.” Technology will be the foundation of this partnership. PM Modi announced that India will also create 100 capacity building institutions, and help develop infrastructure, public transport, and manufacturing capacity, in addition to improving agriculture, irrigation and provision of clean energy across the continent. Trade between India and Africa has doubled to over $70 billion in less than a decade.
MAKE IN INDIA
On the fast track
Indian Railways has awarded contracts worth $5.6 billion to General Electric and Alstom for the supply of new locomotives. The move to rope in foreign companies is seen as a bid to help modernise Indian Railways and strengthen India’s position as a manufacturing hub. As part of the $2.6 billion deal, GE will develop and supply India with 1,000 diesel trains over the next 11 years along with a $200 million investment in building a manufacturing facility in Bihar. The deal is the largest in the US company’s 100-year history in India. At the same time, Alstom has won a deal worth $3 billion, which includes supplying 800 electric locomotives to India and building a new factory in Bihar. What’s worth mentioning is that these contracts are the first and the largest to be awarded to foreign companies ever since the government allowed 100% foreign direct investment (FDI) in the railway sector. Experts view the two deals as a major boost to the government’s Make in India programme.
Modi’s UK visit
2 nations + 3 days = $14 billion
David Cameron British Prime MinisterPrime Minister Narendra Modi’s visit to Britain turned out to be economically engaging as India and UK signed more than 20 commercial deals worth 9 billion pounds ($14 billion), covering sectors like energy, environment, finance and banking. The two nations agreed to strengthen defence ties with more joint military drills, besides welcoming a collaboration to promote clean energy and HSBC’s ‘skills for life’ initiative in India. PM Modi also acknowledged announcements by Bharti Airtel, HDFC and SBI for using London to raise finance. Other major deals included an agreement with UK listed OPG Power Ventures Plc which will invest in India to create 4200 MW of new power (solar, thermal and renewable) capacity. The two sides also announced a new ‘ease of doing business’ partnership which is expected to provide impetus to the bilateral trade. Interestingly, trade between the two countries stands low, with UK ranking 18th among India’s top 25 trading partners.
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