India Economic Newsletter
No. 09/15
Monthly publication of Embassy of India, The Hague
September 7, 2015
Contents
Ambassador Presents
Credentials ………………….. 1
India's Finance Minister views
growth in manufacturing as
positive and reaffirms that
economy firmly on growth path
............................................. 1
India to witness stable growth
momentum: OECD ................ 2
100 cities shortlisted for Smart
Cities Mission ....................... 2
100% equity divestment after
two years of construction
completion for all BOT projects
irrespective of year of award
permitted ............................. 2
Government to increase health
care investment to 2.5% of GDP
by 2020 ................................ 3
Government to construct 1,000km expressways.................... 4
India to overtake US as the 2nd
largest smartphone market by
2017 ..................................... 4
Super-rich population in India
rises 17% .............................. 4
Organic food business grows
four-fold in 3 years ............... 5
Auto sector may generate $300
billion revenue by 2026, create
65 million jobs...................... 5
Telecom companies eye a share
of over $1-billion 4G revenue 5
Google to launch YouTube
production studio in Mumbai 6
Kellogg plans first R&D unit in
India ..................................... 7
Foxconn plans e-commerce
platform in India .................. 8
Foxconn to set up production
unit in Maharashtra for $5 bn8
Bosch to make more products in
India ..................................... 9
Ambassador Presents Credentials
On Wednesday, September 2, 2015, Ambassador of
India, H.E. Mr. J. S. Mukul presented the credentials to
His Majesty Willem-Alexander, King of the Netherlands.
Ambassador Mukul was invited to inspect the Guard of
Honour at the Palace before presenting the credentials to
His Majesty.
After presenting the Credentials, the
Ambassador and his spouse had a meeting with the King
for about 20 minutes. Issues of mutual interest to India
and the Netherlands were discussed. Secretary General
of the Ministry of Foreign Affairs Mrs. Renee Jones-Bos
was present in the meeting.
India's Finance Minister views growth in
manufacturing as positive and reaffirms that
economy firmly on growth path
Finance Minister, Mr Arun Jaitley, said growth in
manufacturing sector is a positive development and
shows that the economy is firmly on the growth path as
the Index of Industrial Production (IIP) data showed that
factory output grew at 3.8 per cent in June 2015, which
is its fastest pace in four months. The growth in factory
output was mainly due to a 4.3 per cent increase in the
manufacturing segment, which was led by consumer
durables and basic goods. Consumer goods have shown
an output growth at 6.6 per cent while consumer
durables sub-segment grew at 16 per cent. At the same
time, retail inflation for July 2015 has reduced to 3.8 per
cent from 5.4 per cent in June 2015. Indirect tax
revenues have also increased 37 per cent to over Rs
210,000 crore (US$ 33.6 billion) in the period April-July
this year on the back of higher excise duty collections.
(IBEF: August 13, 2015)
India News
2
India to witness stable growth momentum: OECD
The Organisation for Economic Cooperation and Development (OECD) expects India’s
growth momentum to be stable in contrast to mixed trends expected in several other
developing and developed economies. In June 2015, OECD had expected India’s growth
to remain strong and stable at 7.3 per cent for the year, led by revival in investments.
The growth expectations are based on Composite Leading Indicators (CLIs), which are
designed to anticipate turning points in economic activity in relation to the trend. Based
on CLIs, peer nations are expected to witness loss in growth momentum. Apart from
OECD, several other organisations expect India’s growth momentum to be maintained.
The Reserve Bank of India (RBI) retained India’s growth forecast for the financial year
2015-16 at 7.6 per cent. (IBEF: August 11, 2015)
100 cities shortlisted for Smart Cities Mission
Signaling the near completion of stage I of its ambitious Smart Cities Mission, the
Government stated that it has shortlisted 100 cities across India for the plan. The
Government had, a few months ago, signed off on a Rs.1 trillion (US$ 16 billion)
urbanization plan after the Union Cabinet approved the proposal to create 100 smart
cities.
Prime Minister Narendra Modi had launched three government flagship schemes in June
this year aimed at changing the face of urban India—Smart Cities Mission, Atal Mission
for Rejuvenation and Urban Transformation (AMRUT) and Housing for All mission with
an expected expenditure of around Rs.4 trillion over the next few years.
The Prime Minister had said that the smart cities will be selected on the basis of a city
challenge competition. States will nominate top cities based on the scores. The 100 cities
will then prepare smart city plans, which will be evaluated again and the top 20 cities
will be finally selected for funding. (Livemint: August 12, 2015)
100% equity divestment after two years of construction completion for all
BOT projects irrespective of year of award permitted
The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Mr. Narendra
Modi has amended its earlier approval dated 13th May, 2015, for permitting 100% equity
divestment after two years of construction completion for all BOT projects, irrespective of
year of award. The approval would allow the concessionaire(s)/promoter(s) to use
proceeds from the sale of divested equity in one or more of the following:
(a) Incomplete National Highway Authority of India projects.
(b) Any other highway projects.
(c) Any other power sector projects; and
(d) to retire their debt to financial institutions in any other infrastructure projects.
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India News
The main object of the approval is to expedite award and implementation of highway
projects in the country by making additional funds available for investment in projects.
Consequently, it will facilitate uplifting socio-economic condition of the entire nation due
to increased connectivity across the length and breadth of the country and also lead to
enhanced economic activity. (Press Information Bureau: August 27, 2015)
Government to increase health care investment to 2.5% of GDP by 2020
The Government plans to increase public investment in health from 1.04 per cent of GDP
(gross domestic product) to 2.5 per cent by 2020, with 70 per cent of this being dedicated
to primary health care. This target has been set in the overhauled draft National Health
Policy that now emphasizes on substantially ratcheting up Government investment in
public health care facilities across the country.
A draft policy was first put up for public discussion in December 2014 and has
substantially been revised putting up specific targets focusing on increasing Government
spending on public health services. Under the revised version, the Government plans to
ensure that it spends an average Rs 3,800 per capita annually on health as compared to
less than Rs 1,000 being spent at the moment at current prices.
While at least 70 per cent of the funds would be spent on primary health care, 20 per
cent would be spent on secondary health care and 10 per cent on tertiary health care. Of
the total funds required, the Union Government would provide 40 per cent, which could
be shored up through a health cess on the lines of an education cess. States would be
encouraged through performance based incentives to ensure that at least 8 per cent of
their annual budgets are dedicated to providing health services.
The draft policy says the Government would provide essential and generic drugs and
diagnostics free of cost for all primary health care needs in the country - something the
Finance Minister had announced in the previous Budget. At the tertiary care level too,
patients in geriatric and chronic care concerns would get most drugs and diagnostics
either free or subsidized with fair price selling mechanisms for most and payment by the
well-heeled.
A very detailed road map for the implementation of the policy has also been prepared on
a phase-wise basis in which specific quantified targets have been proposed and
parameters have been set for countrywide health status, performance of public health
facilities, the financial plans and other deliverables under the policy.
The focus would be on investing to build up public health facilities in rural and urban
India. To meet strategic gaps in the supply that public health infrastructure cannot
provide, the Government will procure specific services from the private health care
industry under a regulatory framework in the secondary and tertiary health sectors.
There too the not-for-profit private sector would be encouraged. In case of need, primary
care facilities could also be contracted out to the not-for-profit private sector under the
policy besides seeking non-medical as well as advanced diagnostics and ambulance
services from outside the Government system. The procurement of services from the
private sector would be done by autonomous authorities and trusts under the Ministry of
Health at the Centre and State levels.
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India News
4
The Government plans to boost investments and focus on domestic pharmaceutical
companies as well as promote Prime Minister's 'Make in India' plans in the medical
equipment sector under the policy.
The policy proposes setting up task-forces to also formulate detailed 'preventive and
promotive' health care strategies in seven areas and schemes such as Swacch Bharat
Abhiyan and Nasha Mukti Abhiyan involving all concerned ministries.
(Business
Standard: August 19, 2015)
Government to construct 1,000-km expressways
The Union Government has approved a plan for construction of around 1,000 km of
expressways at an estimated cost of Rs 16.68 crore (US$ 2.6 billion) on a design-buildfinance-operate-transfer (DBFOT) mode. Based on the traffic intensity and commercial
potential, the project will be prioritized. The corridors approved for the development of
expressways include
Delhi-Chandigarh (249 km), Bengaluru-Chennai (334 km), Delhi-Jaipur (261 km),
Vadodara-Mumbai (400 km). In addition to the above, the Government will also take up
the 135-km Eastern Peripheral Expressway at an estimated cost of Rs 5,763 crore.
This was informed by Minister of State for Road Transport & Highways Pon
Radhakrishnan in reply to a question in the Rajya Sabha (Upper House of Parliament).
(Business Standard: August 11, 2015)
India to overtake US as the 2nd largest smartphone market by 2017
With 26.5 million smartphones shipped in the second quarter, representing a 44 per cent
growth year-on-year (y-o-y), IDC predicts by 2017 India will overtake US to be the
second-largest smartphone market globally.
IDC expects India to maintain a double-digit growth rate over the next few years as
people switch to smartphones and gradually upgrade to 4G.
The strong June quarter performance saw smartphone shipments grow 19 per cent
following a sluggish March quarter, said International Data Corporation’s (IDC) Quarterly
Mobile Phone Tracker. A total of 18.4 million units were shipped for the same period last
year.
However, this growth was specific to smartphones only as the overall Indian mobile
phone market shrunk six per cent in the June quarter on a y-o-y basis. Vendors shipped
59.4 million units in April-June period of 2015 compared to 63.2 million units shipped in
the same period a year ago. (Business Standard, August 12, 2015)
Super-rich population in India rises 17%
Growing opportunities in e-commerce, a rising stock market and an optimistic economic
outlook have helped the number of ultra-high net worth households (UHNHs) in India
grow 17 per cent in the financial year 2015.
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5
India News
In the current financial year, the number of families with net assets (excluding residence)
of more than Rs 250 mln was around 137,100, against 117,000 a year back, according to
Kotak Wealth Management’s annual wealth report, Top of the Pyramid 2015.
“New emerging industries armed with disruptive technology have created space for a
different economy, which has propelled the number of young ultra-rich entrepreneurs,”
said C Jayaram, Joint Managing Director, Kotak Mahindra Bank Limited. The population
of UHNHs has seen a compound annual growth rate (CAGR) of 22 per cent in the past
five years. And over the next five years, it was expected to grow at a CAGR of 26 per cent
to 348,000 families (in the next five years, the report estimated there would be 348,000
such families). The growth was seen not just in major metros; emerging cities and small
towns continued to register a significant proportion of the ultra HNWH population — 44
per cent of the total pie. (Business Standard: August 12, 2015)
Organic food business grows four-fold in 3 years
Growing health consciousness and awareness about harmful pesticides has nearly
quadrupled the size of organic foods in India in the last three years. Organic foods, which
started out by occupying fewer shelves at retail stores, is now a Rs 300 crore (US$ 45
million) business in the domestic market. The export market from India is even bigger at
Rs 700 crore, according to industry experts.
Consumers are adopting healthier eating habits which are driving entrepreneurship in
organic foods, prodding retailers to offer greater shelf space to brands in this category. As
per industry estimates, the category is currently growing at 50 per cent per annum.
Industry experts believe with growing talk about the bad effects of chemicals and
pesticides used in the food industry, products that are believed to be free of such
substances will grow exponentially. (Times of India: August 24, 2015)
Auto sector may generate $300 billion revenue by 2026,
create 65 million jobs
The automotive sector is expected to generate up to $300 billion in annual revenue by
2026, contributing over 12 per cent to the nation's gross domestic product and creating
65 million more jobs, as per a document prepared jointly by the industry and
government.
The Automotive Mission Plan 2016-26 seeks to make the automotive industry the engine
of the 'Make in India' initiative. The document projects India's automotive industry to
grow to over 70 million units a year by 2026, taking it into the league of China and the
US. The AMP is aimed at mapping the progress of the country's automobile industry and
setting its goals over the next decade. Around 23 million vehicles were produced in India
in the year ended on March 31, 2015. The industry is estimated to be worth $74 billion
now. (Economic Times: September 03, 2015)
Telecom companies eye a share of over $1-billion 4G revenue
Telecom equipment makers such as Nokia Networks, Ericsson and Huawei are eyeing a
share of an over $1-billion (about Rs 6,600 crore) revenue opportunity as India's mobile
phone operators prepare to launch high-speed broadband services on the 4G LTE
technology.
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India News
6
"4G presents an exciting opportunity even before the launch as we assist our customers
to prepare the network to deliver on the promises which the technology holds," Srini
Sundararajan, president and managing director, Alcatel-Lucent South Asia said.
Market leader Bharti Airtel was the first mover on 4G, and has already commercially
launched services in 296 cities and towns. The firm Reliance Jio Infocomm is readying to
launch its own 4G services commercially around December. Incumbent rivals Idea
Cellular, Vodafone India and Reliance Communications have also announced launch
plans for their respective 4G services — either later this year or early next year.
Industry data suggests that 73 new 4G networks are expected to be deployed in the next
one year. As of now, 9,674 4G mobile sites have been installed so far in the country to
facilitate ubiquitous coverage.
The total capex spending by mobile operators in India is estimated to be between Rs
27,000 crore and Rs 30,000 crore in 2014-2015 (excluding spectrum payouts), as per
Analysys Mason, a consulting firm. Analysts expect annual capex to grow 10% annually
over two to three years, starting 2015-2016.
"4G network infrastructure market opportunity alone, inclusive of network software, is
expected to be somewhere between $1 billion to $1.2 billion over the next two year
period," estimated market researcher and advisor Deepak Kumar.
Nokia has already bagged a $200-million contract from Bharti Airtel to build the
country's first 4G network in the 1800 MHz band in six telecom zones, apart from the
world's largest IP multimedia system (IMS) deployment deal worth around $100 million
that will allow voice calls over IP-based network to facilitate VoLTE for Jio. Late last year,
Sweden's Ericsson also said it had secured a contract from the market leading telco for
supply of base stations and other equipment for its 4G network.
"4G in India is in its early stage, although the country has already had 5.5 million 4G
capable devices but only about 85,000 subscribers are active LTE users. It indicates
significant opportunity for selective rollout of 4G networks and services in the country,"
Amit Marwah, Head of Technology, India Region, Nokia Networks said.
Arecent Ericsson Mobility Report finding said that around 40% of India's population will
be covered by 4G-based networks by 2020, which the company feels provide immense
headroom for the network segment.
"(4G) technology is ideal for high-bandwidth communication like video streaming, as well
as for less demanding data services and telcos will continue to make investments
towards this," Ericsson VP and Head of Engagement Practices Nishant Batra said.
(Economic Times: August 25, 2015)
Google to launch YouTube production studio in Mumbai
Google India said it will open its video production studio YouTube Space in Mumbai to
support India’s growing community of YouTube content creators.
The initiative is the first in India, and the second in Asia, following Tokyo, where the
Space project was launched in 2013. YouTube will partner Whistling Woods film school
to set up YouTube Space Mumbai.
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India News
In a blog post, David Macdonald, head of YouTube Spaces, Asia Pacific, wrote, “India is
seeing an emergence of a new generation of YouTube creators who are capturing the
color, music, humor and drama of India more creatively than ever before. In fact, Indian
creators are now among the top contributors in Asia when it comes to driving time spent
on YouTube watching videos.”
According to the blog post, Whistling Woods International has been rated one of the 10
best film schools in the world by The Hollywood Reporter, running undergraduate,
postgraduate and short programs in practical filmmaking.
YouTube Space Mumbai will essentially provide some of India’s top YouTube content
creators, “as well as their students’ free-access to Whistling Woods’ studios, high-end
audio, visual and editing equipment,” wrote Macdonald. It will also host training
programmes, workshops and community events.
The announcement also said YouTube was in the “advanced stages of setting up the
space”, and that it would be “opening the gates for all creators soon.”
India is a key market for YouTube. Besides a considerable growth in content
consumption owing to the proliferation of smartphones, India has also witnessed a surge
in the content creators’ community, especially on platforms like YouTube and Facebook.
Two of India’s most popular YouTube content creators include comedy collectives All
India Bakchod (AIB) and The Viral Fever (TVF). Earlier this year, both channels crossed
over a million subscribers, making them among the most subscribed channels across
Asia. (Livemint: August 20, 2015)
Kellogg plans first R&D unit in India
World's largest cereal maker, the $14.6-billion Kellogg Company, wants to triple the size
of its Indian business. Kellogg India is a roughly Rs 800-crore company, contributing
10% to the parent's Asia-Pacific revenues, making the country its fastest growing market
in the region. The plan is to take this contribution to 20% in five years.
Considering that Kellogg India is growing in double-digits, the Michigan-based parent is
making large investments in manufacturing and also plans to set up its first R&D facility
in the country at Taloja, near Mumbai.
After making an investment of $60 million in its second manufacturing plant at Sri City
(Andhra Pradesh), Kellogg Company is already planning to set up a third cereal facility in
India in 3-4 years. The company expects the demand to grow in the wake of changing
breakfast habits in India. Mr. John Bryant, Chairman & CEO, Kellogg Company, said:
"In the last 12-18 months, we invested about $100 million in India, which gives the
potential size of opportunity here."
Bryant said the cereal category in India is at an inflection point with consumers looking
for healthier and convenient alternatives. "We had one cereal facility for the last 20 years
and we have opened a second one, and expect that in three or four years, we should be
opening our third one to accelerate our growth. In the next several years, we should
triple the size of the business in India," he said.
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8
With an R&D facility in India, Kellogg Company is looking to improve upon its technical
capability to make products specifically for India. The idea behind promoting Indian
innovations follows the success of flavored oats, which hinged on the insight that Indian
consumers have different taste preferences, which veer towards a savory breakfast.
Kellogg India is often critiqued for the long time it took to reach the current size since it
started operations in 1994. Over the last few years, however, the pace of growth has
accelerated. India got noticed as an important market when Kellogg's global board met in
Mumbai — the fourth venue after the US, the UK and Canada — two years back. (Times
of India: August 17, 2015)
Foxconn plans e-commerce platform in India
Foxconn, the world’s largest contract electronics manufacturer, plans to build an ecommerce platform in India. It will also set up a local data centre to tap growth in the
country, one of the “key global” markets.
“Our plans in India are being finalized, but these include building an e-commerce
platform, data centre and computing power-related capabilities, and augmenting
manufacturing, research and development and other strategic capabilities,” Foxconn
Technology Group said.
India’s e-commerce sector is expected to touch $22 billion in 2015, according to an
analysis by PwC India. Global investors are looking at India because of its young
population, rising income and a large user base that is mobile first.
On August 8, Foxconn signed an agreement with the Maharashtra government to invest
$5 billion (Rs 32,500 crore) in factories to make electronic goods in the State and
generate over 50,000 jobs. The company did not provide details, saying the plans were
being finalised, but said it would tap local talent in information technology, software,
engineering and telecommunications.
“These plans will be rolled out in phases over the next five years,” the company said in a
statement.
“Our plans include establishing 10-12 manufacturing facilities in the country by 2020, a
development that will meet the needs of our customers and will generate job
opportunities for Indian workers,” Foxconn said in the statement. (Business
Standard: August 18, 2015)
Foxconn to set up production unit in Maharashtra for $5 bn
Foxconn, the world’s largest contract-manufacturing firm for consumer electronics,
signed a memorandum of understanding (MoU) with the Maharashtra government to
invest $5 billion over three years, for setting up a manufacturing unit in the state.
The company said it was yet to identify a site for its proposed production unit. “We have
been looking for other places, but initially the focus is (on) Maharashtra. The unit will
have a manufacturing facility, as well as R&D (research and development) unit,” said
Terry Gou, founder & chairman of Han Hoi Precision Industry Company Ltd, which
operates under the trade name Foxconn, after signing of the MoU.
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India News
At present, the company contract-manufactures devices like Apple iPhone, BlackBerry,
Kindle e-reader, and Playstation video game consoles. It is not immediately known for
which brands Foxconn will manufacture devices at its Maharashtra unit.
Earlier, after his meeting with Prime Minister Narendra Modi in New Delhi, Terry had
said the company was looking for suitable sites across India to set up 10-12 phonemanufacturing units and data centres. It is also in talks with the State governments of
Gujarat, Telengana and Andhra Pradesh for other locations.
The company said it would partner with local companies for its Maharashtra unit. Terry
has also met with Tata group companies like Tata Consultancy Services (TCS),
construction firm Shapoorji Pallonji and automotive major Bharat Forge. It also
announced its association with Whistling Woods International, the media art technology
school promoted by Bollywood film director Subhash Ghai, for content creation.
“Foxconn has provided us technical video-editing equipment and said it is willing to
create digital content in association with Whistling Woods,” said Ghai, whose company
also signed an understanding with Foxconn. (Business Standard: August 10, 2015)
Bosch to make more products in India
Munich-headquartered home appliances major Bosch & Siemens is considering
manufacturing more products in India in the next three years, as the demand for
premium home and kitchen appliances surges.
Gunjan Srivastava, Managing Director and Chief Executive of Bosch & Siemens
Household Appliances Manufacturing, said, "In the past one year, we have grown 70 per
cent compared with the industry's 20 per cent growth." This growth had led us to
consider local manufacturing, Srivastava said. "The plan is to consolidate our position in
both built-in and stand-alone home appliances," said Srivastava. (Business
Standard: August 26, 2015)
Edited by Economic & Commercial Wing, Embassy of India, Buitenrustweg 2,
2517 KD The Hague. Tel: 070-3469771; Fax: 070-3617072