India Improves Investor Appeal

You may want to take a fresh look at business opportunities and investments in India, if a new World Bank report is to be believed.

In November 2001, Goldman Sachs published a landmark paper where they identified India, along with Brazil, China, and Russia as the four “BRIC” economies that the world needed to watch. Many companies and investors began investing in these countries.

In 2002, the World Bank launched a project to rank the Ease of Doing Business in countries across the world. For well over a decade, more than 135 countries ranked better than the world’s largest democracy — India continued to be stymied by red tape, limited infrastructure and an army of bureaucrats who seemed to revel in creating complex, conflicting, and even arbitrary rules. India ranked worst among the BRICs and many companies mitigated their enthusiasm for India as a result. Persistent players such as Abbott, Accenture, Boeing, Coca Cola, Cummins, Deloitte, Exxon Mobil, GE, Hewlett Packard, Mylan, Oracle, PepsiCo, Vodafone and Western Union thrived despite some setbacks.

In our consulting, we always advised clients to look at specific Indian states, rather than the entire subcontinent when locating sales offices, subsidiaries, or manufacturing plants; some states welcomed businesses while others did not care. For the first time in India’s 67-year-old democracy, the leader (Chief Minister) of a state was elected as Prime Minister in 2014. One of Prime Minister Narendra Modi’s first goals was to improve India’s business environment.

The latest report from the World Bank, “Doing Business 2018“, published this week, shows that India made important reforms in six of the eight areas that the Bank measures for its report. Small economies can pass reforms relatively easily and it is important to note that Nigeria and India are the only large economies to make significant improvements as shown in this table:

Table

To global companies and investors, it is even more important to note that India jumped by 30 ranks overall to go from 130 to 100 and leapfrogged over Brazil, which is stagnant at 125. Such an improvement in just three years since the new government took over is quite remarkable. The juggernaut of the BRIC countries is China and it is currently ranked at 78. If Modi’s government can keep up the momentum, it is not inconceivable that India might vault ahead of its autocratic neighbor in three to five years.

We often help clients to start a new company or office in India and that process has improved considerably. Getting credit and obtaining construction permits for a business has also become easier according to the World Bank’s research. Minority foreign investors in India felt vulnerable in the past but new procedures protect them a bit better while enforcing contracts might also become easier once the new National Judicial Data Grid starts paying results. Paying taxes electronically is becoming the norm and import of goods is being streamlined with more and more online functions for customs clearance.

Does this mean that India is an easy place to do business now? Not at all. The World Bank only measures a few criteria. Foreign companies have many challenges in India: the weather, the pollution, the current government’s tendency to place non- tariff barriers, even occasional price controls, and most importantly the illusion that they can readily understand India, just because they can understand their Indian-American physician.

Skeptics may ask, will progress continue? What if Modi’s party loses the next general election, scheduled in 2019? One major initiative that cannot be rolled back is that the states of India were encouraged to compete with each other for foreign and domestic investment. State leaders in Andhra Pradesh, Telangana, Maharashtra and at least seven other provinces and territories have led the charge in improving their own attractiveness. This genie cannot be put back in the bottle and we anticipate that up to 20 of India’s 29 states will join the race shortly.

If you have questions about how your company can do better in India or if you want to take a fresh look, Contact Us or drop me a note here on Linked In.

November 2, 2017   No Comments

India, U.S., to Accelerate Cooperation in the Energy Sector

In the wake of President Trump‘s and Indian Prime Minister Modi’s meeting, the White House released a statement that said, “The United States and India are committed to realizing commercial civil nuclear cooperation, in particular through a contract for six Westinghouse Electric AP-1000 nuclear reactors to be built in Andhra Pradesh, India. Once completed, the project will provide reliable electricity for millions of Indian citizens.”

India’s Foreign Secretary S. Jaishankar said that by the end of the year Westinghouse will rework its current situation and conclude contractual agreements between the Company and the Nuclear Power Corporation of India for the six nuclear reactors, as also related project financing, reports the Economic Times.

Energy
The White House said Indian energy companies have signed more than $30 billion in long-term contracts for U.S.- produced liquefied natural gas, including from Louisiana and Maryland. The industry estimates that Indian companies have invested more than $10 billion in the United States’ liquefied natural gas and shale sectors.
The two countries also announced the Smart Grid and Energy Storage consortia under the U.S.-India Joint Clean Energy and Research Development Center.
Additionally, the U.S. Department of State is facilitating connections between American and Indian industry, state governments, and universities to advance energy solutions, the White House said.

June 27, 2017   No Comments

India’s Shrimp Industry Shows Steady Growth

India’s export of shrimp was 382,959 tons in Calendar Year 2015, up 9.8 percent from the previous year
India’s cultured shrimp production in the year ending March 2015 was about 426,500 tons, up 30 percent from the previous year (Figure 1). From  2005  to 2015, shrimp production has grown at a compound annual growth rate of 13 percent.
Fig 1. Cultured Shrimp Production Rising

Fig 1. Cultured Shrimp Production Rising

The introduction of white leg shrimp (Litopenaeus Vannamei, or Vannamei) in 2009 spurred growth in shrimp production during the last few years and displaced sales of the other major shrimp species such as the tiger shrimp (Penaeus Monodon) which was found to be susceptible to disease. In FY 2015, the production of the white leg shrimp (Vannamei species) rose to  353,000 tons, which was 81 percent of the total shrimp production in India. This species is preferred since it has a fast growth rate, is disease resistant, needs lower feed requirements, and exhibits a higher survival rate.  In 2015, the area under shrimp production in brackish water aquaculture was 121,600 hectares, which was up from 102,500 hectares in 2010. Industry sources indicate that shrimp production accounts for 25 percent of the brackish water aquaculture.
Accounting for 65 percent of the total shrimp produced in India, the state of Andhra Pradesh is India’s largest cultured shrimp producer. This is followed by West Bengal, Tamil Nadu & Puducherry (earlier known as Pondicherry), Gujarat, and Odisha. Tiger shrimp (Penaeus Monodon) are farmed in the states of West Bengal, Odisha and Kerala, while the Vannamei species is preferred in the states of Andhra Pradesh, Gujarat, Tamil Nadu and Odisha.
Although most of India’s shrimp production is exported, its broodstock is imported. According to industry sources, India imports 98 percent of total broodstock specific-pathogen-free (SPF) Vannamei broodstock from U.S.A., and in Calendar Year 2015 import of broodstock from the U.S. reached $10.8 million  In addition to broodstock, Artemia Cysts, which are used as live feed during the larvae raising operations in shrimp hatcheries, are imported as well. In CY 2015, 97 percent of India’s Artemia Cysts worth $15.44 million were imported from the United States, says a GAIN report.

May 15, 2017   No Comments

Walmart to Set Up 50 New Outlets in India

Walmart will open 50 new wholesale  stores across India over the next three to four years which will be located in the states of Telangana, Andhra Pradesh, Maharashtra, Punjab, Uttar Pradesh and Haryana. President and CEO, Walmart Canada and Asia, Dirk Van den Berghe, said Walmart was committed to India, and the country with its efficient economy was an important market for them.

Each store will be spread over 50,000 to 60,000 square feet. The company will invest $10 to $12 million in each store which will serve 300,000 wholesale customers; hotels, restaurants, caterers, offices and institutions; and 30,000 mom-and-pop grocery shops.

Walmart Store

IndiaRetailing reports that Walmart currently sources 97 percent of the products within India. 15 percent of its merchandise is sourced from the region where its store is located. The company proposes to work with small and marginal farmers and offer training and education to all stakeholders in the value chain.

 

May 7, 2017   No Comments

Kia to Manufacture Cars in India

Kia Motors Corp., affiliate of South Korea’s Hyundai Motor Co., will invest $1.1 billion to build its first factory in the state of Andhra Pradesh in India. The plant will have a production capacity of 300,000 vehicles a year, and it will produce a compact sedan and a sport utility vehicle tailored for the Indian market. “Our new India plant will enable us to sell cars in the world’s fifth-largest market, while providing greater flexibility for our global business,” Kia Motors president Park Han-Woo said.

Kia Motors

Reuters reports that Kia will likely leverage Hyundai’s supply chain network built around its factories in the neighboring state of Tamil Nadu to gain a foothold in the Indian market, tipped to become the world’s third-largest by 2020. Hyundai is India’s No.2 automaker by sales.

May 5, 2017   No Comments