Leaders – “What Are They Saying About India Now?” and Macro Indicators

Indian Express: September 8
Moody’s reduced its overall growth forecasts for India on the basis of slow industrial and investment growth. "The risk of a weaker monsoon and potential for higher food price inflation narrowed the scope for more significant monetary easing in the first half of the year. Nonetheless, our expectation is that despite its slower than anticipated pace, the direction of recovery is positive…” said Moody’s.
  • The Current Account Deficit (CAD) would remain low because oil import prices remain low, but the other contributing factors negatively influence rural demand, which threatens the strategy of many firms both inside and outside India who seek to expand their consumer base by targeting rural communities.

Livemint: September 16
July’s industrial production slightly beat expectations, driven by double-digit growth in capital goods, the key indicator of investment demand in this dataset. "’Surge in capital goods sector might be attributable to increase in government spending. However, weak domestic and global conditions (as indicated by weak corporate sales and export growth, respectively) continue to point towards sluggish IIP growth for the rest for the year,’ said [an analyst at Emkay Global Financial Services]."

Export growth fell by 20.6% in August. "’The fall in exports is becoming sharper month-on-month, signalling worsening of global market conditions marked by the turbulence in China,’ pointed out Anupam Shah from the Engineering Export Promotion Council.” The trade deficit has increased by about $2 billion, year-on year. (The Hindu BusinessLine)

OECD trims India growth forecast, but only slightly. “[It] noted that the main exception to the worsening global economy is India, “where growth is supported by strong consumer spending and public investment in infrastructure”. (Livemint)

The Global Innovation Index survey for 2015 downgraded India to 81st in the world, 5 places below its standing in 2014. Although more patents were filed over the past year, "’India still needs to implement substantial reforms in its innovation policy to further improve its innovation performance.’ [says the report] The country has consistently ‘performed poorly during the past four years in political stability, ease of starting a business, tertiary inbound mobility and environmental performance’ it adds.” (Business Standard)
  • "The ‘relative fall in India’s overall ranking this year is due to availability of old data up-to 2013-14 period, and it does not truly reflect the performance of the economy in last one year’ said Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII)."
  • In 2014, it had slipped 10 places based on “…weaknesses in its institutional pillars such as political stability, ease of starting a business, as well as human capital and research."

Innovation and Industry

Biocon, a major pharmaceuticals company, opened a new insulin device manufacturing facility, intending to export as well as make for the Indian market. Chairperson Kiran Mazumdar-Shaw said, "“About 20 per cent of the total volume of generic drugs is made by Indian companies. Pharma exports are currently around $15 billion and there is sufficient skilled manpower for the sector, which also has cost benefits when compared to both the US and Europe.” (The Hindu BusinessLine)

The Economic Times: September 9
Patanjali Ayurveda Limited, run by popular yoga guru Baba Ramdev, is about to launch its large-scale consumer products line, based on ayurvedic principles. The consumer goods sector, considered to be expensive, may be in for a shake-up. "Seen as the most diversified consumer goods firm in India…Patanjali’s products could also act as a risk to competition in the long term. The products are priced lower than those of other players in the market and should be able to influence the price-sensitive consumer easily.” Brokerage Nomura does not predict dominance, however. “’Patanjali products are also health-driven, a play on premiumisation, and should be able generate more awareness among consumers, thereby allowing volume growth for other players as well,’ Nomura said in a report. However, given that Patanjali products have a very wide product line without significant depth, MNCs have the advantage of providing consumers immense variety within a product, it said.” (The Economic Times)

Medianama: September 11
The Chinese smartphone maker had announced plans to invest $50 million over 3 years to manufacture in India, its second-largest market after China, and made that concrete with the announcement that it would manufacture at Foxconn and Dixon’s two facilities in the National Capital Region (NCR, or Delhi) and Andhra Pradesh. This is the latest in a long line of recent commitments by smartphone makers including Samsung, Lenovo, Xiaomi, Sony, and Micromax, to manufacture in India.
  • A mobile phone manufacturing cluster has been set up by three Indian companies — Micromax, Carbonn and Celkon — in Andhra Pradesh. It remains to be seen whether this can trigger a shift from the import of components from traditionally cheap (especially after-tax) Southeast Asia and China. Andhra Pradesh has done its part to trigger this development by relaxing value-added tax (VAT) requirements for these companies. (Livemint)

One auto executive writes that India’s competitive advantage lies in R&D, particularly in the auto components sector. Despite high relative labor costs that show no signs of declining, the promise may lie in innovating “for innovation’s sake.” (Rohit Saboo, The Economic Times)
  • NBC bearings, for example, one of the leading manufacturers and exporters of bearings in India, has a dedicated R&D arm…the result has been a steady increase in patent filings, which has further strengthened NBC’s resolve to invest in R&D progressively every year.”

Samsung, India’s most attractive brand; Tata fourth in India according to a report by Indian market research firm TRA. Other attractive brands include Sony, Nokia, LG, Maruti Suzuki, Bajaj and Dell. This squares with the conventional thinking on Indian brands for the most part, but the CEO of TRA, N Chandramouli, "puts the domination of technology, consumer electronics, auto and conglomerates in the top 10 to increased usage and the ability of these brands to stay in the news. ‘Let’s face it you can’t stay without a mobile phone, TV or laptop. Brands such as Samsung, LG, Sony and Dell figure when you have these gadgets around you. Honda is an aspirational brand, while Godrej, Bajaj and Tatas are popular Indian groups.” (Business Standard) – more on the report’s methodology here.

International brands, particularly in retail, are keen to enter the picture. H&M, Marks and Spencer, and Lacoste, among others, have recently announced plans to expand at a large clip into India. (The Economic Times, Livemint)

Reform Beat

“As a representative of a large foreign company operating in India, in the last one year I have seen very significant focus from governments, both state and central, in the area of ease of doing business. “While efforts are being taken, it is perhaps not visible to all and I think given the deep rooted problems of the economy and the system, it will take some more time for the results to be visible”, [Walmart CEO Krish] Iyer said at India Retail Forum in Mumbai. (PTI/YourStory)

"Iyer added that he could see ‘willingness and the desire to listen and simplify things from every Chief Minister across the country.’” What about the relative willingness? The government believes in the power of competition between the states to attract investment to eliminate red tape. The first major step in driving the latter is a report by the Commerce Ministry’s Department of Industrial Policy and Promotion (DIPP) evaluating and ranking the states in terms of this Ease. Gujarat leads, and many other BJP-led states sit conspicuously near the top.
  • "The government of Narendra Modi, who won an election last year on a pledge to revive the economy, has been thwarted by the most recent session of parliament in its efforts to change the national land-purchase law and to harmonise taxes across India. It has since indicated that it will allow state-level reforms to supersede national law, as a way around the gridlock. It has already blessed a labour reform by this back-door route in Rajasthan, a northern state. More states might now follow Rajasthan’s lead.” (The Economist)

Although some had hoped for the government to call a special sitting of Parliament to pass the Goods and Services Tax bill in order to get it on track for an April 2016 rollout, it decided not to do so, apparently unable to get the opposition in line. The previous session of Parliament had been stalled by Congress-led protests against alleged corruption by members of the BJP. (Business Standard)

In response to the steady flow of critiques against alarming nonperforming asset rates in public sector banks, the Finance Ministry announced that a new Bankruptcy Code will be coming soon, cushioning the fall of sick banks by strengthening the market for corporate bonds. One step at a time. (Moneycontrol.com)