EY’s 2015 attractiveness survey has India ranked as the most attractive investment destination in the world for the next three years, based on feedback from MNC representatives in March and April of this year. While investors continue to be optimistic about India’s demographic features, a notable difference from the previous year’s report was increased optimism about political and economic stability and economic reforms, despite what has been a lukewarm reform record thus far from the central government. (Capital Market/Business Standard)
- The survey also shows India as the top FDI recipient in the first half of 2015, with inflows of $30 billion. (Moneycontrol.com)
Chief Economic Advisor Arvind Subramanian commented on Twitter that industrial production, indirect tax revenue, and core inflation numbers bode well for the Indian economy. Industrial production rose by 6.4%, the greatest amount in 3 years, and capital goods output grew by almost 22%. (Asian Age)
Spotlight: The Evolving Position of E-Commerce
Apparel: October 13
"When it comes to e-commerce, India is positioned to become the next China.” In addition to India’s well-known demographic advantage and booming internet penetration, it is particularly strong at fraud prevention across different methods of payment. Current roadblocks including slow mobile broadband speeds, consumer preference for cash on delivery, and of course obstructive physical infrastructure, are likely to change in the near future.
- Bullish predictions suggest that 500 million or so Indians will be online by 2018, auguring a fivefold growth in e-commerce in that same window, but to reach much of India, companies will have to develop their services and products in various languages. At the moment, English is absolutely dominant, but companies have taken the hint that much of India will be brought aboard in their local language. Facebook is available in 12 languages, HDFC Bank and Snapdeal have Hindi interfaces, and payment provider Paytm is developing local language capabilities. (Economic Times)
Financial Times: October 13
Led by a chemists’ India-wide trade association, about 850,000 pharmacies will hold a strike to protest what they see as unlawful operations by e-commerce platforms that operate in that space. The leader of this association believes, through a sort of sting operation, that there were not enough regulations in place to properly screen for fake prescriptions. New Delhi is in the midst of drafting regulatory measures for online pharmaceutical sales. This is not the only trade association-led backlash against e-commerce. Others have suggested that e-commerce companies are violating India’s ban against multi-brand retail foreign direct investment. — This attention ought to be seen as a signal that the position of online retail will strengthen, as all stakeholders will be forced to confront the industry sea change that is before them.
Other Business Looks
The Hindu BusinessLine: October 8
A persistent risk for companies seeking to grow by expanding to rural areas is the consumer’s dependency on a satisfactory monsoon. This year, as last year, there was a markedly weak monsoon, and Fast Moving Consumer Goods (FMCG) companies have felt the pain. Companies like Bajaj, Hindustan Unilever, Colgate Palmolive, and more rely heavily on rural consumers to drive revenues. Stocks in this space have fallen on the fear that weak rural demand will continue into the current quarter.
- Meanwhile, the X-factor of yoga guru Baba Ramdev’s Patanjali Ayurved line strengthens, as it has tied up with retail giant Future Group, on the heels of a tie-up with Reliance. Patanjali has been suggested as perhaps the “most diversified consumer goods firm” in India, ahead of stalwarts Jyothi and Emami. Patanjali’s products are distinct in that they are priced lower and draw on holistic, Ayurvedic tradition, which at once adds and perhaps wins a dimension of consumer appeal. Patanjali is not the only player drawing on Ayurvedic tradition for its products, but certainly its founder holds more popular cachet than the head of Dabur. (Livemint)
- Hindustan Unilever is taking notice of the startup ethos and its effectiveness both in India and globally. Its startup arm, named Foundry, hopes to keep it from becoming a lumbering giant. (Business Insider)
Consumer electronics majors are searching for an answer for slow rural demand, and hope to find it in offering premium goods to urban consumers during the upcoming festival season. Recent interest rate cuts by the central bank should have some effect on consumer spending, though it is unclear how it will be distributed across consumer segments at this point. (The Hindu BusinessLine)
Economic Times: October 12
On the heels of Modi’s bilateral with Apple CEO Tim Cook, Apple will join with Tata’s Croma chain to open mini-Apple stores in six locations, five in Mumbai and one in Bengaluru. It is hard to believe that this would not be a stepping stone to a full-fledged retail presence for Apple in the country.
Reuters: October 7
It is not a new story that fast food restaurants KFC and Pizza Hut have been suffering of late, and apparently by nothing apart from being outcompeted. McDonald’s and Domino’s have grown of late, and despite (or perhaps because of) Yum’s aggressive discount-oriented promotions, it has not seen the same results. The fast food segment has seen the entry of a number of foreign brands such as Burger King and Wendy’s and is also coping with the entry of food ordering smartphone apps which provide an incomparable variety of options from which the consumer can choose.
Financial Times: October 12
"Getting the private sector investing again has been top of Mr Modi’s to-do list since taking power in May last year, with only modest success. At a private gathering of around two dozen prominent industrialists in New Delhi last month, the prime minister cajoled business-owners to start taking risks. “Everyone looked at their shoes,” says one person who attended."
Financial Express: October 9
Finance ministers from the G20 countries endorsed an action plan to curb corporate tax evasion globally, allowing governments to recover more corporate tax money, on which many emerging markets are increasingly dependent. In India’s case, this will prevent so-called “tax treaty shopping,” which sees almost 40% of investment routed through Mauritius to avoid the brunt of India’s regulatory authority.