Top Read: India rose 4 spots in the newly-adjusted World Bank Ease of Doing Business rankings for 2015. The World Bank suggests that this uptick was stimulated by the May-June streamlining of clearances to start a business and the advent of easier provisions to acquire electricity.

The Consumer, The Entrepreneur, The Markets

Financial Times: November 3
James Crabtree
What does it mean for conglomerates to thrive in emerging markets, particularly in India? Reliance, Tata, and more have seen their empires continue to expand and the e-commerce giants are dabbling in every conceivable retail sector. Anand Mahindra theorizes that value-creating innovation comes from the synthesis of different businesses rather than within a business, but Tarun Khanna at HBS points to weak regulation as an enabling factor. This proposition will not be accurately tested for a few years, when presumably the government’s efforts at regulation can be seen in proper scope.

Business Standard: November 2
Viveat Susan Pinto
E-commerce is transforming the domestic advertising base, where over 2000 new companies joined the advertiser base for the first time in five years, with a projected growth rate of 26.65% over 2014. Private equity and venture capital money is going toward advertising. Instrumental factors in the past year include unique sporting events like the Cricket World Cup, but analysts agree that the major contributing factor was the growth of the e-commerce space. Entrepreneurs, buoyed by the encouraging narratives around them, are emboldened to advertise, and small, regional players in FMCG and electronics are supported by last-mile advertising services offered by new companies.

WSJ.D: October 28
The Wall Street Journal’s tech blog highlights some eye-popping figures that summarize the picture of e-commerce in the throes of the biggest shopping season of the year. Among the figures highlighted: $6.2 billion have gone into startups from January-September 2015 (in contrast to $5.12 billion from all of 2014); and Goldman Sachs in October doubled its May estimate of the e-commerce sector’s FY16-end value, from $12 billion to $23 billion. Read on.

Harvard Business School: October 28
Sean Silverthorne
Insights abound in this talk with HBS professor Sunil Gupta, who interviewed Ranjan Kapur, a Mad Men-era icon in Indian advertising, who illuminates the evolution of the advertising scene, and implicitly, the consumer scene, over the past several decades. On building a brand in an emerging market, Kapur says, “You first build your brand in your home base because then you understand the character of your brand, the virtues of your brand, and understand the core that drives your brand. And if you respect that core can drive any human being wherever they reside, then that brand has the opportunity to become a global brand.”

Business Standard: October 27
“Has Uber ever had a greater learning experience than what it’s seen in India?” The central government has released guidelines indicating regulation of services like Uber, Ola and their competitors. While this is not the end of Uber’s struggles—each state can pass its own laws on this—Uber has weathered perhaps the heaviest of the storm, all while moving to win the confidence of the public and the government through various cooperative measures.

Enabling Production

Financial Times: October 20
James Crabtree
The megatrend in manufacturing is toward automation, throwing in a wrench in Modi’s strategy to target manufacturing as a job creator, particularly for low-skill workers. The answer won’t be to avoid automation, as the resulting quality and productivity increases could win India into the global supply chains it prizes, perhaps while taking steps concurrent to those in the manufacturing sector to address its jobs deficit.

Financial Times: October 21
James Crabtree and David Keohane
Groundbreaking research by Credit Suisse suggests that Indian banks’ bad loans are 17% of the total, rather than 11% as reported by the RBI, based on estimates of unrecognized bad loans, and that the gross debt at India’s most indebted major industrial companies are up 12% from 2013. Perhaps even greater than slippage in the non-performing loan rate is the thought, among some observers, that banks still do not understand or report properly their risky assets.

Focus: Foreign Companies Betting on Growth

Straits Times: October 23
Chong Koh Ping
GIC will tie up with New York-based Tishman Speyer to jointly own an office project in Hyderabad.
The office space houses TCS Accenture, DuPont, Cap Gemini, BirlaSoft, and other MNCs. The project is known as “WaveRock,” and is a bet on Hyderabad’s future as a particularly fast-growing Indian city and growing MNC business going to institutionally owned and asset-managed properties as realty space.

Bloomberg: November 4
Anindya Upadhyay
An Andhra Pradesh auction saw Missouri-based SunEdison beat out Japan’s SoftBank and China’s Trina Solar win the entirety of the wattage at stake with a record-low bid of under 5 Rs./KWh. This follows a then-record-low winning bid of 5.05 Rs./KWh by Toronto’s SkyPower for 150MW in July. While the low price is promising for India’s consumers and for the government’s Solar mission, given its ambitious scale, business analysts wonder about the weaknesses of this approach.

Focus: IPOs Reveal Bet On Consumption Uptick

Local coffee chain Cafe Coffee Day, a market leader by far over Starbucks at this point, raised almost $176 million in an IPO on October 14. Major investors like KKR and Blackrock were in, and the bulk of investment indeed came from institutional investors as opposed to individuals. Observers questioned the hype, the company wound up overvalued and the stock price has since dropped. This is because CCD is run by a parent company that has a diverse portfolio of businesses, which plays into the complexity of valuation and the shaky ground on which the company’s stock stands. (Business Standard, Businessworld, Nikkei)

We are in the middle of festive season, where consumer spending peaks each year, and many are now used to seeing cartoonishly large flash sales from the likes of Amazon and Flipkart. But some expect that companies will see this time as ripe to go to the capital markets. (Economic Times)

Saritha Rai at Forbes says that the fate of the IPOs that we see in India this month will “indicate investors’ faith in India’s consumer story.” Shishir Asthana at Business Standard says, “Coffee Day Enterprises will become a proxy vehicle for betting on the aspiring middle class in the country.” India watchers have not seen stable markets over the past few years and these IPOs are the first by prominent companies in many years. 2015 has seen 15 IPOs compared with 6 in 2014 and 3 in 2013.

"The increased IPO activity is being driven by the enhanced need for the companies to raise capital for their growth and expansion plans, as the corporate sector becomes increasingly confident of its business plans, in light of the economic recovery that we are witnessing," Anup Bagchi, managing director and CEO at ICICI Securities told CNBC. S Ramesh, MD and CEO of Kotak Investment Banking told CNBC that, "It’s a good balance [between domestic and international investors], and varies based on the company and sector. While we’ve always seen good FII [foreign institutional investor] inflows into India, one trend we’ve noticed is that Indian mutual funds are now very active participants in the primary market as they have grown their corpus significantly."

InterGlobe Aviation, notably India’s only profitable airline, raised an optimism-inducing $459 million in its IPO, good for the third biggest Indian IPO in the past five years and the second biggest of a non-divestment IPO: Coal India’s 2010 IPO was about five times that of IndiGo and over three and a half times that of second place Bharti Infratel’s 2012 IPO. (Reuters, Quartz)

The next few IPOs in the pipeline will be featured by Alkem Laboratories, a major generic drug producer, which seeks to raise about $210 million from an offer that may take place in December, though it is possible that this will be pushed back to 2016. (Reuters)

Vikas Beat: Modi and his government’s reform push

Reuters: October 30
Rajesh Kumar Singh and Paritosh Bansal
Channeling his experience as a Chief Minister and reviving the excitement of his first weeks in office, Modi is still committed to galvanizing the steel frame into action. According to this report, he convenes the top officials in the state and federal bureaucracies once a month and one-by-one, asks “why it hasn’t happened.” Anecdotes suggest that this is working to some extent, though some are skeptical of a kick in the pants as a solution to flawed inter-agency coordination, which they see as a major contributing factor to the halting of projects.

MIT Technology Review: October 7
Richard Martin
Can India modernize its manufacturing and supply electricity without relying heavily on coal? {and manage its trade balance} Solar power has proven to be too weak of a solution in particular villages, and minister for power Piyush Goyal is balancing the need for the government to be a champion of renewable solutions with the necessity of supporting a coal industry that provides over 70% of its electricity. Goyal and Modi are leading the charge for renewable capacity generation via mega projects at a breakneck pace, leaving questions of financing and efficacy.

The U.S-India Trade Policy Forum, an essential element of the dialogue between the two countries focused on increasing bilateral trade and investment, met at the end of October in Washington. The dialogue had been stalled between 2009 and 2014, but it now has kinetic work streams in agriculture, trade, manufacturing, and intellectual property. Find the Joint Statement of the latest meeting here. (USTR)

Madhura Karnik submits, for Quartz, that Modi’s disinvestment target is unrealistic and that its hopes for beating expectations have been dashed by falling commodity prices—India’s SOEs slated for disinvestment are mainly concerned with oil, coal, copper, aluminum, etc.
  • Manoj Kumar reports for Reuters that despite falling oil subsidy costs and likely success in meeting his indirect tax target, the underwhelming disinvestment sales threaten the Finance Minister’s fiscal deficit target of 3.9% of GDP. The Finance Ministry may try to save face by halving the target and pressuring SOEs to pay higher dividends.
  • The Economic Times says that a cabinet secretary-led committee on strategic disinvestment will be appointed shortly, focusing first on converting IDBI Bank into a private bank

indian Express: November 3
Ajay Shah
NIPFP Professor and Geoskope expert Ajay Shah says that reworking the tax system will require placing tax policy on a foundation of clear thinking, redrafting the income tax law, and separating tax policymaking from tax administration. The Finance Ministry recently established a pathfinder committee for the simplification of income tax laws. Shah importantly points out that prior financial sector reforms were given more time, such as the drafting process for the Indian Financial Code, which took place over four years. In contrast, this committee will have about three months to submit recommendations before the budget process begins.

Livemint: November 2
Manas Chakravarty
Merely using observations from the government’s own Economic Surveys, Chakravarty highlights a deeply problematic element to the push for greater manufacturing: the job opportunities that exist now are in the unorganized sector, non-contract jobs for unskilled workers. To build a manufacturing sector, you need skilled workers, but the most recent Economic Survey suggests that India’s comparative advantage is in unskilled labor. Attacking that problem is daunting no matter which way you look at it, but Chakravarty discusses pathways to explore.