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Patanjali’s Story: Lessons for Companies in the Indian Market

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By Siddhartha Thyagarajan

Patanjali, a relatively young player in the Indian FMCG (Fast Moving Consumer Goods) sector, has taken the Indian market by storm. Patanjali is a company that produces and sells Ayurveda (Indian alternative herbal medicine) inspired goods. These include essential household items such as shampoos, soaps, toothpastes, and several similar items. Latest data indicates that the company grew by 150 percent from 2015 to 2016. The annual turnover currently is around US$ 745 million. The company targets to hit a turnover of US$ 1.4 billion in 2016-2017. The unprecedented growth begs us to question the reasons behind the company’s success.

Patanjali grew because of three distinct reasons. Firstly, the identity of Patanjali products resonated with the cultural identity of a large proportion of the Indian population. Secondly, Patanjali promised high-quality products at a reasonable price. Finally, the aggressive distribution pattern that the company undertook for its products helped its growth immensely. The following sections assess the finer details of the three-pronged strategy that is at the heart of Patanjali’s growth. Next, the article analyzes a few of the roadblocks that the company has faced in recent months. The final section will assess the key take-away for companies that plan to enter or are currently operating in India. 

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Employing Women in the Indian Workplace

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By: Pritesh Samuel

The female workforce in India remains much smaller compared to the opposite gender. Some estimates reveal that while 80 percent of men are in jobs or are looking for employment, only 32 percent of women remain in the workforce. Some of this can be attributed to cultural attitudes and social norms. Despite rapid economic growth, female workforce participation across all age groups, education levels, and in both urban and rural areas has not caught up. In addition, a recent survey by a hiring firm found there to be a significant gender pay gap in India – as high as 27 percent. Men earned a median gross hourly salary of US $4 (Rs 288) while women earned US $3 (Rs 207) per hour, with the highest gap in manufacturing and lowest in Banking Financial Services and Insurance (BFSI), Transport, Logistics, and Communication.

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India Regulatory Brief: Digital Equalization Levy of 6 Percent and New Tax Proposed on Startups with Falling Valuation

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Digital Equalization Levy of Six Percent from June 1, 2016

The Finance Act 2016 has introduced a digital equalization levy, or ‘Google tax’, of six percent, with effect from June 1. It is applicable only in the case of business to business transactions. When a person makes the payment to a non-resident (without permanent establishment) that exceeds an aggregate of US$ 1493 (Rs 1 lakh) a year, a withholding tax – at six percent of the gross amount paid – is imposed as equalization levy.

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Two Years into the Modi Government – How are Things Shaping Up for India?

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By Melissa Cyrill

The National Democratic Alliance (NDA) government led by Prime Minister Narendra Modi marked its two year anniversary on May 26 of this year. Given its overwhelming mandate in the 2014 general elections, the Modi government has been held to a high standard. A bounty of electoral promises has also resulted in big expectations, particularly, in the domain of economic and institutional reform, infrastructural growth, business competitiveness, and foreign policy.

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India Signs OECD Country-by-Country Reporting Agreement

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By Dezan Shira & Associates
Editor: Tracie Frost

In an ongoing effort to increase transparency by multinational enterprises (MNEs), India joined Canada, Iceland, Israel, New Zealand and the People’s Republic of China in becoming the 39th signatory to the OECD ‘s Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports (CbC MCAA). 

The Country-by-Country Reporting Agreement was conceptualized in 2013, when the OECD and G20 countries adopted the Base Erosion and Profit Shifting Action Plan (BEPS).  BEPS acknowledges that improving transparency for tax administrations by giving them adequate information to assess high-level transfer pricing is crucial for tackling the problems of tax base erosion and profit-shifting.  In response, the September 2014 Report on Country-by-Country reporting provides a template for MNEs to file an annual report for each tax jurisdiction in which they do business. This report is called the Country-by-Country Report.

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India Market Watch: New Capital Goods Policy Approved and Digital Literacy Initiatives Launched by Intel India

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Government Approves New Capital Goods Policy

The Union cabinet has approved the first ever national capital goods policy that was announced by the government earlier this year. The goal is to incentivize the domestic production of manufacturing equipment and subsequently increase their exports. Altogether, the capital goods policy hopes to increase India’s production of capital goods from US$ 34.34 billion (Rs 2.3 lakh crore) to US$ 111.99 billion (Rs 7.5 lakh crore) and create 30 million jobs by 2025.

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India Passes Comprehensive Bankruptcy and Insolvency Law

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By Dezan Shira & Associates
Editor: Tracie Frost

The Indian Insolvency and Bankruptcy Code, 2015 passed a critical milestone last week when the upper house of Parliament, the Rajya Sabha, passed the bill with no changes. The bill is now waiting to be signed by India’s President Pranab Mukherjee. Once signed, it will be India’s first comprehensive bankruptcy and insolvency framework and is expected to promote entrepreneurship, increase availability of credit, and balance the interests of stakeholders by consolidating and forming new laws relating to reorganization and insolvency resolution. 

The new framework is widely seen as a critical juncture in India’s ability to compete in the international business arena. Indian officials hope that its implementation will lead to improved ease of business rankings from the World Bank. While the bill reforms domestic bankruptcy law, it also sets the framework for developing an effective system for addressing cross-border insolvencies in India.

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Prospects in India’s Infrastructure Sector

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By Kabir Narang

India’s 2016-2017 Union Budget provides a significant outlay for infrastructure expenditure. This spending is seen as a key component of the government’s plans to boost India’s growth levels to projections ranging between 7 and 9 percent. The allocation of US$ 32.41 to US$ 32.70 billion (Rs 2.19-2.21 lakh crore) and a newly liberalized foreign direct investment (FDI) policy further underline the government’s commitment in this regard.

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