India Market Watch: Overseas Market for Indian Films Grows and IT Sector Lay-offs Lead to Unionization

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Indian Films Earn Record Revenues in Overseas Markets

Indian films are raking in record revenues in overseas markets, especially in recent years, as big-budget movies utilize more resources to invest in local distribution networks and marketing campaigns. For instance, the Aamir Khan Bollywood starrer Dangal made US$114.18 million (Rs 736.32 crore) in China, while the Telegu film Baahubali 2 earned US$18.9 million in the US box office.

Though previously restricted to Bollywood, the Indian film industry overall has begun to eye international box offices in a much more strategic manner. Part of the reason for this is the presence of a strong Indian diaspora in some of these markets. Another factor is India’s immense soft power in terms of its cultural influence; viewers constantly seek out original content, which benefit foreign film industries.

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Local sourcing norms delay Tesla entry into India

Recently, Elon Musk, the founder of electric carmaker Tesla, identified India’s 30 percent local sourcing norms as a barrier to the company’s entry into the country. In response, Indian policymakers clarified that India’s foreign direct investment (FDI) rules did not mandate manufacturers to comply with a minimum local component sourcing norm.

However, this minimum sourcing rule is a part of India’s retail policy. Tesla, unlike other auto manufacturers, controls the entire process of making and selling its cars. This means it even owns the stores where its cars are sold.

In the past, such hindrances have prevented American smartphone maker Apple and Swedish furniture giant Ikea from setting up their single-brand retail stores in India. These companies state that India does not yet possess the supply chain ecosystem that will make local sourcing compliance possible.

Consequently, the Indian government has emphasized that the minimum local sourcing rule will not apply to foreign ‘cutting edge’ technology products. Just what this ‘cutting edge’ refers to, is mired in confusion as the government seems to be following a case-by-case approach.

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Lay-offs lead to unionization in India’s IT sector

India’s IT industry is facing challenging times as its export-oriented services model responds to the spread of protectionist hiring norms in various countries, especially in the US and Australia. This is in addition to the growing role played by automation and cloud and digital technologies in the sector, forcing employees to upskill or reskill or become redundant.

In fact, over the last few weeks, several hundred employees have suffered job cuts in the country’s leading IT services firms. Previously, these workers would have easily found new jobs in the industry but rising infrastructure costs and overseas hiring commitments have prevented this.

Consequently, many IT workers have joined labor unions such as the Forum for IT employees (FITE) or the New Democratic Labour Front (NDLF) IT Employees Wing. FITE has filed cases of wrongful termination with the labor departments in Bengaluru, Pune, Hyderabad, and Chennai against IT firms such as Wipro, Tech Mahindra, and Cognizant.

India’s labor laws are confusing when it comes to regulating the IT industry, due to the absence of any special Act governing the sector. For instance, labor dispute mediation often makes reference to the Industrial Disputes Act, which may not always be suitable or relevant.

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RERA to force property brokers out of work

The Real Estate (Regulation and Development) Act 2016 (RERA), India’s new realty law, came into force on May 1. It defines stringent norms for property developers and promoters, in an effort to introduce transparency and accountability in the real estate sector.

Under RERA norms, all property brokers will need to register with their respective state real estate regulators. Moreover, RERA dictates that brokers will be liable to penalties as high as five percent of the property cost in case of misrepresentation or even malpractice and delays by the developers.

As a result, only the most serious and well-backed brokerage firms will survive, meaning the sector should see growing mergers and acquisitions as small firms consolidate with major ones.

Experts predict that 50-75 percent of local property brokers will exit the business in the next three years as regulatory reforms shape the real estate market.

 

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Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout India and the Asian region. We maintain offices in Delhi and Mumbai and throughout China, South-East Asia, India, and Russia. For assistance with India investment issues or into Asia overall, please contact us at india@dezshira.com or visit us at www.dezshira.com.

 

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