Other Briefings
India Nears Deflation
Mar. 20 – Within a span of just seven months India has moved from a 16 year high inflation rate of 12.91 percent to a 32 year low inflation rate of 0.44 percent. The situation however represents a cruel paradox for consumers as food prices continue to rise during the deflation – food prices rose roughly nine percent year on year.
MNC’s Increasingly Looking to India as an R&D Center
Mar. 19 – Besides the traditional research and development powerhouses of the United States, Germany and Japan, India too is proving to be the destination of choice for global technology, pharmaceutical and engineering companies. Large multinational corporations like GM, IBM, Cisco, Motorola, Huawei and GE have already set up large R&D centers in India and many small and medium companies are actively considering establishing R&D facilities in India.
India Buys Naval Aircraft from US in US$2.1 Billion Boeing Deal
Mar. 18 – India has just announced the purchase of eight Boeing P-81 maritime patrol aircrafts, worth US$2.1 billion. The deal, just approved by the Obama administration, is the largest U.S.
India-EU Inching Towards FTA
Mar. 17 – India and the European Union are working towards increasing bilateral ties in a hope to sign the India-EU economic agreement soon. The FTA will cover trade in goods and services, IPRs, cross-border investments, competition policy and government procurement.
List of Protected Indian Industries
Mar. 16 – Setting up and maintaining a wholly owned foreign subsidiary has become the investment vehicle of choice in India. Simpler rules and regulations are encouraging foreign firms establish a firm presence in India. According to government data, foreign direct investment inflows during the April-November period stood up 90 percent at Rs 85,700 crore (US$16.6 billion) compared with Rs 45,000 crore (US$8.7 billion) in the corresponding period of the previous fiscal. Mauritius, Singapore and Japan contributed 55 percent of the inflow.
If a company falls under the encouraged or permitted categories while establishing a business in India, it is covered under the automatic route ie it doesn’t need to seek approvals from regulatory bodies such as Reserve Bank of India (India’s apex bank) and/or the Foreign Investment Promotion Board (FIPB).
Government To Relax FII Restrictions On FDI Capped Sectors
Mar. 12 – The Government is considering proposals to scrap the cap mechanism by which foreign institutional investors are restricted in certain industries from investing in Initial public offerings, according to the Economic Times. The proposal, put forward by the Dept. of Industrial Policy & Promotion will be studied by various secretariats before being presented to parliament.
The move would lift the uncertainty over whether FDI applications in sectors such as retail, auto, aviation and telecoms will require permission from the Foreign Investment Promotion Board (FIPB). Currently, both the Reserve Bank of India, which manages foreign exchange and investment through the Foreign Exchange Management Act (FEMA) and regulations concerning FDI into India conflict over the requirement. Common practice is that applications to FIPB are required. It frees up uncertainty over the routes via which investments can be made, provided they remain within the pertinent capped FDI ceiling.
India Most Optimistic of Hiring
Mar. 11 – The Indian economy, Asia’s third largest isn’t looking too optimistic about hiring new employees in the next quarter April – June. In a 33 nation survey by HR consulting firm Manpower, India however topped the ranks for the country most likely to hire, even as only 25 percent of the 3,600 firms surveyed said they would hire new employees in the next quarter. The mining and construction, finance, insurance and real estate sectors have seen the most job losses and are the most affected industries, while the services industry is the least affected.
Manpower said that although India’s net employment outlook dipped from 43 percent in the second quarter of 2008 to 25 percent this quarter, a year later, sentiments had improved from a net employment outlook of 19 percent registered last quarter.
"(Employers) remain hesitant about adding employees at this time," Manpower's India chief, Naresh Malhan, told Reuters. "The modest improvement (quarter-on-quarter) … could be the result of employers reappraising their cutbacks of the previous quarter." Fears are that if the economy further contracts to 6 percent growth, employment will be further affected.
Indian Auto Businesses Expand Into Rural Areas
Mar. 10 – Auto and bike manufacturers are expanding into India’s huge countryside areas in order to take advantage of increasing affluence and to offset falling sales in semi-saturated urban areas. Similar to China, India’s rural markets, are booming and are relatively insulated from the global economic problems that have affected more internationalized cities such as Mumbai, Chennai and Pune.
Maruti, who’s JV with Suzuki is responsible for almost half of all auto sales in India, is racing ahead with its share of non-urban markets tripling in the past nine months. Hero Honda, the world’s largest two-wheel manufacturer, also sees growth in the rural areas. A source at the company said two wheeler penetration in rural areas was only at about 10 percent of households, and that the region therefore had massive potential for growth.
