India Market Watch: Technology Companies Identify India as a Top Market and BRICS Nations Negotiate Social Security Pact
India Top Performing Market for Technology Companies
India is now one of the world’s fastest growing markets for IT/ITeS companies because of its positive GDP growth and the early adoption of new technologies by Indian businesses and the government alike. A rapid pace of consistent growth over several quarters makes India a critical market for innovation-driven tech companies. In fact, the development is most visible in the recent earnings calls of Dell, Microsoft, Cisco, IBM, Accenture, and VMware.
Moreover, India is often singularly lauded as the best performing market for some of these companies as they observe falling profits in markets elsewhere. For instance, Cisco reported that the company’s India revenue grew by 20 percent in the quarter ending in July while it declined by 12 percent in China and by 6 percent in other emerging markets. For IBM, India was the sole positive performer this year as revenue declined in all major markets – by 2 percent in the Americas, 4 percent in Europe/Middle East/Africa (EMEA) and 2 percent in Asia-Pacific.
Underlining this star performance is the investment of Indian firms in new digital technologies to self-disrupt the traditional format of their businesses and move ahead of the curve. This includes the adoption of the cloud, mobility solutions and desktop virtualization, data analytics, and machine learning. While Dinesh Malkani, president of Cisco, points to Mahindra & Mahindra (manufacturing) and SBI and IDFC (banking) as lighthouse companies in their respective sectors, Microsoft India chairman Bhaskar Pramanik states that 52 of the top 100 Indian companies listed on the Bombay Stock Exchange (BSE) use Microsoft’s cloud services. Microsoft launched data centers in India late last year, and its growing list of clients include HDFC Bank, Bank of Baroda, Axis Bank, Kotak Mahindra Bank, Fortis Healthcare, Apollo Hospitals, and Narayana Health. Further, e-commerce firms Paytm, JustDial, and Snapdeal use Microsoft’s machine learning technologies and digital assistant Cortana.
World Bank Report Forecasts India’s GDP to Stay Strong
South Asia is a global growth hotspot according to a biannual report by the World Bank. In the report, a positive forecast is attached to India showing a steady GDP growth rate of 7.6 percent in 2016 and 7.7 percent in 2017. The outlook is supported by various factors, including a healthy monsoon benefiting the agricultural sector and causing an uptake in rural spending, the civil service pay revision (Seventh Pay Commission) boosting consumption, growth in exports, indirect tax reforms, and a medium term recovery of private investment.
Moreover, the World Bank’s report notes the resilience of the South Asian region to external headwinds such as the slowdown of Western economies, China’s ongoing economic change, and slowing remittances. Yet, challenges to future growth in the region remain, particularly with regards to domestic policy and development outcomes. Among the said challenges, the report highlights the need for a stronger showing by governments on poverty reduction, inclusive growth, and human development goals related to health, nutrition, education, and gender. This holds true for India as well.
With specific regard to India, the World Bank identifies “significant downside” risks in the near term at three levels – global economic undercurrents, domestic policy ambitions, and the country’s investment climate. Some of the challenges at the global level come from continuing uncertainties in the international economy, impact of Brexit on world trade, and the slowdown in China affecting the recovery of external demand. On the domestic front, the report cautions against the fallout from setting ambitious targets for raising revenue from divestments and spectrums, which if not met could cut into capital available for growth-promoting social spending. This is in turn would undermine the credibility of the government’s fiscal policy. Finally, with respect to private investment, the World Bank report lists out domestic impediments such as addressing the corporate debt in the country, stress in the financial sector, and other regulatory and policy challenges.
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India to Sign Social Security Pacts with BRICS Countries
India is to sign social security agreements with Brazil, Russia, China, and South Africa (BRICS), which will be a landmark move for labor relations between these countries. The decision emerged after a consensus was reached at the BRICS labor ministers’ conference on September 28 to promote labor mobility within the BRICS grouping. India previously failed to persuade the US to sign a similar bilateral social security arrangement to facilitate the remittance of the billions of dollars’ worth of contributions by Indian workers made in the country despite not being eligible for its social security benefits.
This is why India is of the opinion that despite the lesser labor flows among the BRICS nations at present, continued strengthening of relations between these countries will encourage movement of job seekers across their borders. Consequently, an enabling social security framework will foster strong labor ties to match growing economic ones. (To put their status into perspective, the BRICS countries account for 43 percent of the world’s population, 37 percent of world GDP, and 17 percent of world trade.)
Under the social security agreement under consideration, an Indian labor migrant would not be required to pay for social security in both countries. The agreement would facilitate a system whereby the worker will pay in the country of their work and, in turn, receive benefits such as pension, provident fund, and healthcare. Upon return migration, the social security deposits will be transferred.
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