• Indian internet economy may reachUSD250billionby2020

• DHLtoinvestUSD268millioninIndianlogisticsindustrypost-GST

• IkeaplanstodoubleproductsourcingfromIndiato690millionby2020

• Italyseekstostrengthentradeandin-vestmenttieswithIndia

• IndiaamendsCompanyLawtoattracthigherforeigninvestments

• Indianeconomicgrowthmay touch8percentpost-GST

• ModisetsupacommitteetoworkoutJanuary-Decemberfinancialyear

• IndiaexploresnewmarketsforFTAs

• KiaMotors setting up USD 1.6 billion plantinIndia

INSIDETHISISSUE

T&ACONSULTINGINDIATRADEINSIGHT

MAY2017 NEWSLETTER,ISSUE1

ThereisexcitementintheairasMaybegins.ApositiveperformanceofIndia’sdomesticindustryinthepreviousfiscalwaspraiseworthy.India’sIndexofIndustrialProduction(IIP),whichrepresentseightcoreindus-tries,grewat4.5percentin2016-17.

AprilisusuallythebeginningofsummerinmostpartsofIndia.Itisalsothebegin-ning of the new financial year, amonthfor the government and the industry toreflectupontheirpastyearperformanceand strategise a future roadmap for theyear ahead. Speaking of a future road-map, PrimeMinister NarendraModi hasexpressed his positive intent to changeIndia’s April-March financial year to Jan-uary-December calendar year. He hasdirected State governments to take ini-tiativesinthisregard.Theshift,accordingtothePrimeMinister,wouldalignIndia’sfinancial year with the standard globalpractices, and better position it to re-spond to the country’s economicneeds.Lastmonth,Indiaachievedamuch-await-ed breakthrough with regards to theGoodsandServiceTax(GST)framework.

TheParliamentpassedfourlegislationstopavethewayfor implementationofGSTfrom its scheduleddateof July1.So far,eightstateshavepassedtheirrespectivestatelegislationtofacilitatethelandmarkbill. The government has recommendedafour-tiertaxstructure—5percent,12per cent, 18 per cent and 28 per cent.LuxuryanddemeritgoodswillattractanadditionalcesstocompensatetheStatesforrevenuelossduringthefirstfiveyearsoftheGSTrollout.ClearanceoftheGSTseemstohavegeneratedoverallpositivesentiments.LastyearIndia’sGDPgrewat7.1 per cent, particularly dragged downbyasluggishmanufacturingsector,risinginput cost and subdued bank credit.There are many compelling indicatorsthatprovethatMaywillbejustasproduc-tive.

1

German logisticsmajorDeutschePostDHLGroup isplanningto invest USD 268million in its India operation by 2020.Theinvestment decision is alignedwithDHL’s expansion plans inoneoftheworld’sfastestgrowinglogisticsmarkets,projectedtoexpandat15-20percentinthenextfiveyears.Thelatestin-vestmentisaimedatconsolidatingthecompany’sdistributioncentresacrossthecountry.DeutschePostAGchiefexecutiveofficerFrankAppelwasupbeatabouttheGSTanditspositiveimpactsonthecargoandlogisticsindustry.Appelsaidthenewtaxframeworkwillcreateopportu-nitiestooptimisethelogisticsnetworkbasedoncostandservicequalityinsteadofarbitragetaxsystems.Itwillencouragemoremanufacturersandtheywillnolongerhavetoworryaboutmul-tipletaxprovisions.DHLcurrentlyhas45servicecentres,pro-vidingaccessto598cities&morethan33,000locationsinIndia.

2 2014 | Newsletter

India’sinterneteconomyisprojectedtoreachUSD250bil-lionby2020fromitscurrentUSD100-130billion,accordingtoaBCG (TheBostonConsultingGroup)–TiE (The IndusEntrepreneurs)report.Thisgrowthwillbeledbythecoun-try’sexpandinge-commerceandfinancialbusiness(valuedataboutUSD40-50billionayear)andincreasingnumbersofmobileinternetusers.Indiahasrecentlyemergedasthesecondlargestuserofmobileinternet,currentlyestimatedat409million.Thisnumberisexpectedtotouchnearly735million by 2020. As the number ofmobile internet userssees a rapid growth, the average data consumption willalsomultiplyatleast10-14timesby2020duetoamyriadavailabilityof4Genableddevices,reliablehigh-speeddata

andmultiplicationofdigitalcontent.Astrongadditiontointernetusersandsignificantgrowthindataconsumptionwillfurtherdrivethecountry’sinterneteconomicgrowth.

TherecentreportfitsaptlyintoIndia’s‘DigitalIndia’missionthatunderlinesthegovernment’scommitmenttopromotetechnologyandinnovationinthecountry. Indian interneteconomicboomalsoremainsrelevanttotheglobal inter-neteconomicgrowthprospectsthatprojecta16percentgrowth for thedevelopingnationsand8percent for thedevelopedones.

The expansion of Indian internet economy will generatenewmarket growth opportunities across various sectors,including agriculture, automobile, health, smart cities,transportation,supplychainmanagementandwasteman-agement.ItthuspresentsopportunitiesforbothIndianandglobalbusinesses,especiallyforthesmallandmediumen-terprises (SMEs), as they look to conduct theirbusinessesonline in increasing numbers. However, their adaptationtothedigitaleconomywillbringwithitaplethoraofchal-lengesintheareasoftechtalent,barriersaroundpayment,inconsistentregionallogisticsandimmatureconsumerbe-haviour.Unsurprisinglythough,thegovernment,aswellasthe industry, remainsupbeat about theeconomicoppor-tunities.

IndianinterneteconomymayreachUSD250billionby2020

DHLtoinvestUSD268millioninIndianlogisticsindustrypost-GST.

May2017,Newsletter

FDIOutwardFDI

• On the FDI front, India’sforeign investmentsinflowjumped9percentto USD 43.48 billion in2016-17. In March FDIinflowwas USD 2.45 bil-lion.

• The most exciting newscame from India’s OFDI(Outward Foreign DirectInvestment) segment,which registered morethan three-fold jump toabout USD 3 billion inMarchfromUSD868mil-lioninFebruary2017.

3Newsletter | 2014

KeyAnnouncements

GlobalfurnitureretailerIkeaplanstodoubleitssourcingfromIndiatoaboutUSD690millionby2020tosupport its361storesacross45countries.Currently,thecompanysourcesfurnitureandfurniture-relatedarticlesworthalmostUSD345millionfromthecountry.IkeasaysitssourcingcommitmentisinlinewithIndianGovernment’s‘MakeinIndia’initiativethatencouragesforeigncompaniestoinvestinthecountry’smanufac-turingstrength.

Ikeahasproposedtosetup25storesby2025withatotalinvestmentofUSD1.65bil-lion.ItsfirststorewillcomeupinHyderabadlaterthisyear.Almost70percentofthecompany’ssourcedmaterialsaretextile,andtherestaresofas,mattresses,andkitchenaccessories.

Ikeaisalsolookingtoexpanditssourcedproductbasketandwillincludeothermateri-alsincludingfurniture,consistingofsustainablematerialssuchasbamboosandacacia.Theworld’s largestfurnitureretailerreceivedIndia’sapprovalfiveyearsagotosetupstoresaspartofthegovernment’ssingle-brandretailpolicywhichcurrentlyrequires30percentlocalsourcing.

• DHL has announced itsplans to invest USD 268million in Indian logisticsindustrypost-GST.

• SouthKoreanautomobilemakerKiaMotorshasan-nounced its India entryplanwithaninitialinvest-mentofUSD1billion.

Some foreign companies haverecentlyexpressedtheir interestinIndia’svaluechainintheman-ufacturingsector.

IkeaplanstodoubleproductsourcingfromIndiatoUSD690millionby2020

May2017,Newsletter

Source:DepartmentofIndustrialPolicyandPromotion(DIPP),ReserveBankofIndia(RBI),May2017

4 2014 | Newsletter

FollowingaconsiderabledeclineofforeigninvestmentinflowinIndiainFebruary,theGovernmentamendedCompanyLawstobetterfacilitatemergersandacquisi-tionsofsmallercompanies.

Thedecisionwasaimedatimprovingthecountry’srankingineaseofdoingbusi-nessandattractinghigherinvestmentfromabroad.

The new law will exempt companieswith a turnover up toUSD155millionfrom seeking approvals fromCompeti-tion Commission of India for mergersandacquisition.

India’sforeigninvestmentinflowinFeb-ruary fell to just USD 1.2 billion fromalmostUSD4billionamonthago.For-eigndirectinvestmentoutflowinFebru-ary,too,remainedsignificantlyloweratjustUSD868million.

Foreign investments made by Indianfirms in March, however, grew morethan three-fold to USD 3 billion fromUSD868millioninFebruary.Meanwhile,India’simportsinMarchgrew45.25percenttoUSD39.67billionoverthelevelofimportsvaluedatUSD27.31billioninMarch2016.

Italian Deputy Minister of Economic Development, IvanScalfarotto, leda140-memberdelegation to Indiawithacommonobjectiveofstrengtheningtradeandinvestmentrelationswiththeworld’sfastest-growingmajoreconomy.Italy-Europe’s2ndlargestmanufacturinghub—isseekinggreatercollaborationinIndia’ssmartcities,greenandcleantechnology, machinery, leather, automotive, textile, mar-blesandfoodprocessingindustries.ThevisitingsidesaidtheywerelookingforwardtotheimplementationofGoodsandServiceTax(GST)framework,which,accordingtoScal-farotto,willenhanceforeigncapitalinIndiafromItaly.

Last year, Indo-Italian tradewasUSD8.3 billion.The Ital-ianministerrevealedItalyaimstotaketheirbilateraltradetoUSD9.2billion in 2018.The visitingparticipantshigh-lightedsomeofthemajorchallengesfacedbytheItaliancompanies in India.Amongothers includedthecountry’scomplexbureaucraticsystem,complex taxationandeaseofdoingbusiness.They,however,remainedpositiveabouttheGSTandsaidasuccessfulimplementationofthenewtaxframeworkwilladdresssomeoftheircoreissuesintheIndianmarket.Italyisthe13thlargestinvestorinIndia,anditsFDItoIndiastoodataboutUSD2.2billionbetween2000and2016.

ItalyseekstostrengthentradeandinvestmenttieswithIndia

IndiaamendsCompanyLawtoattracthigherforeigninvestments

ItalianDeputyMinisterofEconomicDevelopment,IvanScalfarotto(L)withIndianCommerceandIndustryMinisterNirmalaSithara-man(R)

May2017,Newsletter

ModisetsupacommitteetoworkoutJanuary-Decemberfinancialyear

5Newsletter | 2014

Indiaissettoemergeasthethird-largestglobaleconomyby2030,pushingJapan– the current third-largest economybehindonlytheUSandChina–tofourthplaceandGermanytofifth,accordingtoUnitedStatesDepartmentforAgricultureEconomic Research Service. The reportsaid Indian economy will grow at anaverage 7.4 per cent annually to USD6.84trillionby2030,thusmakingitevenbigger than the economies of Germany(USD 4.38 trillion) and Japan (USD 6.37trillion).

At the projected growth rate, India’stotal annual economicoutputwill reachalmost double than that of Britain (USD3.6trillion)andFrance(USD3.44trillion)

in the next 15 years. Meanwhile, Inter-national Monetary Fund (IMF) Manag-ingDirectorChristineLagardecontinuesto remain bullish on Indian economicgrowth. Ina recent report, IMFassumedIndia to expand at over 8 percent post-implementation of Goods and ServicesTax.Notsurprisingly,theUKisestimatedtogrowatjustabout2percentthisyearand1.8percent in2018,draggeddownmainlybythenegativeimpactsofBrexit.

NITIAayog,too,estimatedIndianGDPtogrowat8percentoverthenext15yearsandthusseemorethanthree-foldexpan-sionatUSD7.25trillionby2030.By2050Indiaisprojectedtoemergeasthesecondlargesteconomy,onlybehindChina.

Oflate,India’seconomicgrowthstoryhaskepttheworld’sattention,asitgrewawhopping170percentbetween

2005and2016,whiletheworldeconomyregisteredaround30percentgrowth.

Indianeconomicgrowthmaytouch8percentpost-GST

India’sPrimeMinisterNarendraModiisinfavourofreplac-ing India’sApril-Marchfinancial yearwith the regular cal-endar year, i.e. January-December, a move, according tomany,would better position theGovernment to respondto thecountry’seconomicneeds,butwouldhaveseriousshort-termimplications.Modisaidthechange infinancialyearwasespeciallyimportantforthecountry’sagriculture-heavyeconomy.Hefeelsthatthebudgetshouldideallybeannouncedimmediatelyafterthereceiptofagricultural

revenuefortheyear.Iftheproposalisadopted,theunionbudgetwillbepresented ineitherOctoberorNovember.Atpresent, India’sbudgetcycle suffersdue to insufficientdata on crop income,monsoon forecast, which creates aproblemandasenseofuncertaintywhiledraftingthe in-come-expensechart.Thisfurthercreatesdifficultiesforthegovernmentinformulatingtheunionbudget.Thechangewould also align India’s financial year with the standardglobalpractices.Manymajormultinationalsfollowcalendaryearsas theirfiscals. In India, theyhave to follow twofis-calswhichmaketheirbusinessoperationsdifficult.Thein-dustry,however,feelsotherwise.Itsaidthischangewouldcreateahugeavoidabledisruptionforthecountry’stradeandindustry.

Theentire infrastructure in termsof taxation systems, ac-counting software and human resource practices wouldhave to undergo a transformation, a practice, accordingto the industry,would cost billions of rupees for big andsmallindustries.TheGovernment,aswellastheindustry,isgearingupforGSTimplementationonJuly1.IfthenewtaxframeworkisadoptedthenbothGovernmentandcompa-nieswillhavetobearahugecost.

May2017,Newsletter

ImageCourtesy:TheEconomicTimes,April2017

6 2014 | Newsletter

SouthKorea’sautomobilemanufac-turer Kia Motors is entering India,with an initial investment of USD1.6 billion in the world’s fastest-growing car market. The companywill set up its new factory in thestate of Andhra Pradesh. The newfacility will be established by late2019. The 2.5million squaremeterplant will have annual productioncapacityof300,000units. In itsfirstphase, Kia will produce compactsedans and compact sports utilityvehicles best suited to the Indianmarket.AndhraPradeshstateChiefMinister Chandrababu Naidu saidtheprojectwillbooststhecountry’sMakeinIndiavisiontodevelopitasaninternationalmanufacturinghub.HeassuredKiaMotorstopersonallymonitortheproject’sprogresseverymonth.KiaMotorisasisterconcernof Hyundai Motor, which produces650,000carsannuallyandcovers17percentofthepassengercarmarketonlybehindMarutiSuzukiIndia’s47percent.

India is currently the world’s fifthlargest automobile market. With apopulationofover1.25billion, it isexpected to emerge as theworld’sthird-largest car market by 2020.Many global automobile manufac-turers havebeenbettingon India’sirresistible automobile industry.Recently, Volkswagen and Skodasigned MOUs with Tata Motors fortheirlong-termco-operation.InJan-uary, French automaker PSAGroupsigned an agreementwith CK BirlaGroup, thus acquiring a majoritystake in Hindustan Motors FinanceCorp.LastNovember,Japan’sSuzukiMotor announcedan additional in-vestmentofaboutUSD405millionfor a second plant in Gujarat, thustakingitstotalinvestmenttoaroundUSD498millioninthestate.Anoth-erJapanesecompany,IsuzuMotors,is investing about USD 467milliontorolloutitsD-MAXV-Cross,anad-ventureutilityvehicle,fromitsplantinAndhraPradesh.

KiaMotorssettingupUSD1.6billionplant

May2017,Newsletter

US Commerce Secretary Wilbur Ross lastmonth signalled that an India-US FreeTradeAgreement (FTA) is not out of the question,eventhoughnoseriousdiscussionshascom-menced on the topic of a free trade agree-mentthusfar.Currently, IndiaandtheUSdonot have any exclusive trade pact, and theirbilateraltradeisgovernedbythemandateofWTO. India’sFTAwiththeEurasianEconomicUnion, which includes Belarus, Kazakhstan,Russia,ArmeniaandKyrgyzstanasitsmembernations,seemstohavemovedforward.IndiaisreportedlyjoiningthegroupasanFTApart-ner.

IndiaandAustralialastmonthacknowledgedthat they need to reinvigorate talks on theirlong-stalledFTAdeal.Australiaassured Indiathatitwouldlookintotheissuesoftariffsandlabourmobility–mainareasofconcernsbe-tweenthetwosides.Indiahasalsostartedtheprocess of negotiating an FTAwith Georgia.Last month, they decided to initiate a jointfeasibility studyon thepossibleareasofcol-laborationunderabilateralFTA.

Britain, too, is keenly looking at a potentialIndia-BritainFTApost-Brexit.TheUKfeelsthatthe two countries have enough untappedtrade potential to mitigate the possible im-

pacts of Brexit on its exports to the EU.Thisloss can bemade up by building on under-developedlinkswithcountries like Indiaandmaking it apriority in its tradenegotiations.India on its part said the two countries canstartaformaldialogueonapossiblebilateraltradeagreementonlyafterthecompletionofBrexit.

India’s FTA negotiations with the EuropeanUnion remain unproductive. Various roundsof discussions have taken place; various Eu-ropeancountrieshavevisited India tospeeduptheFTAprocess,butthediscussionsdonotseemtobemovingup inan intendeddirec-tion.

All the eyes, however, will once again belooking at India when it participates in theRegional Comprehensive Economic Partner-ship (RCEP) meeting in Manila this month.Many RCEP member countries - (consistingof10ASEANmembersi.e.Brunei,Cambodia,Indonesia,Laos,Malaysia,Myanmar,thePhil-ippines,Singapore,ThailandandVietnamandtheirsixFTApartnersnamelyAustralia,China,India, Japan, SouthKorea andNewZealand)-haveaccusedIndiaofselfishlyblockingtheRCEPtradedeal.

IndiaexploresnewmarketsforFTAs

ContactUs

T&AConsulting1316,13thFloor,DevikaTowers,6NehruPlace,NewDelhi–110019India

+91(0)1141709326+91(0)1140546760contact@insideindiatrade.comwww.insideindiatrade.com

7Newsletter | 2014

T&ACONSULTINGBUSINESSWITHINDIASTARTSHERE...

TheNewsletter“IndiaTradeInsight”isaninitiativebyT&AConsultingtoprovideemergingopportunitiesforfor-eigncompanieslookingto“DoingBusinessinIndia”.TheNewsletterprovidesanoverviewofIndianGovernment’sinitiatives towardseaseofdoingbusiness,majorannouncements related toGreenfield investments,M&AandlatestfiguresonForeignDirectInvestment.

T&AConsulting(NorthernIndiaRepresentativeofHungarianNationalTradingHouse)exhibitedatSmartCityExpo2017,NewDelhi

T&AexhibitedattheSmartCityExpo1,NewDelhiastheofficialrepresentativeofHungarianNationalTradingHouseinIndia.TheeventendedonaverypositivenotefortheparticipatingHungariancom-panies.T&AConsultingsuccessfullyarrangedmorethan15focusedB2Bmeetingsfortheparticipat-ingHungariancompaniesandhadjointmeetingswithover65visitingcompanies.

Someof theHungarian technologiesonofferwerewater treatment- services, smart street lights,smart logistics, potablewater cleaning technology, especially for the rural Indiawith capacity of3,000l/day,andewastecollectingvehicle.

1Smart City Expo: Exhibition focused on the needs of urban development and sustainability.

May2017,Newsletter

T&A is a boutique advisory firmwith extensive expe-rience of working with overseas enterprises towardsachievingsuccessfulandacceleratedentryintoIndia.

T&A’s portfolio of market entry services includesopportunity assessment, feasibility studies, partneridentification (JointVenture, distributor, vendor, licen-see and franchisee) competitor analysis, price bench-marking, location identification, technologycollabora-tionandlocalrepresentation.

LOOKINGFOREFFECTIVEINDIAMARKETENTRY?CALLUS...