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India Economic News Consulate General of IndiaMarch 2016 Munich

Government allows 100% FDI in e-commerce marketplace model:

The government has given the green light to 100% FDI in the marketplace format of e-commerce retailing with a view to attract more foreign investments. As per the guidelines issued by the Department of Industrial Policy and Promotion (DIPP) on FDI in e-commerce, foreign direct investment (FDI) has not been allowed in inventory-based model of e-commerce. The DIPP has also come out with the definition of ‘e-commerce’, 'inventory-based model' and 'marketplace model'.Marketplace model of e-commerce means providing of an IT platform by an e-commerce entity on a digital

and electronic network to act as a facilitator between buyer and seller. According to the guidelines, the inventory-based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to consumers directly. According to DIPP, a marketplace entity will be permitted to enter into transactions with sellers registered on its platform on business-to-business basis, an e-commerce firm, however, will not be permitted to sell more than 25% of the sales affected through its marketplace from one vendor or their group companies.

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Budget 2016: Foreign investors can now establish ARCs in India:

The Asset Reconstruction Companies (ARC) got a huge leg up from the Union Budget with relaxation in sponsor holding limit, 100 per cent foreign direct investment and a complete pass-through of income tax, paving the way for foreign investors to set up an ARC in India. Currently, no sponsor can hold more than 50 per cent of an ARC's shareholding either by way of FDI or by routing it through foreign portfolio investor controlled by the single sponsor. The government also relaxed foreign direct investment rules for ARCs by permitting 100 per cent FDI through the automatic route. The investment basket of foreign portfolio investors will now be expanded to include securities issued by such special purpose vehicles. The Finance Minister also announced a compete pass through of income tax for all securitization trusts. The measures announced by the FM is aimed at enabling banks to clean their balance sheet which is saddled with rising bad loans.

Budget 2016: FM gives Rs 1700 crore for setting up 1500 skill centres:

Furthering Prime Minister Narendra Modi’s Skill India Mission, Finance Minister Mr. Arun Jaitley has announced Rs 1,804 crore (approx. Euro 241 million) for the Ministry of Skill Development to push job creation, apart from announcing a pension incentives. The Ministry of Skill Development and Entrepreneurship will target training 10 million youth over the next three years. As many as 1,500 new multi-skill centres will be set up with funds amounting to Rs 200 crore (approx. Euro 27 million) under the National Skill Development Council through the Ministry’s flagship scheme, the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). The Ministry was created last year to “capitalise India’s demographic advantage”, and has so far seen a 73 per cent jump in its allocation.

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GDP growth expected in the range of 7 to 7.75 per cent in coming year:

As per the Advanced Estimates released by Central Statistics Office (CSO), the growth of Gross Domestic Product (GDP) at constant (2011-12) market prices is estimated at 7.6 per cent in 2015-16. This indicates that despite uncertainties in the global economy, Indian economy stands out as a haven of macroeconomic stability, resilience and optimism and can be expected to register GDP growth that could be in the range of 7 to 7.75 per cent in the coming year. IMF, in their World Economic Outlook Update (January 2016) has indicated that India is projected to continue growing at a robust pace. As per the Advanced Estimates released by Central Statistics Office (CSO), the growth of GDP at constant (2011-12) market prices is estimated at 7.6 per cent in 2015-16.

Airbus eyes $2 billion worth procurement from India by 2020:

According to the Indian arm of the Airbus, global aerospace major Airbus group plans to procure components and sub-systems worth $2 billion per annum by 2020 for its civil and defence projects, up from $500 million in 2015. About 6,000 skilled people at 45 state-run and private suppliers side across the country provide engineering and IT services, aero-structures, detail parts and systems, materials and cabins to the group for many of its leading platforms. Claiming every Airbus commercial aircraft was partly ‘Made in India’, Airbus chief procurement officer Klaus Richter said Indian suppliers were a cornerstone of its globalization strategy. According to Airbus Group India President and Managing Director Pierre de Bausset, the company is ready to set up system integration and final assembly lines if its proposal of producing C295W military transporters in India with Tata and military helicopters with Mahindra fructify. Further elaborating on its Indian



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procurement collaborations, Airbus said Hindustan Aeronautics Limited (HAL) manufactures half of A320 family forward passenger doors while Dynamite Technologies makes flap trackbeams. Mahindra Aerospace has a contract with Airbus Group company Premium Aerotec to supply more than one million aero-components per annum, while Wipro received technology transfer to produce 8,000 aerospace actuators per year. Infosys provides SAP development and maintenance services while Geometric supports on product lifecycle management (PLM) applications and CAD services. Tech Mahindra provides consulting services on Quality and Business Support.

Ford, GM to operate India factories round the clock:

Three global automobile powerhouses either have started operating their India factories round the clock or are in the process of doing so to meet increasing export demand, in a resounding endorsement of the Prime Minister’s call to ‘Make in India. For the past six months,

Ford Motor’s manufacturing facility in Tamil Nadu is running three shifts a day, which is uncommon in the American carmaker’s global operations. Europe’s largest carmaker, Volkswagen, is set to start a third shift soon, while the US No. 1, General Motors, is expected to add another shift from the beginning of next year. While these carmakers have a market share of less than 3-4% in India, experts say high export volume is helping them make local operations viable. Automakers have committed to invest billions of dollars in India, enticed by the local market opportunity in the long term as well as its frugal manufacturing capabilities and abundant skilled manpower, which offer a cost-effective environment to make small cars and sell them at competitive prices internationally.

Japan commits 30 billion dollars investment in Haryana:

According to Japanese Ambassador to India, Mr. Kenji Hiramatsu, Japan has committed about 30 billion



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dollars in investments and aid for development in Haryana where as many as 305 Japanese companies are operating -- the highest in the country. Gujarat comes at number two with a total of 203 Japanese companies operating. Mr. Hiramatsu was attending the two-day ‘Happening Haryana Global Investor Summit’. He added that Jhajjar has been identified for setting up a Japanese integrated industrial township.

90 percent of FDI inflows in 9 months through automatic route:

According to a reply by Commerce Minister Mrs. Nirmala Sitharaman in the Parliament, 90.24 percent of the total foreign direct investment (FDI), received during the first nine months (April-December) of this fiscal year 2015-16, came through the automatic route. She also informed that the government had put in place a liberal and transparent policy under which most sectors have been opened to FDI under the automatic route. In reply to a separate question, Sitharaman informed that the demand for

electronics in the Indian market is expected to reach $400 billion by 2020 and without intervention and at the current rate of growth, domestic production can cater to a demand of about $100 billion by 2020.

India a bright spot for growth and investment: Ernest & Young:

According to Mr. Mark Weinberger, EY’s Global Chairman, global CEOs are looking at India along with US as the world’s top investment destinations. With a presence in 152 countries across the globe, Weinberger has a better feel of the pulse of the global economy than most CEOs and accordingly, when he says that, his voice carries heft. He has opined that relative to the rest of the world, India is a bright spot from the point of investment for the next three years, attributing it to multiple factors like political security in India relative to other emerging markets, fiscal discipline and good policies like ‘Make in India’. According to him, this year’s budget has focused more on rural economy and that may



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help provide consumers and create jobs. The FDI through automatic approvals for agriculture marketing companies is seen as a positive step for the investment. While awaiting the introduction of GST (Goods and Services Tax), he considers the other things in the budget, like clarifications on issues like withholding tax and other changes as positives as it takes away certain uncertainties.

Airbus plans global hub in India for Panther copters:

Europe’s Airbus Group which is competing for aircraft orders from India’s navy and air force announced its decision to build local assembly lines if these projects come through. According to the firm, the final assembly lines to make Panther helicopters for the Navy and C295 transport aircraft for the Indian Air Force will be built at a cost of over Rs.5,000 crore (approx. Euro 667 million) and will create over 10,000 high skilled jobs. Mr. Pierre de Bausset, President and MD, Airbus Group India has stated that along with the final assembly line, Airbus will set

up tier I, II and III supply chain infrastructure in India for these helicopters. Airbus Helicopters is in the process to form a joint venture company with Mahindra Defence Systems Ltd., hoping to become the private strategic partner on helicopter platforms.

Foreign direct investment up 29% under Make in India: Nirmala Sitharaman:

According to a statement by Mrs. Nirmala Sitharaman, Minister for Commerce & Industry in Parliament, Foreign direct investment (FDI) in the country increased by 29% for the 15-month period ended December 2015 as compared to the 15-month period prior to launch of Make in India initiative. In a separate reply, she also informed that during April-January 2016, the government received 424 FDI proposals and out these, 285 proposals have been disposed of. On the issue of FDI in e-commerce, the minister informed that foreign investment in business to customer e-commerce activities has been “opened in a calibrated manner” and an entity is permitted to



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undertake retail trading through e-commerce under certain circumstances.

Income-tax department eases norms governing foreign fund managers:

The income-tax department has notified rules relaxing certain earlier conditions governing Foreign Fund Managers in a bid to encourage them to move to India. Presently, most of them manage foreign capital to India out of Singapore, Dubai and London. Finance minister in his budget speech last year had proposed steps to encourage the relocation. The new rules provide for a pre-approval mechanism under which a fund can seek prior approval from the tax department and avail exemption under Section 9A of the Income Tax Act. Thus providing the much-needed certainty to the offshore funds. The latest circular also clarified that in case the investment in the fund is made directly by an institutional entity, the investor interest in the fund will be determined by looking through the entity and will help in meeting the criteria

that a fund should have a minimum of 25 members. It has also been clarified that a fund will not be able to own more than 26% in an Indian entity to avail exemption.

Cisco to invest US$100 million in India over two years:

Joining the league of global technology giants who are making a beeline to invest into the booming India startup ecosystem, US networking major Cisco has committed $100 million over the next 18 to 24 months. The series of investments will include $40 million that will be used to fund early-stage and growth-stage companies in the country, and train around 250,000 students by 2020. The rest of the funds will go towards opening six new innovation labs and three centres of expertise, apart from collaborating with Universities and making other investments for skill development, Cisco has announced.

Easing norms for EXIM trade:

The Central Board of Excise and Customs (CBEC) has



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developed an 'integrated declaration' to incorporate all the information required for import clearance by various government agencies into the electronic format of the bill of entry. This is to be filed electronically at a single entry point, the Customs Gateway. Separate application forms required by different agencies such as the Drugs Controller, Textile Committee, etc, would be dispensed with. The scheme will go online from April 1, for consignments to be cleared under the Indian Customs EDI Systems but not for clearance of imported goods in the manual mode. The integrated declaration has a separate section on particulars of supporting documents to be provided with the bill of entry. CBEC is in the process of procuring information technology infrastructure to capture digitally signed copies of the supporting documents. Once this is implemented, the need to provide hard copies of supporting documents will be dispensed with.

India aims to capture 20% market share in Internet of Things: Nasscom:

India aims to capture 20% market share in Internet of Things (IoT), an emerging sector which would be worth $300 billion by 2020, according to a top Nasscom representative. The Internet of Things is driving the fourth wave of industrial revolution dramatically alerting manufacturing, energy, transportation, medical and other industrial sectors while emerging worldwide. As the global IoT business is expected to touch $300 billion by 2020, India aims to capture 20% market share in another five years. Recently Nasscom has launched Nasscom IoT Centre of Excellence in Coimbatore, a joint initiative of Government of India, Department of Electronics and Information Technology (DEITY) along with TCS, Intel, Amazon Web Services and FORGE Accelerator. Depending on the success of Coimbatore hub, it was proposed to launch such centres in Pune, Baroda and Hyderabad.



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National CAD narrowed down to 1.3% of GDP in December quarter: Reserve Bank of India:

According to RBI, India’s current account deficit (CAD) narrowed to 1.3% of GDP in third quarter of the fiscal as against 1.5% in the same period last year, mainly on account of lower trade deficit. India’s CAD at $ 7.1 billion in Q3 of 2015-16 was lower than $ 7.7 billion (1.5% of GDP) in Q3 of 2014-15 and $ 8.7 billion (1.7% of GDP) in the preceding quarter primarily on account of a lower trade deficit ($ 34 billion) as against in Q3 of last year ($ 38.6 billion). On a cumulative basis, the CAD narrowed to 1.4% of GDP in April-December from 1.7% in the corresponding period of 2014-15.

India Development Foundation for Overseas Indians (IDF-OI):

Government of India in 2008had set up IDF-OI to facilitate contributions/philanthropy by NRIs/PIOs to India, as a not-for-profit Trust chaired by Hon'ble Minister of Overseas Indian Affairs. Following the

merger of MOIA with MEA, IDF-OI is now under MEA and is chaired by Hon'ble EAM. IDF-OI has recently gathered a pool of nearly 100 social and development projects pertaining to Swachh Bharat, sanitation, education, women’s empowerment and sustainable livelihood after consulting the States. The revamped website of IDF-OI includes detailed information about these projects. Some important aspect about IDF-OI mechanisms are being highlighted as:

(a) IDF-OI has received exemption from MHA under the Foreign Contribution Regulation Act (FCRA 2010) owing to which it has necessary permissions to receive contributions in foreign currency.

(b) IDF-OI does not charge/deduct any administrative charges from the contributions it receives from



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NRIs/PIOs. Except the bank transaction charges the entire amount received from NRIs/PIOs is transferred to the project implementing agency.

(c) To enable oversight of implementation of programmes funded by overseas Indian donors an agreement will be signed between IDF-OI and project implementing agency.

(d) Implementing agency for the programme will send regular feedback reports, photos and statement of utilization of funds to the donor. These will also be posted on IDF-OI’s website.

(e) At the site of project funded by the

NRI/PIO donors will get an acknowledgement with a signage which states that “The project has been funded by Shri......... through IDF-OI”.

As a result of revamping and outreach efforts IDF-OI has already received the following contributions from overseas Indians in the last six months:-

(i) Rs.72 lakh for construction of community toilets in Kerala.

(ii) Rs. 25 lakh for the Namami Gange project.

(iii) Rs. 1 lakh for the Namami Gange project.

IDF-OI is setting up a Payment Gateway through its website which will enable NRIs and PIOs to contribute even small amounts ranging from a few dollars using their credit cards or debit cards online to projects of their choice offered by IDF-OI.



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***DISCLAIMER

This newsletter is a compilation of news articlesfrom various business e-newspapers and in no

way is an endorsement or reflection ofviews of Consulate General of India, Munich.

For queries contact:

Mr. Asheesh Gupta, Consul (E & C), Consulate General of India, Widenmayer Strasse 15, 80538 Munich, Germany. Email: [email protected] , Web: www.cgimunich.com


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