Interviews

Turnaround Talk – In a Diplomatic Way

Diplomats present their outlook on the much awaited turnaround, and how the business climate can be made more favourable...

Michael Siebert - GemanyMichael Siebert, Consul General, Federal Republic of Germany


Do you think the much awaited turnaround from the recession has occurred for the Indian Economy?
Certainly the atmosphere has turned around. Indicators for economic growth show first positive developments again. The government has initiated some long awaited steps to further develop India’s enormous economic potential and to attract more potential investors. Consequently, the IMF and rating agencies have raised their growth forecasts for the years to come. If I get the companies’ mood right, they appreciate India’s new economic policy a lot but believe that more will have to follow in order to sustain the new trend.

What business opportunities do you see for companies from your country to participate in building India’s infrastructure sector?
German engagement in Indian infrastructure construction is one of the strengths of the Indo-German economic partnership: It is strong, and it will definitely grow! German companies are perfectly suited to participate in all kinds of infrastructure projects, bringing along experience, quality and efficiency for planning, as well as executing a multitude of projects, also looking at the environmental and social impact of what they do. They cooperate on an eye-to-eye level with their Indian partners. To give you just a few examples: German companies have huge roles in the construction of metros in Delhi, Kochi and elsewhere, and in modernising the Indian electricity network, and the biggest solar power station in India, Sakri in Northern Maharashtra, has been built with German financing. By the way, German and Indian Governments do their part as well. When PM Modi came to Berlin in mid-April, both countries committed to broaden their cooperation – from green energy corridors to include renewable energies in the net to a solar partnership, from smart cities to improving the Indian rail network. And don’t forget Germany’s huge effort to modernise Indian skilling with our famous dual education system that the Indian Government asked us to undertake with them.


Richard Bale - CanadaRichard Bale, Consul General, Consulate General of Canada

Your opinion on upcoming business opportunities for companies from your country to participate in building India’s infrastructure...
Canadian companies are already actively participating in many projects throughout India including creating Master plans for some of India’s key infrastructure projects, developing integrated transportation plans for some of India’s largest cities, and contributing design and architecture capabilities. Canadian technology providers are also active in India in areas ranging from the provision of clean water to innovative renewable energy projects. Most recently, during Prime Minister Modi’s visit to Canada, an MoU on rail cooperation was signed between Canada’s Transport Ministry (Transport Canada) and the Ministry of Rails. This MoU outlines areas of cooperation and engagement related to the rail sector. As the second largest country in the world, the movement of people and goods is essential to the Canadian economy. Canadian companies have extensive experience in design, construction, operation and refurbishment of transportation related facilities.

Camille Richardson - US

Camille Richardson, Principal Commercial Officer, US Consulate – Mumbai


Has the much awaited Turnaround from the recession occurred for Indian Economy? Your opinion...
Several reports and analyses by global agencies and think tanks indicate that a slow turnaround is happening in India.

  • In its April 2015 report on the 'State of Global Economy,' the World Bank confirmed that growth in India will reach 8 per cent by 2017. In India, GDP growth is expected to accelerate to 7.5 per cent in fiscal year 2015-16. It could reach 8 per cent in FY 2017-18, on the back of significant acceleration of investment growth to 12 per cent during FY 2016-18, the bank said in its semi-annual report. Additionally, the bank’s semiannual 'South Asia Economic Focus' report projected a steady increase in regional growth from 7 per cent in 2015 to 7.6 per cent by 2017 with anticipated strong consumption and increasing investment.
  • In April 2015, global rating agency Moody’s also revised India’s sovereign rating outlook to “positive” from “stable,” as it expects that actions by policymakers will enhance India’s economic strength in the medium term. Moody’s also said that it expected structural advantage - supported by relatively benign commodity prices and liquidity conditions globally - will keep India’s growth above its peers.
  • The Asian Development Bank (ADB) was also bullish about growth of the Indian economy. Revising India’s GDP upwards by 0.3 per cent to 6.3 per cent in 2015, the ADB has said the Indian economy shows a new promise of turnaround after the election brought in a stable government with a majority mandate in May 2014.
  • The decline in oil prices has been reflected in domestic prices of oil products to different extents across the region. Together with favourable food prices, cheaper oil has contributed to a rapid deceleration of inflation. The Indian economy has gone from having the highest inflation rate among developing regions to having the lowest in barely one year. The 'Asian Development Outlook 2015' report noted that India has already taken encouraging steps to decouple international oil prices from fiscal deficits and to introduce carbon taxation to address the negative externalities from the use of fossil fuels.


Your comments on upcoming business opportunities for companies from your country to participate in building India's infrastructure sector.
The Prime Minister has made infrastructure development a priority along with a challenge to develop 100 smart cities. India needs infrastructure upgrades and technologies that will help it to meet a growing energy demand among its 1.25 billion citizens. Infrastructure expansion in the region is expected to grow at an annual rate of 5 per cent in 2015. Despite growth in infrastructure sector, in recent years India ranks 89th in basic infrastructure as per 'Global Competition Report 2011-2012’, indicating relatively slower developments as compared to other countries. India’s growing economy holds a huge potential for critical infrastructure developments consisting of transportation, power, and telecommunications.

The Indian planning commission has projected an investment of $1 trillion (assuming a growth rate of 9 per cent) during 12th Five Year Plan, with at least 50 per cent expected from private sector. These aggressive targets for infrastructure development in energy, water treatment, and smart city development, could mean great opportunities for U.S. exporters. To that end, we are organising an inbound trade mission of US clean energy, water, and technology companies to India in early December.

Over the next few years, the private sector can play a big role in further realising future infrastructure projects in India. US companies will benefit from exploring the market at early stages and introducing their advanced technologies. Several financial institutions and institutional investors have noted the growing appetite for investments in infrastructure and have developed tailored programs to meet the demand. The Asian Development Bank, The World Bank, IFC Global Environment Fund, the US Agency for International Development (USAID), the Overseas Private Investment Corporation (OPIC), and the US Trade and Development Agency (USTDA) are all exploring opportunities to invest in clean energy and energy efficient infrastructure projects in India to reduce India’s contribution to climate change as one of the top fossil fuel consumers in the world.

 

In Right Direction

Trade bodies and industry players react on the Indian business climate and future prospects...

Laura Prasad

Laura Prasad, Secretary General, Indo-French Chamber of Commerce & Industry (IFCCI)

I feel that things are definitely moving in the right direction, and the fact that more and more French companies are looking at India as a new potential market is a definite sign of it. According to a recent report, the World Bank and IMF project that India will emerge as the fastest growing economy in the next two years and will finally emerge from China’s shadows. The projected growth rate is about 7 per cent. India being Asia’s third largest economy, its growth will only accelerate in coming years as the newly elected government is now taking measures to cut red tape, raise infrastructure investment, deregulate key parts of the economy, and shrink the role of the government. What India needs is to tweak laws and regulations to give Indian as well as foreign - and French - companies more confidence to invest and help the economy expand.

There are currently more than 1,000 French companies in India according to the new report that was recently released by the Embassy of France in India. Many big names have joined hands with the Indian Government to bring the best in technologies to build the Indian infrastructure, especially following the visit of Prime Minister Narendra Modi in France last month. Alstom was recently awarded a contract to supply 20 metros to the Kochi Metro Rail Ltd. Veolia Transport’s joint venture with Reliance – Mumbai Metro One Pvt Ltd (MMOPL) operates the Mumbai Metro. French utility company, Suez Environment is working closely with bodies like Municipal Corporation of Greater Mumbai in the sphere of Water and Waste management. Nuclear power company Areva signed a pre-engineering agreement with stateowned Nuclear Power Corporation of India Ltd (NPCIL) and also an MoU with engineering company Larsen & Toubro for cooperation to maximise localisation for the Jaitapur project. Last but not least, Dassault Aviation will form a JV with an Indian company to jointly manufacture the next batch of Rafale fighter planes with hope to fulfill the ‘Make in India’ dream. And there are many more existing Indo-French collaborations as well as future ones to come.


Yong Chan Kim KotraYong Chan Kim, Director General, KOTRA (Korea Trade-Investment Promotion Agency)

The Indian economy has been suffering from low investment in infrastructure and manufacturing for the last 3-4 years. The current low petroleum prices have given fiscal space to the government to reduce subsidies and invest more in public infrastructure. We are hoping to see the investment cycle reversing this year on back of strong infrastructure growth in Railways, Ports, Renewable Energy, and Urban Mass Transportation. Many Korean companies are looking at India for expanding their manufacturing base. We are keen to participate in the India growth story. If the government follows up on its commitment to improve the “Ease of Doing Business” in India, it can be major factor towards improving bilateral trade and investment. Korean companies are looking for opportunities both in services (EPC contracts) and also supply of construction equipment.

Korean companies are looking to actively participate in the many projects coming up under the smart city programme of the Indian government. Samsung C&T is constructing a high rise tower for the Oberoi group in Worli while HDC is constructing one for RNA developers in Sewri. Hyundai Rotem is supplying coaches and Samsung SDS has been providing its Fare Collection solution to metro projects in Delhi and Hyderabad. Hyundai Heavy Engineering and Liftech are supplying construction equipment like excavators and elevators. Midas IT is a leading supplier of software solutions to structural engineers for large and complex construction projects.

Bernhard Steinruecke IGCCBernhard Steinruecke, Director General, IGCC

The German companies in India hold a positive long term view of the Indian market but they also mention some areas where improvement is needed. Ease of doing business is looked upon as the single biggest hindrance by German companies. At a time when more and more German companies are showing confidence in India’s sustainable economic growth, the Hannover Trade Fair offers an excellent platform to enhance economic relations between the two nations. Around 250 German companies that are already ‘making it in India’ will be present in Hannover. 330 Indian companies will exhibit in 39 decentralized India pavilions. Already more than 1,600 German companies are doing business in India, many of them for decades and as market leaders in their field.

The latest IGCC Annual Business Monitor shows that the 30 largest German companies alone employ about 200,000 people. These companies with an annual turnover of about €16 billion, have invested €2.7 billion in the last 3 years and intend to invest another €1.6 billion in the next 3 years with plans to recruit another 40,000 people. In the last 2 to 3 years, more than 120 factories were opened or significant expansions took place along with formation of more than 100 new companies.

German companies in India are highly profitable. This is proven by the fact that the 13 largest German companies listed at the Indian Stock Exchanges, due to their good profitability in 2014 itself, could on an average double their value and today have a market capital of more than €27 billion.


Sandeep Ahuja RichaSandeep Ahuja, CEO, Richa Realtors

It would be too early to term it as a turnaround, but the economy has surely appreciated from weak to recover level. With the current growth rate between 7 – 8 per cent, the future of Indian economy looks bright. Tax reforms like reducing the corporate tax and implementation of the GST is a very thoughtful move which will help to decrease the fiscal deficit. From the real estate sector perspective, Tax pass through on REITs is an excellent and much required move. We still have to look at the specifics of how capital gains will be rationalised during REIT listing.

The real estate market is gaining the right momentum especially after the cabinet’s nod to the Real Estate (Development and Regulation) Bill, though the bill needs to get the final approval from the parliament, it has set a positive tone.


Sanjeev Ranjan - ICA

Sanjeev Ranjan, Managing Director, International Copper Association (ICA India)

The Modi Government has presented two budgets – One in August 14, an interim one, and another in February 15. Both the budgets have been very directional and helped to draw a blueprint for India’s turnaround where an attempt has been made to come out of the economic morass.

The government is trying hard to sell the various opportunities as they exist in India through its campaign on – Make in India but it will take at least another 6-9 months for us to see the movement happening on the ground. The economic growth not only focuses on generating employment for the youth but provides an opportunity for pushing inclusive growth. Infrastructure can be the medium which helps to address this in a big way.

An open transparent environment has been created both through government policies and by RBI. The Indian economy to a large extent is driven by domestic consumption and we need to keep stoking the fire through government spending followed by easing of interest rates which can be the much needed stimulus for our economy to improve.

Manoj HessManoj Kumar, Managing Director, Hess (India)

“After two years of slowdown, it seems like the market has started to move forward. Whatever be the decisions or the policy changes taken by the government, after the financial yearend it seems that things have started to move and even the banks have also started to support, and for Hess it looks like ‘Manufacturing in India’ is happening. We already started to export the first equipment and now we have started with the second equipment with the 3rd and 4th in the pipeline. So, we could see that whatever we are doing locally in India, price wise it is at least 30 per cent lower than everywhere else. Since the last two years were the years of survival, we could say this is the year for moving. We can see the light far away which is the result from new actions or new directions given by the new government and also the RBI as well. At least we can see some light at the end of the tunnel. I think it’s on the right track and may be by last quarter or the beginning of next year this will be a complete Turnaround for the Indian economy and the construction sector.”

Soji ColumbiaSoji T P, Senior Manager - Marketing, Columbia-Pakona

“Financial year 2013-14 was very bad. It was towards the end of UPA rule in India but when the government changed, the construction segment in India has started to bounce back. So, there is a Turnaround but it is not as per the expectation of the people. All infrastructure companies are in huge debt. Companies are not having money to invest. Their interest patterns are so high and new projects are not allocated at the place where we were expecting. These were the reasons. But for any new government it will take time to implement new policies. Next it will take time for the government to fund all these projects. Companies are already in huge debts and so they won’t be able to invest further at their end. In 2-3 years’ time, we should see a Turnaround. The Land Acquisition Bill will be a major turnaround towards prosperity of our country. By Land Acquisition Bill farmers will be compensated quickly, they will get very good compensation and developers and infra companies will get land for development.”

 

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