india newsletter 04.2013

India Newsletter | 1

INDIA NEWSLETTERPublished by the Embassy of India, Vienna

Year 3 | Issue 28 | April 2013

Featured IndustryFInancIal servIces

2 | India Newsletter

News

QUICK FACTSSnapshot of last month’s Highlights

India’s media and entertainment sec-tor is expected to reach US$ 30.52

billion by 2017.

India has received foreign direct

investment (FDI) worth Rs 8,569 crore (US$ 1.57 bil-lion) in the renew-able energy sector during April 2009 to December 2012.Index of Industrial Production (IIP)

rose by 2.4 per cent in January 2013 as compared to 1 per cent in January 2012.

India Inc has in-vested around

US$ 1.65 billion overseas by means of debt, equity and guarantees to their international sub-sidiaries in Feb/13.Indo-US bilateral trade has the po-

tential to touch US$ 500 billion over the next decade.

The number of billionaires in

India is expected to increase from 122 (2012) to 225 by 2022.

The contribution of renewable

power to the total installed capacity in India is expected to increase from 12.5 per cent cur-rently, to be in the range of 16 to 17 per cent by 2016-17.India has invested US$ 2.5 billion

in Egypt and is the seventh-largest trading partner of the country.

India is expected to become the

third largest auto-mobile market in the world by 2020.Foreign Institutional Investors (FIIs)

have invested US$ 10 billion in In-dian equities so far in 2013.

Indian companies have made 72

overseas acquisi-tions worth US$ 11 billion in 2012.Indian IT firms have more than dou-

bled their share in total worldwide spends over the past six years ac-counting for US$ 77 billion, or 9.8 per cent, of the global spending of US$ 785 billion in 2012-13.

India’s foreign exchange reserves rose by US$ 1.05 billion to US$

293.36 billion in the week ended March 22, 2013.

Foreign institu-tional investors

(FIIs) have invest-ed a record US$ 26 billion in the Indian stock market in FY 2012-13, the high-est ever since over-seas entities start-ed investing in the country.Private equity (PE) deals and merg-

ers and acquisitions (M&As) in In-dia’s media and entertainment sector increased by 40 per cent and 27 per cent respectively in 2012.

The MSME sec-tor in India

contributes around 9 per cent of GDP, 45 per cent of the manufacturing out-put and 36 per cent of the total value of exports.The online advertising market in

India is projected to reach Rs 2,938 crore (US$ 536.18 million) by March 2014.


INDIA FORUMS IN LINZ AND GRAZPast Events

COMMERCIAL PUBLICATIONS RELEASE NOTEMore Information below

Articles

The Embassy of India, in a joint ini-tiative with the Chambers of Com-

merce of Upper Austria and Styria invited Austrian businessmen for the seminars “Successful and sustainable business in India and emerging markets” (on March 20th in the WKO Linz) and “Business Fo-rum India” (on March 21st in the WKO Graz).

In both occasions, H.E. Ambassador R. Swaminathan presented the current busi-ness opportunities for Austrian corpo-rates in the Indian market and highlighted the progress in bilateral economic and commercial ties and investment opportu-nities between India and Austria. Invited guests included specialists in the fields: le-gal and tax issues of opening and starting

a business in India (by Rödl & Partner), logistics (by Cargo Partner) , investment and export risk insurance (by Oberbank and Austrian Development Bank) as well as the cultural impact of doing business with India (by Impact KEG) among oth-ers.

Some impressions of the events:

The Embassy of India, Vienna, has of-ficially released the first three of

a series of publications entitled “India Reader”. The series is targeted at the India-Austria Business Community and aims to provide information on the most commonly discussed topics of doing business in India.The series has already another half-doz-en titles planned and shall be released in batches in the future.The first three publications have been developed in cooperation with some ex-perts in the selected topics. The publica-tions can be read online at the Embassy’s website. If you wish to order printed copies of the publications, please get in contact with the commercial wing of our Embassy under +43 1 505 8666 31 or [email protected]

Indovation• How to innovate for India?• Why companies fail in India• Acquiring Market Intelligence in In-

dia• India-centric product-development• Market Entry

PAN – Permanent Account Num-ber• What is the Permanent Account

Number (PAN)?• Why is it necessary to have a PAN?• How to apply for a PAN• FAQs about the PAN

Legal and Tax Aspects of Doing Business in India• Indian Market Entry Options• Indian Corporate Taxation• FAQs about Legal and Tax Aspects of

Doing Business in India


Articles

ShARE OF ExPORTS IN INDIA’S OvERALL GDP RISES TO 17.7%From the Ministry of Commerce and Industry

INDIA, GERMANy TO SIGN SEvERAL PACTS TO BOOST TRADE TIESInternational

SwITZERLAND KEEN TO STRIKE vENTURES wITh INDIAN FIRMSInternational

The share of merchandise exports in the country’s GDP has increased

from 13.9 per cent in 2009-10 to 17.7 per cent in 2011-12, Parliament was in-formed.

In a written reply to the Rajya Sabha, min-ister of state for commerce and industry D Purandeswari said that exports have always played an important role in the economic development of most coun-tries.

“This is evident even in Indian case from

the continuous upward movement of percentage share of merchandise ex-ports in the overall GDP of India from 13.9 per cent in 2009-10 to 16 per cent in 2010-11 and 17.7 per cent in 2011-12,” she said.

She also said that as per the WTO trade statistics, India’s share in the total global exports has also been increasing since 2007.

In 2007, 2008, 2009, 2010 and 2011, the country’s share in the total global ex-

ports stood at 1.07 per cent, 1.21 per cent, 1.31 per cent, 1.48 per cent and 1.67 per cent respectively.

“The long term vision of the government is to make India a major player in world trade and assume a role of leadership in international trade organisations com-mensurate with India’s growing impor-tance,” the minister said.

During April-January period, overseas shipments declined by 4.86 per cent to USD 239.6 billion.

India and Germany are likely to sign sev-eral pacts in areas including renewable

energy, trade, infrastructure and educa-tion during Prime Minister Manmohan Singh’s visit to Berlin this month.

Speaking to reporters in New Delhi ahead of the three-day visit, German Am-bassador to India Michael Steiner said the visit will boost trade and investment between the most populous countries in South Asia and Europe.

He specifically mentioned the second-round of Inter-governmental Consulta-tions on April 11 where the prime min-ister will lead a five-member ministerial delegation from India, while Chancellor Angela Merkel will head the German side.

“Germany is the only country with which India has such a format of high-level dis-cussion,” the ambassador said, adding it covers a host of areas ranging from urban

development to nuclear safety.

The first round was held in New Delhi in May 2011 during Chancellor Angela Merkel’s visit. The prime minister had last visited Germany in December 2010.

Those accompanying him include Ex-ternal Affairs Minister Salman Khurshid, Commerce Minister Anand Sharma, Re-newable Energy Minister Farooq Abdul-lah, Human Resource Development Min-ister M.M. Pallam Raju and Science and Technology Minister S. Jaipal Reddy.

The German chancellor had visited India previously in October-November, 2007. During her visit in 2011 she was con-ferred the Jawaharlal Nehru Award for International Understanding for the year 2009 .

Germany is India’s largest trading partner in Europe and bilateral trade with the

country had registered an 18.4 percent increase to touch 18.37 billion euro in 2011. Germany is also the 8th largest for-eign direct investor in India.

According to the Ambassador, Manmo-han Singh will also mark the close of the “Days of India in Germany” - that was kick-started in 2011 with four themes, “Connecting Cultures”, “Connecting Ide-as”, “Connecting Capabilities” and “Con-necting Minds”.

According to India’s foreign office, Ger-many has a vibrant Indian community of 110,000 people with 43,175 holding In-dian passports and 67,029 of them being nationals of that country.

This apart, some 4,500 Indian students are pursuing various courses in Germany, while around students from European country are pursuing similar courses in India.

Visakhapatnam as a fast-developing city can look to Switzerland and the local com-

panies can form joint ventures with Swiss companies in many sectors to mutual ad-vantage, Bangalore-based Consul-General of Switzerland Rolf Frei said. He was interacting with the local industrialists and investors at a session organised here by the Vizagapatam Chamber of Commerce and Industry.

On his maiden visit to the city, Frei said the Switzerland Government was looking at strengthening the bilateral ties in trade and commerce. Frei also said they were looking

at investment opportunities in tourism, infra-structure, information and communication technology, retail, life sciences, clean technolo-gies, research and development and educa-tion.

“Many from South India are investing in Swit-zerland because it’s the gateway to Europe and has excellent infrastructure and tax in-centives,” he stated.

Biotech and IT offices have been opened with an investment of $1 billion by Indians in Swit-zerland. The Swiss investment in India is of the order of $4 billion.

Thirty Indian companies with interest in Eu-rope have so far opened their offices in Swit-zerland.

“We have stable political environment, skilled manpower and excellent infrastructure. Low taxes are the main attraction,” he said.

Chamber president K. Ramabrahmam, Sym-biosys CEO O. Naresh Kumar and others spoke on the advantages of investing in Vi-sakhapatnam and urged the Consul-General to bring in a delegation of Swiss industrialists and others the next time with him to show-case Vizag.


Articles

INDIA-CZECh TO COLLABORATE IN ADvANCED MANUFACTURINGInternational

MUMBAI AMONG wORLD’S 10 MOST POCKET-FRIENDLy TOURIST DESTINATIONSTourism Report by TripAdvisor

Acknowledging the Czech expertise in the field of engineering sector,

especially automotives, the Union Min-ister for Commerce, Industry & Textiles Shri Anand Sharma, in a meeting with Mr. Martin Kuba, Czech Minister of Indus-try & Trade, invited Czech investment into the proposed National Investment Manufacturing Zones in India. “Owing to the fact that the Czech Republic is strong in manufacturing generally and heavy engineering in particular – metallurgy, machine tools, defence equipment, we invite its automotives which accounts for 24 per cent of Czech manufacturing, to invest in NIMZs in India,” conveyed Shri Sharma to Mr. Kuba.

Shri Sharma, while appreciating the repu-tation of the Czech Republic in the field of technology, emphasised the need for institutional engagement for collabo-ration in the field of science and tech-nology. “The thrust in our bilateral ties would be to focus on accelerating co-operation in advanced and niche tech-nologies in which the Czech Republic has special capabilities,” said Shri Sharma. The Indian Minister also expressed satisfac-tion at the ongoing projects in the field of lasers and put stress on the need for

bright engineers and scientists from both countries to be provided an enabling en-vironment by the Czech and Indian sides to further cooperation in high technol-ogy areas.

While discussing the issue of coopera-tion in metal-cutting machine tools, Shri Sharma conveyed to the Czech Minister the opportunities the Czech companies could explore for collaborations with Indian companies. Shri Sharma also ap-prised Mr. Kuba about the participation of Czech companies in the Indian Metal-cutting Machine Tool exhibition (IMTEX), which was held in Bangalore from Janu-ary 24-30, 2013. Thirteen Czech compa-nies participated in IMTEX 2013, which is the largest exhibition of metal-cutting machine tools in South and South-East Asia which showcases exhaustive range of innovations in the product segment of metal-cutting machine tools.

The two Ministers also discussed is-sues regarding defence cooperation. Shri Sharma conveyed to the Czech Minister that both the countries could build an enduring defence relationship that could include joint research, development and production of weapons systems. “The rapid up-gradation of Czech industry,

defense production facilities make state-of-the-art products namely defence equipment, passive and active electronic intelligence & surveillance systems, ra-dars, trainer aircraft, high-mobility all purpose vehicles, modernisation of Sovi-et-era tanks, field hospitals and logistics open gives leverage to the strong Czech interest in promoting sales to India in these areas of specialisation,” said Shri Sharma.

Minister Sharma further said that a Joint Working Group (JWG) on Advanced Manufacturing and Heavy Engineering is scheduled later this month. He also con-veyed that a JWG on Skills and Innova-tion and on Mining are expected to take place later this year.

The total bilateral trade between India and the Czech Republic in 2012 stood at USD 957.47 million as compared to USD 992.42 million in 2011. Shri Sharma said that although there has been some de-cline in bilateral trade figures, due to the global economic scenario, “the outlook for the future is promising and avenues in job producing manufacturing units in both the countries should be seriously explored.”

Mumbai is among the 10 most af-fordable destinations, according to

a cost comparison study on common incidental items and services that travel-lers purchase while staying at a hotel. The study was done by travel review Web site TripAdvisor.

The study, which covered four-star ho-tels in 46 destinations, found Africa as the most pocket-friendly for Indian travellers.

TripAdvisor’s TripIndex Room Service tracked against the rupee the combined cost of a club sandwich ordered on room service, a bottle of water, peanuts from mini bar, a mini bottle of vodka, a can of coke from the mini bar, and the dry cleaning of one shirt.

Nikhil Ganju, Country Manager, TripAdvi-sor (India), said, “While we bear in mind the cost of a room night when planning

our travel, we often forget to account for incidentals such as in-room dining and laundry. Mumbai has emerged as the third-most affordable destination on the TripIndex Room Service. As the focus on in-bound tourism grows, this works in our favour since affordability has been an important factor in drawing leisure trav-ellers to India.”

Ordering a club sandwich in Zurich can cost you as much as Rs 1,551.69 while in Sofia (Bulgaria) about Rs 294. A bottle of water can cost you Rs 435.15 in Oslo while Hong Kong and Kuala Lumpur offer free bottled water at the hotels. Peanuts from mini bar in Moscow could burn a hole in your pocket of about Rs 662.56 while you can get it for just about Rs 85.21 in Puerto Vallarta (Mexico). A can of coke from the hotel mini-bar will cost you a bomb in Oslo at Rs 421.61, while

it is available nearly four times cheaper in Cape Town (Africa). A mini-bottle of vodka will cost you a little less than Rs 1,000 in Stockholm, while it is the cheap-est at Rs 165.15 in Cape Town.

Just based on the price of the incidental costs, African cities such as Cape Town, Sharm el-Sheikh in Egypt and Marrakech (Morocco) emerged as the most afford-able destination for Indian travellers.

In Asia, Jakarata and Taiwan are among the least expensive for Indian travel-lers. Meanwhile, European cities such as Paris, Stockholm, Oslo, Zurich and Hel-sinki emerged as the key expensive cities, while Istanbul, Budapest and Sofia (Bul-garia) emerged as relatively more afford-able.


Articles

PRODUCTION UNITS IN INDIA ARE BEST IN ThE wORLDAs reported by Car Manufactures

INDIA EMERGING AS AN ExPORT hUB FOR SUvSAs reported by SUVs Manufactures

Multinational automotive plants in India rank among the top across

the world in terms of their productivity and quality. Top auto MNCs like Hyun-dai, Toyota and Suzuki rank their Indian production facilities right on top of their global pecking order. Despite fighting it out with factories in much larger markets - including the US and China - some of these plants fare better cranking out cars at upwards of 98-99% efficiency.

Take Hyundai Motor India (HMI) which has two plants in its Sriperumbudur fa-cility near Chennai. The newer, second plant actually ranks number one in terms of productivity and quality according to Bo Shin Seo, CEO & MD, Hyundai Mo-tor India (HMI). “Hyundai has plants in China, Russia, Brazil, the US (Alabama), Turkey and Czech Republic and in terms of operational average productivity ratio we are number one,” he added. HMI’s second plant makes two models and rou-tinely hits average productivity ratio of upwards of 99.7%.

Of course a number of the bigger plants crank out many more volumes - Hyun-dai’s China plant for example produces

4-5 different models while the newest factory in Brazil cranks out just one mod-el but at “very high productivity ratio,” he added. Between its two plants Hyundai can expand its production to hit 700,000 units on a three-shift basis though cur-rently the volumes are lower due to the demand skid in the marketplace.

Hyundai isn’t the only MNC to hit top spot with its Indian factory. Take Toyota Kirloskar Motor (TKM) which has in-vested around Rs 4700 crore to build two plants at its facility near Bangalore. Like HMI, TKM’s plants too rank right up there among Toyota’s global pecking or-der. “In the last three years we have had an internal shipping quality audit wherein a global team comes and checks vehicles randomly at the shipping yard for defects. On that basis, they have come to conclu-sion that TKM plants are the number one alongside Toyota’s China and Thailand fa-cilities,” stated Shekar Vishwanathan, vice chairman, TKM.

Like the Hyundai plant, the TKM factories too run at 98-99% efficiency. “Efficiency is measured by both the speed of the conveyor belt as well as the ability to

change the speed of the line according to demand variation,” said Vishwanathan. “We make 600 vehicles per day over two shifts.” The total capacity in the two plants is around 310,000 units over 278 working days in a year.

In terms of pecking order ranks though car marketleader Maruti hogs the lion’s share of parent Suzuki’s global produc-tion. With its 1.5 million unit a year cur-rent manufacturing capacity, Maruti is Suzuki International’s largest production centre worldwide.

India comprises just short of half of Suzu-ki’s global sales volumes and commands around 25% of its total sales revenue, said a Maruti executive. Maruti Suzuki plans to add another 250,000 units this year, with its new factory in Manesar at a cost of Rs 2100 crore. That plus the proposed Rs 4000 crore Gujarat plant - which will add another 250,000 unit capacity by 2015 - will take Maruti’s total production numbers to two million units a year. Al-ready Maruti’s India sales are more than what the Japanese company sells in its home market in Japan.

Soon, sports utility vehicles (SUVs) made in India would burn rubber in

developed markets such as Europe, Japan, Latin America and Australia. Global au-tomobile majors are looking to leverage India’s cost-competitive manufacturing practices and turn the country into an export hub for utility vehicles.

Domestic automobile major Mahindra & Mahindra (M&M) and French car maker Renault started exporting the XUV500 and the Duster, respectively, to Europe in December 2012. Now, Fiat and Ford India are assessing opportunities to ex-port SUVs to Europe, South Africa and Southeast Asia.

Joginder Singh, president and managing director, Ford India, said, “The European equation works well with the EcoSport. We already export the Figo to 38 coun-tries from India. We would look at a simi-lar scale for the SUV.” While Singh didn’t specify the number of EcoSport units the company had earmarked for exports, in-

dustry sources indicated it was planned about 40 per cent of the scheduled an-nual production of 1,50,000 units would be sold in foreign markets. Overall, 380 variants of the SUV, manufactured at Ford’s Maraimalai Nagar facility, would be shipped to 40 countries.

Italian car maker Fiat, which plans to launch nine new models in the Indian market by 2016, is firming up plans to ex-port some of these to right-hand drive markets abroad. Recently, Enrico Atana-sio, former managing director, Fiat Group Automobiles India, told Business Stand-ard, “We are looking at leveraging India as an export hub for right-hand drive models. We have excess capacity available in India and are looking at exporting vehi-cles from here to the UK, Japan, Australia and South Africa.”

Through the next three years, Fiat plans to introduce the Jeep, the Grand Chero-kee and at least two compact utility vehi-cles with the Fiat badge in India.

Fiat and Tata Motors share a production facility at Ranjangaon (Maharashtra).

Together, the two companies utilise about half the factory’s capacity of 180,000 units.

“India is growing out of a portfolio of small cars for exports and the trend is being driven increasingly by global auto-mobile manufacturers. Sedans and utility vehicles are gaining acceptance among consumers in the Indian market. To gain the requisite volumes for producing a model cost-effectively, companies have started shipping out larger vehicles from India,” said V G Ramakrishnan, senior di-rector (automotive and transportation), Frost & Sullivan.

In the last financial year, M&M exported about 2,000 units of the XUV500 to Af-rica and Europe. By the first half of this financial year, it plans to raise exports to Latin America.

Abdul Majeed, partner (automotive prac-


Articles

INDIAN RAILwAyS ENTERS ONE BILLION TONNE SELECT CLUBFrom the Railway Ministry

INDIA TO BE ThIRD LARGEST AvIATION MARKET By 2020From the Ministry of Civil Aviation

SELLING DIRECTLy AND PROFITABLyIndustry Report

The Indian Railways achieved yet an-other significant milestone when it

entered the one billion tonne select club in freight movement joining Chinese, Russian and USA railways. In 2012-13, In-dian Railways have been able to achieve an originating freight loading of around 1010 million tonnes (i.e. one billion plus) which shows an incremental loading of 40 million tonnes (4.1% growth) over the last financial year.

Shri Pawan Kumar Bansal has congratu-lated Railwaymen for this achievement. In a message to them, he said it is re-ally creditable to achieve this significant freight loading despite present economic scenario the world over. The Minister pointed out that Indian Railways will play the role of engine of growth for country’s economy.

The Railway Minister Shri Pawan Kumar Bansal had announced in his 2013-14 Rail Budget speech that Indian Railways is poised to enter the one billion tonne se-lect club. Indian Railways did achieve this

mile stone despite the present industrial growth in the country. The achievement is more than the revised target of 1007 million tonnes fixed for the year 2012-13.

It may be worthwhile to mention that the economic growth in the country has been sluggish in 2012-13 and it is esti-mated that the GDP growth would be in the range of 5%. The Index of Indus-trial Production (IIP) growth during the period April-December in 2012-13 has been 0.7%. The growth in the INDEX OF 8 CORE INFRASTRUCTURE IN-DUSTRIES has been 3.3% during April-December, 2012-13. Demand for Rail-way transportation services is a derived demand with a direct co-relation to the IIP growth in the country, especially the growth in the core infrastructure indus-tries.

Under the freight loading strategy adopt-ed by Indian Railways, special focus was given to enhancing evacuation of coal from Coal India Limited (CIL) sources and during the month of March’13, on an

average 228 rakes/day were loaded from CIL sources. If the washed coal from coal sourced from CIL is included, on an av-erage 247 rakes/day were loaded during March’13. Due to increased evacuation of coal by Railways, Coal India has been able to achieve an off-take of 465 million tonnes of coal, even though its produc-tion was only 452 million tonnes in 2012-13. There has been a draw down of 13 million tonnes of stocks with Coal India and its pithead stocks have reduced to 57.9 million tonnes as on 1st April 2013 as against 70.9 million tonnes as on 1st April 2012. Increased transportation of coal by Railways has facilitated building up of coal stocks with Thermal Power Houses in the country to 20 million tonnes as on 1st April 2013 as against 14.7 million tonnes as on 1st April 2012. Indian Railways also transported 39.29 million tonnes of foodgrains on Food Corporation of India’s account in 2012-13 as against 33.71 million tonnes in 2011-12.

Speaking at a function in the capital on the occasion of Aviation Day, the

Minister for Civil Aviation, Shri Ajit Singh said that, India would be the third larg-est aviation market by 2020. Addressing senior representatives of the aviation in-dustry, Shri Ajit Singh informed that stud-

ies suggest, the countries airports would be handling 336 million domestic and 85 million international passengers with projected investment to the tune of US$ 120 billion by 2020.

The Minister reminded the gathering that recently he took a decision to liberalize

the process for airlines to aquire aircrafts by doing away with the Aircraft Acquisi-tion Committee. He added that the Gov-ernment has also taken steps to liberalize and grant traffic rights to Indian carriers to fly to new destinations around the globe .

The direct selling industry is one of the fastest growing non-store retail for-

mats in the Indian market today. Providing self-employment opportunities to over 50 lac distributors, the industry has grown by 22% last fiscal top to touch INR 6,385 crore (US$ 1.17 billion) in 2011-12 as against INR 5,229.4 crore (US$ 963 million) dur-

ing 2010-11. Interestingly, tax collections from direct selling companies have regis-tered an increase of 26.9% in 2011-12 to touch INR 821.2 crore (US$ 151 million) as against INR 647 crore (US$ 119 million) in 2010-11. Companies like Amway, Tup-perware and Oriflame have been operating in India for over a decade now and the sec-

tor continues to attract both domestic and international direct selling companies to the Indian market. Currently, direct selling account for 35.8% of non-store retail sales, 4.41% of organised retail sales and 0.07% of GDP. Going by the estimates, it can be expected to touch INR 21,690 crore (US$ 4 billion) by 2019-20.

tice), Pricewaterhouse Coopers, said, “Some exports markets do not have the volumes to justify setting up a manufac-turing or assembly unit. India is a low-cost manufacturing hub and automobile makers are leveraging it as a base to grow in derivative markets.”

Renault India’s export strategy adheres to Majeed’s views. The company plans to export 1,000-3,000 units of the Duster to the UK, where it is sold under the ‘Da-cia’ brand.

“Like India, the UK is a right-hand drive market. Sourcing the vehicle from here

enables us to leverage synergies in manu-facturing,” said a senior Renault India ex-ecutive. The company, which shipped the first consignment of 350 vehicles from India to the UK and Ireland in December 2012, is considering exporting the car to other right-hand drive markets such as Malaysia, Indonesia and South Africa.


Articles

The government announced simplifi-cation of norms for foreign institu-

tional investors (FIIs) to invest in govern-ment and corporate bonds, in its latest attempt to woo overseas investors to finance the widening current account deficit. The move was among the major demands made by FIIs during their recent interaction with finance minister P Chid-ambaram and his team. Now, the govern-ment, Sebi and the Reserve Bank of India (RBI) have decided to remove sub-limits for FIIs within the overall cap for bonds.

From now on, there will only be two ceilings — a $25-billion limit for invest-

ment in government securities that has been formed by merging g-secs (old) and g-secs (long term). In addition, there will be a $51-billion sub-limit for corporate bonds that will include the existing one for FIIs ($25 billion), qualified foreign in-vestors ($1 billion) and $25 billion for FIIs in long term infrastructure bonds.

In case of g-secs, however, the govern-ment appeared more cautious and de-cided to limit the annual enhancement within 5% of Centre’s gross borrow-ings during a fiscal. The government has budgeted for borrowings of Rs 5.79 lakh crore, which means that the government

can at best enhance the ceiling for the current fiscal by around $5 billion.

“The current account deficit can be fi-nanced only through foreign inflows and that is why I am happy to announce a major rationalization of foreign invest-ment in government securities and cor-porate bonds,” the minister said. FII flows and FDI are crucial for India to fund its current account deficit that is expected to hit 4.5% of GDP during the current FY. Large inflows would check against a steep depreciation of the rupee and en-sure that there are sufficient foreign ex-change reserves to cover for imports.

According to Cushman & Wakefield’s latest report International Invest-

ment Atlas, the global property invest-ment market recorded a modest 6% rise in activity during 2012 with volumes reaching US$929bn (714bn).

In what was a difficult year in most mar-kets, investment volumes rallied in Q4 signaling the beginning of real momentum and a return of confidence in the market which could see volumes this year in-crease 14% to exceed US$1 trillion mark (815bn) for the first time since 2007.

India was (20th) among the top 20 real estate investment markets globally with investment volume of INR 190 billion (USD 3466 million) recorded in 2012. Majority of the investment in India were through institutional sales (67%) while remaining were through private eq-uity (PE) investments (33%). The market witnessed institutional sales (excluding apartments) of INR 128 billion, concen-trated in commercial development sites and office segment including stand-alone and pre-leased office buildings. However the investments in institutional sales saw a decline of 37 % over last year. On the other hand private equity investment in India increased by 7% in 2012 and was noted at INR 62.0 billion.

In terms of value, majority of the Private Equity in Real Estate (PERE) investments were noted in ready income generating / operational office assets at INR 32.3 bil-lion saw an increase of 34% over 2011. Under construction residential projects

continued to witness the highest number (25) of PERE deals in 2012 and witnessed private equity investments at INR 28.5 billion.

Sanjay Dutt, Executive Managing Direc-tor, South Asia, Cushman & Wakefield, “Investment in ready income generating / operational office assets have gained strength over the last few years due to lower risk and steady cash flows associ-ated with this type of investment. With increase in number of high value transac-tions in this sector, the market is moving towards a mature phase.”

In 2012, China and the USA were two key engines of the strong finish - the former benefitting from a record high in land right sales and the latter seeing a rush of activity to beat year-end capital gains tax hikes. However growth was far from limited to these two global heavy-weights and a range of other markets in all regions saw a final quarter rally no-tably Spain, Poland, Norway, Switzerland, India Indonesia, Thailand, India and Aus-tralia.

INDIA CITY PERFORMANCE IN PERE MARKET

Bengaluru witnessed the highest number and value of private equity investments at INR 32.5 billion in 2012, recording more than double of investment over last year, followed by Mumbai with INR 13 billion and NCR with INR 7 billion of invest-ments. However, Mumbai witnessed a marginal decline of 2% while NCR wit-

nessed a decline of 44% in total value of investments compared to 2011.

Sanjay Dutt added, “Bangalore witnessed some high value investments in pre-leased office asset which has led it to be the top runner in the PERE market. How-ever NCR and Mumbai continue to be preferred locations for investments due to the opportunity they offer. NCR mar-ket in 2012 saw lower number of invest-ments, as it is an active residential sales market, which obviated the need for PE funding in many projects.”

Announced PE Deals Volume(INR billion)

City 2011 2012

Bengaluru 16.1 32.5Mumbai 13.2 13NCR 12.6 7Others 15.9 9.6Total 57.8 62.0

ASIA PACIFIC - INVESTMENT ACTIV-ITY TO RISE 15-20% IN 2013

Improved macroeconomic conditions with sustainable growth across the region will boost activity and performance re-sulting in 15-20% increase in investment activity forecast. Investment demand will increase as faith grows in China’s soft landing but demand will also broaden and other markets such as Australia and Japan will be an increasing target for overseas investors while markets such as India and Indonesia are likely to be on the rise.

GOvT EASES NORMS TO ATTRACT FOREIGN INvESTORSInvesting in India

INDIA AMONG TOP 20 GLOBAL REAL ESTATE INvESTMENT MARKETSReport by Cushman & Wakefield


Articles

The government has issued norms for setting up of manufacturing zones

under the national manufacturing policy, giving them many benefits, including tax sops.

Units located in the National Investment & Manufacturing Zones (NIMZs) will be exempt from capital gains tax on sale of plant and machinery, the guidelines issued by the Department of Industrial Policy and Promotion said.

NIMZs will be eligible for Viability Gap Funding, support from the government

to make projects commercially viable, of up to 20% of the project cost.

The national manufacturing policy seeks to enhance the share of manufacturing in GDP to 25% from the current about 14% within a decade and in the process create 100 million jobs in this period.

To achieve the goals, the policy will large-ly rely on NIMZs, which are envisaged as integrated industrial townships of at least 50 sq km (5,000 hectares) with state-of- the-art infrastructure. A minimum of 30% of the total land area of NIMZs will be

available to manufacturing units.

The capital gains tax exemption will be available only if the proceeds are re-in-vested within a period of three years for purchase of new plant and machinery in any other unit located in the same NIMZ or another NIMZ, the guidelines said. NIMZs will also be allowed to raise funds through external commercial borrowing for developing the internal infrastructure of the NIMZs. The government will also explore the possibility of soft loans from multilateral institutions for funding infra-structure development in NIMZ.

Indian IT outsourcers have more than doubled their share in total worldwide

spends over the past six years. The bigger Indian infotech companies have outpaced their multi-national counterparts over this period.

Indian IT companies accounted for $31 billion, or 4.8%, of the worldwide IT spending of $641 billion in 2006-07. This year, it is estimated at $77 billion, or 9.8%, of the global spending of $785 billion, ac-cording to research by brokerage firm Angel Broking.

The research also looks at 13 of the top global IT outsourcers - 8 MNCs and 5 In-dian - and finds that the Indian outsourc-ers’ share in the total revenues of the 13 companies has risen from 7.7% in fiscal 2007 to 14.3% in fiscal 2012. That of the multinationals has dipped from 92.3% to 85.7%.

IBM’s share in the revenues of the 13 companies dropped from 29.8% to 26%, Japanese IT company Fujitsu’s share fell from 19.5% to 15%. On the Indian side, TCS increased its share from 2.6% to 4.4%, Infosys from 1.9% to 3%, and Cog-

nizant from 0.9% to 2.6%. Angel Broking’s report explains Indian companies’ gains saying that although the labour cost ad-vantage for Indian IT has been in decline, there is still a comfortable, 20%-25% cost saving for clients along with availability of a young workforce.

Pradeep Udhas, partner and head of IT/ITeS in consultancy firm KPMG India, says Indian companies have developed people capabilities and moved up the value chain to pitch for bigger contracts. “Many com-panies have opted for fixed-price con-tracts and transformational engagements.

To give a boost to the entrepreneurial ecosystem in the country, Nasscom

has announced the launch of ‘10,000 start-ups’ programme.

This programme aims to incubate, fund and mentor start-ups in the next 10 years.

While Nasscom has been running such entrepreneurial activities in the past, this time it has sought to involve all the stakeholders – from venture capitalists to product companies that can help fos-ter the start-up ecosystem. They will be provided with tools consisting of hosting credits and other technology and busi-ness tools valued at $25000.

As a part of this, Nasscom has partnered by Indian Angel Network, Google, Micro-soft and Verisign.

Further, the industry body has ambitious plans of creating $15 billion firms in the next 10 years, which eventually would be a part of the $300-billion Indian IT indus-try.

Som Mittal, President, Nasscom, said this will create a significant national impact on employment, GDP, innovation, entre-preneurship and will be vital to realise the industry vision.

TECH EVENTS

“Start-ups need handholding in the initial stages in areas like monetising of business, especially in technology and mentorship helps,” said M.K. Sridhar, Member-Secre-tary and executive director, Karnataka Knowledge Commission.

In line with this, the programme will fa-cilitate 7,000 start-up-related events

such as hackathons, investor roadshows and best practices workshops across 30 cities. Tech talks and white space discus-sions will help young entrepreneurs iden-tify global technology trends and needs, according to Mittal.

While these are noteworthy objectives, some start-ups still are sceptical and concerned that this does not turn into a lobby for start-ups affiliating with the key technology partners.

“We are concerned that we might get sidelined if we are not working in areas that Microsoft and Google have inter-ests,” said an educational start-up which works on open source technologies.

Further, Nasscom plans to create aware-ness about technology entrepreneurship as a career option. India has 3 million professionals working in the IT sector.

GOvT ISSUES NORMS FOR SETTING UP MANUFACTURING ZONES Manufacturing Industry

INDIAN IT FIRMS DOUBLE MARKET ShARE IN 6 yEARS Report by Angel Broking

NASSCOM LAUNChES PROGRAMME TO INCUBATE 10,000 START-UPSFrom The National Association of Software and Services Companies (NASSCOM)


Previously, Indian players were grouped together based on low-cost offerings sans any differentiation. Companies like Accenture and IBM made a positive im-pact on business issues especially around strategy. But in the past few years, Indian

IT companies are able to sell a differen-tiated proposition, deepening the client relationship,” he adds.

Siddharth Pai, partner and MD of out-sourcing advisory firm ISG, notes that

not just Indian, even other regional IT

players are steadily winning market share.

“Companies like Xchanging and Atos are

chipping away market share from MNCs

with their specialized offerings.”

Articles

Favourable demographics and growth opportunities are the factors that

make India an “attractive” destination for merger and acquisition (M&A) activities across diverse sectors including consum-er goods and pharmaceuticals, according to Ernst & Young (E&Y), a global consul-tancy.

“Catering to a growing, expanding and spending population is what every or-ganisation wants to do. So, there is a lot of interest from outside India to come inbound,” as per Ms Phillipa McCrostie, Global Vice Chair (Transaction Advisory Services), E&Y.

“I don’t think India’s growth is based on one factor or bubble that has evaporated and gone away. It is exciting time in India for M&A growth,” Ms McCrostie added.

India’s wonderful population and demo-graphics are attracting a huge amount of interest around industries such as con-sumer goods, pharmaceuticals and life sciences, among others.

She expects India to continue to be an at-tractive M&A destination in a sustainable way going forward as there is widespread interest from the US, Europe and others.

She noted that the country is becoming all the more attractive destination with reforms coming through.

“India has to be one of the most attrac-tive investment destinations. Look his-torically, what India has achieved... If you compare other countries, many don’t have the population, stability that India has been trying to produce in the last ten years,” she added.

McCrostie said that investor pressure is also steadily growing over the time on companies’ growth strategies. “It is trans-lating into what we see as green shoots for some more M&A activities. So to be clear, no boom activity, no bubble activ-ity... But a slow, steady increase in M&A activities is one of the means of achieving growth,” she said.

The “green shoots” for M&A also de-pends on sectors as well as geographies, she added. Going by E&Y, India is poised to be among the top five M&A destina-tions this year.

In 2012, BRIC (Brazil, Russia, India and China) nations together accounted for about 15 per cent of global M&A market by value.

INDIA: AN ATTRACTIvE DESTINATION FOR M&A ACTIvITIES Report by Ernst & Young

INDIA PRODUCES wORLD’S 2ND CLONED MALE CALF SwARAN From Karnal-based National Dairy Research Institute (NDRI)

A male buffalo calf has been produced through cloning at the Karnal-based Na-tional Research Institute (NDRI). This is the world’s second male cloned calf.

The calf, named Swaran, was born through the new and advanced ‘hand-guided cloning technique’.

The calf, born by normal parturition and weighs 55 kg, is reported to be normal and healthy.

“Swaran” is keeping good health and has started suckling milk, said A.K. Srivastava, Director, National Dairy Research Insti-tute.

This cloned buffalo calf is unique and dif-ferent from the earlier clones because, in this case, the donor somatic cell used was isolated from the seminal plasma of a bull which is currently being used for donating semen at the Animal Breeding Research Centre of NDRI, Karnal, said Srivastava.

ACHIEVEMENT

The scientists said that this achievement

was of particular interest to them be-

cause, using the same approach, they ex-

pect to re-create highly valuable progeny

tested bulls, which may have died long

ago, using their frozen semen available at

breeding centre.

Srivastava said that there is an acute

shortage of bulls and that this may en-

able scientists to shrink the gap between

the demand and supply of the bulls in a

short time.

Swaran is the second male cloned calf in

the world. Before Swaran, Shreshth was

born on August 26, 2010 at NDRI.

Shresth was the first male buffalo born

through the “hand-guided cloning tech-

nique” developed at NDRI.

Earlier this year, on January 25, the cloned

buffalo Garima II gave birth to a calf and

she was named Mahima.


ATR, Bombardier and Embraer are mak-ing a strong pitch for their planes, with growing number of Indian airlines plan-ning expansion in regional routes. Bom-bardier is also promoting its latest C series planes, which will compete with the Boeing 737 and Airbus A320 in the narrow body market. The C series plane will make its first flight in June. Torbjorn Karlsson, Bombardier’s vice-president (sales), Asia-Pacific, talks on the growth of regional aviation in India and the re-sulting demand for small planes. Edited excerpts:

Q: WHAT IS THE SIzE OF REGIONAL JET MARKET IN INDIA? WHAT OP-PORTUNITIES DOES BOMBARDIER SEE HERE?

A: Bombardier released a 20-year fore-cast last year and our estimate is that In-dia will require about 640 planes in the 60-149 seats category. India and China will be the top two markets in this cate-gory over the next 20 years. India is a sig-nificant market place for us. The regional market in India is under-served because of the airlines’ focus on planes with a ca-pacity of 180 or more seats.

Q: WHY HAS THE REGIONAL MAR-KET REMAINED UNDER-SERVED?

A: It’s due to a number of factors. Pre-dominantly, air travel in India has grown from capital cities. That’s where you have the airports. But what you are seeing now is that a growing number of Indians from the hinterland are getting accustomed to speed and convenience of air travel. I see regional air transport take off with Spice-Jet connecting tier-II and-III cities.

Q: WHAT IS THE NEAR-TERM vIEW. HOW MANY PLANES WILL BOMBAR-DIER SELL IN INDIA IN TWO-THREE YEARS?

A: We do not forecast aircraft sales in near term. However, media reports over the last six months do indicate that air-lines in India are looking at planes with less than 100 seats. There are two rea-sons for this interest--airlines want to tap the regional market and also that the government is putting in place incentives for operating smaller aircraft.

Q: SPICEJET HAS PuRCHASED 15 BOMBARDIER Q-400S AND HAS AN OPTION TO BUY ANOTHER 15

PLANES. HAVE THEY MADE THE DECI-SION ON IT?

A: I cannot comment on what our cus-tomers plan to do. SpiceJet has received 15 aircraft with the last three coming in December. The Q-400s are doing ex-tremely well. The opportunity size in In-dia for these planes is clearly more than 15 and we clearly see potential for Spice-Jet to deploy more Q-400s in the market. I can easily see two-three other airlines getting into regional routes with the Q-400s

Q: BOMBARDIER HAS RECEIvED OR-DERS FOR 180 C SERIES PLANES, BUT NONE FROM INDIA. WHY?

A: I think the short-term opportunity in India is driven more by turbo props planes with a capacity of less than 90 seats. There are not many of them flying in India at the moment, but are ideal for high growth regional markets.

Q: IS THERE A MARKET IN INDIA FOR THE C SERIES PLANES?

A: There is definitely a market for them. In India, air travel is concentrated be-tween capitals and and tier II cities. We have not seen air connectivity between tier-III and -III or -II and -III cities. But I feel the C series will do extremely well in connecting routes in the SAARC (South Asian) region. India has a potential to be-

come an aviation hub in the region. A hub will be successful when it creates maxi-mum number of connections. The advan-tage of the C series planes is that they are cheaper than the current generation narrow body planes and are of right size for Asian markets. Our analysis of daily demand in Asia shows that over half of all flights flown in 2011 departed with loads appropriate for 100-150 seat air-craft. On an overall market perspective, 86 per cent of all markets in the region belong to the less than 150-seat segment. We are having conversation with a num-ber of Indian carriers. Most of them have been focussed on profitability and with domestic market share. The C series will do its first flight in June and that will also drive interest.

Q: HOW COST COMPETITIvE ARE C SERIES AIRCRAFT

A: The operating costs are 15-20 per-cent lower than the current generation airplanes. The wings are fully made of carbon components and we have used aluminum lithium for for fuselage, which makes the aircraft light. The C series plane is 12,000 lbs lighter than current generation aircraft like airbus A319 and more fuel efficient.

ON BOMBARDIER’S PRESENCE IN INDIAInterview with Torbjorn Karlsson, Vice-president (sales), Asia-Pacific, Bombardier

Interview


Indian financial markets, broadly com-prising of segments like asset manage-

ment, banking, insurance, foreign direct investments (FDI) and foreign institu-tional investors (FII), effectively promote the savings of the economy by directing them towards suitable investment op-tions. The Indian financial sector is well developed, competitive and integrated to face all traumas (like the recent financial turmoil).

World Economic Forum’s latest report ‘Financial Development Report 2012’ has named India as the world’s top-ranked country in terms of life insurance den-sity. Life insurance density is the ratio of direct domestic premiums for life insur-ance to per capita gross domestic prod-uct (GDP) of a country. India has been ranked 40th in terms of overall financial development of a country, but is much ahead of larger economies like the US, UK, Japan and China for life insurance density.

INSURANCE SECTOR

Premium collection by general insurance companies increased by 24.7 per cent year-on-year (y-o-y) in September 2012 at Rs 6, 059.02 crore (US$ 1.1 billion), ac-cording to the data compiled by the sec-tor regulator Insurance Regulatory and Development Authority (IRDA). The to-tal premium stood at Rs 34,001.09 crore (US$ 6.32 billion) for April-September 2012.

In terms of premium collections for life insurance segment, private players col-lected Rs 7, 095 crore (US$ 1.32 billion) in April-September 2012 period while state-owned Life Insurance Corp of India (LIC) recorded a remarkable 24 per cent y-o-y growth in premium collections at Rs 15, 532.7 crore (US$ 2.88 billion) dur-ing the period. LIC’s support helped the industry post a 15 per cent y-o-y growth in premium collected in the first half of 2012-13.

BANKING SERvICES

According to the Reserve Bank of India (RBI)’s ‘Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks’, March 2012, Nationalised Banks accounted for 53.0 per cent of the ag-gregate deposits, while the State Bank of India (SBI) and its Associates accounted

for 21.8 per cent. The share of New Pri-vate Sector Banks, Old Private Sector Banks, Foreign Banks, and Regional Rural Banks in aggregate deposits was 13.0 per cent, 4.8 per cent, 4.4 per cent and 3.0 per cent, respectively. Nationalised Banks accounted for the highest share of 52.0 per cent in gross bank credit followed by State Bank of India and its Associates (22.5 per cent) and New Private Sector Banks (13.5 per cent). Foreign Banks, Old Private Sector Banks and Regional Rural Banks had shares of around 4.8 per cent, 4.8 per cent and 2.4 per cent, respectively.

Another statement issued by the RBI revealed that foreign exchange reserves stood at, US$ 294.99 billion for the week ended January 4, 2013 wherein the value of gold reserves was recorded at US$ 27.21 billion and that of foreign currency assets (FCAs) was at US$ 261.06 bil-lion.The value of special drawing rights (SDRs) was US$ 4.40 billion and the country’s reserve position with the IMF was at US$ 2.30 billion.

MUTUAL FUNDS INDUSTRy IN INDIA

Indian mutual funds’ average assets under management (AUM) increased by 5.3 per cent or Rs 392 billion (US$ 7.39 billion) to Rs 7.87 trillion (US$ 146.31 billion) in the October-December 2012 quarter from Rs 7.47 trillion (US$ 139 billion) in the previous quarter, as per the latest data released by the Association of Mu-tual Funds in India (AMFI). The growth in assets was majorly driven by inflows into income and gilt funds.

Further, assets recorded a stupendous growth rate of 15 per cent or Rs 1.05 trillion (US$ 19.52 billion) in the calendar year 2012 as against 1 per cent growth in 2011.

PRIvATE EQUITy, MERGERS & ACQUISITIONS (M&A) IN INDIA

Private Equity (PE) companies invested around US$ 8.85 billion in 2012, accord-ing to consultancy firm Price Waterhouse Coopers (PwC). Information technology (IT) and healthcare seemed to have wit-ness the highest number of deals on the PE canvas wherein there were 162 deals worth US$ 3.25 billion in IT and health-care witnessed 48 deals worth US$ 1.23 billion.

Similarly, the pace intensified on the merger and acquisition (M&A) front. There were as many as 268 deals (in-volving Indian entities) that amounted to about US$ 36.3 billion in 2012; up 22.6 per cent over the 2011 tally, reported the global deal tracking firm Mergermarket.

FOREIGN INSTITUTIONAL IN-vESTORS IN INDIA

Investments into Indian shares through participatory notes (P—Notes) were recorded at US$ 32.4 billion in Novem-ber 2012, according to the latest data released by the Securities and Exchange Board of India (SEBI).

P—Notes, allow entities like overseas High Net-worth Individuals (HNIs), hedge funds and other foreign institu-tions, to invest in Indian markets through registered FIIs , while saving on time and costs associated with direct registrations.

Overseas investors infused a hefty sum of Rs 4, 500 crore (US$ 836.64 million) in the first week of January 2013; wherein during January 1- 4, 2013, FIIs were gross buyers of shares worth Rs 8, 350 crore (US$ 1.55 billion), while they sold equi-ties amounting to Rs 3, 830 crore (US$ 712.09 million).

As on January 4, the number of regis-tered FIIs in India stood at 1, 760 and to-tal number of sub-accounts were 6, 357.

RECENT DEvELOPMENTS

The Ergo Insurance Group (part of world’s leading reinsurer Munich Re) and the Avantha Group, India’s leading busi-ness conglomerate, have entered into a joint venture agreement in the space of life insurance. The new company, to be named Avantha Ergo Life Insurance Company Ltd, is expected to commence operations at the beginning of 2014, sub-ject to regulatory approval.

The Small Industries Development Bank of India (SIDBI) has partnered with eight regional rural banks (RRBs) and urban co-operative banks in West Bengal. The scope of agreements includes training the staff of RRBs and co-operative banks in project appraisal, monitoring and col-lection as also providing free access to software on a down-scaling methodol-ogy developed for lending to micro en-terprises.

Industry

FINANCIAL SERvICES INDUSTRyIndian Industry Sector Close-Up


GOvERNMENT INITIATIvES

The Indian Government has re-affirmed its efforts to push economic growth by increasing the FDI limit from 26 per cent to 49 per cent in insurance. The reform is expected to please international players who had been waiting to venture into In-dia and also encourage existing players to increase their stakes in strategic alliances.

The Indian insurance sector needs US$ 10-12 billion capital infusion in the next five years.

Furthermore, in a bid to attract higher foreign inflows, the Government of India (GoI) has opened up an opportunity for FIIs of all jurisdictions to earn tax-free in-terest by investing in debt instruments of

a state-owned enterprise. Owing to this landmark move, FIIs and non-resident In-dian (NRIs) have been allowed to invest in the public issue of tax-free bonds by Housing and Urban Development Cor-poration (Hudco) that opened up on January 9, 2013.

The GoI has also approved the establish-ment of a Credit Risk Guarantee Fund Trust (CRGFT) for low income housing, with an initial outlay of Rs.1000 crore (US$ 185.92 million). The CRGFT, regis-tered on May 1, 2012 and launched on October 31, 2012 would administer and operate the Scheme, which is demand-driven, as stated by Ajay Maken, Union Minister of Housing & Urban Poverty Al-leviation (HUPA).

ROAD AhEAD

Both the Houses of the Parliament have recently passed the much awaited Bank-ing Laws Amendment Bill to give a face-lift to the Indian banking industry as the initiative has paved way for more banks (domestic as well as international) in the market. This will not only create a healthy competition among the players in the in-dustry, but will also escalate the style of operation and technology.

Also, the Indian mutual fund industry is expected to grow to Rs 2, 000 billion (US$ 37.19 billion) by 2020 owing to regulatory changes and shift in investors’ savings pattern, according to Reliance Capital Asset Management.

Industry


India’s social security system is composed of a number of schemes and programs spread throughout a variety of laws and regulations.

The generally accepted concept of the social security system includes not just an insurance payment of premiums into government funds, but also lump sum employer obligations.

Generally, India’s social security schemes cover the following types of social insur-ances:

• Pension

• Health Insurance and Medical

• Maternity

• Gratuity

• Disability

While a great deal of the Indian popu-lation is in the unorganized sector and does not participate in each of these schemes, Indian citizens in the organized sector (which include those employed by foreign investors) and their employers are entitled to coverage under the above schemes.

The applicability of manadatory contribu-tions to social insurances varies; some of the social insurances require employer contributions from all companies, some from companies with ten or more em-ployees and some from companies with twenty or more employees.

In this article, we’ll discuss each of these social insurances, along with their cover-age, contribution rates, and the laws and regulations behind them.

PENSION

The Employees’ Provident Fund Organi-zation, under the Ministry of Labor and Employment, ensures superannuation pension, and family pension in case of death during service.

Presently about 35 million out of a labor force of 400 million have access to formal social security in the form of old-age in-come protection. Out of these 35 million, 26 million workers are members of the Employees’ Provident Fund Organization, which comprises private sector workers, civil servants, military personnel and em-ployees of State Public Sector Undertak-ings.

The schemes under the Employees’ Prov-ident Fund Organization apply to busi-nesses with at least 20 employees. Con-tributions to the Employees’ Provident Fund Scheme are obligatory for both em-ployer and employee when the employee is earning up to INR6,500 (US$126)1 per month and voluntary when the employee earns more than this amount. If the pay of any employee exceeds this amount, the contribution payable by the employer will be limited to the amount payable on the first INR6,500 (uS$126) only. Con-tributions should be made to the Em-ployees’ Provident Fund Organization on an annual basis.

The Employees’ Provident FundOrgani-zation includes three schemes:

• The Employees’ Provident Fund Scheme, 1952

• The Employees’ Pension Scheme, 1995

• The Employees’ Deposit Linked In-surance Scheme, 1976

The Employees’ Provident Fund Scheme is contributed to by the employer (1.67-3.67 percent) and the employee (10-12 percent).

The Employee Pension Scheme is con-tributed to by the employer (8.33 per-cent) and the government (1.16 percent), but not the employee.

Finally, the Employees’ Deposit Linked In-surance Scheme is contributed to by the employer (0.5 percent) only.

Four main types of pension (all monthly) are offered:

• Pension upon superannuation or dis-ability;

• Widows’ pension for death while in service;

• Children’s pension; and

• Orphan’s pension.

In addition, there are separate pension funds for civil servants, workers em-ployed in coal mines and tea plantations in the State of Assam and for seamen.

hEALTh AND MEDICAL INSUR-ANCE

India has a national health service, but this does not include free medical care

for the whole population. The Employees’ State Insurance Act creates a fund to pro-vide medical care to the employees and their families, as well as cash benefits dur-ing sickness and maternity, and monthly payments in case of death or disablement for those working in factories and estab-lishments with 10 or more employees.

In case of sick leave, the employer will pay half salary to the employees covered under the Employee’s State Insurance Act.

DISABILITy

The Workmen’s Compensation Act re-quires the employer to pay compensation to employees or their families in cases of employment related injuries resulting in death or disability.

In addition, workers employed in certain types of occupations are exposed to the risk of contracting certain diseases, which are peculiar and inherent to those occu-pations. A worker contracting an occupa-tional disease is deemed to have suffered an accident out of and in the course of employment and the employer is liable to pay compensation for the same. Occupa-tional diseases have been defined in the Workmen Compensation Act in parts A, B and C of Schedule III.

Compensation calculation depends on the situation of occupational disability:

(a) Death: 50% of the monthly wage multiplied by the relevant factor (age) or an amount of INR80,000 (US$1,559), whichever is more

(b) Total permanent disablement: 60% of the monthly wage multiplied by the relevant factor (age) or an amount of INR90,000 (US$1,754), whichever is more

The Compensation Act also includes stipulations for partial permanent disa-blement and temporary disablement (to-tal or partial).

MATERNITy

The Maternity Benefit Act requires an employer to offer 12 weeks wages during maternity as well as paid leave in certain other connected contingencies.

Every woman shall be entitled to, and her employer shall be liable for, the pay-ment of maternity benefit at the rate of

Business

INTRODUCTION TO ThE SOCIAL SECURITy SySTEM IN INDIABy Dezan Shira


the average daily wage (the average of the woman’s wages payable to her for the days on which she has worked during the period of three calendar months im-mediately preceding the date from which she is absent on account of maternity), including the day of her delivery and for the six weeks immediately following that day.

The maximum period for which any woman shall be entitled to maternity benefit shall be 12 weeks, six weeks up to and including the day of her delivery and-six weeks immediately following that day.

During the one month proceeding the period of six weeks before her expected delivery or any period during that six-week period for which she does not take a leave of absence, no pregnant woman shall be required by her employer to do any work that is arduous, involves long hours of standing or is in any way likely to interfere with her pregnancy or the nor-

mal development of the fetus, or is likely to cause her miscarriage or otherwise adversely affect her health.

Any woman working in an organization and allowed to maternity benefit may give written notice to her employer stat-ing that her maternity benefit and any other benefits to which she may be enti-tled may be paid to her or to anyone she nominates in the notice and that she will not work in any establishment during the period for which she receives maternity benefit.

On receipt of the notice, the company shall authorize the employee to absent herself from the company until the end of six week period following the day of her delivery.

The maternity benefit for the period pre-ceding the date of her expected delivery shall be paid in advance by the company to the employee after having confirmed that she is pregnant. The amount due for

the subsequent period shall be paid by the employer to the employee within 48 hours of the child’s birth.

In addition to the above, the act states that no company shall deliberately em-ploy a woman in any organization during the six weeks immediately following the day of her delivery or her miscarriage.

No company shall compel its female em-ployees to do tasks of a laborious nature or tasks that involve long hours of stand-ing or which in any way are likely to in-terfere with her pregnancy or the normal development of the fetus, or are likely to cause her miscarriage or otherwise ad-versely affect her health.

GRATUITy

For establishments with ten or more employees, the Payment of Gratuity Act requires the payment of 15 days of ad-ditional wages for each year of service to employees who have worked at a com-pany for five years or more.

Business

This article was extracted from Dezan Shira & Associates’s publication entitled “India Briefing”. For further corporate assistance, consider contating Dezan Shira & Associates, a specialist in foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. For further details or to contact the firm, please email Mr. Olaf Griease under [email protected] or visit www.dezshira.com

Pension - Employee Provident Fund Organization

Health Insurance and Medical

Disability

Maternity

Gratuity


INTERESTED IN vISITING A TRADE ShOw IN INDIA?In case your company is interested in visiting a tradeshow/B2B event in India, be it one listed here or

another one that came to your attention, get in contact with us via [email protected] to get more information about possible assistance/subsidies.

Trade Shows & Events


LIBRARyThE EMBASSy’S LIBRARy IS OPENED

MONDAyS AND wEDNESDAyS FROM 11AM TO 1PMwithout appointment. For scheduling an appointment outside the opening hours,

please contact the information assistant under [email protected] or 01 505 8666 33

BUSINESS CENTREThE EMBASSy’S BUSINESS CENTRE IS OPENED

DAILy FROM 11AM TO 1PMwithout appointment. For scheduling an appointment outside the opening hours,

please contact the commercial wing under the contacts given below.Marketing Officer: [email protected] or 01 505 8666 30

Marketing Assistant: [email protected] or 01 505 8666 31

Announcements

STUDENTS wELFARE OFFICERMr. Pawan T. Badhe, Third Secretary in this Embassy has been designated as Officer to look

after welfare of Indian Students in Austria and Montenegro. His contact details are: Tel: +43-1-505866614 Email: [email protected]


A short flight from Calcutta by air (it is also connected by flights from Delhi

and Madras) is Port Blair, capital of the Union Territory of Andaman and Nicobar Islands consisting of about 293 islands (39 of which are inhabited) and situated in the Bay of Bengal. Though travel is re-stricted here, those islands open to tour-ism, with their lovely beaches and coral beds, are a traveller’s delight. On Port Blair, the Cellular Jail and Anthropological Museum merit a visit. Excursions can be taken by motor launch to the islands of Wandoor and Jolly Buoy and to the bird sanctuary at Chiriyatapoo.

The unparalleled beauty of these islands, create in men a love of nature with a ca-ressing tenderness, a wistful fondness for all its delicate nuances. The enveloping atmosphere with its subtle harmonies of light and shade, fragrance and exhales the paradise, visionary splendours, and the music of the birds that defies definition would develop creative and constructive feelings in the hearts of those people who come here to enjoy the beauty of nature. He would like to rebel against the ste-reotyped moulds and forms into which life is so called ‘modernman’ is cast. He would be under the impact of the com-plex mood of infinite longing and tragic helplessness, “the yearning that craves for expression, yet defies expression, the inconclusive struggle between emotional apprehension of life and the articulation that must transcend personal emotion”.

Tourism

ANDAMAN AND NICOBAR ISLANDSIndian State Profile

FOR MORE INFORMATION ON INDIA TOURISM:

India Tourism FrankfurtBaseler Str. 48 / D-60329 Frank-

furt Tel: +49 (69) 242949-0

Fax: +49 (69) [email protected]


INDIAN MOvIE EvENING: Jodhaa AkbarFriday, April 26th, 18:00 | Indian Embassy Business Centre (1st Floor, Kärntner Ring 2, 1010 Vienna)

Genre: Action / Adventure

Directed by: Ashutosh Gowariker

Starring: Hrithik Roshan, Aishwarya Rai Bachchan, Sonu Sood

Released: 2008

Duration: 213 Minutes

Language: Hindi

Subtitles: GERMAN

Image Quality: hD

Synopsis: Jodhaa Akbar is the story of the greatest Mughal emperor that ruled Hin-dustan (now India), Jalaluddin Mohammad Akbar, and the fiery young Rajput princess, Jodhaa. Set in the sixteenth century, this epic romance begins as a marriage of alli-ance between two cultures and religions, for political gain, with the Hindu King Bharmal of Amer giving his daughter’s hand to a Muslim Emperor, Akbar. When Akbar accepts the marriage proposal, lit-tle does he know that in his efforts to strengthen his relations with the Rajputs, he would in turn be embarking on a new journey - the journey of true love. From the battlefield where the young Jalaluddin was crowned, through the conquests that won him the title of Akbar the Great (‘Ak-bar’ in Arabic means great), to winning the love of the beautiful Jodhaa, Jodhaa Akbar traces the impressive graph of the mighty emperor and his romance with the defi-ant princess.

Genre: Romance

Directed by: Aan Mukherjee

Starring: Ranbir Kapoor & Deepika Padu-kone

Duration: N.A.

Language: Hindi

Release Date: May, 31st (same Re-lease Date as in India)

Synopsis: Yeh Jawaani Hai Deewani is a cocktail of all these encounters and ob-sessions… A story of the exhilarating and terrifying journey of four...

Produced by Hiroo Johar & Karan Johar. After giving a blockbuster hit like ‘Wake Up Sid’, director Ayan Mukherjee now presents his upcoming film ‘Yeh Jawaani Hai Deewani’ featuring Ranbir Kapoor & Deepika Padukone. The duo will be seen together for the second time after ro-mancing in 2008 hit ‘Bachna Ae Haseeno’.

Due to limited capacity, seats will be given on a first come, first served basis. Therefore, you are highly encouraged to reserve your seats online at www.indi-anembassy.at or via phone at +43 1 505 866633 (Ms. Lily John).

India in Austria

UPCOMING BOLLywOOD PREMIERE: yeh Jawaani hai DeewaniAt the UCI KINOWELT Millennium City (Wehlistr. 66,1200 Vienna)


India in Austria/Overseas Indians

OThER EvENTSMore Information below

INDISChER TANZABEND - ‘vON NORDEN BIS SüDEN. vON KLASSIK BIS MODERNE’Kathak, Bharatnatyam, Padmaya Bollywood Dance and Rajasthani Folk Dance

When: April 13th, 19:30Lalish Theaterlabor - Gentzgasse 62, A- Wien 1180Reservations under [email protected]

KAThAK wORKShOPLed by Kaveri Sageder* Workshopteilnehmerinnen haben freien Eintritt am Tanzabend 13. April!

When: April 14th, 13:00-18:00Lalish Theaterlabor - Gentzgasse 62, A- Wien 1180Reservations under [email protected]

KLASSIChER INDISChER TANZBharatnatyam-Vorführung anlässlich des Welttanztages der Schülerinnen von Radha Anjali aus der Natya Mandir Schule und vom Universitäts-Sportinstitut Wien

When: April 28th, 15:00Interkulttheater - Fillgradergasse 16, 1060 ViennaMore information under www.natyamandir.at/

Expanding thE Economic EngagEmEntof thE indian diaspora with india

FOR DETAILS CONTACT:MS. SUJATA SUDARSHAN, CEO, OIFC, AND DIRECTOR – CII

249-F, SECTOR 18, UDYOG VIHAR, PHASE IV, GURGAON —122015, HARYANA, INDIATEL: +91-124-4014055/6 | FAx: +91-124-4309446 WEBSITE: WWW.OIFC.IN

india newsletter 04.2013

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