At a time when President Donald Trump has been going all-out with his “Buy American, Hire American” push and putting the squeeze on foreign guest worker visas in the process, Indian companies have pumped in a tidy $18 billion in investments across the United States and created more than 113,000 jobs.
A report, titled “Indian Roots, American Soil”, highlighting this ‘tangible foreign direct investment’ by Indian companies, was released by the Confederation of Indian Industry (CII) in the presence of a host of lawmakers on Capitol Hill here on last Tuesday.
Based on a survey of 100 Indian companies with investments and operations across a wide spectrum of sectors in the US, the report ranks New York ($1.57 billion), New Jersey ($1.56 billion), Massachusetts ($931 million), California ($542million) and Wyoming ($435 million) as the five top States to benefit from the Indian FDI. In terms of jobs created, New Jersey leads the table with 8,570 jobs, followed by Texas (7,270), California (6,750), New York (5,140) and Georgia (4,550).
The report, the fifth of its kind brought out by the CII in alternate years, noted that the surveyed companies have also collectively committed $588 million for R&D and $147 towards corporate social responsibility.
The companies represent diverse sectors including pharmaceuticals, telecommunications, aerospace and defence, financial services, healthcare, tourism, engineering and construction, automotive, food and agriculture, energy and information technology. Hailing the initiative, the lawmakers, both Democratic and Republican, called upon the Indian companies to keep up the momentum, with several of them pitching for steering the investment towards their own respective States.
“Indian industry and professionals are making significant contributions to the US economy - I am delighted that this fact is being recognised today at the CII event on Capitol Hill,” said India’s Ambassador to the US Navtej Sarna, adding: “The presence and reach of Indian companies continues to grow each year as they invest billions of dollars and create jobs across the United States.”
Sarna said the study highlights Indian industry's ascension as a significant stakeholder in the US economy, noting: “This is a critical component of our strong and vibrant bilateral relationship with the US, which continues to flourish in strategic terms as well.” Congresswoman Tulsi Gabbard, the first Hindu lawmaker in the US Congress and Democratic co-chair of the India Caucus, lauded the Indian companies for not only adding value to the US economy, but investing in American communities as well. US-India trade in goods and service totalled $114 billion in 2016 - a year when India was America's ninth largest trading partner, she said, but noted: “There is much work to be done.”
“I am glad to see the principles of free market economics being celebrated today on Capitol Hill as we recognise the contributions Indian Industry have brought to the US economy and States,” said Republican Congressman Dave Brat from Virginia said: CII Director-General Chandrajit Banerjee said the story of Indian investment in the US showcases “how intertwined we are as nations that contribute to each other's success”.
India's push to digitize has seen its economy undergo massive changes, but that presents a multitrillion-dollar investment opportunity as both tax compliance and access to credit increase, according to Morgan Stanley.
Prime Minister Narendra Modi's push to digitize the Indian economy has seen the introduction of Aadhaar — a unique identification number based on biometric information issued to residents of India — and attempts to reduce dependency on physical cash, although last November's surprise demonetization drive caused plenty of disruption.
Still, as the Indian economy returns to a sense of normalcy, the country could be set to reap the benefits of those reforms.
"The good thing with digitization, apart from bringing more cash into the economy ... is credit," Anil Agarwal, head of Asian financial research at Morgan Stanley, told CNBC on the sidelines of the bank's Asia Pacific Summit in Singapore.
India's problem, Agarwal explained, was that most lending that occurred in the formal sector went to large corporations or mortgages as banks did not have access to data on individuals or small and medium enterprises (SMEs) that wanted to take out loans.
As the adoption of digitization improves, tracking the credit history of individuals or SMEs is expected to become simpler and that's likely to give a boost to the economy.
"[T]hat will allow banks to be able to lend much more effectively, so the credit will flow to the right part of the economy," Agarwal said
"Our view is that that creates employment opportunities, that increases GDP per year by about 50 to 75 basis points, so GDP growth [on a] real basis is 7.1 percent, nominal is around 11 percent. That means economy and markets can do very well," he added.
Morgan Stanley forecasts India's GDP to reach $6 trillion in 2027 as a result of its digitization drive. That would make India the third-largest economy in the world, behind the U.S. and China, which recorded $18.5 trillion and $11.2 trillion in GDP, respectively, last year.
Digitization also paves the ways for the country's equity market to become one of the world's five largest, with a market capitalization of $6.1 trillion.
The bank isn't the only one optimistic about the impact of Modi's reforms on the country either.
India's sovereign rating was upgraded by Moody's Investors Service for the first time in 14 years to Baa2 from Baa3 on Friday. "The decision to upgrade the ratings is underpinned by Moody's expectation that continued progress on economic and institutional reforms will, over time, enhance India's high growth potential," Moody's said.
The rating agency highlighted the new Goods and Services Tax as a measure that will "promote productivity," and it noted that the Aadhaar system and demonetization helped to "reduce informality in the economy."
Nevertheless, Agarwal acknowledged that it could take some time for those in India's massive informal economy to adopt digitization.
"It will take some time because it is a material change in habits, material change of business model ... but I think over the next 12 to 18 months, by fiscal 2019 or early 2020, I think you'll start seeing those changes," he said.
India's Manushi Chillar won the coveted Miss World 2017 pageant here, 16 years after Priyanka Chopra won the title in 2000.
Chillar competed against 108 contestants from various countries at a glittering event held at Sanya City Arena here.
Miss World 2016 winner Puerto Rico's Stephanie Del Valle gave away the coveted crown to the winner.
Chillar, who is from Haryana, had earlier this year won the Femina Miss India 2017.
India, England, France, Kenya and Mexico grabbed the top five spots at the peagant.
Manushi, born to doctor parents, studied in St. Thomas School in New Delhi and Bhagat Phool Singh Government Medical College for Women in Sonepat.
Her entire family including brother and sister were present and they looked excited watching Manushi grabbing top five spot.
In question and answer round post getting the top five spot, Manushi was asked: "Which profession deserves the highest salary and why?" She replied: "I think a mother is of highest respect. I don't think its just about cash but love and respect she gives to someone. She is the biggest inspiration in my life. Mother should get highest respect."
As many as 108 beauty queens from different parts of the world participated in the prestigious pageant.
Source: Business Standard
India should be able to return to its "normal" growth range by next year as the short-term fallout from a new goods and services tax plan and last November's currency ban ebb, the country's finance minister told CNBC.
The Indian economy grew at its slowest pace in three years between April and June at 5.7 percent. A Reuters poll conducted in October showed economists predict South Asia's largest economy will grow by 6.7 percent in the fiscal year ending March 2018.
"I see the Indian economy picking up quite well," Arun Jaitley told CNBC, adding that the negative impact on growth from demonetization and tax reforms appear to have bottomed out.
"All indications do indicate that we will certainly improve, and whatever is the "Indian normal," other factors remaining the same, we should be able to grow between that 7-8 percent range," he said.Worst of demonetization is over
Last November, India unexpectedly announced all 500 and 1,000 rupee banknotes would be withdrawn from circulation, replaced by new 500 and 2,000 rupee denomination notes. The move caught most people off-guard and led to a massive shortage of cash around the country.
While Jaitley acknowledged that India's decision to squeeze out a large portion of its high value currency temporarily affected growth, he said the worst of it was "long over."
He also pointed to the benefits that came about as a result of India's demonetization efforts. Jaitley said it allowed the government to put digitization of the economy — an important aim for Prime Minister Narendra Modi — as a center-stage issue and allow for more cashless transactions.
The move also opened new funding sources for the economy. "We've been able to increase the tax base as far as the Indian economy is concerned," he said, adding that there have also been an increase in the number of deposits in banks.
"Today, the banks have more funds to lend even to the [small-and-medium businesses], providing we are able to recapitalize the banks," Jaitley said.
That said, many economists and analysts have said the real impact of demonetization was felt in India's large informal sector, where most transactions are done in cash.
When asked how the move affected the informal sector, Jaitley said there wasn't a "lasting impact" since "remonetization took place within a matter of weeks."
But experts have said that India's quarterly statistics — including its gross domestic product figure — use data on organized sectors as a proxy of the country's unorganized sectors, meaning the numbers may not accurately reflect the impact of demonetization.
Positives from the tax reform
The other main factor affecting India's growth outlook was the goods and services tax — India's most ambitious economic reform plan in 70 years. It was rolled out only on July 1, but according to Jaitley, manufacturing slowed down in the months leading up to it because "people were de-stocking."
The new goods and services tax replaces a thicket of indirect central and state levies that critics argued had blunted economic competitiveness and hobbled efforts to lift more out of poverty. The reform introduced four main tax rate bands on goods and services: 5-, 12-, 18-, and 28 percent irrespective of the location of purchase.
Jaitley said that, in the first few months since the plan was rolled out, the tax receipts collected had been "fairly okay." Big and medium-sized businesses have adjusted well, he added, but smaller businesses — typically more reliant on cash — will "obviously take some time."
"Therefore, we are giving them time in terms of compliance burdens," he said. "I do see people will take time in adjusting to the new setup, and therefore, we are moving slowly in implementing some of the eventual steps which are a part of the [goods and services tax] itself."
He pointed to several positives that came about from the reform. "The decision-making process of the [goods and services tax] has matured itself. The Council is functioning very effectively. You have a common market which has been created. You have all the barriers which have been removed," Jaitley said.
In order to get states to comply with the reforms, Jaitley said they were promised a 14 percent yearly increase in tax revenue for the first five years.
"I'm quite sure we'll be able to maintain that," he said.
Maruti parent SuzukiBSE 0.02 % has inked a pact with Toyota Motor and, if things go as planned, India would see the first electric vehicle (EV) from the Maruti stable in less than two years!
That would prove to be a game-changer for the domestic auto industry.
How the EV segment would perform in the initial years would majorly depend on the price points of these vehicles.
The average cost of a small car in India today stands at $6,00-8,000 (ex-showroom), while the median cost of a car comes to $10,000. A long-range EV (380km) is expected to cost about $21,500 while a moderate-range one (190km) could cost $16,000 by 2025, UBS said in a forecast this past August.
That takes the battery cost at $130/Kwh. At Friday’s rupee-dollar exchange rate, $16,000 equals roughly Rs 10.40 lakh, the price point at which entry-level SUVs are selling in the domestic market currently.
UBS analysts argued that even though battery costs are falling, a long-range electric vehicle (EV) could still remain too expensive for mainstream adoption, without major government subsidies.
India needs local battery cell manufacturing and electronics value chain and charging infrastructure. For that, the government would need to invest significantly to drive industry growth, said the UBS report.
The government’s fiscal space is limited currently. The disruption from EVs is not priced in India so far, the analysts said.
Bank of America-Merrill Lynch (BofA-ML) in a report forecasts electric vehicles to have a 12 per cent market share in the light vehicles segment globally by 2025. It expects the penetration to rise to 34 per cent by 2030 and 90 per cent by 2050.
Globally, China is likely to maintain 50 per cent of EV sales by 2030. Renault-Nissan has been an early EV adopter in Europe, while Toyota and Honda have entered the space recently.
Among US OEMs, GM’s ability to integrate autonomous EVs into a ridehailing/shared fleet looks differentiated. Ford is focused on using existing platforms for EVs, while FCA lags behind in terms of EV offerings. Tesla’s auto focus is solely on pure EVs (new Model 3 launch in 2017), it said.
India aims to achieve a target of all-electric vehicles by 2030.
Regulatory actions against fossil fuel vehicles are likely to support EVs over the next few years, Nomura India said, noting that the Suzuki-Toyota pact should give a headstart to Suzuki over other OEMs in India.
The two companies together are likely to have enough volumes in India and for exports for high utilisation, which will bring down the overall cost per vehicle. Other OEMs dependent on imported components may find it difficult to compete on costs, it said.
Suzuki intends to build the entire value chain in India, which would require a lot of investment. It is likely to pay off in the medium term, Nomura India said.
The company earlier this year announced setting up of a lithium-ion battery manufacturing JV with Toshiba (40 per cent share) and DensoBSE 0.32 % (10 per cent share). The JV is expected to supply batteries for hybrid and all-electric cars by 2020.
Mahindra & Mahindra (M&M) is also gearing up for manufacturing all key components for electric vehicles on its own, media reports suggest.
M&M was an early entrant in this segment after the automobiles-to-financial services conglomerate acquired a majority stake in REVA Electric Car in 2010. Mahindra later rebranded the company as Mahindra REVA Electric Vehicle.
For M&M, building on the first mover advantage and cab aggregator tie-ups is a must. The company expects battery cell prices to drop to $130/Kwh in the next 2-3 years from $230/Kwh at present.
Mahindra Electric is forging necessary technology tie-ups to facilitate the development and introduction of electric vehicles across segments, JM FinancialBSE -1.26 % said in a note.
Bajaj AutoBSE 1.43 % has plans to launch e-rickshaws to 2018 from 2020. Hero MotoCorpBSE 0.88 %, on the other hand, has invested up to Rs 205 crore in electric automotive startup Ather Energy with a 26-30 per cent stake.
Analysts believe original equipment makers (OEM) such as Maruti SuzukiBSE 0.05 %, M&M, Ashok LeylandBSE 0.04 % and Bajaj Auto may gain in the long term as they develop EV platforms. Battery makers Exide IndustriesBSE 1.14 % and Amara RajaBSE 0.09 % are also expected to gain as they look deeper into lead-acid and lithium ion batteries.
Souce: Economic Times