GE’s Jeff Immelt is a champion of “reverse innovation.” Mukesh Ambani is an “extreme innovation” protagonist. Both minds think alike.
They know that necessity is the mother of innovation and that India is the land of necessity.
That’s why Mr Immelt and GE have decided to build products for the world from India. They’ve made a start with an ultra-cheap electrocardiogram device — it sells for $1,000 and is made in India.
That’s why Mr Ambani and his Reliance Industries have set up an innovation team led by RA Mashelkar, a former head of government research agency network CSIR.
Mr Ambani cautions against “getting trapped” by the western model and to rely on “extreme innovation” instead to leapfrog to the next level of development. “What’s needed is extreme innovation. Twenty years from now, people will not talk about garages in Silicon Valley, but projects in Indian villages and rural areas that will be scaled up.”
“People perceive India as a land of a billion problems, but I see it as a land of a billion opportunities.”
The GE CEO, made a case for “reverse innovation” — the flow of knowledge and products from the developing world to the developed world. For this, India must develop efficient business models that could be used by the rest of the world.
“We should get to a point where ideas start transporting back to the developed world,” Mr Immelt said. GE has decided to let all its business heads in India report to the country head, underscoring the importance India has in its scheme of things and how much the company feels that a flexible environment in India could be more conducive for growth here. “At GE, the only person who believes that it’s a good idea is me,” he joked.
GE has set itself a target of growing its nearly $3 billion India business by 30% a year for the next five years.
Mr Immelt, whose father worked at GE for 40 years, said his story represented the American dream.
“From discussing GE at our kitchen table to managing the company at the board level in just a generation is representative of the American culture.”
“We are normal people who work together and do extraordinary things — and we like it that way.” The panel discussion involving the two business leaders and moderated by CII chief mentor Tarun Das had its share of banter as Mr Ambani shared his personal secrets.
“I’m from the chemical industry”, he remarked when Mr Das quizzed him about his jet-black hair. That his wife Neeta makes him work out regularly was an admission by Mr Ambani. “Neeta makes sure that I work out though you don’t get to see the obvious results.”
Not too long ago, a call for Indian investment in the US by the CEO of GE would have raised more than an eyebrow. But when Mr Immelt made that call on Thursday, it didn’t seem surprising.
‘’The next generation of BPO jobs should be in the US,’’ he said, and asked Indian businesses to see the world “from (US President Barack) Obama’s eyes.” Emphasising the importance of ensuring that politicians come on board, he said, “If globalisation is put to vote today in the US, it will lose 70:30.”
Mr Immelt was all praise for Indian entrepreneurs. “The business class in India is equal or better than the rest of the world.” A regular practice at GE is for the top leadership to discuss their perceptions of CEOs from other countries, he said, and they often found that Indian CEOs cared more about their companies than they did for themselves.
On the new drive to give back to the society or bring in change where it’s needed most, Mr Ambani said the bulk of India’s young people want to work for rural transformation.
The two corporate leaders were optimistic that the next five years would see India growing rapidly. In a lighter view, Mr Immelt said he expected a good road between Mumbai airport and the city, mainly to highlight the need to focus on infrastructure.
In what he called his wish-list, Mr Ambani said he hoped by 2014, India would have demonstrated to the world that it could register double-digit growth annually, create gainful employment for 12-15 million people every year and have in place world-class education and training infrastructure.
Thursday, October 1, 2009
Saturday, September 12, 2009
IIP clocks robust growth of 6.8 per cent in July 2009
The industrial output, as measured by the index of industrial production (IIP), continued to post robust growth of 6.8 per cent for the second consecutive month, in July. Industrial growth has clocked positive growth for the seventh consecutive month.
For the first four months (April-July) of this fiscal, the industry grew by 4.6 per cent compared with 5.6 per cent a year ago. The high growth rate comes even as the core sector grew at a low rate of 1.8 per cent in July.
Commerce and Industry Minister Anand Sharma had earlier said that the industrial growth for July was in line with his expectations at 7 per cent. “The industrial growth, though lower than June, is as we had expected and is an indication of recovery,” Sharma had told reporters yesterday.
“The industrial growth has been in line with our expectations. However, we expect it to slow down in the coming months as drought will have an effect on consumer demand, which in turn will affect industrial production,” said Jyotinder Kaur, economist with HDFC Bank.
“The trend is definitely one of revival but it still does not point to a strong recovery. The government spending is basically driving the growth and a neutral monetary policy is expected to continue for the coming months,” said DK Joshi, principal economist with Crisil, a research and ratings agency.
The mining sector grew robustly by 9.9 per cent in July, against a mere 2.8 per cent during the year-ago month.
Manufacturing and electricity sectors grew by 6.8 per cent and 4.2 per cent, respectively, during the month against 6.9 per cent and 4.5 per cent, respectively, in the year-ago period.
However, all the three sectors registered lower growth in July over the previous month.
In terms of use-based classification of the industry, consumer durables sector expanded by 19.8 per cent in the said month, against 13.9 per cent growth in the year-ago period. Intermediate goods also registered 9 per cent growth against a 3 per cent increase last year. Basic goods grew by 4.8 per cent against 5.3 per cent growth in the year-ago month.
Only capital goods sector perfomed dismally, clocking a mere 2 per cent growth against a robust 17.9 per cent growth in the year-ago month.
Growth of basic goods came down to 4.8 per cent in July from 10.6 per cent in June, while for capital goods the growth came down to 2 per cent from 13.3 per cent registered in June.
“The decline in basic goods during the month is a result of the decline in core sector growth while increase in the automobile, cement and other sectors are driving growth in other categories,” Joshi added.
“As far as the high growth rate clocked in June and July, one needs to keep in mind the volatility of the data. The high numbers constitute inventory adjustments,” Kaur added.
For the first four months (April-July) of this fiscal, the industry grew by 4.6 per cent compared with 5.6 per cent a year ago. The high growth rate comes even as the core sector grew at a low rate of 1.8 per cent in July.
Commerce and Industry Minister Anand Sharma had earlier said that the industrial growth for July was in line with his expectations at 7 per cent. “The industrial growth, though lower than June, is as we had expected and is an indication of recovery,” Sharma had told reporters yesterday.
“The industrial growth has been in line with our expectations. However, we expect it to slow down in the coming months as drought will have an effect on consumer demand, which in turn will affect industrial production,” said Jyotinder Kaur, economist with HDFC Bank.
“The trend is definitely one of revival but it still does not point to a strong recovery. The government spending is basically driving the growth and a neutral monetary policy is expected to continue for the coming months,” said DK Joshi, principal economist with Crisil, a research and ratings agency.
The mining sector grew robustly by 9.9 per cent in July, against a mere 2.8 per cent during the year-ago month.
Manufacturing and electricity sectors grew by 6.8 per cent and 4.2 per cent, respectively, during the month against 6.9 per cent and 4.5 per cent, respectively, in the year-ago period.
However, all the three sectors registered lower growth in July over the previous month.
In terms of use-based classification of the industry, consumer durables sector expanded by 19.8 per cent in the said month, against 13.9 per cent growth in the year-ago period. Intermediate goods also registered 9 per cent growth against a 3 per cent increase last year. Basic goods grew by 4.8 per cent against 5.3 per cent growth in the year-ago month.
Only capital goods sector perfomed dismally, clocking a mere 2 per cent growth against a robust 17.9 per cent growth in the year-ago month.
Growth of basic goods came down to 4.8 per cent in July from 10.6 per cent in June, while for capital goods the growth came down to 2 per cent from 13.3 per cent registered in June.
“The decline in basic goods during the month is a result of the decline in core sector growth while increase in the automobile, cement and other sectors are driving growth in other categories,” Joshi added.
“As far as the high growth rate clocked in June and July, one needs to keep in mind the volatility of the data. The high numbers constitute inventory adjustments,” Kaur added.
Monday, September 7, 2009
Private equity funds: New code, new issues
In the draft Direct Taxes Code, 2009 (Code) currently under review for public comments, the government seeks to exempt venture capital funds (VCFs) from the liability to pay income tax, thereby bringing VCFs on par with mutual funds. While the re-introduction of the much coveted pass-through status is a positive step, a finer reading of the Code reveals potential pitfalls.
‘Mutual fund’ vs ‘mutual fund’: By placing VCFs under the umbrella term, ‘mutual fund’ (as distinguished from ‘Mutual Fund’ under Sebi (Mutual Funds) regulations, it seems that income from a VCF unlike a Mutual Fund may not be tax-exempt. It would have been prudent to use terminology such as ‘Sebi-registered Mutual Funds’ and ‘Sebi-registered VCFs’, instead of using alphabet cases as a differentiating factor.
Investor-level taxation: The Code does not provide for the mechanism of taxation of investors in a VCF as Section 115U of the current tax laws does. There is no operational provision for taxation of income of a VCF in the hands of its investors. A definitional provision cannot be construed as a provision for the characterisation and taxability of income in the hands of investors in a VCF.
Some may argue that as most VCFs are set up as trusts and a trust is not a separate legal or a taxable entity (defined to include legal obligations under the Code), characterisation of income in the hands of investors will be the same as that in the hands of the trust. To clear any ambiguity, the Code should clearly articulate details on taxability of investors in a VCF, especially for such VCFs that are set up as a company. Further, the proposal of imposing up to 30% tax on all forms of capital gains is another dampener.
Confusion reigns supreme on the taxability of dividend income in the hands of investors in a VCF, especially when provisions regarding the classification of a VCF as an exempt entity is read along with the provisions of dividend distribution tax (DDT). The Code provides that no DDT (currently taxed at an effective rate of 17%) is to be levied on the distribution of dividend to pass-through entities such as VCFs. Further, only such dividends received on which DDT has been paid, are tax
-exempt. While this appears to benefit VCFs, in reality, investors receiving dividend income from the VCF will end up having to pay tax on such dividends at the regular applicable rates (up to 31%).
It appears absurd that the tax authorities would have intended to increase the tax burden for investors in VCFs with respect to dividend income.
To further add to this complexity, the third schedule of the Code provides that dividends on which DDT is not payable shall be subjected to a withholding tax at the rate of 10% (in case of a resident deductee). The prime question that arises is: Who will be responsible for withholding such taxes? Will it be the portfolio company distributing dividend, or the VCF itself? This will be supplanted by the administrative hassle on claiming tax credit, arising from a mismatch in the name appearing on the TDS certificate (which in most probability will be the name of the VCF, assuming that the portfolio company has to withhold) as opposed to the persons (i.e. the investor) claiming the credit.
However, the exemption from withholding taxes on interest income paid to VCFs as proposed by the Code will benefit VCF investors who so far encountered administrative roadblocks while claiming credit on tax withheld by portfolio companies on such income.
Lastly, with VCFs being regarded as ‘persons not liable to pay income tax’, it’s unclear whether a VCF is eligible to tax treaty benefits on its investments made outside India. These are some of the pressing issues that need to be corrected.
‘Mutual fund’ vs ‘mutual fund’: By placing VCFs under the umbrella term, ‘mutual fund’ (as distinguished from ‘Mutual Fund’ under Sebi (Mutual Funds) regulations, it seems that income from a VCF unlike a Mutual Fund may not be tax-exempt. It would have been prudent to use terminology such as ‘Sebi-registered Mutual Funds’ and ‘Sebi-registered VCFs’, instead of using alphabet cases as a differentiating factor.
Investor-level taxation: The Code does not provide for the mechanism of taxation of investors in a VCF as Section 115U of the current tax laws does. There is no operational provision for taxation of income of a VCF in the hands of its investors. A definitional provision cannot be construed as a provision for the characterisation and taxability of income in the hands of investors in a VCF.
Some may argue that as most VCFs are set up as trusts and a trust is not a separate legal or a taxable entity (defined to include legal obligations under the Code), characterisation of income in the hands of investors will be the same as that in the hands of the trust. To clear any ambiguity, the Code should clearly articulate details on taxability of investors in a VCF, especially for such VCFs that are set up as a company. Further, the proposal of imposing up to 30% tax on all forms of capital gains is another dampener.
Confusion reigns supreme on the taxability of dividend income in the hands of investors in a VCF, especially when provisions regarding the classification of a VCF as an exempt entity is read along with the provisions of dividend distribution tax (DDT). The Code provides that no DDT (currently taxed at an effective rate of 17%) is to be levied on the distribution of dividend to pass-through entities such as VCFs. Further, only such dividends received on which DDT has been paid, are tax
-exempt. While this appears to benefit VCFs, in reality, investors receiving dividend income from the VCF will end up having to pay tax on such dividends at the regular applicable rates (up to 31%).
It appears absurd that the tax authorities would have intended to increase the tax burden for investors in VCFs with respect to dividend income.
To further add to this complexity, the third schedule of the Code provides that dividends on which DDT is not payable shall be subjected to a withholding tax at the rate of 10% (in case of a resident deductee). The prime question that arises is: Who will be responsible for withholding such taxes? Will it be the portfolio company distributing dividend, or the VCF itself? This will be supplanted by the administrative hassle on claiming tax credit, arising from a mismatch in the name appearing on the TDS certificate (which in most probability will be the name of the VCF, assuming that the portfolio company has to withhold) as opposed to the persons (i.e. the investor) claiming the credit.
However, the exemption from withholding taxes on interest income paid to VCFs as proposed by the Code will benefit VCF investors who so far encountered administrative roadblocks while claiming credit on tax withheld by portfolio companies on such income.
Lastly, with VCFs being regarded as ‘persons not liable to pay income tax’, it’s unclear whether a VCF is eligible to tax treaty benefits on its investments made outside India. These are some of the pressing issues that need to be corrected.
Real estate moves towards industrial hubs in tier 2 & 3 cities
The demand fundamentals of India are now focused around cities that have sufficient economic activity, be it industrial, service sector-driven or
incentive-driven programs by the State Government. In Gujarat, which has seen considerable industrial progress, cities of Ahmedabad, Surat and Vadodara come readily to mind.
Baddi in Himachal Pradesh and Pantnagar and Rudrapur in Uttaranchal attracted a lot of residential developers, thanks to government policies. In the South, Coimbatore, Vizag and Kochi emerged, either thanks to a large investor segment or as the outcome of sufficient economic activity. Towards the West, Pune, Nasik and Nagpur are noteworthy in this context.
In all cases, developers positioned their development close to industrial hubs, targeting a totally different price segment. While this was a worthy ambition , it was poorly conceived as a plan since many of them did not factor in State Government-level regulatory challenges such as local municipal laws.
incentive-driven programs by the State Government. In Gujarat, which has seen considerable industrial progress, cities of Ahmedabad, Surat and Vadodara come readily to mind.
Baddi in Himachal Pradesh and Pantnagar and Rudrapur in Uttaranchal attracted a lot of residential developers, thanks to government policies. In the South, Coimbatore, Vizag and Kochi emerged, either thanks to a large investor segment or as the outcome of sufficient economic activity. Towards the West, Pune, Nasik and Nagpur are noteworthy in this context.
In all cases, developers positioned their development close to industrial hubs, targeting a totally different price segment. While this was a worthy ambition , it was poorly conceived as a plan since many of them did not factor in State Government-level regulatory challenges such as local municipal laws.
Tuesday, August 11, 2009
India ranks second in consumer confidence level: Survey
India has emerged as the second most optimistic nation across the world in consumer confidence level, with a majority of people having bullish opinion about job prospects, personal finances and their willingness to spend in the next 12 months, a survey has said.
According to the survey conducted by global consultancy firm The Nielsen, consumer confidence in India is on upswing, registering a 13 point rise to 112 index points in the second quarter after Indonesia (113 points).
"The recent elections in India have had a positive effect on Indians' sentiments towards its economy. With the UPA government back in power for the second term, consumers are more confident that political and policy continuity will help recover the Indian economy," The Nielsen Company Associate Director Consumer Research Vatsala Pant said.
The consumer confidence in India witnessed an uptrend after three parameters -- job prospects, personal finances and willingness to spend -- on which it is based, witnessed significant rise.
In terms of job prospects also India ranked second after Indonesia.
Regarding personal finances, Indians are the most optimistic globally as about nine per cent of Indians think that their personal finances would be 'excellent' in the next 12 months and 65 per cent consider they would be 'good'.
According to the survey conducted by global consultancy firm The Nielsen, consumer confidence in India is on upswing, registering a 13 point rise to 112 index points in the second quarter after Indonesia (113 points).
"The recent elections in India have had a positive effect on Indians' sentiments towards its economy. With the UPA government back in power for the second term, consumers are more confident that political and policy continuity will help recover the Indian economy," The Nielsen Company Associate Director Consumer Research Vatsala Pant said.
The consumer confidence in India witnessed an uptrend after three parameters -- job prospects, personal finances and willingness to spend -- on which it is based, witnessed significant rise.
In terms of job prospects also India ranked second after Indonesia.
Regarding personal finances, Indians are the most optimistic globally as about nine per cent of Indians think that their personal finances would be 'excellent' in the next 12 months and 65 per cent consider they would be 'good'.
Sunday, August 2, 2009
Do Banks' current quarter results represent an economy's outlook?
In my last blog, I had discussed recently concluded quarter results about various firms like Goldman Sachs, JPMorgan Chase, Microsoft, Amazon. Looking at the current economic outlook and the way the organizations are slashing their payroll to remain in profit, one question comes to everyone's mind "Do the quarterly results of the firms represent the economy outlook?"
Goldman Sachs declared record quarterly profits in their history surpassing analyst expectations, while Microsoft and Amazon could not meet analyst expectations to reach their targets. We can consider sentiment plays an important part when DOW-JONES tumbled upto 6600 in Mar'06 in response to continuous failure of banks in US and most of the retailer's same stores sales were plummeting. Since March '09, DOW has recovered upto 9200 in July 31st, increased ~40% and it shows the optimism across the board rather than an economic outlook. There are not much changes to the economy since March '09, as Unemployment has increased from ~8.5% to ~9.7% from Mar '09 till Jul '09, 57 more banks have filed Chapter 11 bankruptcy since Jan '09, industries are still cutting payrolls, job cuts were 467,000 in Jun '09, 322,000 in May '09.
Results of the banks are showing optimism in the economy as there is positive sentiment in the economy for signs of stabilization, but they do not provide the exact picture of the economy. Rather firms whose profits are directly related to the consumer spending such as Discount Retailers e.g. Walmart, Sears, Electronic retailers like RadioShack, BestBuy, J&R, online retailers e.g. Amazon, OfficeDepot and most of the retailing firms' results are not showing any improvement even though they are cutting their payroll to remain in profit. And till the time unemployment is rising, and there wont be any positive signs on people's spending there can't be any growth to the economy.
Obama led government is putting their every effort to increase consumer spending and provide employment by increasing construction, bridge, roads related contractual works. But DOW's 2600 points jump from Mar '09 till Jul '09 does give breath to consumers till the time teh industries feel confident about the economy and again start hiring.
So we can say economy is stabilizing and it will take 9/12 months before it shows good signs of improvement.
-Amit
Goldman Sachs declared record quarterly profits in their history surpassing analyst expectations, while Microsoft and Amazon could not meet analyst expectations to reach their targets. We can consider sentiment plays an important part when DOW-JONES tumbled upto 6600 in Mar'06 in response to continuous failure of banks in US and most of the retailer's same stores sales were plummeting. Since March '09, DOW has recovered upto 9200 in July 31st, increased ~40% and it shows the optimism across the board rather than an economic outlook. There are not much changes to the economy since March '09, as Unemployment has increased from ~8.5% to ~9.7% from Mar '09 till Jul '09, 57 more banks have filed Chapter 11 bankruptcy since Jan '09, industries are still cutting payrolls, job cuts were 467,000 in Jun '09, 322,000 in May '09.
Results of the banks are showing optimism in the economy as there is positive sentiment in the economy for signs of stabilization, but they do not provide the exact picture of the economy. Rather firms whose profits are directly related to the consumer spending such as Discount Retailers e.g. Walmart, Sears, Electronic retailers like RadioShack, BestBuy, J&R, online retailers e.g. Amazon, OfficeDepot and most of the retailing firms' results are not showing any improvement even though they are cutting their payroll to remain in profit. And till the time unemployment is rising, and there wont be any positive signs on people's spending there can't be any growth to the economy.
Obama led government is putting their every effort to increase consumer spending and provide employment by increasing construction, bridge, roads related contractual works. But DOW's 2600 points jump from Mar '09 till Jul '09 does give breath to consumers till the time teh industries feel confident about the economy and again start hiring.
So we can say economy is stabilizing and it will take 9/12 months before it shows good signs of improvement.
-Amit
Saturday, August 1, 2009
Kutch/Gujarat an ideal investment destination in India
Kutch is a growing economic and industrial hub in one of India's fastest growing states,Gujarat and it is becoming an ideal investment destination for big investors and big business houses in India. As a nature Kutch-Gujarat is almost dead agricultural region where the average annual rain is 250mm and most its land is covered with sand. But since 2001's earthquake epi-center in Kutch region and Gujarat's Chief Minister Mr. Naredra Modi's ideal thoughts to grow industries in the region has attracted investors from all around the world. Government declared tax incentives upto 15 years.
Kutch's Kandla port is considered the most busy port in India after Mumbai's Jawaharlal Nehru port and has attracted lots businesses related to transportation and import/export in the region since decades. And since Mr. Narendra Modi's ideal sight of converting an idle region into a business destination, land prices increased more than 10/15 times in a span of 7 years(this depends on location and growth oriented areas). And due to large tax incentives and government's 'Vibrant Gujarat' initiatives it attracted Rs.12,000,000 Crore worth of MOUs in 2009's event to invest in businesses. Apart from Kandla port, Mundra port is developed by Adani Industries whose businesses range from pickel export, power/coal trading, natural gas trading, power and import/export.
The industries who are investing includes World leader in Wall Clock Manufacturing Ajanta group's CFL plant, Nissan Motors manufacturing plant that will export the assembled Nissan motors to Europe region and host of businesses(including Welspun group in Anjar, JayPee group, Jindal group and couple of windmill farms) who wants to take advantage of the tax incentives and its ideal destination for import/export market. Sanghi industries is having India's biggest cement plant at a single location and currently expanding.
Kutch is mineral rich region with very large reserve of Lignite, Gypsum and lot of other mineral. GMDC(Gujarat Mineral Development Corp) and lot of Cement industries are dependent on this materials are expanding their wings in the mineral rich region.
In all, Kutch's ideal location and geographical benefits would help it attract lots of manufacturing businesses and help to provide more synergies to export-focused businesses.
View invited from readers.
Amit
Kutch's Kandla port is considered the most busy port in India after Mumbai's Jawaharlal Nehru port and has attracted lots businesses related to transportation and import/export in the region since decades. And since Mr. Narendra Modi's ideal sight of converting an idle region into a business destination, land prices increased more than 10/15 times in a span of 7 years(this depends on location and growth oriented areas). And due to large tax incentives and government's 'Vibrant Gujarat' initiatives it attracted Rs.12,000,000 Crore worth of MOUs in 2009's event to invest in businesses. Apart from Kandla port, Mundra port is developed by Adani Industries whose businesses range from pickel export, power/coal trading, natural gas trading, power and import/export.
The industries who are investing includes World leader in Wall Clock Manufacturing Ajanta group's CFL plant, Nissan Motors manufacturing plant that will export the assembled Nissan motors to Europe region and host of businesses(including Welspun group in Anjar, JayPee group, Jindal group and couple of windmill farms) who wants to take advantage of the tax incentives and its ideal destination for import/export market. Sanghi industries is having India's biggest cement plant at a single location and currently expanding.
Kutch is mineral rich region with very large reserve of Lignite, Gypsum and lot of other mineral. GMDC(Gujarat Mineral Development Corp) and lot of Cement industries are dependent on this materials are expanding their wings in the mineral rich region.
In all, Kutch's ideal location and geographical benefits would help it attract lots of manufacturing businesses and help to provide more synergies to export-focused businesses.
View invited from readers.
Amit
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