Can you name India’s biggest hotel chain?

This chain started in India, expanded to China and has now invested heavily in Indonesia. It is called OYO (On Your Own) and was started in 2011 by then 18-year old Ritesh Agarwal. It is like the “Uber” of hotels – acquiring and setting standards for previously struggling hotels.

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The group now has more hotel rooms in India than Taj Hotels – of course, Taj is at the top end while OYO has been a big provider of budget rooms.

Within three months of its foray into Indonesia, the company has launched the first phase of expansion in 16 cities and witnessed a 5x growth. It aims to expand to 100 cities by the end of the year.

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The company is adding on an average 70 hotels in Indonesia every month.

OYO created a uniquely Chinese identity for its local Chinese business and is localising in Indonesia.

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OYO is in over 280 cities in China, with about 5,000 hotels, and over 260,000 rooms.

The company has already started operations in Malaysia and will enter Philippines soon.

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It plans to have a pan-southeast Asian presence by the end of the year, before it starts making a move towards Europe.

The Labor Market in India: Structure and Costs

Something different today – I am posting a complete piece from a reputable source (see bottom of article) on a specialist topic – the labor market. Hope you find it useful.

India possesses a large labor pool as almost half its population of 1.2 billion is of working age. Naturally, the structure of India’s labor market is diverse; foreign companies need to understand this structure to benefit from India’s demographic dividend.

A majority of the working population is engaged in the unorganized, or informal sector, working for small businesses or manufacturing units that employ less than ten individuals. Businesses that don’t need skilled labor can source employees with some ease.

The expansion of higher education has created a larger skilled talent pool, but it still only amounts to about ten percent of the country’s overall labor market. Companies seeking skilled labor need to be prepared to compete to recruit from this comparatively small pool.

Structure of labor in India

The government’s labor laws usually classify employees on the basis of skill and area of operation. In terms of skill, employees are categorized as unskilled, semi-skilled, skilled, and highly skilled. In terms of area of operation, employees are categorized as managerial personnel and workmen. This defines their job roles, wages, disbursal of benefits, and their rights and obligations.

Labor costs in India

Firms entering the Indian market often choose to make the decision after assessing the comparative costs of labor. India offers competitive advantages with its lower wage structure and access to a vast labor market. For instance, the average minimum wage for contract workers in India is US$148 per month (Rs 10,000) and US$234 in China.

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Employers should note that the minimum wage in India is indicative; it is often utilized as a benchmark, especially in the employment of unskilled and semi- skilled labor in the manufacturing sector.

Labor costs also vary by region in India; wages in tier two and three cities are much lower than tier one due to lower costs of living and affordable real estate. The difference in salary pay scale can be up to 25 percent as the city compensatory allowance and employee conveyance allowance is a much smaller portion of paychecks in tier two and three cities when compared with tier one cities. This is why, for instance, the average salary of a software engineer in New Delhi is US$7,632.53 while in Mysore it is US$6,621.47.

Hiring costs in IT and auto manufacturing

Information technology (IT) and auto manufacturing are the two most prominent sectors in India’s organized economy – they receive the bulk of foreign investment and are the biggest employers. The IT sector in India accounts for 67 percent of the global outsourcing market. While the overall manufacturing sector constitutes about 17 percent of India’s economy, automotive manufacturingis the largest contributor at 22 percent of the manufacturing GDP and seven percent of India’s overall GDP.

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Within the IT sector, new technology segments like artificial intelligence (AI), data analytics, and machine learning are changing the nature of jobs and professional service capabilities. Firms are ready to pay higher salaries to software developers and engineers with skills in these new technology areas, but the competition to recruit is intense as the majority of the labor market is educated in the use of legacy technologies. As such, the sector is witnessing some disruption due to lay-offs and reskilling drives, which in turn may benefit foreign firms looking to hire labor at competitive rates in legacy industries like business process outsourcing (BPOs).

In the manufacturing sector, the federal Make in India initiative anticipates expanding industrial investments and domestic operations, which will boost the creation of technical jobs and factory and assembly work.

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Regional manufacturing hubs are centered on major tier two and three cities in the northern, western, and southern parts of the country, where a majority of India’s skilled labor resides. For instance, Pune (Maharashtra) in the west, Gurgaon (Haryana) in the east, and Chennai (Tamil Nadu) in the south.

Proximity to large urban cities allows companies to tap into skilled talent located nearby, while also reducing operational costs due to reliable logistics networks.

In the IT sector, lower tier cities such as Ahmedabad (Gujarat), Chandigarh (Punjab), and Mangalore (Karnataka) are emerging as prominent hubs besides the tier one cities of Mumbai (Maharashtra), Bangalore (Karnataka), and Gurgaon (Haryana). In the automotive sector, hubs have emerged in the states of Gujarat, Maharashtra, Haryana, Tamil Nadu, and Andhra Pradesh.

Industry experts note that the average salary increment in the IT and manufacturing sector for 2017-18 was projected at seven and 10.1 percent, respectively. We highlight the average annual remuneration for skilled positions in the IT sector and the auto component manufacturing industry.

About the Source

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write india@dezshira.com for more support on doing business in India

 

Happy Republic Day for all in India, land of the “freedom fighters”

Today is Republic Day in India, celebrating 26 January, 1950, when the Indian Constitution came into effect.

India’s other major national event is Independence Day, a celebration of 15 August, 1947, when India became independent of the United Kingdom.

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The two days that created the “world’s largest democracy” really came about because of hundreds of years of “freedom fighters”. I am going to list some names – and apologies for all the great names I have not been able to include.

Most of us would think of Mahatma Gandhi (Mohandas Karamchand Gandhi 1869-1948) who became an inspiration to many around the world – including Martin Luther King, Nelson Mandela and The Dalai Lama.

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But other greats include Pandit Jawaharlal Nehru (India’s first Prime Minister), Subhas Chandra Bose and Sardar Vallabhbhai Patel.

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Picture above – Rajkumar Amrit Kaur

Indian women played a strong and vital role for freedom, including Sarojini Naidu, Rajkumar Amrit Kaur and Kasturba Gandhi.

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Above – Kasturba Gandhi

Inspirational for many of these was the example of courage and self sacrifice shown by the young Bhagat Singh who lost his life in the cause.

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Above – Indian Prime Minister Modi hosts USA President Obama in 2018 at Republic Day celebrations in New Delhi

India – you have earned the right to celebrate! Have a great day.

India’s Bajaj Auto to jump into electric vehicles next year

Pune-based Bajaj Auto is planning to make a foray into electric vehicles (EV) next year and is hoping to build market share in India, its Managing Director Rajiv Bajaj said Monday. The new marketing slogan is “The World’s Favourite Indian”.

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The company plans to launch electric version of its quadricycle Qute along with electric three-wheelers next year.

He also said the company would bring KTM-owned ‘Husqvarna’ motorcycle brand to the Indian market this year with “half a dozen” products in the pipeline.

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Bajaj said the company has leadership positions in over 20 overseas markets such as 70 per cent share in Bangladesh and around 50 per cent in Nepal and Sri Lanka and it would like to replicate this in India.

“We would like to be a little more successful in the domestic market than we have been so far in the motorcycles market,” he said.

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In India: “We have only 20-21 per cent share. We think now the time has also come that after having done a good job overseas, after having huge dominant position in India in three-wheelers, it is about time we make the same impact in the domestic motorcycle segment in India as we have done across the world.”

Other big motorcycle makers in India are Yamaha, TVS and Honda.

Bajaj also has a partnership with British niche bikemaker Triumph.

Indian economy to pass the UK in 2019 to become 5th in the world – PwC

India is likely to pass the United Kingdom in the world’s largest economy rankings in 2019, becoming number 5, according to a report by global consultancy firm PwC.

The report said: “While the UK and France have regularly switched places owing to similar levels of development and roughly equal populations, India’s climb up the rankings is likely to be permanent.”

PwC’s report projects real GDP growth of 1.6 per cent for the UK, 1.7 per cent for France and 7.6 per cent for India in 2019.

PwC’s Global Economy Watch is a short publication that looks at the trends and issues affecting the global economy and details its latest projections for the world’s leading economies.

Really engaging with India becomes a smart step for anyone in business, politics or education – but start with the right strategy.

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Kerala – great tourism but also good for innovative business

India got its largest startup ecosystem Sunday when Kerala Chief Minister Pinarayi Vijayan inaugurated a facility housing incubation set-ups across a string of segments in modern technology.

The Integrated Startup Complex under the Kerala Startup Mission (KSUM) includes the ultra modern facilities of Maker Village that promotes hardware startups, the BioNest that promotes medical technologies, BRINC which is the country’s first international accelerator for hardware startups; BRIC which aids developing solutions for cancer diagnosis and care, and a Centre of Excellence set up by industry majors such as UNITY.

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After the completion of three more projects, Kerala will have startup and incubation space of 5 lakh sq ft, which will be the largest of this type in the world.

No less than 30 applications for patent has gone from startups with the 13.5-acre TIZ, the CM noted, lauding it as a sign of the high-quality work in the zone. Simultaneously, Kerala was sensing increasing optimism in boosting software export from the state.

M Sivasankar, secretary, IT (Kerala), pointed out that the entire space at the TIZ facility has been sold out.

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“This has never happened in our country, where it usually takes a couple of years for an incubator to get the whole area occupied,” he said. “The first three floors of the new complex have been furnished, while the rest of the floors have already got allotted to various startups.”

“The campus has another incubator complex coming up and it will be opened early next year,” Sivasankar said.

Besides the Maker Villager with its 30-odd startups, the facility has nascent firms working in fields such as biotechnology, computer-aided design, augmented/virtual reality and advanced communication.

So – Kerala is “gods own country” for tourism but also a magnet for innovative business. Worth a visit.

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Can Australia make Asia a top priority?

A new study shows that three of the world’s top five economies by 2033 will be Asian, with China number one, India third and Japan fifth. The US will be second and Germany fifth.

This suggests Australia’s trade and investment focus for the next 15 years needs to swing more sharply to Asia.

The study is the World Economic League Table, published annually by the Centre for Economics and Business Research, or CEBR, in London.

It would be timely for Australia to radically change its approach to diplomatic appointments – our “plum” diplomatic postings remain Washington and London, but should now shift to Beijing, New Delhi and Tokyo.

We need to boost our presence in other Asian economies too – South Korea is set to become the 10th-largest, Indonesia (12th), Thailand (21st), the Philippines (22nd), Bangladesh (24th) and Malaysia (25th), all making the top 25.

On top of this, one of the world’s greatest transformational projects is on our doorstep – China’s Belt and Road Initiative might be controversial but is a growth driver. Infrastructure spending is set to increase from US$11.5 billion, or 13.5 percent of global GDP last year, to US$27.4 billion, or 15.5 percent, by 2032, largely due to this initiative.

While China is high profile, quietly building a supersized economy is India which in 2018 remained ahead of China to retain the world’s fastest growing large economy status.

Yet Australia has largely put India on the backburner, unable to complete the kind of trade agreements that we have with China and other Asian countries. This low focus on India needs to shift over the next 15 years of growth there.

David Morris, and Australian who chairs the United Nations Asia Pacific Business Forum, agrees that Asia is now vitally important to the global economy. His consistent message is: “We are in the midst of the biggest global economic shift in memory, with East Asia now driving growth in the world economy”.

The Australian specialist India advisory firm India Avenue Investment Management points out that Indian equity markets performed quite well relative to their emerging market and developed market peers – yet our focus has been on three regions which fared particularly poorly in 2018 – China, Australia and Emerging Markets (which China dominates).

Granted, Australia has shifted focus to Asia, as shown by the 2016 opening of our largest and most expensive embassy in Jakarta, Indonesia at a cost of A$415 million and hosting 500 staff.

Despite this, one of Australia’s major research houses, the Lowy Institute, has long claimed that our Department of Foreign Affairs and Trade is “under-resourced over a period of several decades”.

The symbolism at the very top suggests we are struggling against the shift to Asia – former Ministers and Prime Ministers almost salivate at the chance to take the top post in London or Washington.

It is time to shift this focus to New Delhi, Beijing and other parts of Asia – while these are the epicentres of our future, it is unlikely ex politicians will pursue them as vigorously as they chase the old world.

Perhaps appointing Julie Bishop as our Ambassador in a major Asian country would send better signals?

Symbolism is important, especially for investment and trade, so sending top ranking former politicians into Asian posts could have a powerful effect – so long as we give them the resources to do the job.

Knowledge of Australia remains dangerously low across the whole of Asia, including Commonwealth partners such as India and Malaysia. We are variously seen as a “kangaroo nation” or a giant mine and even a “white enclave” (admittedly said more in private these days), showing ignorance of our major multicultural achievements. This ignorance is dangerous for diplomatic and defence relationships and is restricting our trade.

Education and tourism are the two sectors that can really turn this around, giving Asians a first-hand experience of what a great country Australia is. We are boosting efforts in both, but do we really grasp the vast potential size of the market?

Only by shifting our diplomatic resources more and more to Asia will we gain a true understanding of these markets and how we can build a positive future together.

India the place for investors in 2019

According to India Avenue Investment Management, India is the growth market for investors this year – with a young population and strong economy. The company is based in Sydney and has an office in Mumbai.

India Avenue are very keen on the Indian banking sector and consumption providers.

Here are their thoughts:

“We expect companies in the Banking, Consumption and Industrial companies to outperform in the first half of 2019. Provisioning in Banks have bottomed out and we expect earnings to improve significantly from here, particularly given credit growth.

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“Our top picks here are ICICI Bank, HDFC Bank, Kotak Bank, State Bank of India, IndusInd Bank and Axis Bank.

“Consumption will also remain a dominant theme as interest rate cuts are delivered, retail credit growth increases and the benefit of handouts to rural India (Government initiatives, populist measures and farm loan waivers) lead to a pick-up in spending.

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“Our top picks here are Mahindra and Mahindra (autos/tractors), Dabur (consumer health products), Britannia Industries (biscuits, milk and basic foods), Crompton Greaves (consumer products) and Sun TV (media/television).”

More information:

https://indiaavenueinvest.com/

Cricket shows business and politics how Australia and India should get closer

Can Australian business wake up to new realities – for example, if you do not have an India engagement strategy then you are missing out on the growth centre of the world.

Cricket had to wake up too – India is now the epicentre of cricket and the biggest contest in town is Australia and India.

The cricket battle between Australia and India has provided special moments and lots of insights into how our two countries should relate.

First, enjoy the difference – both teams clearly enjoyed their interaction and cultural differences.

Second, go beyond the basic commitment – the Tweet and pic of the series was Indian wicketkeeper Rishabh Pant and Bonnie Paine when he was babysitting the Paine children.

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Third, adapt to each other – Australia toned down the sledging and India toned it up, thereby meeting in the middle.

Fourth, sometimes we can all be direct – Indians are known as “indirect” communicators but Captain Kohli and his bat conveyed a direct message when he made a century – “my bat is talking!”

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Fifth, conflict can be followed by harmony – both teams crossed the line but quickly resumed the contest as normal, tough but not over the top.

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Sixth, crowds can tell you a lot about a country – Australia is an increasingly successful multicultural community and enjoying it.

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Now the cricket is done – how about Aussie business and politics – can they learn too, and engage more closely with India?

Climate Change – India turns away from coal as Australia and Adani still dream of selling them more coal

More evidence that the Australian and Adani dream of selling coal to India is just a fantasy.

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India is increasingly shifting towards green energy

Simon Mundy of the Financial Times reports that Indian power companies spent much of the past decade rushing to build coal-fired power plants in anticipation of surging electricity demand as economic growth took off.

You can see the article at https://on.ft.com/2GShz3Q

Now, many of those projects are mired in deep financial distress and private investment in coal power has ground to a near halt – making the Australian and Adani dream of selling more coal to India look deluded.

Mundy writes that the biggest driver of long-term uncertainty for the industry is one that few anticipated 10 years ago: an explosive take-off in the renewable power sector, as India joins the global push to tackle climate change by shifting towards green energy.

Soon after taking power in 2014, Prime Minister Narendra Modi’s government set a target of increasing India’s renewable energy capacity by 2022 to 175 gigawatts, equivalent to 40 per cent of the country’s total power capacity at the time of the announcement.

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Indian coal power producers are considering renewable projects when they build new capacity © Getty

Mr Modi’s ambitions were stoked by a dramatic fall in the price of solar panels after a huge expansion of production in China, which is seeking to capitalise on the international drive to cut emissions. This was steadily making the cost of electricity from solar plants — once far more expensive than coal power — more competitive with plants running on the dirtiest fossil fuel.

Making a mockery of Australia’s long hopes of selling more coal to India, in the 2017 financial year, newly added renewable energy capacity overtook new coal-fired capacity for the first time. The renewable push attracted major investors such as Japan’s SoftBank, whose consortium last year sealed a deal that stunned the industry.

Mundy goes further on coal – this shift in the industry’s economics means that coal power — once one of the hottest prospects for Indian industrialists — is now a space where most fear to tread.

“You’d have to be quite courageous to invest in coal at this point,” said Navroz Dubash of New Delhi’s Centre for Policy Research.

Does Australia realise that India has plentiful supplies of coal in its eastern region?

This year, state-run NTPC — by far the biggest thermal power producer in India — has cancelled several plans for large coal projects, including one for a giant 4GW plant in southern Andhra Pradesh state.

Increasingly, large private-sector coal power producers are looking at renewable projects when they build new capacity.

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Even Adani, which is in big strife with plans to mine and export coal from Australia, has invested more than $600m in a solar plant in Tamil Nadu — a southern state with abundant sunshine.

There is no longer an economic case for the highest-cost coal plants in inland areas of the country’s south and west, which are forced to rely on coal expensively transported over long distances from the northeastern coalfields, said Tim Buckley at the Institute for Energy Economics and Financial Analysis.

Credit Suisse estimates that more than half the debt owed by power companies is now stressed — with interest payments exceeding profits — amounting to a total of more than Rs2.5tn ($35bn).

Several coal-focused power groups are being dealt with under India’s new bankruptcy code, which will force them into liquidation if a swift sale is not agreed. Indian authorities have an incentive to minimise the distress in the coal power sector. State-controlled banks, reeling from a surge in non-performing corporate loans, are heavily exposed to this industry.

But the Modi Government is clear in favouring renewables, leading to long-term self-sufficiency, lower costs, more competitive industry and better climate outcomes. Even though major corporates like Tata and Essar are struggling with the economics of coal power plants, the Government remains unwilling to shift from renewables.

Which makes the Australian/Adani dream of creating our biggest coal mine and shipping it all to India look like a case of sticking to an old fantasy while the target market has moved on. Can Australia move on too?

Because Australia is expected to commit about A$1 billion towards the scaled down A$5 billion mine project, the Australian Prime Minister and the Queensland Premier need to have some serious discussions with Adani Group – and possibly Indian Prime Minister Modi – to get answers to some disturbing questions:

  • If Adani is simply planning to supply coal to its own power stations in India, what tiny fraction of the Carmichael coal reserve does this represent?
  • Does Australia face the worst of all worlds with no royalties and vastly fewer jobs than expected?
  • Exactly how many jobs will Adani Group commit to long term?
  • What would be the environmental degradation costs of the project?

With these answers both governments can assess the risk of being left holding a distressed or potentially stranded asset of no value to anyone.

Right now our politicians seem to want to resist the future, rather than embrace it.

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