India Government to open state-owned firms to investors

The Modi Government plans to raise as much as US$ 47.4 billion in the next five years – by reducing the stakes in large state owned firms. It will include those in the oil, gas and power sectors.

I think this must be the country’s biggest privatisation move in more than two decades.

Finance Minister Ms Nirmala Sitharaman, in her maiden budget announced that there will be reduction in direct controlling of stakes in some state- run firms.

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In its previous term, the government sold stakes in a host of companies to raise US$ 40.92 billion which was three times that of the previous government.

The government has identified several state-owned firms, including explorer Oil and Natural Gas Corp, oil refiner Indian Oil Corp, gas transmitter GAIL (India) Ltd, power producers NHPC Ltd and NTPC, miners NMDC Ltd and Coal India, and Bharat Heavy Electricals Ltd.

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World GDP in one amazing chart

The latest estimate from the World Bank puts global GDP at roughly $80 trillion in nominal terms for 2017.

Today’s chart from HowMuch.net uses this data to show all major economies in a visualization called a Voronoi diagram – let’s dive into the stats to learn more.

The world’s top 10 economies

Here are the world’s top 10 economies, which together combine for a whopping two-thirds of global GDP.

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In nominal terms, the US still has the largest GDP at $19.4 trillion, making up 24.4% of the world economy.

While China’s economy is far behind in nominal terms at $12.2 trillion, you may recall that the Chinese economy has been the world’s largest when adjusted for purchasing power parity (PPP) since 2016.

The next two largest economies are Japan ($4.9 trillion) and Germany ($4.6 trillion) – and when added to the U.S. and China, the top four economies combined account for over 50% of the world economy.

Here are some of the most important recent movements:

India has now passed France in nominal terms with a $2.6 trillion economy, which is about 3.3% of the global total. In the most recent quarter, Indian GDP growth saw its highest growth rate in two years at about 8.2%.

Brazil, despite its very recent economic woes, surpassed Italy in GDP rankings to take the #8 spot overall.

Turkey has surpassed The Netherlands to become the world’s 17th largest economy, and Saudi Arabia has jumped past Switzerland to claim the 19th spot.

Austrade provides great insights into India opportunities

Austrade’s Senior Trade and Investment Commissioner in India, Dr Matthew Durban, (pictured below) analyses opportunities presented by India in this article for Austrade’s Insights. (Extracts)

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With trade wars, powerful neighbours, and the odds on a recession narrowing within the next two years, considering Indian market entry has never been more mission-critical for Australian business.

  • In 2018, Australia’s total exports to India grew 10% to A$22.3 billion. India ranked number five in Australia’s export destinations.
  • Two-way trade increased by a similar percentage to A$30.4 billion, making India Australia’s sixth largest two-way trade partner.1
  • Australian investment in India increased almost 12% to A$15.6 billion, slightly ahead of India’s investment in Australia at A$15.1 billion.2

However, according to the Australian Bureau of Statistics, in 2016–17 (the latest year for which there is data), only 2,087 exporters engaged with India, compared to 7,214 for China.3

Opportunities for Australian business

The election was largely fought on national security and rural support. However, Austrade has extrapolated opportunities for Australia business from past performance and Austrade’s Indian post network.

Mining equipment, technology and services (METS)

Minerals and fuels already account for almost A$13 billion or 75% of Australia’s total merchandise exports to India. Industry sources suggest the new government will restart the auction of currently moribund coal mines and allow 100% foreign direct investment.

The government is under pressure to meet projected energy demands and accelerate electrification. According to the BP Energy Outlook 2019, coal’s share in India’s primary energy consumption will decline from 56% in 2017 to 48% in 2040.7 But that is still nearly half of the total energy mix and way ahead of any other source of energy.

This will create ongoing demand for Australian METS, two-way mining investment in strategic minerals (this includes coking coal, rare earths and battery minerals), and trade in renewable technologies as well as smart infrastructure.

Food and agriculture

Demand for safe, reliable and quality Australian foods will continue in light of India’s projected population growth.

India’s already very large population will surpass China’s within the next decade. Population growth, currently at 1.1%, is expected to continue until mid-century, reaching an estimated 1.68 billion in the 2050s.8 Though the number of children has peaked, the workforce will continue to expand. According to Bain & Co, the growth of the Indian middle class will lift nearly 25 million households out of poverty. In addition, India will have 700 million millennials and Gen Z (those born between 1995 and 2009) consumers, who have grown up in a more open and confident country.9

The retail landscape in rural regions is developing, with large retailers such as Future Group opening supermarkets in tier-two and -three cities to cater to the nearby regions. Government support in establishing infrastructure facilities, such as cold storage, rural electrification and the internet, is likely to further drive further growth.10

The growth in modern retail opens up opportunities for Australian businesses to supply healthy, high-quality and nutritious packaged goods. Eighteen Australian brands are currently active in the market and there is room for many more.

Education and training

According to India’s human resource development ministry, the Modi Government will focus on setting up teacher training centres and increasing the intake capacity of Indian institutes in engineering, management, science and law by 50% over the next five years.

Telecommunications

Indian telecommunication companies are set to push ahead with investment in broadband infrastructure.11 The advent of 5G, autonomous technologies, edge computing and a digital marketplace for services will need to be balanced with the government’s desire to champion low-cost access, data localisation and e-commerce regulation.

Mitigating the risks with a tailored strategy

Execution remains the single largest risk for India. Doing business in India takes time. India is a diverse country, with 29 states and seven union territories, 22 official languages and innumerable dialects.

Local representation and careful location selection are essential to bridging gaps in understanding and miscommunication. And Australia can start from a position of strength. People-to-people ties are strong and growing. Around one in 50 Australians today (2.4%) were born in India12 and more than 108,000 Indian students enrolled to study in Australia at the end of 2018 – a 20% increase on 2017.13

For the Australian Government’s part, Peter Varghese’s India Economic Strategy lays out the opportunity by sector and geography to 2035. This has been well received by the Indian Government, and the Indian response – an economic strategy for Australia – is expected in the second half of 2019.

Austrade has been operating across India for more than 30 years and has experienced commercial representatives in six major hubs: Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore. Contact any of our team in-market to learn more.

Dr Matthew Durban is Austrade’s Senior Trade & Investment Commissioner in India with responsibility for Austrade Posts in Mumbai, Bengaluru, Hyderabad and the in-market Resources & Energy industry team. He has almost 30 years’ commercial experience across five countries.

Have a go

Delhi’s Connaught Place 9th “most expensive” for offices

New Delhi’s Connaught Place is the ninth most expensive office location in the world with an annual rent of nearly USD 144 per sq ft, according to property consultant CBRE.

CP is located in the heart of India’s national capital.

In its annual Global Prime Office Occupancy Costs survey, CBRE tracks the cost of leasing prime office space globally.

For the second year, Hong Kong’s Central district retained the top spot as the world’s most expensive market for prime office rents, with the prime occupancy costs valued at USD 322 per sq.ft.

Mumbai’s Bandra Kurla Complex and Nariman Point CBD slipped to 27th and 40th positions.

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India – have a go! Some “quick tips” for those thinking of doing business with India

Have a go! India is already a large market and growing fast – with a massive young population driving future demand. Interest is growing in “all things western” and demand in many sectors (IT, education, resources) is just so big it cannot be satisfied locally.

Do your homework! Failures are many and most can be traced back to lack of research or inability to adapt to the local market. Factors such as cultural differences, consumer trends and what the market wants have to be identified.

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Above Australian PM Morrison and Indian PM Modi hit it off at a recent meeting

Use our reputation! Australia is generally well thought of in India – those who come here are amazed at the quality of our cities. Use this for brand advantage and to open doors.

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Choose the right channel. Distribution, e-commerce choices and so on will be make or break for you if consumers are your target. Aussie firm COTTON ON recently set up and online sales entry into India, the first step towards a physical presence.

India is a “relationship” culture – meaning they want to get to know you first. It might take several visits for you to create the connection. Otherwise you get a short term transaction this year that might not be there next.

Indians can help you! Finding local Indian talent has been a big success factor for so many global companies, large and small. If you cannot afford to establish a local team then perhaps you cannot afford to do business there.

Adapt to culture – get some training to understand how to behave and how your Indian counterpart might think. We are different! If you are culturally adaptive you can succeed and enjoy the difference.

Have both short term and long-term goals – and long term with India means committing to this venture for at least three years.

But above all – have a go!

Australian firm MoooFarm wins award for work in India

MoooFarm, co-founded by Australian Indian impact entrepreneur Param Singh (pictured below) has been awarded a winning prize of $30,000 for their breakthrough technology of ‘Facial Recognition of Cattle’ in the Agriculture Insuretech Innovation Challenge organised by the World Bank Global Index Insurance Facility.

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MoooFarm is an award-winning initiative that aims to increase income of 75 million small dairy farmers through capacity building, last mile extension and transfer of technology. Through its unique approach, MoooFarm addresses United Nation’s Sustainable Development Goals toward Gender Equality, Poverty and Responsible Production and Consumption.

MoooFarm, bagged a winning price of USD 30,000 by The World Bank Group in Data Analytics category for their unique solution of ’Facial Recognition of cattle’.

With an accuracy of 95.7%, MoooFarm was able to test the facial recognition model using deep learning technology. In the coming weeks, this breakthrough technology will reach each and every small-holder farmer via MoooFarm’s mobile based application and its network of Village level Entrepreneurs.

According to The World Bank Group, the Global Index Insurance Facility (GIIF), “helps smallholder farmers and micro-entrepreneurs gain better access to finance, manage financial losses, and protect their livelihoods against more frequent and more severe weather events…since 2009 it has facilitated more than 4.6 million contracts, covering over 23 million beneficiaries and $730 million in agricultural investments insured in more than 30 developing countries.”

Australia could benefit from Trump’s trade war with China

Here’s a very nice irony – Australia and India have really struggled to agree a Free Trade Agreement but one outcome of the Trump trade war on China is that the 15 countries in the Regional Comprehensive Economic Partnership (Including Australia and India) are now motivated to do a deal.

They are talking fast, negotiating hard and could come up with a sweeping deal this year that reduces the need for direct talks on an Australia-India FTA.

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Australian PM Morrison (left) and Indian PM Modi – pretty happy about the future

RCEP will have the potential to deliver significant opportunities to Australian businesses and consumers. RCEP will cover ten of Australia’s top 15 trading partners, and collectively RCEP participating countries will account for a combined GDP of US$23.8 trillion (2016). These countries account for almost 60 per cent of Australia’s total two way trade, and over 65 per cent of our exports.

Thanks Donald.