India’s pharmaceutical industry shows how we are all connected today

India plans to set up a US$ 1.3 billion fund to boost the manufacture of pharmaceutical ingredients domestically.

How so, since India is already a big pharma player? For example, India supplies about 20% of the world’s generic drugs and is the world’s largest exporter.

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Well, in pharma as in everything else in life, all things are connected.

You see, India’s supply chain was disrupted due to the coronavirus pandemic – exposing the country’s dependence on China.

Here’s where “we are all connected” comes in – India is indeed a global leader in pharma but it imports almost 70 per cent of its active pharmaceutical ingredients, the chemicals that make a finished drug work, from China.

Which part of China provides the ingredients? Hubei province, the epicenter of the coronavirus outbreak has been major source of these ingredients.

The new program consists of spending on infrastructure for drug manufacturing centers and financial incentives of up to 20 per cent of incremental sales value over the next eight years, according to a government statement.

 

“Namaste Trump” good diplomacy for India but differences with USA remain

Can India make the most out of US President Donald Trump’s visit?

“Namaste Trump” this week been a great visit for India and looks to have been celebrated across the nation. Two leaders of great democracies.

But differences still exist, and the question is can India and PM Modi build on President Trump’s historic visit which took place this week?

PM Modi will drive the relationship, but he is not alone.

One man in South Block — Harsh Vardhan Shringla, India’s foreign secretary – will make a big contribution to the outcome.

India’s foreign secretary is seen as a calm and composed officer, and he has handled bilateral ties even during turbulent times as the Indian ambassador to the US.

It was he who dreamed up and led the “Howdy, Modi!” event in Houston.

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Now he has a lot of the responsibility of making “Namaste Trump” a success.

What will be the big issues? Top of the list is a free-trade agreement and disagreements on intellectual property rights. Plus how both countries feel about and react to China.

But clearly Namaste Trump is a big win for India and PM Modi and a mark of the increasing respect India has on the global stage.

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Indian PM Modi and US President Trump – two men who enjoy centre stage and get on well

Trump to open Indian cricket stadium bigger than the MCG – not “fake news” – it will happen next week

Trump and Modi are good at surprises.

How about this? US President Trump will make his first visit to India next week and will open a new cricket stadium set to “dislodge the Melbourne Cricket Ground” as the world’s biggest cricket stadium. The Motera Stadium in Gujarat can take 110,000 spectators.

Interesting combination – look forward to seeing the Indians explaining the game of cricket to President Trump.

But sometimes these two are also predictable.

Australia knows very well the difficulty of getting a free trade deal with India – and so do the Americans (although their “America first” attitude makes negotiation difficult).

Nisha Biswal, president of the U.S.-India Business Council, said hopes were fading for the two sides to quickly bridge gaps in their efforts to restore some U.S. trade preferences for India and improve access for selected U.S. agriculture products and medical devices to India’s 1.3 billion consumers.

Still, PM Modi is good at using charm and relationship as a part of diplomacy so you can expect him to pull out all the stops for the visit of President Trump.

EV’s and charging stations boosted in India

Two announcements have given a great promotion to Electric Vehicles in India.

First, the Government has lowered the GST rate on EV’s to 5% from the standard 12%.

Second, leading company Tata Power will increase its network of electric vehicle charging stations to 700 by next year.

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The company which has already installed 100 fast charging stations in various cities, including Delhi, Mumbai, Bengaluru, Pune and Hyderabad.

The company is not only targeting the public spaces but will also offering home EV charging stations.

The company is also in talks with metro rail authorities and municipal corporations for setting up EV charging stations. Moreover, it will set up charging stations at Tata Group owned outlets such as Chroma, WestSide, Titan watch showrooms and Indian Hotels.

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Pictured is a trial solar powered EV charge station in India

India FY20-21 Union Budget

Commentary by India Avenue India Avenue Investment Management (IAIM) – a boutique investment company focused on providing investment solutions for clients in Australia and New Zealand who seek exposure to India’s growth potential through its capital markets. The India Avenue Equity Fund is managed by the team at IAIM and has a bias towards companies which are experiencing strong growth through rising local demand.

The Government of India (GoI) is currently stuck in a dilemma between managing a challenging economic environment (slow growth, rising inflation and weak tax revenues) whilst maintaining fiscal prudence. Hence it was of little surprise to us that whilst the budget continued with its infrastructure push, simplification of the personal tax regime for middle income taxpayers and improvising ease of doing business, to a large extent their hands were tied.

This is evident from the fact that the Budget off balance sheet funding has grown 8% over FY20. Having said that, we expect that spending will likely pick up significantly in FY21 (April 2020-March 2021). Below are some of the key aspects of this year’s budget.

Fiscal Deficit

GoI raised the FY20 fiscal deficit target to 3.8% of GDP from 3.3% set earlier. The fiscal deficit target for FY21 was set at 3.5% of GDP.

Disinvestment

GoI raised the divestment target to INR 2.1tn (USD 29bn), more than double the previous year’s target of INR 1.05tn (USD 15.2bn). Privatisation examples include a few big ticket SOE’s like Bharat Petroleum Corporation Limited and a stake sale via an IPO of India’s largest life insurance player, Life Insurance Corporation of India.

Taxation

A 100% tax break was offered for sovereign wealth funds for investment in infrastructure. A reduced tax rate of 15% for new power generation investment. Removal of dividend distribution tax at the hands of the company and charging it in the hands of shareholders at their individual rates (particularly beneficial to foreign companies as they are subject to a withholding tax of merely 5-10%).

Infrastructure

The GoI continues to emphasise infrastructure as its key development focus. Key areas include building 100 more airports by 2024, development of 9,000kms of economic corridors, 2,000kms of coastal roads connecting ports and 2,000 kms of strategic highways.

Measures to attract foreign capital

Proposal to increase foreign portfolio investor limits in corporate bonds from 9% to 15%. Tax exemptions for Sovereign Wealth Funds fulfilling certain conditions, for dividends, interest and long-term capital gains arising from a debt or equity investment made in India.

Our View

The slowing economy and the Government’s current constraints to spend its way out of the slowdown remains a concern. This had led to a large dichotomy in returns with investors seeking “safety” in Large cap names. Names outside the top-15 have fallen significantly and priced in this concern over the last 2 years whilst India’s mega caps reach all time high prices and valuations. We emphasise that India is a not simply a beta story, as the country rapidly changes, typical of an emerging market country. India today will look markedly different in 5 years’ time and astute investors need to be ahead of the curve to fully participate in India’s ascent to the 3rd largest economy by 2025.

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Commentary by India Avenue Investment Management (IAIM)

India budget revives “Modinomics”

Has “Modinomics” been given a boost by the Indian budget?

A couple of highlights from the recent Indian budget make me think the PM Narendra Modi might have found his economic mojo again.

Here’s one – 100 more airports will be developed by 2024 – that is a big number!

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Pictured above – Mumbai and Delhi airports

The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman, while presenting the Union Budget 2020-21 in Parliament said that infrastructure was crucial to the theme of “Economic development” and hence the Budget is dedicated to providing “Ease of Living” to all citizens.

Here’s another – Indian Sea Ports will receive funding for technology to improve their performance and the government is considering corporatizing at least one major port and subsequently listing on the stock exchanges.

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Here’s a third example – a national gas grid, expanding to 27,000 km plus states to introduce “Smart Meters” plus a corporate tax rate of 15 per cent for new domestic companies generating electricity.

Just my quick take on the budget, which seems to have found the Modi economic mojo again.

Delhi-Mumbai expressway part of transformation of Indian highways

By 2023, Indians will be able to drive on the world-class Delhi-Mumbai expressway which will also be one of India’s longest expressways. The trip is estimated at 12 hours (we almost took that long from the Taj Mahal in Agra to Delhi!)

Expressways are major projects of the Modi Government.

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In the next three years, the Modi government is planning to build three of 22 expressways and green corridors. A total of 22 new expressways and green corridors will be built by FY25. This is change on a massive scale.

Once completed, the total length of the Delhi-Mumbai expressway will be 1,320 km.

How long now (before the expressway) to drive from Delhi to Mumbai?

Officials estimate at least 24 hours, but I think that is wildly optimistic.

In other words, this infrastructure upgrade will make a huge difference to India.