India’s strategic win at UNSC

Inspite of slight tense situation created by our strategic partner Britain, India is able to convince United Nations Security Council that the situation in Kashmir is normal and there is no need to assume any panic.

(Source courtesy : Wikimedia Commons)

Nearly after 54 years, UNSC has Kashmir as a topic of discussion. This meeting was called up by permanent member China and its ally Pakistan claiming havoc in Kashmir after revoking article 370 in Jammu and Kashmir. Pakistan has earlier wrote a formal letter to UNSC for a meeting on Kashmir. UNSC declined an open formal meeting but agreed for a meeting close doors where all the details are not to be made public.

With China backing its move to bring in Kashmir as an international dispute, Pakistan made a final attempt to get US buy-in on Friday. However US, Britain, France and Russia has ruled in favour of India saying Kashmir remains a bilateral issue between India and Pakistan and this cannot be ‘internationalized’.

An anxious moment raised when Britain agreed China’s proposal that an informal outcome to be notified through UNSC president. This could mean that a statement be issued on Kashmir’s situation by UNSC. However eventually 4 out of 5 permanent UN members denied any intervention on Kashmir. India has been appraising the circumstances and on going normal situation to 5 permanent and 10 non permanent members from the day article 370 was revoked

India’s current foreign relations

The dynamics in global relationships are changing frequently. Some have been favourable to India and others are posing challenges for its growth.

India ensured a clear approach on West Asia policy. A combination of investment, defense and security, counter terrorism was understood with Gulf Arabs and Iran. This is done tactfully, while maintaining a a special relationship with Israel. The crown prince of UAE, will be India’s chief guest for Republic Day 2017. Maintaining a deeper relationship with Gulf countries should help further weaken their current unhealthy relation with Pakistan
Leaders

(image courtesy: Indianexpress.com)

Africa is India’s maritime neighbour separated by Indian Ocean. With huge resources and opportunities evolving, African countries would be definitely a strategic and economic partner to India.

With active participation in Naval exercises and making this years Nuclear deal, India has made a very progress in strengthen the relationship with Japan. It also started passive support to other countries along with Japan in keeping tab on China’s aggression in south China Sea.

Key nations has always been curious about Trump’s strategy. Well, with India it seems to be have positive till now. His ‘remarks’ till now placed India in a comfort zone, also considering his remarks for Pakistan and China. The only thing that is bothering till now is on the visa’s and its impact on IT industry. Experts has given mixed opinions on it, but India need not worry on it immediately.

Relations between Russia and India peaked in October this year after the annual summit held in Goa. Russia has been a reliable partner in defense, nuclear energy. However instances like Russia’s strategies supporting Taliban to check Islamic State would hamper the relationship.

It is quite evident that Pakistan has been one of the biggest threats for India in the area of terrorism. While India can make certain aggressive steps like in Indus Water Treaty, it will have implications. With new man as GHQ, India can wait and see on how Pakistan’s next step.

China has been India’s hindrances for economic growth. At the same time we rely on China on many areas, how India deals with China in 2017 will determine its own global rise.

With alliances and relationships getting complicated globally , India should be cautious choosing its strategies.

(Analysed from Indrani Bagchi, TOI, Stanly John from TheHindu,NILOVA ROY CHAUDHURY, RIR sudanvisiondaily.com)

German Chancellor’s visit to India

German Chancellor, Angela Merkel lands in India this week for a three day trip. Needless to say, Chancellor Merkel’s visit is of great significance. She is not only accompanied by her elite cabinet ministers, but also by a large delegation of business leaders.

With 21 billion $ worth of trade, Germany is the top trading partner from EU. And there is still scope for expansion. Today there are around 1,700 German companies in India, creating 4 lakh jobs. Germany needs IT skills and India needs technology, to create more jobs. The major agenda that India is seeking is in manufacturing, infrastructure, vocational training and renewable energy. We, India is a fast growing economy with 7+ growth rate and we need a large amount of foreign investment. With the new policies, thanks to our new government, our Indian economy is opening up as never before. The recent visits by our PM to various nations highlights this. There is a significant relaxation in caps on FDI in key sectors.

India-Germany(Picture courtesy : indiatoday.intoday.in)

Infrastructure:
With Metro rail projects, Smart cities, Speed railways taking into shape it is vital that we have the support of German technology. German companies like Siemens are there from Decades. Companies like Deutsche Bahn can help us in developing high sped corridors. It is only about how well we reform and utilize their expertise.

Manufacturing sector:
The ‘Make in India’ providing huge potential, India is keen to parter in manufacturing sector. Indian government is driving hard to on the ease of doing business. German companies that are already make in India have brought their global business networks and advanced technologies.

Vocational Training:
Vocational training is used to prepare for a certain trade. It is all the training needed for a certain job especially Auto repair, plumbing etc. Germany is eager to provide its expertise in modernisation of the apprenticeship system and supporting in Small and medium enterprises. (http://thekalyan.com/2014/12/26/small-and-medium-enterprises-smes-are-key/)

Renewable energy:
Germany sees an opportunity to partner with India in development of solar power on rooftops in cities in India. Forecasts show that India plans to add 175GW of renewable energy in the next seven years. (our non renewable energy is 195GW for only 2014-15). German cooperation on in this aspect will be a great asset.

Clean Ganga Project:
It is also an opportunity for India if we can get the expertise of German’s having cleaned up Rhine River that was in the same state as Ganga now.

In conclusion this visit is an opportunity for India in many economic aspects.

(Analyzed from dw.com, financial express, yahoo news Indiatoday)

Is Indian Ocean still India’s Ocean?!

Prime Minister’s visit to Seychelles, Mauritius and Sri Lanka has infused fresh energy and support to all these Indian Ocean states. Many of the countries in Indian Ocean are crucial for India’s security and economic concerns. As Hindustan Times rightly mentioned, New Delhi has to ensure that Indian Ocean is, strategically, India’s Ocean! This visit has signaled that India is a security provider in strategically crucial sea lanes for global commerce and geopolitics. India is making its maritime safe and secure for the nation’s interest.

Indian Ocean(Image taken from http://www.marineline.com website)

What PM did in these three countries was to assert India is still a leader with the ability to safeguard and develop these regions and it does not waste its comparative advantages to China and partly US which are trying to influence their presence.

At the same time this does not mean dominance or an ownership, but India would like these countries to consult it before taking any major strategic decisions. Generally small countries lying in the Naval borders of big Nations can feel venerable. For instance China’s revolution in military affairs (RMA) has raised fears of mineral rights, claims over territories, in the nations of East and South China seas. Where as India will never go for a territorial claim, it would strengthen the defense sectors of those countries to eliminate any external powers in those regions.

It is important and a high time for India to strengthen ties with these nations because:

  • Seychelles had previously offered refueling and docking facilities to Chinese warships. Sri Lanka too had hosted Chinese submarines for re-supplying. With the mindset of Chinese to send more and more Naval naval escorts to these places, India should ensure it is the “preferred partner” for these kind of activities.
  • Terrorism through sea is a threat to India

In Summary, Modi has signed two agreements with Seychelles and Mauritius and thus India acquired the infrastructure development rights. By operating and sharing the surveillance systems on these islands, India is slowing ensuring its presence and support in Indian Ocean.

Analyzed from ET and HT.

 

India ranks 4 in the most powerful Militaries!!

ET magazine today published “The 10 most powerful militaries in the world” in its centre page. I felt a moment of pride when I see India ranking 4th. I see India has second largest military manpower in the world after China. While US spends $612 billion and China $126 billion, Russia $76 billion, countries UK, Japan, India, France and Germany spend nearly $45 billion each of their budget. Also published are various numbers of military assets like tanks, rocket systems, aircrafts, helicopters, submarines, and aircraft carriers.

indiandefence

Image taken from indiandefence.com

It’s also nice to see India possess 2 aircraft carriers while rest of the countries has 1 or none. Of course no need to mention US has 10. The number of aircraft carriers a country has determines its air power and amount of dependency on other countries’ local military bases.

In the last year’s Union budget, FDI limit in defence was increased from 26 to 49% to boost military modernization. It is very vital for India to allocate its budget based on strategic and operational (military modernization) priorities. Government has made military modernization as priority for now.

Strategic priorities determine when and where the forces are to be deployed. Though two third’s of military is deployed against Pakistan, the threat of conventional military war from Pakistan is not as much as from China now.

Why threat from China is noticeable:

  • There are unanswered questions on how the mountain corps across the China’s border is raised.
  • There has been increased presence of China’s navy in Indian Ocean.
  • The increased China’s defence budget.

Well, when it comes to National security – defence, not all strategies are not visible to us. I am certainly sure; there is something in our government’s mind that has a counter to China.

How far Bullet Train is feasible in India

Though, the high-speed train proposition has been initiated by Mr. Lalu Prasad in 2008, the then Railway minister, it seems that current government looks anxious in completing the project. Lalu has proposed Mumbai Ahmedabad as one of the high-speed rail corridor with 160-200KMPH. But Modi’s govt is making it a full speed corridor with the speed of 300KMPH in line with Japan’s bullet trains.

BulletTrain

 

(image taken from hdnux website)

Bullet train is obviously a sign of growth for Railways. Well, with most of benefits like less travelling time and high-end infrastructure and other amenities like Wifi etc, there comes lot of questions and risks involved in building the project.

  • Reaching the common man: With the commercials mentioned below, it is evident that the travel in bullet train is not for common man. With the recent hike in railway charges, and reducing passenger subsidies even to the poor, it may not be wise to set up a bullet train where fares have to be subsidised.
  • Feasibility of the project commercials: Critics question the creation of 60,000 crore project when Railways are short of money. The Rs.60,000 crore project has to earn a minimum surplus of 6,000 Crore, annually to service debts and the capital.  To generate profit of 6,000 Crore annually, with an estimate of 10 lakh passengers (no. as per Railway info) travelling in the corridor, the annual servicing cost of the investment would have to be Rs. 60,000 per journey. Experts feel this math is nearly impossible.
  • Land acquisition: A huge amount of land should be acquired and it may take up to 5 years as per experts. The cost of project will be increased for every passing day. The bullet train runs in a populated line where land acquisition rate will be high.
  • One more point to note is with respect to bullet trains in China: except the Beijing and Shanghai line, rest all bullet train facilities are operating in losses for years. We should be cautious and learn not to repeat the mistakes they did.

Having said, all these, government would have considered all these challenges and hence let us wish and wait to see how our government will overcome these.

So what is FDI all about?

FDI – Foreign Direct Investment.

FDI in simple terms is a company from a country investing into the business of another country.

Example, Wal-Mart trying to invest into the retail markets in India. FDI can be done as investing into production, joint ventures, acquisitions or expanding the existing operations into another country.

dollors

Why India seeks FDI?

  • Capital need – as the money in India is inadequate for a good economic growth
  • Especially country like India when transforming from developing to developed nation!!
  • FDI bring Technology, skills and business expertise
  • Employment increase
  • Indirectly helps increasing exports

 

Why the opposition?

  • Domestic companies loose the markets
  • Small enterprise face tough competition in terms of quality, knowledge, skill and technical expertise.
  • Eventually, domestic companies may surrender their ownership to these companies.

Automatic route and Government route

In FDI policies, a company interested for FDI has to take prior Government approval if legislated as Government route. And no prior approval is required is automatic route.

There will be a percentage of FDI that a company can invest on –

Some of them for example are:

  • FDI cap in telecom – 100% (automatic route upto 49% and beyond via govt. route)
  • Insurance sector – 49% – Automatic route
  • Single brand retail – 100% 49% through automatic, 49-100% through government
  • Petroleum 49% in – automatic route, from earlier approval route

Weak demand, a concern for IT sector – Can impact the Indian GDP

IT sector contributes to 12% of GDP and it has good growth in India

However, the second half of this fiscal year has a weak demand. This may put some pressure on IT sector in the near, considering their higher current valuations (The process of determining the current worth of a company.)

TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra — along with some of their mid-tier counterparts such as Hexaware Technologies, Infotech Enterprises, KPIT Technologies, Mindtree and Persistent Systems has earned healthy returns in 2013.

Economy

Source: Economic Times

A gradual renewal in the outsourcing demand in the US and the European market helped Indian IT players to resume on the growth path.

A sharp fall in the rupee against the major currencies during the first half of the fiscal further boosted the top line growth and operating margins.

However, the December and the March quarters are traditionally weak for IT companies due to the festival season and the financial year for many of the client firms to ascertain IT budgets for the next year. IT players naturally report a sequential volume growth of 1.5-3% during this period, compared with more than 3% increase in the first two quarters.

As seen in the December quarter, the rupee has more or less stabilized on an average. Some of the currency market observers have predicted this trend to continue in the remainder of the fiscal.  If that happens, India IT players will not be able to enjoy higher top lines (sales), unless a major depreciation in the rupee takes place. Both these factors are likely to curb the pace of growth in the later of year 2014, which may impact valuations in the near term considering the facts that valuations have risen at a faster pace in recent months.

For more info please check out Economic Times Dec 31st 2013

8 things the next government should do

These are few thoughts of our business heads on what next government should do:

Articulate the Promise 2019: Any government should measure their performance with respect to the promise they made. Ex: MW of generation capacity added. KM of national highways constructed. Mainly publish regular and transparent annual updates.

Measure social sector “outcome”: out policies are input focused, emphasising how much is spent in healthcare, education etc. Instead, measure outcome – how much is the outcome.

–       Anand Mahindra, CMD – Mahindra Group

Indian Government

Reimagine healthcare delivery: India’s healthcare systems is in major crisis. India has 63 million diabetics and 2.5 million cancer sufferers, the majority does not get quality treatment. Urgent need to scale up the practices of those Indian hospitals

– Vijay Govindarajan, Professor Dartmouth College.

Boost tech Infra: New government should focus on the rural broadband strategy, enhancing our mobile internet infrastructure, increasing the reliability, security and sped of web

– Sachin Bansal, CEO – Flipkart

Control fiscal deficit, Introduce GST, improve relations with other SAARC countries.

–       ADI Godrej, Chairman Godrej Group

Create jobs: Only way India can reduce poverty is by creation of jobs with decent disposable incomes.

                                 –       N R Narayana Murthy, Chairman Infosys.

Minimise Energy security: Two thirds of India’s power is generated from coal. India holds fourth position in coal reserves, yet faces shortages. Long term, government should focus is to minimise energy imports.

Target  FDI

–     Deepak Parekh, Chairman HDFC

Is China a threat to Indian IT companies?

Studies show that Chinese software outsourcing firms are unlikely to catch up with Indian and other global software services firms anytime in the near future, despite a major policy push towards outsourcing from China’s central government in recent years. Language barrier has also played a huge role in China’s inability to attract large outsourcing contracts at a time of increasing commoditization of IT services. According to a survey 79% of IT services firms in China have been in business for less than 10 years. On the other hand, top US and Indian IT firms have been around for the better part of the last three decades, in some cases, even longer.

software-company-logos-india

China has also faced the problem of attracting the best talent, with the country’s engineering graduates not looking at IT services as a primary option for employment, instead focusing more on manufacturing firms. China currently trains 1.1 million engineers annually, according to a recent report by Kotak Institutional Equities. Since 2006, the Chinese government has tried to build expertise in software outsourcing. It identified 20 cities where such firms could be developed.

 The average profitability of Chinese IT services firms went down from 10-15% to less than 5% over the past two years, while that at most large Indian firms was in the 15-25% range

Experts say China’s focus on the domestic market and Japan may have hindered its ability to gain market  share in other growing economies.

To be sure, China’s IT industry was never considered to be a serious threat to traditional multi-national and Indian outsourcing giants, such as IBM, Accenture, TCS, Infosys, Wipro Etc.