India draws roadmap to implement infrastructure projects

Delay in implementation of infrastructure projects in India costs the country dearly with the government losing Rs 300-400 crore daily only on interest part, said minister for Road transport highways and shipping, Nitin Gadkari.

Nitin Gadkari

He was speaking at the 4th International Summit on ‘Infrastructure Finance-Building for Growth,’ organised by the leading business chamber the Associated Chambers of Commerce and Industry of India (ASSOCHAM) in New Delhi recently.

“We have streamlined projects in the road sector worth about Rs 1, 80,000 crore that were stuck up due to land acquisition together with forest, environment and other clearance related issues,” Gadkari said, adding, “We have solved about 80 per cent of issues that were involved with the Environment and Forest Ministry.”

He further said that the government is facing financial constraints and the decision for implementing public-private-partnership (PPP) based investments in the road sector has been taken after a very long delay.

“In the present scenario if projects are financed at 13 per cent rate of interest then it will impact economic viability and will be a blockage in infrastructure development, thus there is a need to reduce interest costs,” said Gadkari.

He also said that there are projects worth about Rs five lakh crore that can be implemented under the PPP model.

“Somewhere we have to find a way out to reduce cost of construction, interest rates and how we can improve economic viability and internal rate of return,” he said, adding, “We need to change the mindset and promote use of digital e-governance.”

With a view to reduce the number of road accidents in India, the National Highway Authority of India (NHAI) has taken a decision to improve accidental spots in existing projects, informed Gadkari.

He further said that there is a need to discourage road transport and promote inland waterways as it is very cheap and is non-polluting mode of transportation.

Calling private sector to play a key role in supplementing infrastructure development in the country, the minister said, “Infrastructure financing plays a critical role in stimulating economic growth by providing strong impetus to economic development, industrial growth and employment. We need to have a huge quantum of capital investments for this.”

With a decisive Government at the centre, there is now renewed focus in incorporating the element of ‘People’ to PPP projects, aided by transparent policy and contractual frameworks. India requires a consistent infrastructure drive, all the way up to 2050, Rana Kapoor, President of ASSOCHAM said.

IFCs funding infra sector should be through automatic routes: ASSOCHAM

To facilitate flow of funds from the international market with flexible but prudent regulatory framework, the apex industry body ASSOCHAM has suggested that all infrastructure finance companies (IFCs) be brought under the automatic route in line with other corporate in the infrastructure sectors.

“Exempting withholding tax on interest and other payments to external commercial borrowings (ECBs) by infrastructure sector including the IFCs and also allowing, within a certain limit, Indian corporate in the infrastructure sector, including IFCs to issue rupee denominated bonds in the international markets”, said a study titled ‘Indian Infrastructure: A Trillion dollar opportunity’, jointly conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Deloitte.

The study said, recently, take-out financing arrangement has been permitted through ECB, under the approval route, for refinancing of rupee loans availed from domestic banks by eligible borrowers in the port, airport, roads including bridges and power sectors for development of new projects.

However, there is a need to simplify the process for take-out financing/refinancing rupee loans through ECBs for infrastructure companies as to engage foreign lenders for takeout are limited. It is difficult for foreign lenders to come to an agreement at the initial stage itself and assume the execution risk at the time of take out, said the study that was jointly released Tamaki Tsukada, Minister (Economic), Embassy of Japan, Gautam Bhandari, Chairman- PEVCAI, Gautam Adani, Chairman Adani Group, Kalpana Jain, Co-Chairperson, PEVCAI & Senior Director, Deloitte Touché Tohmastu India Pvt. Ltd. at ASSOCHAM 5th PEVCAI Annual Convention in New Delhi today.

This condition of entering into tri-partite agreement may be dispensed away with and an amount for such take-out financing through ECB automatic route could be declared on an annual basis, suggested the study.

There is a need to relax the all-in-price ceiling for ECBs (i.e. 500 basis points over the 6 month Libor) for infrastructure projects with average maturity exceeding 7 years. The interest rate ceilings set by RBI on ECBs put constraints in availing foreign currency loans for domestic infrastructure projects, the study said further.

Relaxation of the ECB ceiling of USD 500 million per annum per company for automatic route will help make ECB stable source of financing and ensure increased ECB funding

To facilitate flow of funds from the international market with flexible but prudent regulatory framework, following measures could be considered; bringing IFCs in the infrastructure sector under the automatic route in line with other corporate, exempting withholding tax on interest and other payments to ECBs by infrastructure sector, including IFCs and allowing, within a certain limit, Indian corporates in the infrastructure sector, including IFCs to issue Rupee denominated bonds in the international market.

Foreign Direct Investment in Multi-Brand Retail, Hope In Abeyance

India’s decision to allow foreign direct investment (FDI) in multi-brand retail towards the end of 2012 and its FDI policy modified in April 2013 put the country back on the retailing map of the world. However, this is not the first time that India has invited global retailers to set up their shops, says Ashutosh Limaye, Head – Research & REIS, Jones Lang LaSalle India.

In 1997, the government approved 100% FDI in “cash and carry” wholesale stores under the automatic route and, in 2006, 51% FDI was allowed in single-brand retailing, although with prior approval from the government. In December 2011, the government fully opened up FDI in single-brand retail stores.

A number of international retail brands such as IKEA and Carrefour were excited to enter the Indian market and announced their plans to start talks on investment proposals with the concerned ministries. In the much-debated and politically-sensitive multi-brand retail space, however, partial 51% FDI was proposed only in September 2012, with parliamentary approval in December 2012.

Retail in India - A Growing Story

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) predicts that the Indian retail sector is poised for 15% year-over-year growth over the next five years through 2018. This robust growth picture also is painted by AT Kearney, whose 2012 Global Retail Development Index (GRDI) puts India as the fifth most favourable destination for global retailers.

In 2011, India’s retail industry accounted for 22% of India’s GDP and employed close to 9.4% of the labour force. Organized retail in India currently constitutes only 6-7% of overall retail trade in India, although by 2016-17 this share is projected to grow to 10%.

Economic growth of about 7% over the next 10 years, rapid urbanization, a growing young demography with rising income, easy access to credit and rising brand consciousness are indeed contributing to the growth story for the country, but inconsistencies in policy-making, glaring inefficiencies in supply-chain logistics, the high cost of real estate and a shortage of good quality retail properties are the main constraints in achieving the projected growth.

While there is no doubt about India’s huge market size that attracts the world’s largest retailers, retail real estate in India is still a young industry. With a history of approximately only 13 years, India’s malls make up only 80 million square feet (sq ft) of space. The global financial crisis and its lingering impacts have resulted in major delays to retail-supply additions planned for over the last five years, with 2012 seeing the lowest number of new mall completions in India since 2006. If all of the planned new supply targeted for completion between 2013 and 2015 gets delivered, India will have 100 million sq ft of mall space by the end of 2015, still a fairly small number given the market size.

Visible Impact of FDI Will Take Time

With the relaxation of the FDI policy, the government has ended a waiting period of more than seven years for multinational retailers to enter the market. The impact is likely to be a mixed initially as small retailers and middlemen/agents will face increased pressure on their business with the entry of the international retail-chain operators.

However, it will work positively for farmers and small-scale manufacturing hubs as they will find large-scale buyers for their products. It will also be beneficial for customers as this will increase one-stop shopping options with access to international brands. It could require an additional 6-10 years for the market to mature.

Even in China, the international giants like Wal-Mart, Tesco, Carrefour, Auchan and Costco had a long settling-in period contrary to a general perception that streamlined approval systems, government facilitation and shorter construction periods can help retailers settle down quickly.

While the relaxation in FDI rules will allow a big-bang entry by global retailers, some of them have already set up their business in some way or have collaboration arrangements in place with Indian companies. For example, Carrefour opened its first cash-and-carry store in India in New Delhi, German-based Metro opened six wholesale centres in the country, Wal-Mart plans to invest about US$2.5 billion over the next five years in a joint venture with Bharti Retail and Tesco has signed an agreement with Trent Ltd., the retail segment of the Tata Group, to set up cash-and-carry stores.

Additionally, Swedish fast-fashion retail giant H&M has sought permission from the Foreign Investment Promotion Board (FIPB) to invest US$120 million in India to start a fully-owned company that will open 50 H&M stores. IKEA is currently waiting for the final approval from FIPB to open 25 stores with an investment of US$150 million. U.S. casualwear retailer Gap Inc., French apparel retailer Celio and Japanese fashion brand Uniqlo are also ready with their plans to enter India.

Some Hurdles To Overcome

The impact of FDI is closely linked with how India can address economic, political and social hurdles. One of the economic hurdles is the high cost of real estate. Rents in India easily account for 9-15% of retailers’ revenue, which is significantly higher than the global average of 4-10%.

International retailers, sensitive about real estate costs, will help to reduce the dominance of central city locations. Good but off-centre locations can bring down the land cost substantially and eventually developers can pass on these savings to their retailer occupiers with rent that is compatible with their retail business.

Another hurdle is the role that Indian state governments can play in allowing FDI in the states they rule. Though the central government has allowed FDI in multi-brand retail at the Centre level, the state governments are at liberty to make their own decisions about the implementation of the policy. With Indian elections due to take place no later than May 2014, the decisions of retailers to enter India could be deferred by a few months.

Also, the government has laid down some requirements before allowing FDI in retail and these can affect the business planning for international retailers. The retailers must fulfill the conditions of not less than 30% of the value of procurement needs to be sourced from Indian small industries, at least 50% of FDI brought into India should be invested into backend infrastructure (distribution centres, warehousing and logistics) within three years, minimum FDI investment of US$100 million, multinational retailers can conduct their business only in cities with a population of more than one million (54 such cities as of 2011) and a requirement of a minority Indian partner.

While these conditions appear fair to most, it will still take at least 12 to 24 months before India can actually experience the fruits of FDI in multi-brand retail. India is likely to witness a new era in retailing which will be defined by the emergence of new formats and, vastly improved collaboration among the various stakeholders and experimentation with concepts such as tourism, luxury and destination-focused retail and rural retail. 

Upcoming large townships, mixed-use retail developments, retail centres at transport nodes and in office districts, along with a research driven approach by developers, will assist in bringing in quality supply of the right size and in the right place - and hopefully addressing the demand from  foreign brands waiting to tap the extensive and mostly under-exploited Indian market.

Private sector accounts for 87% of Haryana’s total investments: ASSOCHAM

Private sector accounts for a whopping 87 per cent of the total outstanding investments worth over Rs 4.5 lakh crore attracted by Haryana as of June 2012, apex industry body ASSOCHAM said today.

With a share of over 4.8 per cent in the total private sector investments made across India, Haryana has attracted private sector investments (including both domestic and foreign private sector) to the tune of over 3.9 lakh crore as of June 2012, according to a sector specific analysis titled ‘Composition of Outstanding Investments Across States,’ carried out by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Besides, with a share of over Rs 82.9 lakh crore, the private sector accounts for over 59 per cent of the total outstanding investments across India worth over Rs 140 lakh crore as of June 2012, highlights the ASSOCHAM analysis.

“Flow of the private investments is decided by the attractiveness of investment opportunities as they are mostly driven by profitability considerations,” said D.S. Rawat, national secretary general of ASSOCHAM while releasing the findings of the chamber’s analysis.

“Bureaucratic efficiency, infrastructure facilities, and ease of land acquisition influence the flow of private investments,” said Mr Rawat. “Tax concessions, product market conditions and exit policies are effective tools of private investment attraction.”

Jharkhand, Odisha, Chattisgarh and Uttar Pradesh are other top leading industrial states where private sector accounts for over 70 per cent of total investments made across the state.

With a share of about 12.5 per cent, Gujarat accounts for the highest share in the total outstanding private sector investments (including both domestic and foreign private sectors) across India as of June 2012, according to ASSOCHAM analysis.

Of the total outstanding investments in Gujarat worth over Rs 14.8 lakh crore, private sector accounts for over Rs 10.3 lakh crore thereby registering a share of about 70 per cent in the overall investments across the western state.

With private sector investments worth over Rs 8.8 lakh crore, Odisha ranks second with a share of 10.7 per cent in the total private sector investments across India. Besides, the private sector accounts for almost 75 per cent share in the total outstanding investments worth over Rs 11.8 lakh crore across the state, according to the ASSOCHAM analysis.

Maharashtra (8.9 per cent), Andhra Pradesh (8.4 per cent) and Karnataka (7.2 per cent) are other states with maximum share in outstanding private sector investments across India.
But interestingly, the share of private investments in the total live investments across these three states is less than the all-India average of over 59 per cent, points out the ASSOCHAM analysis.

Kerala, Himachal Pradesh, Jammu and Kashmir, Uttarakhand and Assam have the least share in India’s total private sector investments which is even less than one per cent.

NHB to introduce guidelines for non-banking housing finance cos

The National Housing Bank (NHB) will soon come out with guidelines for non-banking housing finance companies to give impetus to funding for housing sector and create an asset-backed securitisation thereby further expanding the securitisation domain, R.V. Verma, chairman, NHB said at an ASSOCHAM event held in New Delhi today.

“Investments in the housing sector account for a meagre seven per cent of the country’s gross domestic product (GDP), which is woefully low and inadequate more so as the sector is second largest employer after agriculture,” said Verma while addressing a national conference on ‘Securitisation: The Emerging Funding Vehicle’ organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“We have to find ways to bring more liquidity into the capital-deficient housing sector through market oriented measures and all this is satisfied by securitisation,” said Verma, adding, “Introduction of Basel III would bring in severe liquidity crunch and the banking sector would require huge amounts of capital inclusion and at the same time growth will continue to be more predominant, securitisation is thus a very imminent mechanism on both these fronts.”

The NHB chairman further said that securitisation would result in capital conservation, capital relief and optimum utilisation of capital through off-balance sheet transactions.

“Besides, the lending sector cannot lend beyond a certain point due to capital constraints and with securitisation they would be enabled to continue to lend and can come over all constraints if they are able to securitise,” said Verma while releasing an ASSOCHAM study titled ‘Securitisation: The Emerging Funding Vehicle’ along with A.K. Choudhary, general manager, Department of Banking Operations and Development (DBOD), Reserve Bank of India; S.C. Aggarwal, chairman, ASSOCHAM Capital Market Committee;  B.K. Sabharwal, chairman, ASSOCHAM Commodity Futures Market Committee and D.S. Rawat, secretary general.

 “Looking at the securitisation process from the housing sector’s perspective it is driven by need-driven funding, need-driven liquidity, need-driven capital inflows and all this resulting in greater transparency, stability and sustainability and for this each player is required to be aware of his role,” said Verma.

Verma also said that NHB is looking to mobilise funds from institutional investors to channelize long-term funds in the mortgage market for a better match of assets and liabilities which would be another benefit they seek to offer to the industry.

“Benefit of securitisation cannot be undermined in India’s perspective, however, the need of the hour is to make an effort to develop orderly and healthy securitisation and ensuring greater alignment of market in the interest of investors,” said Choudhary in his inaugural address.

Fake products sale to touch over Rs 55,000 cr by 2013

The widespread sale of counterfeit products across various sectors such as electronic items, automotive components, consumer durables, pharma, herbal medicine & cosmetic has become so alarming as to capture a market size of Rs 55,000 crore through illegal channels by 2013, according to estimates made by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

  On account of increasing sale of fake products in the absence of regulatory mechanism, the revenue losses to the exchequer would have exceeded Rs. 5,000 crore for fiscal 2011-12, further reveal the ASSOCHAM estimates.

“Delhi is the hub of counterfeit products in India as nearly 75 per cent counterfeit products originate here. FMCG companies having maximum loss up to 45% and an average loss around 25% of their market share of their well known products”, added D S Rawat, Secretary General, ASSOCHAM.

The sale of contraband electronic items, consumer durables, automotive components, pharma, herbal medicine & cosmetic products, based of ASSOCHAM estimates for fiscal 2011-12 is Rs 25,000 crore. The current market size of fake products sale is around 45,000 crore, adds Rawat.        
The other areas in which spurious products sale is going unabated comprise vegetable oils, spices, ghee and even watch components. In these areas of large economic activities, the fake products sale has been estimated within the range of Rs 15,000 crore by 2013. In a paper on Fake Products Sale, prepared by ASSOCHAM, based on the feed back of its constituents, it has been stated that Electronic, Consumer durables and pharma  sectors have witnessed the highest sale of fake products with an estimated amount of Rs 20,000 crore in the current fiscal.

In pharma sector, fake medicines were sold off in rural and semi urban market the cost of which works out to be Rs 12, 000 crore with growth of over 100%, says Mr. Rawat while commenting on the ASSOCHAM paper.

 The chamber estimates also point out that Rs 8,000 crore worth of fake products were sold off in areas of vegetable oils, ghee, spices & watch components by 2011-12, of which the large chunk came from the sale of watch components which has been estimated at Rs 5,000 crore.  The genuine manufacturers of watches had to lose out heavily because of huge price differential.
Herbal Medicine & cosmetics sector alone registered a sale of Rs. another 10,000 Cr. in 2011-12, which did a great deal of damage to its consumers, says the ASSOCHAM paper on fake products sale. The most popular counterfeit market is clothing, followed by shoes, watches, leather goods, and jewelry.

The biggest concern is, however, the customers attraction towards these pirate products is directly proportional to price of these products which are sold at 40 to 45% lesser value than the original. A common man with limited knowledge falls for the counterfeit products due to its cheap or discounted prices. Enforcement of laws against counterfeiting is not so strict in India which is another big jolt for the brand industry.

Recently Dubai authorities also seized US$1.09m in counterfeit electric goods as part of a recent crackdown which included fake goods from leading brands LG, Panasonic, Sony, Sharp and Hitachi.  The seized goods weighed a total of 120 tonnes and included 5,300 television sets, 7,000 DVD players and various other devices including stereo sets, and home appliances.
The chamber is of the view that under the present dispensation, those indulging in sale of counterfeit fake, contraband or spurious products are least afraid of consequences arising from their being caught. The laws at present hardly provide for effective deterrence for the offenders either by way of monitory penalties, damages or criminal prosecution.

The ASSOCHAM, has therefore suggested that the government must immediately implement bar coding on medicines and electronic items to control fake products.
 

Economic growth may slow down in 2013: ASSOCHAM

Continuing slowdown in industrial growth and its spillover effect on the service sector, deficit Monsoon and worsening global are expected to drag Indian economic growth to 6-6.3 per cent in the fiscal 2012-13, an ASSOCHAM survey of economists and industry leaders has indicated.

Indian economy had slowed to 6.5 per cent, the nine-year low in 2011-12, as per the official data. The survey conducted amid 110 senior industry leaders and economists also cautioned that the prospects may further worsen if some of the policy issues are not immediately addressed.

Almost 80 per cent of the economists covered in the survey, said the government has to create a fiscal space for significantly raising its capital expenditures so that the economy gets an investment booster. This can be done by removing untargeted subsidy bill.  The private sector will follow as a spin-off, they said.

As the overall business confidence has further eroded in the first quarter of the current fiscal, the outlook survey of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) indicated that the gross domestic product may grow even slower than the RBI’s lower projections of 6.5 per cent as the risks have increased on several counts. 

Significant deficiency in Monsoon has added to the problems. The survey found that the prospects of growth in agricultural sector are dismal. In fact, the agricultural   sector which grew at about 2.5 per cent in 2011-12 may not show any growth this year since sowing of the khariff crops, the main stay of the sector, has been affected.

In this background, the survey respondents find that the industrial expansion at best could be just about 4-4.5 per cent for the year while the services sector, the major contributor to the GDP is also showing signs of weakness.  Mining is at a near standstill due to inadequate regulatory environment and manufacturing is at low ebb.   

However, all is not lost pointed out majority of the survey participants if immediate steps are taken to address the policy issues. These include addressing bottlenecks facing the infrastructure projects and removing hurdles in the way of the foreign direct investment.

“The Reserve Bank of India has rightly pointed out that the Indian economy is at the cross-road. As the central bank called it, the economy can ‘spin up or down depending on how the policy uncertainty is addressed and supporting measures put in place’. Even though confidence level is low, urgent remedial measures can retrieve the situation,” ASSOCHAM President Rajkumar Dhoot said.

The immediate measures are required, since the global headwinds are staked against most economies in the world, including emerging markets of India, China and Brazil. While China may soft-land with growth below nine per cent, India and Brazil would find it more difficult to cope up.
The survey found while it is true that India still has a large domestic market, the country’s total external engagement is well over half the size of the economy. “It is not only the merchandise exports which are getting hit, but also the services exports which are directed towards the problem hit western economies,” Dhoot said.

As many as 75 per cent of those included in the ASSOCHAM survey said that the persisting  euro zone  problems and weakening growth in developing economies (EDEs) will be weighing on the global growth in 2012. The deceleration in  BRICS countries, which have so far been pushing growth in the emerging and developing markets has made things even more difficult for the global recovery.

The global trade flows have slowed with tight credit conditions and the adverse impact of squeezing trade finance. The situation does not look promising in terms of capacity utilization, overall investment and the order book, found the survey. The investment outlook remains uncertain. As per the RBI figures,  investment intentions in the new projects sanctioned financial assistance moderated to Rs 2.1 trillion in 2011-12 from  Rs 3.9 trillion in 2010-11. These may further go down in the current financial year.

Industry feels let down by RBI policy instance: ASSOCHAM

Industry feels disappointed with unchanged key policy rates by RBI in its first monetary policy review.  This move will definitely slow down the growth momentum further, said the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The continuation of the hawkish policy instance by RBI to rein in high inflation and dwindling growth across all sectors is not a right step in the current scenario of falling growth rates.  However, it has put further pressure on the government to bring in the long pending reforms and mend its policy on fiscal consolidation, said D S Rawat, Secretary General, ASSOCHAM.

“Reduction in SLR by 100 bps is a positive move to free liquidity with banks with concerns of high cost of lending continues to hit fresh investments”, said Rawat. 

While cutting its growth forecast and lifting its inflation outlook as economic conditions deteriorate RBI appears to be in no mood to buy the industry demand for a rate cut immediately.  Headline inflation has persisted even as demand has moderated and the pricing power of corporates weakened, adds ASSOCHAM.

ASSOCHAM wants RBI to relax monetary policy

Industry body ASSOCHAM today urged the Reserve Bank of India (RBI) to reduce cash reserve ratio by another 75 basis points and repo rates by at least 50 basis points to reduce the cost of borrowing that will make home loan affordable and encourage fresh investments.

“The economy is going through a very difficult patch and business confidence has plummeted. New investments have slowed down,” said Rajkumar Dhoot, president of the Associated Chambers of Commerce and Industry of India (ASSOCHAM) during his interaction with RBI governor D Subbarao ahead of the central bank’s monetary policy review on April 17.

The industry – particularly manufacturing – has been affected by moderation of demand besides high input and capital costs. In the services sector, large firms registered growth with some fall in profits. But small firms suffered on both counts, said Dhoot.

High inflation and tapering of demand in interest-sensitive sectors come amid global macro-economic conditions, which are not conducive anymore for raising low-cost funds. The sharp depreciation of rupee during August to December last year led to drying up of foreign equity flows.

“The RBI’s monetary tightening has added to the low business confidence and affected financial bottomlines, leading to deceleration in investments,” said Dhoot. “The low capital spending could not help generate supply response required for controlling inflation and ensuring long-term growth. There exists a need for interest rates on borrowings to be brought back to 10 per cent level.”

On March 10, the RBI had cut CRR from 5.5 to 4.75 per cent. Now it needs to reduce it by another 75 basis points. While MSME sector continues to struggle for bank credit, repo rates too should be reduced by 50 basis points to squeeze cost of borrowings, encourage investments and boost growth.

To check online frauds, Dhoot called for implementation of digital signature enabled techniques as stipulated in the monetary policy statement for 2011-12. At the same time, the reforms process needs to be speeded up and policies must see fast implementation on the ground level.

India's Trade deficit may rise to 428 billion dollars by 2015-16

India’s trade deficit could rise from 130.5 billion dollars in 2010-11 to 428.3 billion dollars by 2015-16 and become unsustainable with merchandise imports rising from 380.9 billion dollars to 858.6 billion dollars, industry body ASSOCHAM said today.

The imbalance likely to be above 180 billion dollars in 2011-12. While the share of manufactured goods in exports of China, Japan and Germany is very high, India’s share has declined from 44.1 per cent in 2000-01 to 37.5 per cent in 2010-11, according to a study by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The country’s merchandise exports during 2015-16 will stand at 430.3 billion dollars, up from 250.5 billion dollars in 2010-11 with exports of manufactured goods rising from 101.6 billion dollars to 119.6 billion dollars. Exports of petroleum products are set to rise from 41.9 billion dollars to
51.2 billion dollars in the same period.

On the flip side, said the study, oil imports will jump from 106.1 billion dollars to 243.7 billion dollars while gold imports will rise from 33.9 billion dollars to 83.3 billion dollars in the same period.
However, if capacity building of the industry takes place and competitiveness of Indian exports improves, then merchandise exports can stand at 549 billion dollars in 2015-16 and the trade deficit will be 309.6 billion dollars.

“There is need to curtail oil imports, or else there will be a severe burden on external payments position. The gold imports figure must also decrease by educating domestic investors and encouraging substitution of gold purchases with alternatives from formal financial sector which will help in increasing the productive capacity of economy,” said ASSOCHAM secretary general D.S. Rawat while quoting the study.

It is thus critical to enhance manufacturing capabilities along with improvement in technological content of products which should translate into sharpening the export competitiveness and gaining a price advantage. Promotion of international trading houses will help develop strong international linkages.

The study said growing uncertainties in the Eurozone, slowdown in advanced economies and weakening of the domestic had adversely impacted India’s external sector outlook.
Adverse global conditions and protectionist attitude being adopted by various western countries may lead to further drop in service exports, further decreasing the invisibles contribution to current account.

ASSOCHAM said India’s capital account rose almost seven times from 8.5 billion dollars in 2000-01 to over 57.3 billion dollars in 2010-11 with foreign investments being a major contributor. In times of global uncertainty, it is very much likely that foreign investors pull out their money from India and take it back to their home countries.

“Poor regulations, inefficient processes and inconsistency of policies may also deter potential foreign direct investments,” it said.

Government may ban solar energy equipments import

New Delhi: In an effort to encourage power generation through renewable energy sources, the government will limit imports and encourage domestic manufacturing through Public Private Partnerships (PPPs) to boost solar energy generation as power consumption goes up dramatically with the fast-growing economy, minister for new and renewable energy Farooq Abdullah has said.
Foreign companies must set up manufacturing facilities along with research and development centres if they want to enter India for solar power generation, he said while inaugurating a conference organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) on Wednesday.

About 170 megawatt capacity of grid solar power has already been set up under the Jawaharlal Nehru National Solar Mission. During its first phase, 1,100 MW capacity is envisaged by 2013. In the second phase, additional capacity of 10,000 MW capacity for various off-grid applications has been sanctioned.

“This scale-up will require a paradigm shift in the approach. We must continue to rely more on the regulatory framework, development of transmission infrastructure and developing innovative business models. The sector will require an investment of 20 billion dollars by 2017,” said  Abdullah.

The challenge is to introduce newer and efficient technologies which can lead to cost reduction and ultimately help in grid parity, he said adding there is need to grab opportunities in developing partnerships in all spheres of research, development, designing and setting up projects.
Meanwhile, ASSOCHAM president Rajkumar Dhoot said the country is endowed with vast solar energy potential and 5,000 trillion kilowatt hour per year energy is incident over the land area with most parts receiving four to seven KWh per square metre daily.

Hence both technology routes for conversion of solar radiation into heat and electricity – solar thermal and solar photovoltaic – can be effectively harnessed providing huge scalability. Mr Dhoot said the government should allocate a substantial portion of clean energy fund to service capital requirements of solar energy projects at low bank interest rates.

Others present during the conference were Pramod Deo, chairman of the Central Electricity Regulatory Commission, Anil Agarwal, past president of ASSOCHAM, Rakesh Bakshi, chairman of ASSOCHAM council on new and renewable energy, and N.K. Bansal, former head of department at Indian Institute of Technology’s centre for energy studies.

They said solar energy applications are cost effective in remote and far-flung areas where grid penetration is not feasible. These applications ensure that people without access to electricity move directly to solar power by leap frogging the fossil fuel growth trajectory.
 
Also, the mobile phone network infrastructure in the country consists of more than three lakh towers with 3,000 new ones being added every month. By 2015 India is expected to have over five lakh telecom towers with almost all of them having a diesel back-up. This is another area where solar power can play a substantial role.

ASSOCHAM flays poor logistic support for steel industry

The Associated Chambers of Commerce and Industry of India (ASSOCHAM)  has advocated the importance of laying slurry pipelines to transport iron ore and coal for the steel industry which is cost effective and environment friendly.

Voicing concern over poor logistics infrastructure for supply of iron ore and coal for the steel industry, the apex business body said said slurry pipelines should be included in the list of industries with infrastructure status to address bulk transportation needs of the sector.

Moving iron ore and coal by pipelines in slurry form has advantages like low operating costs, higher availability and environment friendly. Existing railway lines are almost reaching a saturation point, ASSOCHAM said in a statement. 

“While augmenting railways infrastructure is important, slurry pipelines may eventually re-invent raw material transportation for the iron and steel industry,” it said in recommendations for the National Steel Policy being formulated. In 2008, the Planning Commission included pipelines for water and oil and gas eligible for infrastructure status but slurry pipelines were not, despite being recommended by the Rangarajan Committee.

The chamber said road and rail connectivity at the Braganza Ghat section near Goa must be doubled as the port’s capacity is being expanded manifold. Rail connectivity from Jaigarh port should be provided up to Kohlapur so that steel manufacturing units in Hospet Bellary region can benefit.

The ports proposed on Karnataka coast will depend on completion of Hubli-Ankola and Talguppa-Honavar rail lines to service the steel industry efficiently. ASSOCHAM said smaller ports too need to be provided with four-lane highways so that movement of imported coking coal can be improved.

“Finished steel products need to be moved expeditiously from the plants to ports as dynamic market conditions place heavy strains on logistic systems to deliver products to consumers in the shortest possible time at economical costs.”

Development of national highway 63 and state highways connecting Bellary to Chitradurga, Hubli and Solapur will allow multi-axle load vehicles to speedily move freight of finished steel to south India, it said.