insight india - issue one

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www.ukibc.com INSIGHT INDIA | Issue 01 | 3

INSIGHT INDIA

Dear Reader,Welcome to the first edition of Insight India. This new UK India Business Council

publication and its website (www.insight-india.co.uk) together provide the definitive guide to the UK and India’s bilateral trade and investment relationship.

Prime Minister Modi’s first year as leader of a majority NDA Government has seen a raft of measures and initiatives designed to help return the Indian economy to double digit growth - “Make in India”, “Digital India”, “Skill India” as well as “100 Smart Cities”. The focus on trade and investment in and with India has become sharper and more competitive.

The UK has undoubtedly deep and strong economic ties with India. UK finance and industry are well placed to help India grow. Specifically, the

UK India Business Council believes that the UK has unique commercial and technical expertise, and the willingness to deploy it further, in order to help India meet the next decades coming challenges. In line with this, it is crucial that the UK identifies and establishes areas of closer collaboration with India.

It is here that Insight India comes in. Published every six months the UK India Business Council sees this new platform as allowing UK PLC and India Inc to demonstrate why the UK and India represent, in Prime Minister Modi’s words, such “an Unbeatable Combination”.

Insight India will delve below the surface and offer real pointers to help you understand what is happening within India. What’s more it is our firm intention that this magazine becomes your platform through which your experiences, ideas, news and insights can be shared with the broadest range of

interested parties.We will also use this platform

to keep you apprised of events, developments and progress within the UK India Business Council, including analysis of our nine key sectors.

You’ll find we have a great line up including an interview with our Chair, Rt Hon Patricia Hewitt, on the strengthening commercial relationship as well as articles from Diageo, OCS, KPMG, M&S, and PwC on why the UK and India are such “an unbeatable combination”.

We will also be providing UK India Business Council’s take on developments in the Indian market and I hope you will enjoy hearing from Divya Dwivedi, our Indian Head of Policy and Communications, on what India’s emerging cooperative and competitive federalism means for UK companies.

Utilising our relationships with UKTI, the BBGs, UK and Indian trade associations and both the UK and Indian governments, the UK India Business Council will through this publication ensure that the story of the UK and India’s “Unbeatable Combination” is told and understood in boardrooms and in policy circles in both countries.

We are very grateful to all contributors, distributors and in particular our members who made this enterprise come together.

I hope you enjoy our new publication.

Richard HealdCEOUK India Business Council

‘WHAT’S MORE IT IS OUR FIRM INTENTION THAT THIS MAGAZINE BECOMES YOUR PLATFORM THROUGH WHICH YOUR EXPERIENCES, IDEAS, NEWS AND INSIGHTS CAN BE SHARED WITH THE BROADEST RANGE OF INTERESTED PARTIES.’

FOREWORD UK AND INDIA REPRESENT AN ‘UNBEATABLE COMBINATION’

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www.ukibc.com4 | Issue 01 | INSIGHT INDIA

INSIGHT INDIA

CONTENTS ISSUE 01

+44 (0) 207 592 3040 [email protected] www.ukibc.com

INSIGHT INDIA is the UK India Business Council’s new flagship publication, which highlights business opportunities between both countries, predicts trends, profiles success stories, offers tips and practical advice, and carries in-depth interviews and analysis with business leaders and policy makers.

Published every six months, the magazine is aimed at business people interested in bilateral trade opportunities between India and the UK.

For magazine enquiries please contact [email protected]

UK India Business Council HEAD OFFICE 12th Floor, Millbank Tower 21-24 Millbank London SW1P 4QP United Kingdom

MISSION STATEMENTWe believe passionately that the UK-India business partnership creates jobs and growth in both countries, and that UK businesses have ideas, technology, services and products that can succeed in India. The fact that the UK is the No 1 investor in India reinforces this. Through our insights, networks, policy advocacy, services and facilities, we support UK businesses to achieve this success.

03 FOREWORD Richard Heald, Chief Executive, UK India Business Council

06 UKIBC NEWS ROUND UP

08 VIEW FROM INDIA Forging a model of cooperative, competitive federalism Divya Dwivedi, UK India Business Council’s Head of Policy & Communications

10 INTERVIEW A natural partnership Patricia Hewitt, Chair, UK India Business Council

14 INTERVIEW The liberalising Indian market Richard Heald, Chief Executive, UK India Business Council

18 INTERVIEW Encouraging trade and investment Kumar Iyer, British Deputy High Commissioner in Mumbai

22 INTERVIEW Flight of the Hawk John Brosnan, Managing Director, Southeast Asia and India, BAE Systems

26 INTERVIEW Operating to global standards Chris Cracknell, CEO, OCS

30 INTERVIEW Collaborative approaches to sustainable growth Dr Frank-Jürgen Richter, Founder, Horasis

32 INFRASTRUCTURE Connecting opportunities Hugh Jones, CEO, Steer Davies Gleave

36 RETAIL, LIFESYTLE & LOGISTICS Spirit of change Abanti Sankaranarayanan, Business Head, Luxury and Corporate Relations, United Spirits

38 FINANCIAL, LEGAL & PROFESSIONAL Ease of doing business Richard Rekhy, CEO, KPMG in India

42 RETAIL, LIFESYTLE & LOGISTICS Looking behind the label Venu Nair, CEO, Marks & Spencer Reliance India

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WELCOME TO INSIGHT INDIA

EDITORIAL10

A NATURAL PARTNERSHIP

8 VIEW FROM INDIA

Welcome to Insight India, the new magazine from the UK India Business Council. We were delighted to launch it at the India-UK

Business Convention 2015 in New Delhi, a forum for UK businesses operating in India and for Indian businesses who are looking to do business with the UK.

We are fortunate to have many of the speakers featured within these pages, giving us their opinions on the current state of bilateral trade, as well as the opportunities that lie in India for British companies. The Indian market can be hard to get to grips with, given the competition between the States for foreign investment, but our authors offer experienced advice for those looking to put a toe in the water.

The consensus is that the climate is changing, so take a look through our pages and see how you can make the most of the current opportunities in India.

Do let us know how your find our new magazine and if there are any areas you would like us to cover in future issues.

Sarah CartledgeEditor, Insight India

44 INDUSTRY PROFILE

An introduction to FICCI: Gathering strength Dr Jyotsna Suri, President, FICCI

46 INTERVIEW Eyeing up Indian opportunities Mukesh Rajani, Partner, PwC

48 FINANCIAL, LEGAL & PROFESSIONAL Signs of recovery Saurav Anand, Economist and Anubhuti Sahay, Head of South Asia Economic Research (India), Standard Chartered Bank, India

52 INDUSTRY PROFILE An introduction to the CII: 120 years of building business leadership Chandrajit Banerjee, Director General, CII

54 HEALTHCARE Trends in the Indian healthcare sector Dr Rana Mehta, PwC

56 HEALTHCARE Disposable income Emma Sheldon, Group Marketing Director, Vernacare

60 HEALTHCARE Healthcare opportunities in India for British organisations and companies Healthcare UK, the Government body to drive exports of UK health services, expertise and innovation

‘THE CONSENSUS IS THAT THE CLIMATE IS CHANGING, SO TAKE A LOOK THROUGH OUR PAGES AND SEE HOW YOU CAN MAKE THE MOST OF THE CURRENT OPPORTUNITIES IN INDIA.’


INSIGHT INDIAINSIGHT INDIA

UKIBC NEWS ROUNDUP

In July the UK India Business Council hosted, with FICCI, a

delegation to London led by the Chief Minister of West Bengal, Mamata Banerjee. The Chief Minister was in London for 3 days with a high-powered 62-member delegation, including business chiefs from across India and state cabinet ministers.

The programme included: a highly-interactive seminar attended by 250; a networking reception with speeches by Ms Banerjee, Priti Patel MP, Minister or of State for Employment, and Scott Furssedonn Wood, British Deputy High Commissioner for Eastern India; and a roundtable discussion with UK mining and energy companies.

West Bengal has a strong consumer

base, rich mineral resources and a large talent pool, and its economy is growing strongly - Gross Value Added (GVA) of 10.48% in FY 2014-15 as compared to the country’s GVA of 7.5%. West Bengal has recently attracted significant investments in smart cities, steel, energy, mining, manufacturing and ports. The State Government is focusing on improving the ease of doing business, principally through e-governance and total transparency in decision making.

With increased opportunities and an improved operating environment, the UK India Business Council was pleased to sign an MoU with the West Bengal Industrial Development Corporation, creating an additional channel for UK businesses to engage with the State.

CHIEF MINISTER OF WEST BENGAL, MAMATA BANERJEE, VISITS LONDON

LONDON

The Confederation of British Industry (CBI) launched the first

edition of India Sterling Assets in September, which was produced in partnership with PwC and UK India Business Council.

We are delighted to report that the UK plays a substantial role in the Indian growth story, being the largest G20 investor, having invested US $22.2bn between 2000 and 2015. The study reveals that UK investments have directly generated around 138,000 new jobs within this fifteen-year timeframe.

This is around 7% of the total 1.96 million jobs generated by FDI in India. Joint ventures, partnerships with Indian companies as well as wholly-owned subsidiaries and branches of UK companies currently employ around 691,000 people across India, which is 5.5% of the total workforce in the organised private sector.

This report demonstrates that, at 4.4% of profits, UK companies spend more than twice the legal requirement on CSR. They also spend an average of 7% of their total revenue on training and up-skilling their employees in India.

INDIA STERLING ASSETS REPORT LAUNCHED

LONDON/NEW DELHI

Just after he delivered his first full budget, the UK India Business

Council and Federation of Indian Chambers of Commerce and Industry, hosted the Indian Finance Minister, Arun Jaitley, in London (right).

At a business seminar attended by 300 UK business leaders, Mr Jaitley outlined the growing areas of possible collaboration between the UK and India and took questions from the audience on the Indian business environment.

UK INDIA BUSINESS COUNCIL HOSTS THE INDIAN FINANCE MINISTER

LONDON

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HARROW

UK India Business Council held a successful full day of training for London-

based SMEs in August as part of the Gateway Asia II programme. Participants received an introduction to the Indian market and practical guidance on how to do business there, via one-to-ones with India experts, online tutorials, and seminars. The programme has been part-funded by the European Union.

LIVERPOOL

The UK India Business Council has signed up to a working partnership

with International Festival for Business 2016 (IFB 2016) to help promote the festival and the benefits of attending to its corporate members across India and the UK.

UK India Business Council’s Chair, Rt Hon Patricia Hewitt, met with festival director, Ian McCarthy (pictured above), to officially sign the agreement that supports IFB 2016’s objectives to encourage Indian businesses in manufacturing, environment and energy, and creative and digital sectors to attend the three week festival, which runs between 13 June and 1 July 2016.

“The UK India British Business Council is delighted to be IFB’s international partner for India. 2014 was a fantastic experience – generating £300 million of business – and we’re sure that 2016 will be an even greater success!” said Rt Hon. Patricia Hewitt, Chair, UK India Business Council.

INTERNATIONAL FESTIVAL FOR BUSINESS 2016 RECEIVES UKIBC SUPPORT

FUTURE OF UK-INDIA COLLABORATION DISCUSSED AT UKIBC ADVISORY COUNCIL

In June the UK India Business Council’s Advisory Council met for

the fifth time since forming in 2013. Led by UK India Business Council

Chair, the Rt Hon Patricia Hewitt, the Advisory Council met in London to discuss issues affecting UK India collaboration across a range of sectors.

The people attending the Advisory Council meeting were: Graham Cartledge, Chair, Benoy; Professor Sir

NEW MARKET EXPANSION SERVICES LAUNCHED ‘BUSINESS SETUP’ AND ‘RECRUITMENT SUPPORT’

GURGAON

The UK India Business Council has launched two new services to help

UK corporates with their market expansion plans. The services ‘Business Setup’ and ‘Recruitment Support’ provide UK companies with a pain-free and reliable way to incorporate and fully register their company in India, and

recruitment support to help source the right staff in India.

Visit ukibc.com for more information or call either 0800 1096 176 or +44 (0) 207 592 3040 to speak to an adviser.

LONDON

SUCCESSFUL “DOING BUSINESS IN INDIA” TRAINING DAY

Mike Gregory, Head, Institute for Manufacturing, University of Cambridge; Ivan Menezes, CEO, Diageo; Stuart Paver, MD, Pavers; Sir Richard Stagg, Chair, Rothschild; Kevin Wall, Chair, UK Corporate Banking and Vice Chairman Investment, Barclays; David Whittleton, Chief Operating Officer, Arup Group; and Richard Masters, Director of Sales and Marketing at The Premier League, English Premier League.


INSIGHT INDIA

Prime Minister Modi is establishing a framework for the revival of Indian federalism, and businesses and the people

of India will be the main beneficiaries. The Cooperative Competitive Federalism initiative

establishes equal partners – the Union and the states - with a common goal, shared powers and overlapping jurisdictions. It also encourages a race to the top, with States vieing for investment and talent.

In the recent past, federalism has been framed as a ‘centre-states relations’ problem, with party politics pivotal. The relationship was positive when the same party was in power in both the State and in Delhi, but negative when different parties were in power.

Mr Modi has changed the game by introducing four policies that position the centre as the catalyst, and give states the powers and responsibilities to drive their own development: 1 Acceptance of the 14th Finance Commission’s

recommendations, which transfer about half of the central government’s receipts (including non-tax receipts) to the states, thus incentivising the States to improve their financial management.

2 Creating the National Institution for Transforming India (NITI) Aayog to replace the Planning Commission. While the Planning Commission operated, essentially, in a top-down manner, the NITI Ayog’s brief is to facilitate Union-State policy coordination and deliver a proper balance between cooperative federalism and constructive competition among the states.

3 A pan-India Goods and Services Tax (GST), which will have far reaching financial implications, including making India a single market. A boon for businesses.

4 Generating resources from non-conventional sources, such as auctions and using state assets more productively. For example, the auctioning of coal blocks from 32 mines is expected to generate

around £20 billion, most of which will be turned over to the concerned states, substantially improving their fiscal base.

While much difficult work lies ahead, it is accepted that cooperative federalism will be a process. It is, though, a process that is gathering pace, with many states agreeing to align their strategies with Mr Modi’s objectives.

It is, however, important to consider that states are unevenly

‘MR MODI HAS CHANGED THE GAME BY INTRODUCING FOUR POLICIES THAT POSITION THE CENTRE AS THE CATALYST, AND GIVE STATES THE POWERS AND RESPONSIBILITIES TO DRIVE THEIR OWN DEVELOPMENT.’

The UK India Business Council’s Head of Policy & Communications, Divya Dwivedi, analyses Prime Minister Modi’s mission to forge a new Indian model of cooperation and competitive federalism.

Forging a model of cooperative, competitive federalism

VIEW FROM INDIA


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WHAT NEXT? Contact Divya Dwivedi, Head of Policy & Communications at [email protected]

equipped to compete due to regional socio-economic disparities and differences in governance capabilities. Cooperative competitive federalism will have to therefore stand the test of time. How the Union government through the NITI Aayog delivers on this agenda will be crucial for its success.

It is already encouraging to see the business benefits of competitive federalism as States reduce red tape and simplify compliance procedures to appear more business-friendly and attract investments. Rajasthan has relaxed legislation on a range of issues including land and labour and West Bengal has introduced a series of key initiatives including introduction of web-based services and time-bound delivery of services such as trade licenses, environmental clearances and power connections. The central government’s decision to rank states on ease of doing business and the

contest-led approach to funding assistance for smart cities development is also reflective of the pursuit of competitive federalism.

As seen with the visit to London of the West Bengal Chief Minister in July 2015, Indian States will take their competition for investors onto the international stage. This proactive engagement, improved governance, and less red tape, will create new and exciting opportunities for UK businesses, and make them easier to access.


INSIGHT INDIA

A new innovative partnership of trade is beginning to develop between India and the UK. Patricia Hewitt, Chair of the UK India Business Council, discusses here her special connection with the large Indian community in the UK and her enthusiasm about the future relationship between the two countries.

A natural partnership

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INTERVIEW

Patricia Hewitt had a long and distinguished career in politics and government, including as the longest-serving Secretary of State

for Trade and Industry in the last fifty years. She also served in Tony Blair’s government as Cabinet Minister for Women (2001 - 2005) and Secretary of State for Health (2005 - 2007). Between 1997 and 2010, Patricia was Labour MP for Leicester West. In October 2014, Patricia was selected by the UK Government to receive the first Dadabhai Naoroji award to recognise her contribution to economic ties between the UK and India.

What makes India such an exciting market to operate in? India is extremely exciting at the moment. It has a market growing faster than almost any other country and is soon going to be one of the world’s

largest economies. It also has a fast growing and aspirational consumer population who want a lot of the things that the UK can provide. Alongside that there is lots of innovation in the country, developing a market that our companies can learn from, work with and invest in.

How was it that you came to be involved in India? I have a long-standing love affair with India. When I was a Member of Parliament in Leicester I formed very close links with the large Indian community there. Then when I was the Trade and Industry Secretary I made India my number one international priority, as I thought we had been neglecting the relationship and that it needed strengthening. The result is that I have relationships with Indian business and political leaders that stretch back nearly twenty years.

What opportunities does India represent for the UK? The opportunities in India are so numerous across sectors that the challenge is to know where to start. The Prime Minister has set out his priority through the Make in India campaign, which is a plan to make India a global manufacturing hub. Manufacturing, engineering, defence and aerospace are all sectors where India wants to excel and where the UK has world-class companies, forming a natural partnership.

Prime Minister Narendra Modi used the phrase ‘unbeatable combination’ when he launched the ‘Great Collaborations’ campaign, and I think that is a great phrase to use. Any company that is thinking about its international strategy and not thinking about India is missing out. Not only is it a large market but it also provides the opportunity to partner with an innovative Indian company.

‘PRIME MINISTER NARENDRA MODI USED THE PHRASE ‘UNBEATABLE COMBINATION’ WHEN HE LAUNCHED THE ‘GREAT COLLABORATIONS’ CAMPAIGN, AND I THINK THAT IS A GREAT PHRASE TO USE.’


INSIGHT INDIA

What opportunities in smart technology does the relationship offer?Prime Minister Modi’s wants to create a hundred new smart cities. A year or so before he announced that ambition the UK government had itself embarked on a smart cities programme in the UK. The UK has a very long tradition of liveable cities and hugely imaginative urban developments, including industrial cities such as Manchester and newer cities like Milton Keynes. When you combine all that vision in urban planning with the UK expertise in digital technology you can see what we have to offer.

India is a very different country. Will it take time for UK companies to adjust? The sheer scale of India can be very daunting. It has a population of well over a billion and is growing fast, which can be a challenge for UK companies. For example if a UK further education college wanted to move into India, they would have to upgrade their programmes from hundreds of people to thousands. This can also be an opportunity to expand however, and the key is not to be frightened by India but see it for the opportunity that it is.

How do the historical links between the two countries impact the relationship?The historical link can sometimes be problematic and lead UK business leaders to think that India is a lot more familiar than it really is. However, it has left the UK with the second largest Indian diaspora community in the world, and this gives us a great advantage when partnering with Indian companies.

How can the UK India Business Council help small companies who perhaps do not have sufficient knowledge to enter the market?We can speed up and reduce the risk of the entry process, and can help SMEs make significant connections with future investors, customers, buyers or partners. We also have these three wonderful UKIBC Business Centres in Gurgaon, the big Business District just outside Delhi, Bangalore and Mumbai. Businesses and entrepreneurs coming into India can use these centres as a home away from home. Through Launchpad® we can employ a dedicated consultant to work exclusively on a company’s behalf. This allows us to take on the legal, administrative, and financial technicalities

‘IT IS ESSENTIAL FOR UK COMPANIES TO GET OUT TO INDIA AND START BUILDING RELATIONSHIPS. WINNING CONTRACTS IS NOT ALWAYS EASY AND IT IS IMPORTANT TO GET TO KNOW THE RIGHT PEOPLE FIRST.’


Bagmane Tech Park, Bangalore, and Canary Wharf, London

and responsibilities so they can focus on their market entry strategy. Many companies have found this very useful when first coming into India.

We can also help businesses work out which state and which city will be best for them to work in. The Indian government is very deliberately promoting a philosophy of ‘competitive federalism’ and encouraging the different states to compete against one another for inward investment. This is helping to drive reduction in red tape and increase the ease of business. An example is the State of Rajasthan, which has not been high on most UK companies priorities but is now becoming one of the best governed and most business friendly

States in the whole of India. This is the type of useful local knowledge that ourselves and the UKTI can provide.

What is your advice to UK companies looking to move into India?It is essential for UK companies to get out to India and start building relationships. Winning contracts is not always easy and it is important to get to know the right people first. UK India Business Council’s members are willing to share their formal intelligence and companies can really benefit from that. Taking the time to learn from the people you are building relationships with will put you on the road to success.

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INSIGHT INDIA

The liberalising Indian market

INTERVIEW

What is it about India that makes it such an exciting market to work in?India has emerged as one of the most

attractive destinations in recent years. The World Bank and the IMF expect India to overtake China and become the world’s fastest growing major economy. There are numerous reasons India is such an attractive option. These include the fact that they have a large and fast growing middle class and hence growing domestic consumption. There are also rising rural incomes and continuing urbanisation which will continue to increase opportunities in India’s second tier cities and create new markets. With India’s large population skilled manpower is readily available and its geographic location, close to the expanding markets of South East Asia and the Middle East, make it all the more attractive a proposition.

What is the general perception of UK businesses about the obstacles to doing business in India?It is often believed that investment and trade barriers, getting approvals and dealing with bureaucracy in India remain the main obstacles for businesses. However, the country has come a long way since 1991, when financial and economic reforms began. Today, 100 per cent foreign direct investment is permitted in most sectors of the economy, and government of India is very focused on framing a conductive regulatory environment.

Although the recent tax disputes in India with MNCs have created some negative perceptions, the current government has taken several positive steps such as General Anti Avoidance Rules (GAAR) which has been deferred beyond the stipulated date of April 1, 2015 and the Government has not appealed against court rulings in favour of MNCs.

The India market is liberalising and has much to offer. It would be wrong to pretend that no barriers remain, but there are real opportunities for those who are prepared to take advantage of them. Also there are organisations with the expertise and knowledge to help you succeed in India.

How can the UK India Business Council help UK companies overcome these challenges? With an extensive network of influential corporate and individual members, UK India Business Council provides the resource, knowledge and infrastructure support vital for UK businesses to make the most of the opportunities in India. UK India Business Council provides Launchpad facility which is a stepping stone for UK companies looking for incorporation or a joint venture in India. We also provide modern office facilities in India through our business centres in Guragon, Bangalore and Mumbai, as well as a range of market entry advisory and support services including member only sector policy groups.

India is going through dramatic changes and will soon be much easier to operate in, says Richard Heald, Chief Executive of UK India Business Council.

Who are the UK’s main competitors when attempting to move into the Indian market? With the election of the NDA government in India last year and, particularly, the launch of the ‘Make in India’ programme, trade and investment in and with India has received global attention and become sharper and more competitive. India offers a wide range of opportunities, and almost every country can benefit from a partnership with India. The US, Japan, China, Australia and EU countries are exploring opportunities to make in India, in Smart Cities and in Digital India.

The UK remains the largest G20 investor in India, a position it has occupied for the past 14 years. Over 600 UK companies of all sizes are present in India. Some 550 UK funds are registered with SEBI investing over US$20bn in Indian companies via the Indian Stock markets and coupled with significant investments from UK venture capital and private equity markets the City of London plays a leading role in India. The way forward is to build on these existing linkages to enable both the UK and India to meet the demands of the globalised world of the 21st century.


The liberalising Indian market

A number of sectors, such as organised retail, have begun to be opened up to foreign investment in recent years. Are there any other sectors where it has, or will, become easier to do business?Recent legislative reforms increased FDI limit in insurance and defence to 49% from 26% and India now allows 100% FDI in the construction sector and railway infrastructure. UK companies should also seek opportunities in India’s projects such as Smart Cities, Digital India and Skill India. India has one of the world’s largest educational systems with 1.4 million schools, 35,500 colleges and 600 universities; over half its population is under 30 years of age, and each year, 10 million people join the workforce. There are immense opportunities in the skills and education sector and the excellent academic capabilities and assessment methodologies make the UK an attractive partnership proposition for India.

India plans to build 100 new cities, can you tell us what India hopes to achieve by building these and how they will affect the country as a whole? Cities in India contribute over 60% of the country’s

‘INDIA OFFERS A WIDE RANGE OF OPPORTUNITIES, AND ALMOST EVERY COUNTRY CAN BENEFIT FROM A PARTNERSHIP WITH INDIA.’

GDP and 80% of tax revenues. Recognising that there is an urgent need to improve urban planning, design and management, India announced an ambitious ‘100 Smart Cities’ programme. At present, India has 68 cities with a population greater than 1 million. Europe only has 35 such cities. It is estimated that the demand for essential public services namely water supply, sewage, solid waste and transportation is expected to increase by 4.5 to 8 times the existing demand. Through the Smart Cities project India hopes to make urban areas more liveable and to make them engines of economic growth.

The project creates opportunities for UK companies in areas such as: clean and reliable


INSIGHT INDIA

water and sanitation; uninterrupted power which includes green and renewable sources; effective solid waste management and sewage treatment with a waste to wealth approach; effective use of ICT in areas such as last mile connectivity, security and governance.

In terms of ‘ease of doing business’ how easy will it be for British companies to benefit from the investment being put into these new cities?Under the recently launched guidelines for developing smart cities, the selection of the final 100 smart cities will be a two-pronged process involving intra-state and inter-state competitors. To be eligible for funding assistance from the Central government, State governments will have to undertake a set of 11 reforms in urban governance and service delivery. Cities within a state will first have to compete with one another and after the state governments pitch their nominations, merely 20 cities that fit the norms will be eligible for funding in the first year of implementation, followed by 40 each over the next two years. This contest-led approach to Smart cities development is reflective of the pursuit of competitive federalism and is expected to improve the business environment.

Are there any particular States Governments that are making dramatic progress on the ease of doing business? For the first time India is seeing a move towards strengthening the federal policy and promoting competitive federalism through increased state-level autonomy. With a focus to improve the ease of doing business in India, India’s Commerce and Industry Ministry has initiated an extensive survey on ‘ease of doing business’ in states which will surely improve the business climate of the country. Many states are doing their best to cut down on red tape and simplify compliance procedures to appear more business-friendly and attract investments.

For example Rajasthan has relaxed legislation on a range of issues including land and labour. Madya Pradesh has also gone ahead with an overhaul of state labour laws to make it business friendly and other states such as Haryana, Uttar Pradesh and Punjab are also looking at similar measures. Delhi and Maharashtra have allowed online registration of shops and establishments. West Bengal has introduced a series of key initiatives including introduction of web-based services and time-bound delivery of services such as trade licenses, environmental clearances and power connections. Chhattisgrah has introduced online consent monitoring and management system for grant of environmental clearances. While Maharashtra has reduced the number of procedures and time in getting electricity connection, Punjab has exempted 131 types of industries from pollution consent requirement.

At a national level what changes are India’s national government making to improve the ease of doing business in India?The Indian government’s efforts to enhance ease of doing business in the past few months include: withdrawal of requirement of minimum paid up capital and common seal for companies; allowing single step incorporation of companies through the inc-29 form; the integration of 14 government services on an online single window portal called eBiz; cross-border trade eased by reducing the volume of paperwork for export and import.

Also the Department of Industrial Policy and

Right: MFG Metropolitan mall 4, Jaipur

Far right: Tunnel boring machine on construction site building in Bangalore

Below: ICT conference and exhibition, Kolkata

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Promotion (DIPP) is now producing its own ease of doing business rankings for the different states and promoting competitive federalism will produce enclaves of competitiveness, encourage reforms and boost growth and development.

India’s new National Government has put a strong emphasis on encouraging foreign investors to ‘Make in India’. Do you think this initiative has made a tangible difference? Encouragingly, India is off to a good start in the new fiscal year with manufacturing output growing by 7.1% in 2014-15. India’s energy consumption increased by 7.1% in 2014 which further signals expansion of the Indian manufacturing economy. The NDA government’s thrust to promote ‘Make in India’ globally has yielded results as the manufacturing sector posted a 142% growth to £98 bn ($1.55 bn) in FDI in April over the same period last year. The economy and consequent growth numbers are improving, however sustaining this momentum depends critically on effectively implementing, in a time-bound manner, the various initiatives announced by the government.

The National Government recently announced it aims to be in the top 30 countries in the ‘ease of doing business’ index, what measures do you think they should prioritise to make this happen? The introduction of a pan-Indian GST will be a potential game charger for the Indian economy and government should prioritise its effective implementation. A stable, clear and transparent

tax regime will greatly improve the perception of India as an investment destination. To improve the ranking in particular, the Central and State government should work together to ensure transparency in governance and time-bound delivery of services. India is not really a single market with legislative and investment climate changing from one state to another. Cooperative and competitive federalism will therefore play a key role.

How does the UK India Business Council help foster greater collaboration between the UK and India?Working with the UK government and other influential and connected partners, we ensure business interests are conveyed to India’s Union and State legislators. We seek to influence decisions that will make it easier for UK businesses to operate in India. Our network is at the heart of our support. Through our wide variety of events and our member-only sector policy groups, we enable businesspeople to meet each other, identify potential partners, suppliers and customers, and to learn from top business leaders and commentators, including those on our Advisory Council.

We work across India and the UK to promote the interests of UK businesses with ministries and officials by partnering with a wide range of government and non-government organisations. These include UK and Indian trade associations, think tanks, and other influential bodies. We produce white papers, and facilitate interactions between businesses, politicians and policy makers to generate a shared understanding of the issues.

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INSIGHT INDIA | Issue 01 | 17


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INTERVIEW

Kumar Iyer is the British Deputy High Commissioner in Mumbai with responsibility for Western India and the Director General

of UK Trade and Investment with overall responsibility for the UK-India trade relationship. The Mumbai office has some 150 staff, whose main work covers trade and investment, entry clearance and bilateral relations with India. There are over 80 UKTI staff across India that work to support British businesses wanting to trade in India and Indian businesses investing in the UK.

From your perspective what is the state of the relationship between the UK and India? The relationship is in good place: the UK is the largest G20 investor in India, last year it invested more in India than America and Japan combined. In turn, India invests more in the UK than in the EU combined.

Encouraging trade and investment

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What are the key differences in doing trade with India? There are many, from language and culture to laws and regulations. Perhaps one of the things that isn’t always obvious is that it’s a federal setup, and the States are quite autonomous and have quite a bit of power. They all have varying levels of bureaucracy so picking the right locations is important. Since Prime Minister Modi came to power there has been an increased level of competition between the States, each one of them vying to outdo the other in terms of how business-friendly they are.

One of the big drivers of this change is Mr Modi himself, and it stems from his time as a Chief Minister. He showed what was possible at a state level, even at a time when the central government was from a different party. So the state Chief Ministers’ incentives are very much aligned in trying to make things as easy as possible for businesses.

Kumar Iyer; Chhatrapati Shivaji International Airport, Mumbai

The UK should be India’s partner of choice across all fields, says Kumar Iyer, British Deputy High Commissioner in Mumbai.


And how is the ease of business?It’s moving along. The government is talking about doing the right things and in many cases it already has done the right things, such as the Insurance Bill. Some of the relaxation in FDI has helped to open doors and encourage people to think a bit more optimistically about India. But the government is facing ongoing challenges in terms of passing certain pieces of legislation, but what’s important here is that they’re still trying, and they’re trying hard. It’ll take time - Prime Minister Modi himself said that it’s going to be a 10-year journey to put through the bulk of his reform agenda and he’s probably right.

As well as regulatory reforms India also needs better infrastructure, whether it’s roads, hospitals, electricity or energy. It will take time. However, the goodwill and the number of people who want India to succeed is quite significant. So if the government can bring about the reform needed to unlock that goodwill and that desire to “Make in

India” and to invest in India, then I think India has a lot that’s going for it.

What is your relationship with the UK India Business Council and how does UKTI work alongside them?I speak to Patricia Hewitt and Richard Heald on a regular basis, and we have representatives that sit on the UK India Business Council board so the relationship is good and it’s close - it needs to be. And it’s early days as well . People forget that no more than two years ago UK India Business Council was yet to build a physical presence in India and so the teams are still learning how they interact and work with each other, but so far so good.

Which sectors are you particularly focusing on and looking to encourage in your role? India’s a big country and we don’t pick one or two sectors; we pick five, six, seven sectors. That’s because a bilateral relationship of this size needs to operate across education, healthcare, financial services, infrastructure as well as retail and consumer goods, in which India is one of the biggest and most rapidly growing markets in the world. So the question is not so much about deprioritising or prioritising sectors, but being able to support UK business efficiently across the board.

Where prioritisation comes in is making sure that you are supporting in the areas that are most productive. UKTI has improved its performance over the last two years both in investment, where investments from India to the UK increased by 65% last year and also in trade where UKTI has supported over £1bn of business wins this year already (a 10 times increase on the previous year). A large part of that has been because of our relationship with UK India Business Council, which has taken on a lot of the high-volume work such as Market entry consultancy work and the market introductory services.

The new UKIBC Business Centres are great; if I was a UK business I would think this is fantastic - I can get off a plane, I can rent a desk by the week, I can get an internet access that works, put an address on my business card and find immediate support, including to hire staff and manage

‘SINCE PRIME MINISTER MODI CAME TO POWER THERE HAS BEEN AN INCREASED LEVEL OF COMPETITION BETWEEN THE STATES, EACH ONE OF THEM VYING TO OUTDO THE OTHER IN TERMS OF HOW BUSINESS-FRIENDLY THEY ARE.’


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payroll. In an operating environment like India that is a definitively superior offer. It allows UKTI to focus on the areas where government can help the most, which is the focus of our strategy.

How is your background in the private sector helping you in the role?It is helpful having a commercial background; I’ve built enough spreadsheets and done enough presentations to know both their advantages and their limits. It also helps me understand better what the role of government can be and where government can help. UKTI’s work is to focus on the aspects that either only government can do or government can do best. In India, government involvement and support is needed in many cases, so having a private sector background helps me to understand not just where UK India Business Council and its members are coming from, but also where wider UK business is coming from, making sure we focus UK taxpayer energy on the areas that UK business really needs us to help with.

What is the biggest challenge that needs to be overcome when encouraging UK-India trade?There are some real-world challenges but there are also some perception challenges as well. On the real-world side it can be difficult turning up in India if you have no experience of the market and India does have more forms to fill than many other countries! More damaging is the perception that things are worse than they really are.

The India-UK Business Convention in September is tackling these issues. Such large-scale gatherings are good and efficient ways for businesses to test out the market if they’re not already thinking about it, and if they are already thinking about it, to go that little bit deeper. In India having a good local partner is a really good strategy for a lot of businesses.

Education is obviously a massive issue in India with the large youth population. Can you tell us a bit about the Generation UK project and what you hope to achieve through that? The average age in India is 25 and if that section of the population is well-skilled, well-trained and well-developed, then you’ve got a big demographic dividend there. No other large country has such an advantage in this area. We are not only focused on bringing UK skills providers out here and encouraging bright Indian students to study in the UK but we are trying to encourage a two way flow, with UK students coming to India as part of Generation UK. This year was the first trial run for Generation UK. We opened up 500 spots and had 2500 applications. It shows clearly the interest and the demand. It’s a really interesting project because a lot of people think about our skills and education connection as being relatively one-way, but if you

want to build long-term partnerships you need people going back and forth in both directions. Generation UK is about bringing British students across to India and I’m really excited about it. So hopefully over the course of five years there will be 25,000 students.

Your role as Deputy High Commissioner means your responsibilities extend beyond trade. Are you taking steps to encourage cultural dialogue between the countries? We work obviously with the British Council very closely on all of these and even since I’ve been here, the British Museum has brought several displays across to Mumbai, as has the Tate Gallery, the British Library, as well as artists from Julian Opie to Howard Hodgkins. It’s important to build a relationship on lots of levels - if you want any chance of understanding another country you need to understand their art and their history otherwise you’re going to struggle to understand them at all.

‘THE NEW UKIBC BUSINESS CENTRES ARE GREAT... IN AN OPERATING ENVIRONMENT LIKE INDIA THAT IS A DEFINITIVELY SUPERIOR OFFER. IT ALLOWS UKTI TO FOCUS ON THE AREAS WHERE GOVERNMENT CAN HELP THE MOST, WHICH IS THE FOCUS OF OUR STRATEGY.’


What are your ambitions and aims for the future of the relationship? What would signify success in your opinion? I’m exactly half-way through my posting and if someone had given me where we’d be at this point I would probably have taken it. On the commercial side we’ve done a lot in the last two years and my hope would be to hold that same position or do slightly better on the investment side. On the trade side I think there is still a lot further to go and we see the EU3 as a key benchmark to keep beating - we have beaten them over the last three years but we need to continue to do a lot better. On the non-trade and investment side, we have the second largest number of visa applications in the world that come through Western India and we have a very large consular workload - for example more than 120,000 British nationals visit just Goa every year.

There is a wide range of areas that we run smoothly, but just continuing to get them ticking over the next few years would be a big part of that success. But the real ambition is to position the UK as India’s partner of choice across all the fields in which we operate.

Kumar came to Mumbai in July 2013 from Her Majesty’s Treasury where he held a number of senior posts including most recently as Head of Financial Sector Interventions which included responsibility for the Government’s stakes in the Royal Bank of Scotland and Lloyds Banking Group; and Deputy Director for Strategy, Planning and Budget which included oversight of the UK Budget process and overall strategy for the Treasury. Prior to that Kumar was Deputy Director of the Prime Minister’s Strategy Unit, where he worked on a range of policy priorities for the Prime Minister.

Prior to his public sector career, Kumar spent several years at the Boston Consulting Group working mainly in the Financial Services Practice but also for large multinational media and retail clients. Kumar joined BCG from Harvard University where he was a Kennedy Scholar and also a Teaching Fellow in International Capital Markets at the Kennedy School of Government. He has an MPhil in Economics from Cambridge University where he was a Bank of England scholar and an undergraduate tutor in microeconomics; and a BA in Economics from Durham University where he was a Deloitte scholar.

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INTERVIEW

John Brosnan took up the role of Managing Director for South East Asia and India in January 2014, with responsibility for all

BAE Systems operations across this region. John heads the Company’s regional headquarters in Kuala Lumpur, and his role focuses on strengthening relationships with customers and industrial partners, as well as developing new business opportunities across the region.

Before moving to Malaysia, John was Senior Vice President for Offset and Operations for BAE Systems, managing the delivery of the Company’s multi-billion dollar industrial partnership programmes in some 20 countries across the globe. Having joined the Company in 2008 as Director for Corporate

Given the right conditions we see India becoming an aerospace and defence manufacturing hub for the region and beyond, says John Brosnan, Managing Director, Southeast Asia and India, BAE Systems.

Flight of the Hawk

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Development, John was initially involved in developing international industrial partnerships under the BAE Systems ‘Home Market’ initiative.

Prior to this, John worked for the UK Government in a variety of roles, including over ten years in the UK MOD on equipment acquisition, logistics and international security collaboration. He also worked in UK Trade and Investment (UKTI), as a Regional Director and Business Development Director, and had operational tours with the Royal Navy, at NATO Headquarters in Brussels and the UK Crisis Management centre.

John has an MBA from the London Business School, is a graduate of the Whitehall and Industry Group’s Senior Leaders’ Programme and a fellow of the Chartered Institute of Management.


with HAL into our Hawk Global Supply Chain. In the near term, we are looking forward to

progressing to signature a contract to supply products and services for HAL’s manufacture of an additional 20 Hawk advanced jet trainer aircraft for India’s prestigious aerobatics team, the Surya Kiran. The new team comprising four Hawk aircraft debuted at the Air Force Day Parade in October and we are excited and proud to see these ‘Made in India’ Hawk take-off.

In addition to the aerospace and defence sector, are you exploring any new areas for growth in India?India is a key international market for BAE Systems and we have an established defence and aerospace footprint in the country that spans several decades. Our strategy is to offer the full span of our capabilities in India to include solutions for cyber security, financial crime, communications intelligence and digital transformation and help law enforcement, banking and insurance, telecoms and critical infrastructure enterprises protect and enhance their critical assets. The Indian security market is at the start of its growth trajectory and we have begun building our understanding of client requirements, showcasing our capabilities and meeting and engaging with local sector participants.

You have been a major investor in the community. What’s been your experience?India has a clearly articulated goal of improving its position on key Human Development Index parameters and achieving the Millennium

What has been the impact on your vision for your business in India with the emphasis on ‘Make in India’?‘Make in India’ is a powerful and hugely positive idea and we are fully aligned and committed to supporting its success. We take pride in being a founding partner of defence manufacturing in the country - with a track record of the Avro, Jaguars, the ‘Leander-class’ ships, and most recently, the Hawk advanced jet trainer manufacturing programmes. The cornerstone of our strategy for India is partnerships with Indian industry, both public enterprises and private sector, with whom we share technology and capability and co-produce and co-develop in India, for India, and from India for other markets.

Spurred by Prime Minister Modi’s call to ‘Make in India’, we have significantly enhanced our offer on the Indian Government’s procurement of the M777 ultra-light howitzers from the US Government and committed to establish a specialist Assembly, Integration & Test facility for this one-of-a-kind weapon system in India with an Indian industrial partner. This programme will also integrate nearly 40 Indian companies into our global supply chain. From an investment point of view, we were a first mover amongst international companies to make a direct investment in local manufacturing in partnership with Indian industry, and going forward too, we remain enthusiastic about such opportunities.

The Hawk has been inducted in the Air Force in large numbers and the Indian Navy has also inducted it. What are your plans for the platform going forward?India is the largest operator of the Hawk advanced jet trainer with 123 aircraft ordered to date. Of these, 99 are Made in India at the production line we helped establish in Bengaluru working closely with the Indian Ministry of Defence and HAL. It is no wonder then that the Hawk advanced jet trainer manufacturing programme is a flagship for BAE Systems in India, and together with HAL, we believe there is substantial scope in our partnership for exploring long-term sustainable business opportunities, globally.

Towards this, we recently signed an MoU with HAL for Hawk Mk132 upgrade, development of combat Hawk for Indian and export markets, and maintenance solutions for supporting Jaguar and Hawk fleet. These discussions got off to a good start with a five-year contract worth GBP 18.5 million to provide HAL a comprehensive package comprising Ground Support Equipment, Spares, Support and Training for the Hawk. This is in support of HAL’s plans to establish a dedicated Repair & Overhaul facility for the aircraft in advance of a major servicing milestone anticipated in 2016. We have also qualified Indian suppliers working


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Development Goals and our community investment programme in India supports this. We’ve just concluded a multi-year programme with Smile Foundation, a national level, not-for-profit trust in India focused on improving access to quality education and healthcare amongst select underserved communities across eight locations in seven states. I am pleased to share that this programme set an exceptional standard of continuous beneficiary-focused performance and has delivered a healthy set of outputs and outcomes directly impacting over 51,000 beneficiaries and mainstreaming over 400 non-school going children into formal mainstream schooling.

We are excited about our next phase of investment in India for which we have initiated discussions with several potential partners.

What are your views and plans for local Indian suppliers?For us, partnerships, both manufacturing and technology-based, are vital and we are in continuous discussions to expand our current portfolio with an emphasis on MSMEs. In fact, for

the M777 Ultra-Light Howitzer FMS case, we have integrated over 40 Indian MSME companies into the $200 Million Offset Offer. Additionally, we have developed Goa based Kineco Kaman Composites India (KKCI) Private Limited, a Joint Venture Company between Kineco Group of Goa and Kaman Aerospace Group USA, as a supplier on our industrial commitments on the Boeing P8 Poseidon acquisition by India. Our aim is to continue to develop domestic industrial capabilities and build skills in partnership with local suppliers.

What is your outlook for the Indian aerospace, defence and security sector?With the right incentives and enablers, predictable decision-making timelines, an increasingly liberalized FDI policy, further clarity in Offsets and Procurement policies, expansion of the existing talent pool, amongst others, we see India becoming an aerospace and defence manufacturing hub for the region and beyond.

Having partnered with Indian industry over several decades, we believe the sector is at a point of strategic inflection. The Make-in-India platform has the potential to focus all the various efforts of the past towards improving the import ratio. The opportunity is immense and there is positive early traction.

Our experience with some of the key Indian industry participants - Hindustan Aeronautics Limited on the Hawk advanced jet trainer, Mahindra with whom we had a Land Systems Joint Venture, BEL on the Tactical Communications System, and the supply chain assessment we conducted to develop a $200 Million Offset Offer for the M777 Ultra-Light Howitzer - makes us confident that the Indian industry is poised for its next phase of growth.

‘WE ARE EXCITED ABOUT OUR NEXT PHASE OF INVESTMENT IN INDIA FOR WHICH WE HAVE INITIATED DISCUSSIONS WITH SEVERAL POTENTIAL PARTNERS.’


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INTERVIEW

Chris Cracknell is Chief Executive of OCS Group, the facilities services company that operates across five continents, with over

91,000 employees. Founded over 100 years ago, sales exceeded £870m in the year to March 2014 – around a quarter of which came from operations in Asia Pacific. Chris joined OCS Group in 1977 after holding posts in the UK and overseas and was appointed to the Group Board in 1985. He was responsible for emerging companies and international development, including Thailand and New Zealand, which remain two of the largest and most significant international contributors to the Group’s results and profitability. In April 2015, OCS Group received a Queen’s Award for Enterprise in International Trade.

How did a family window-cleaning business grow into a global phenomenon? It’s still a family business today. When I took over as chief executive in 1996 I had a key ambition to increase our geographic coverage, and Asia in the emerging markets was a point of focus for me. We started off in Thailand in 1988/1989 with our first investments there, progressing from a very small business into our regional operating headquarters. This led to expansion into New Zealand, Australia and into other Southeast Asian countries.

We moved into India with our first janitorial contract in about 1999. In 2012, after a period of learning about the market, we made a series of three other investments to broaden our scope and capabilities within India.

Operating to global standards

Greater modernisation and a real willingness to embrace foreign investment will present an abundance of opportunities for British business, says Chris Cracknell, CEO, OCS.

We then grew our business in the Middle East and the culmination was the Queen’s Award for Enterprise for international trade this year.

How do you guarantee the level of organisation and quality that you need to when your providing such a huge array of services?At one level you can look at it as a wide range of services, but at another level actually it’s very narrow. It’s about making a building operate to greatest effect for the client and our expertise is in coordinating the data, in coordinating the site management and sharing best practice from around the world. It’s not one glove fits all; it’s actually about tailoring a solution that’s quite specific to the needs of that client and the area in which they’re operating.

We have to take into consideration clients that operate in multiregional destinations with different languages and cultures, where the state of the economy can be completely different. This has an impact on how we can operate. You can’t just run it remotely from overseas - these are people that are carrying out duties and making decisions every day and every minute for the client on site. That’s where our expertise lies, around our computer-aided facilities management programmes, around the training we give our staff and how we bring that together as a package for the client.

Obviously commercial buildings, whether factories or hotels, is about the provision of all the services that enable those buildings to function. It requires us to manage the data of that building such as the movement of people in and out of a shopping centre or commercial office, taking decisions such as when you need the heating or the air conditioning and how


that can be run in a sustainable economic way.It’s about the provision of soft services, the

catering, the cleaning, washroom hygiene, anything that enhances how that building operates. Most of our clients want to focus on their core activity; we want to provide them with an environment in which they can do that effectively and that is what we do in facilities management. We’re able to coordinate our expertise from around the world and share best practice in our solutions anywhere in the world. That’s one of the great positives with OCS.

So is it fundamentally about organisation?We are a people-intensive business, employing, training, organising and leading. It is about giving them empowerment and delegated authority to act

in the best interests of our clients. I go around the business on a regular basis and meet people on the front line, and I’m always amazed the extraordinary lengths they go to in ensuring our customers get quality service and a solution they need every day.

How did your business in India grow?India is a fascinating market case for us. There’s a huge amount of potential within India as it emerges and moves forward, and yet it has a number of inherent challenges that we need to overcome. Initially there’s a real need to understand the culture. So our first move was to find Indian business partners that we could trust who could provide the local knowledge to complement our international knowledge.

Our first janitorial contractt gave us a platform to gain a greater working knowledge of the Indian economy. We then moved in and launched our washroom hygiene business, again by way of a joint venture, under the Canon brand. Having a local partner enabled us to understand some of the nuances of India and how it works, especially when employing a lot of people. So we needed that bridge.

We chose people who share our ethics in our approach to business and the longevity of our goals. This enabled us in 2012 to make three further significant acquisitions to bolster our skills.

‘INDIA IS KEEN TO GET AHEAD - A LOT OF PEOPLE IN INDIA ARE LAPPING UP EDUCATION, BUSINESS OPPORTUNITY AND A DESIRE TO IMPROVE THEIR STANDARDS OF LIVING.’


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Acquisitions here have provided a rapid growth performance for us, enabling us to jump to a higher platform straight away. We can complement that with training and organic growth, and that has worked extremely well for us.

India itself, as a marketplace, is not easy necessarily to understand but I think when you look at the growing middle class within India, it gives you some idea of the potential of the Indian economy for the long term.

Is it going to be easy? No, of course it’s not, but actually by working and growing a local management team that lives and breathes the

way India works, then we can develop a sustainable business into the future and that’s exactly what is happening for us now.

Mr Modi famously described the relationship between the UK and India as an unbeatable combination. Do you agree with that statement?The statement has a lot of value. UK and India have a unique opportunity to work together incredibly well. Clearly there’s a lot of history that sits behind that statement, but essentially we have the capabilities to export from the UK into the Indian market. We have a huge advantage in the English language being very well spoken throughout India, and with Mr Modi’s visit to the UK in the near future. There are further opportunities for British companies to build and cement their bonds with India and the new Indian government.

As an economy it is rapidly growing; it has a very large workforce, which is mobile and extremely keen

to be educated and learn. They are all good ingredients for anyone wishing to invest. However, there will be challenges. There is a degree of protectionism; there are frustrations in operating in India and there are challenges around the way some of the cultural issues interface and contradict with business.

The way we have to operate now is to go in and understand those cultures, how the economics of the country work, and work within the structure and environment that India presents. If you’re prepared to do that and understand it and love the country,


then the opportunities in front of you are enormous and the relationship between Great Britain and India will be a real positive for the future.

What’s your take on the future, for OCS in particular and for UK companies in India in general?The big fundamental for me is the growing Indian middle class. A larger proportion of population in India can now travel overseas to see what the rest of the world is like, bringing back new ideas and ways of working.

India is keen to get ahead - a lot of people in India are lapping up education, business opportunity and a desire to improve their standards of living. This is a really good fundamental; the country has a lot of internal business so it’s self-sufficient in many ways. It can also operate on a global basis - look at the number of Indian businesses now operating around the world. I think if we ignore or underestimate the power of the Indian economy it will be our downfall.

In the next few years, I see greater modernisation and a real willingness to embrace foreign investment, but with restrictions. Those restrictions are not going to disappear quickly - we have to accept that and work with them. Through education hopefully those restrictions, whether it’s in percentage shareholding in say the security business, or whether it’s a restriction on how you can operate, will ease over time as the Indian economy is more established its own right.

WHAT NEXT?

Contact Steve Buckley, Asia Pacific Advisor, OCS on 07884 293 091 or email [email protected]

Some have said India is a difficult place to do business because the economics of the country mean that many organisations simply won’t pay the prices, particularly in the healthcare sector, that UK and other foreign businesses are demanding? We’re talking about an emerging economy here and we have to put this into perspective. Yes, you could say at one level, everything’s about cheapest price. But my experience is that, as the multinationals and internationals move into India and as Indian businesses become more internationalised, there is a much greater need for the standards and the operating levels that we experience elsewhere in the world to be replicated.

We’ve seen it first hand with our clients. We may have started off at one level but we’ve been able to bring it up to another level. If they’re going to operate in the healthcare market or in tourism health care, they will operate to global standards. Similarly in tourism, in manufacturing, in pharmaceuticals, they will operate to global standards.

All of these organisations will pay the price to get the right quality to have competitive international status on the global stage.


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It will take ten years to make the change but India has the keys to the future, says Horasis founder Dr Frank-Jurgen Richter.

Collaborative approaches to sustainable growth


INTERVIEW

Dr. Frank-Jürgen Richter is the Chairman of Horasis: The Global Visions Community. Horasis is an independent international

organization committed to enacting visions for a sustainable future. As one of the leading analysts of international business and emerging economies, he influences major business and governmental decisions with his public commentary. He has a thorough understanding of how the world functions today - an understanding created through an on-going interaction with top business, political and intellectual leaders around the world.

Preparations are well underway for the International Festival of Business in Liverpool in 2016, one of the largest gatherings of business and political leaders in the world. A global marketplace for creating connections and doing deals, IFB 2016 brings together thousands of businesses from around the world for three weeks of events, networking and deal-making.

Among the major partner is Horasis, the Global Visions Community, founded by Dr Frank-Jurgen Richter as an independent international organisation committed to enacting visions for a sustainable future. A former Director of the World Economic Forum, Dr Richter is an accomplished financier and linguist who believes passionately in dialogue and the exchange of expertise as the driver to greater global integration.

Horasis holds regular events that bring together highly influential groups of business leaders to discuss collaborative approaches to addressing sustainable growth. The meetings are the foremost annual gatherings of business leaders from emerging markets and their global counterparts, and are regularly attended by CEOs of leading companies.

Even at this early stage 150 companies have confirmed their attendance at the Horasis Global Meeting in Liverpool. “There is a very engaging dialogue going on and we very much believe in this dialogue,” Dr Richter explained to Insight India. “When there is trust you can bridge the divide and do business together. This is not a conference; it is a peer to peer event. We believe in community building where people come and meet each other, and the return ration for events is high - up to 80 per cent.”

Individual events held by Horasis centre on India, China, Russia and the Arab World.Dr Richter’s own expertise lies in Asia where he lived and worked for a decade, principally in Tokyo and Beijing where he became fluent in both Chinese and Japanese. “I see a lot of similarities between India and China,” he says. “There is a lot of investment going into the country”.

The Horasis India Meeting in July in Switzerland was the first landmark business meeting on India to

take stock of the state of the Indian economy after having seen the new government one year into power. More than 18 CEOs and two former government ministers took part, and the resulting dialogue identified many of the advantages and challenges facing the country currently.

“Mr Modi is using some elements of the Chinese approach, such as improving infrastructure by building a great network of highways, as well as focusing on energy and rail links. It’s what the Chinese did 20 years ago and it’s the right time for India to look at these issues as infrastructure has been a real bottleneck for the country,” observes Dr Richter.

“China is portrayed to be the world’s manufacturing hub but India is now taking over this role, especially in traditional industries like car manufacturing. Small to mid size companies are now rediscovering India so there are a lot of alternatives.

“Of course we have to give time to the Indian government; habits don’t change in a day. The big problem in India is really bureaucracy in the third and fourth layer; that is where the problems start.

ADVANTAGE “The States have quite some power, and maybe this is the reason to revisit the British system where a lot of power is concentrated in London. When investors go to India, they think its enough to talk to a minister in Delhi. But it’s not enough.”

As the largest G20 investor within India for the last 40 years, ‘the UK should use its historic and linguistic advantage to increase its investment. “The country is changing, and the Indians now differ in many parts from the British and the Europeans, and even the Chinese. They very much inhabit the American way of entrepreneurship. Almost everything is possible in India, a lot of young people are creating

companies, that is really the future. The young population is definitely a big advantage.”

Another important issue is creating stability for investors. “They don’t want legislation to change every month. The Chinese created a pro-investment climate and rolled out the red carpet for potential investors. This process has now begun within India. As a result, he feels confident that the climate is moving in the right direction and that ease of business is a priority for Mr Modi’s government. “It will take at least ten years to make the change, but the will is there and I feel very bullish about India right now.”

For further information on the International Festival of Business in Liverpool in 2016, go to www.ifb2016.com To read more of the Horasis India meeting, go to http://www.ifb2016.com/festival/schedule/26-horasis- global-meeting

‘ALMOST EVERYTHING IS POSSIBLE IN INDIA, A LOT OF YOUNG PEOPLE ARE CREATING COMPANIES, THAT IS REALLY THE FUTURE. THE YOUNG POPULATION IS DEFINITELY A BIG ADVANTAGE.’


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With a burgeoning population and rapid urbanisation, India has an acute need to expand on and develop its transport systems. This presents numerous challenges but also opportunities, says Hugh Jones, CEO of Steer Davies Gleave.

Connecting opportunities

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INFRASTRUCTURE

Transport in India is a complex issue and comes with a range of challenges. The size of the country and a lack of investment over the years mean much

of the transport connections have fallen behind the standards required to match the economy’s ambition. India has the second largest road network in the world behind the US. It also has the 4th largest and most heavily used rail system in the world. This magnitude means while progress is being made, there are large areas where the networks can be out-dated and not up to standards. With increased urbanisation the pressure is set to increase in city centres where at the moment huge demand is made of the road networks that can become extremely overcrowded during peak periods.

Transport is key to dealing with the increased urbanisation in India and allowing the country to fulfil its massive potential. However, the challenges are great. A lack of investment in the transport sector can cause a drag on the economy, as access to opportunities can be restricted. The electric and hybrid vehicle industry in India is virtually non-existent. Indian roads have a terrible record for accidents and deaths. The railway system is infamously overcrowded. It is clear that investment in new transport projects is needed and the Indian government have set aside vast amounts of money to this end.

The funding and management of these projects is also something that needs to be established. “The private sector has an important role to play globally in delivering transport solutions. The private sector brings capital, innovation and skills that are not always apparent in the public sector. The challenge though is for the public sector to harness those skills in a sensible way,” says Hugh Jones, CEO of Steer Davies Gleave. “Our experience in India to date suggests that this partnership is still emerging, and it is important that the partnership comes to fruition before the work can be conducted properly.”

SOLUTIONSThe new 100 smart cities proposed in India represents an opportunity to develop modern and innovative transport systems. The new Mumbai monorail, which was built to relieve pressure on the congested roads, is an example of the projects that India is trying to push through. However, Hugh Jones emphasises that advancements in transport do not necessarily have to be highly technical modern developments. Indeed because of the size of India, simple solutions can offer a cost effective alternative

Connecting opportunities

‘TODAY WE ARE SEEING THE DEMAND FOR AIR TRAVEL RISE ON A LOCAL BASIS AS WELL AS A GROWTH IN NEW INTERNATIONAL MARKETS.’

HUGH JONES, CEO , STEER DAVIES GLEAVE


and bring widespread improvements. “Often smart cities are seen as being highly technologically reliant solutions whereas in fact much simpler solutions bring about connected cities. For example helping people find the right transport connection through good signing, good information provision and accessible fares can be just as useful.”

Steer Davies Gleave is well positioned to assist India in developing its connectivity through transport. “The challenges India faces are multi-dimensional and involve complicated local issues, and so it would be wrong for any one company to say that they can bring all the solutions to the Indian market’’ says Hugh Jones. “Steer Davies Gleave provide some unique characteristics due to the fact we are independent and therefore bring no downstream affiliation to a system, design, construction or contract. Our sole focus is to look after the client and deliver to them the best value and advice to ensure that they have the transport solutions they need. We turn visions into reality for our clients by combining analytical pedigree with real world delivery.”

RAIL AND AVIATION Steer Davies Gleave has previously worked to improve the accessibility and delivery of buses in the metropolis of Delhi. The bus network remains the backbone of the public transport network in the city and Steer Davies Gleave undertook a review of contract options to encourage enhanced safety and efficient operation. Their work within the UK also makes them well positioned to assist India’s transport development. Recent work includes the improvement of transport links to Canary Wharf that allowed it to

evolve from a marginalised area to one of the best-connected parts of London, both in terms of its regional, national and international links. These links allowed the area to develop into an international finance and office centre.

Rail is also a particular focus of the organisation. Jim Collins, Head of Rail at Steer Davies Gleave, is enthusiastic about the global potential of rail as it receives something of a renaissance in terms of investment and innovation. This may be true for inner city metro links, but Jim is also aware of the challenges of rail in a country the size of India. “Rail only works where you have sizeable big markets city to city,” says Jim. “England and parts of Europe are quite unusual in that they have big populations within good train distances of each other, such as London to

Manchester or London to Liverpool. If you look at other geographies, such as India, the big cities are much more disperse. Rail in these situations finds it very difficult to compete with air.” This is just one challenge that the rail industry faces within India.

Aviation is a sector that is always changing. Today we are seeing the demand for air travel rise on a local basis as well as a growth in new international markets. India’s civil aviation industry is on a high-growth trajectory, with India aiming to become the third-largest aviation market by 2020. Large numbers of the Indian population are still living in poverty and so air travel is still too expensive for many. However with a growing middle class, the growth of low-cost carriers, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology (IT) interventions and growing emphasis on regional connectivity, aviation is expected to develop quickly in the country in the coming years.

The issues facing the Indian transport systems are wide-ranging and complex. A long-term approach is needed to ensure the networks are developed sufficiently to match the aspirations of the population. The UK has a long history of innovation within the transport sector, and British companies are well positioned to offer assistance to their Indian counterparts. Despite the challenges, the need to improve transport systems in India does represent a massive opportunity for UK companies. Steer Davies Gleave work across transport modes to offer pertinent advice and guidance, and they are one such company who have the capabilities to help India enhance its infrastructure needs.

Waiting for the train at one of the largest railway station in New Delhi. It handles over 350 trains and 500,000 passengers daily

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RETAIL, LIFESTYLE & LOGISTICS

India represents one of the most compelling spirits opportunities in the world. The Indian total beverage alcohol market is worth £5.3b and is

forecast to grow at 8-10% CAGR in value over next 5 years. India is the second largest market for alcoholic spirits accounting for approximately 10% of global volumes according to the IWSR 2014 report. A favourable demographic dividend with an increase of 270m in the working age population by 2030 is good news for the alcobev industry. 19mn new Indian consumers enter the legal drinking age each year; 1bn+ within 10 years. So the economic and demographic opportunity is extremely attractive.

Traditionally, alcohol has been a part of

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Spirit of change

celebrations in India; increasingly the social barriers to enjoying alcohol within the family or at traditional celebrations are being discarded. Attitudinal changes within the consumer segment, such as women enjoying an evening out over a drink or young adults in Tier-2 cities, those with populations over one million, meeting up with their friends for a drink, are increasing. The increase in disposable incomes and transformation in lifestyles is juxtaposed with the gradual erosion of social taboos around the consumption of alcohol beverages. So the convergence of economic opportunity and social and attitudinal change makes for a very attractive scenario for the alcohol beverage industry.

Indians certainly enjoy international alcohol brands, however consumption is still underpenetrated compared to other emerging markets. This category

Athough attitudes to alcohol are changing in India it is still one of the most regulated sectors in the country, thanks to a complicated tax and licensing environment, says Abanti Sankaranarayanan, Business Head, Luxury and Corporate Relations, United Spirits.


‘THE INDIAN GOVERNMENT IS MOVING TOWARDS A SIMPLIFICATION OF TAXES, WHICH SHOULD REDUCE BUREAUCRACY AND COSTS FOR MANY INDUSTRIES.’

ABANTI SANKARANARAYANAN.BUSINESS HEAD, LUXURY AND

CORPORATE RELATIONS, UNITED SPIRITS

the exchequer in the last fiscal. Diageo and USL share the

World Health Organisation’s goal of reducing alcohol related harm and set out to address this through every one of our responsible drinking programmes, partnerships and campaigns. Through our various initiatives we aim to combat alcohol misuse, set rigorous standards for responsible marketing and promotion for ourselves and the industry. We believe that efforts to reduce the misuse of alcohol are most effective when Government,

civil society, individuals and families, as well as the industry work together. Over the past year, we partnered with the government, NGO’s and educational institutes to implement programmes to prevent drink driving and underage drinking. Our Road to Safety programmes have imparted road safety and drink drive education to thousands of police officials, commercial drivers, and university students across 30 India cities.

The alcobev industry has been engaging with the government, presenting logical perspectives and international best practices. We are seeing some green shoots where the government is prepared to give the industry a fair hearing and are hopeful of win-win solutions that will enable us to deliver on the enormous potential that India holds.

is usually led by the affluent and upper middle class in metro cities. Its growing popularity can also be noticed among young professionals and entrepreneurs who migrate from local brands to international brands.

Currently, India is Diageo’s second largest market and a major contributor to its global ambitions. Earlier this year, Diageo integrated its India business with United Spirits to create a single operating entity. This convergence of India’s largest spirits company by volume, comprising a strong portfolio of brands straddling every market segment coupled with an enviable distribution network, and Diageo’s portfolio of iconic brands, is expected to transform our business in India.

However, alcohol continues to be one of the most regulated sectors in the country today, at both the Federal level as well as in the States within whose purview the Indian Constitution places this industry. The multiplicity of States creates a complex tax and licensing environment that limits economies of scale and reduces the ability of new manufacturers and new products to achieve national distribution and gain competitive advantage. Inter-state taxes effectively prohibit the free transit of goods across the country. Licensed retail availability is very low, with one outlet per 18,000 people.

NECESSARY CHANGESThe Indian Government is moving towards a simplification of taxes, which should reduce bureaucracy and costs for many industries. It plans to introduce a Goods and Services Tax to replace a range of existing indirect taxes. The GST has been touted as the panacea for resolving the situation created by the host of taxes currently levied by Central and State Governments. Such a dramatic change in the taxation scenario would help to provide a national common market for Goods and Services, spur economic growth by removing the cascading of taxes while at the same time providing for increased compliance and better administration. Unfortunately, the government has not included Alcohol Beverages in the Constitutional Amendment Bill on GST. This is despite the industry’s representation that a GST audit trail will provide greater exposure of unreported activities, increase transparency and thus excise revenue, as well as reduce public health concerns.

Moreover, permitting alcobev companies to freely price their products is critical to the long-term sustainability of the alcobev business and of excise revenues generated by the sale of such products.

The current government has vowed to make ‘ease of doing business in India’ a reality and we are hopeful that we will see the effect of that soon.

USL has a big role to play in the government’s ‘Make in India’ ambition. We have a bottling plant in nearly every state, we provide employment to over 11,000 people, and contributed Rs.35,000 crores to


Ease of doing business: An ambitious targetA globally competitive business environment is key to attracting foreign capital. Ensuring optimal utilisation of the factors of production and transparency in government policies would ultimately lead to better economic development, says Richard Rekhy, CEO KPMG in India.

INSIGHT INDIA


FINANCIAL, LEGAL & PROFESSIONAL

Richard Rekhy has over 30 years of multi-sectoral leadership expertise. Since joining KPMG in India in 2004, Richard has spearheaded the firm in

various capacities. In October 2012 he was appointed as Chief Executive Officer, KPMG in India. His multi-layered experience is founded on detailed understanding of corporate governance, enterprise risk management, internal controls and business processes, across multiple domains. In addition to various industry association memberships he is part of the UK-India Financial Partnership, formed to strengthen the financial links between the two countries.

India is one of the fastest growing economies, with multilateral agencies pegging the country’s growth rate at more than 7 per cent. India, a $2 trillion economy now in current prices, aspires to become a $5 trillion economy by 2025 and has all traits, such as favourable demographics, cost competitiveness and entrepreneurial spirit, to reach that spot. However, India’s ranking in the World Bank’s ease of doing business continues to be disappointing, which subverts its ability to attract foreign capital while oppressing the growth of the formal sector. A conducive business environment that makes it easier to start a new business, reduces uncertainty

over the taxation system, trims the time required to enforce the contract and makes it easier to exit the business is one of the prerequisites for sustainable economic growth. Crucially, the success of the government’s flagship programs like ‘Make in India’ and ‘Digital India’ is contingent on how quickly the country revamps current business conditions.

India’s poor infrastructure facilities call for swift overhaul,

and for this the country would require around US$1 trillion investment over the next five years.

India received US$256 billion FDI from April 2000 to May 2015, which is equivalent to the amount China received in just two years. This tells us that although foreign investors are upbeat about India’s growth story, they are cautious about investing in the country. This perception could be changed by cutting bureaucratic hurdles and making rules and regulations investor-friendly.

GOVERNMENT INCENTIVESThe current government set itself an ambitious target of getting the ranking within the top 30 in the next three years. To this end, it unveiled a slew of measures, including the e-Biz portal to integrate

‘THE CURRENT GOVERNMENT SET ITSELF AN AMBITIOUS TARGET OF GETTING THE RANKING WITHIN THE TOP 30 IN THE NEXT THREE YEARS.’

RICHARD REHKY, CEO KPMG IN INDIA


Rajasthan

amendments to the bill, proposed by the current government, face political hurdle. So the government may contemplate other approaches; perhaps it could allow states to frame their own land acquisition law that is in the interest of their development. This together with increased transparency in land records management could make the land acquisition process much easier than now.

MODERNISING AND UPSKILLINGArchaic labour laws and a lack of skill availability are other major hurdles for foreign firms investing in India. If India wants to become a favourable destination for foreign investors, it has to ease its labour laws, which incentivise companies to remain small while making the exit process arduous. Last year, Rajasthan amended the labour laws, allowing companies to retrench employees without prior approval, and this model could perhaps be leveraged at a national level.

While the government’s initiatives to skill youth are a welcome development, it would have to deliberate over increasing the private sector’s participation in its programmes. India’s space programme ‘Mangalyaan’ is a shining example of India’s innovative capabilities. But for frugal innovation to play an important role in India’s future growth,

14 government services and a single window labour compliance process. Besides, the Defence Ministry tweaked its offset policy to provide flexibility to foreign companies in changing partners while the Department of Industrial Policy and Promotion is all set to rank Indian states on the base of ease of doing business, mainly to drive competition among them to attract investment. Transparent coal and spectrum auctions and doing away with FDI caps and FPI caps are a clear manifestation of the government’s intent to improve ease of doing business.

There is no doubt that the initiatives promulgated by the government could lead to a positive change but achieving a ranking in the top 30 requires chronic issues like land acquisition concerns and inflexibility in the labour market to be addressed through judiciously designed reforms.

The current land acquisition bill is seen as investor-unfriendly for it considerably increases the time and cost required for land acquisition. The new

‘MANGALYAAN IS A SHINING EXAMPLE OF INDIA’S INNOVATIVE CAPABILITIES. BUT FOR FRUGAL INNOVATION TO PLAY AN IMPORTANT ROLE IN INDIA’S FUTURE GROWTH, STRONG INTELLECTUAL PROPERTY REGULATION IS A PRECONDITION.’

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www.ukibc.com

WHAT NEXT? Contact Subir MoitraVice President – Marketing and CommunicationKPMG in IndiaMobile: +91 [email protected]

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‘Mangalyaan’ - ISRO’s Mars Orbiter Mission

strong intellectual property regulation is a precondition.

Finally, creating a friendly and predictable tax regime is essential to build an environment that is conducive for business. GST would be extremely beneficial to the Indian economy, and the cost of further delays in the implementation of this most crucial reform would be enormous. So the government should get the bill passed through coherent Parliamentary floor management strategies. Since retrospective taxation is seen as anti-investor, renouncing it could go a long way in boosting foreign investors’ confidence. Reforms are urgently needed to address the problem of delays in the litigation process.

In sum, these changes could create a thriving economic environment that would in turn propel the

industry. Ensuring optimal utilisation of the factors of production and transparency in government policies would ultimately lead to better economic development. Tackling chronic issues seems like a daunting task, but they can be resolved with steadfast efforts coupled with constructive strategies. As Nelson Mandela said, ‘It always seems impossible until it is done’.



INSIGHT INDIA

RETAIL, LIFESTYLE & LOGISTICS

Mr. Nair was appointed as the Managing Director for Marks & Spencer Reliance (M&S) in January 2012. Prior to this role, Mr. Nair

joined Marks & Spencer in 2004 and was responsible for setting up M&S’ Regional Sourcing Offices in South Asia where he held dual responsibility as M&S’ Head of Sourcing for South Asia and Director of Buying Operations for M&S stores in India.

Before joining M&S, Mr. Nair was the Regional Head for Madura Garments (Europe). Prior to that, he started his career with Arvind Mills. Mr. Nair has over nineteen years of experience in the retail and clothing industry, across South Asia and Europe. Mr. Nair did his MBA from SP Jain Institute of Management and Research (Bombay University) and holds an engineering degree from National Institute of Technology, Calicut.

How did the joint venture between M&S and Reliance Retail come about?Marks & Spencer opened its first store in India in 2001, initially as a franchise business. In April 2008 we signed a Joint Venture with Reliance Retail to capitalise on the growth opportunities in the Indian market.

The joint venture partnership has helped us transform our position in the market and expand our store presence rapidly. Reliance Retail has strengths in property, logistics and experience of operating in the India market.

What importance do you place on the UK-India relationship and what caused you to support the India-UK Business Convention (IUKBC)?The India-UK Business Convention is a prestigious platform that enables dialogue between the UK-India businesses giving them the opportunity to share their learnings, discuss concerns and share

Marks & Spencer’s quality and style have made it one of India’s favourite retailers, says Venu Nair, Managing Director of Marks & Spencer Reliance (M&S) India.

Looking behind the label

‘COLOUR IS REALLY IMPORTANT TO INDIAN CUSTOMERS, WHICH IS WHY WE SELL FOUR TIMES AS MANY COLOURS OF POLO SHIRTS AND TWICE AS MANY COLOURS OF LINEN SHIRTS AS COMPARED TO THE UK.’

success. M&S is an iconic British fashion brand and India is one of our priority markets, so we are keen to work together with other British businesses to grow in the markets.

What is your relationship with UK India Business Council and has it helped M&S develop its profile in India? As members of the UK India Business Council for the last two years it has helped us access various stakeholders and connect with a number of our customers, who are also members of the UK India Business Council.

What do you think it is about the M&S brand that has allowed it to be successful in India? M&S has built a unique position in India as a quality, British fashion brand. As one of the largest international


Above: Venu Nair

Below: Marks & Spencer, Bandra

retailers in India with over 600,000 sq ft of selling space across 18 cities, customers recognise that quality and style are at the heart of our clothing offer. Our commitment to deliver the M&S difference that customers expect, and to exceed their expectations on fabric, fit and finish has kept customers coming back to us consistently.

Our on-trend styles that incorporate our best innovations, such as Machine Washable Suits and Drop-a-Size Dresses among others, have helped us build a loyal customer base.

Given M&S’s ethical work through Plan A and Plan A 2020, how important is it that large companies give back to the local communities and the environment in which they are working? Launched in 2007, Plan A is our ethical and environmental programme to help protect the planet – by sourcing responsibly, reducing waste and helping communities. Having achieved our major aim of making our own business carbon neutral, we’ve now introduced Plan A 2020 with the ultimate goal of becoming the world’s most sustainable major retailer.

We believe it is extremely important for all businesses, whether small or large, to adopt ethical practices to mitigate their impact on the environment and the society.

Are there any great differences in consumer preferences between the UK and India? Do you have to alter your products for local needs?Wherever we trade we find that our customers look for quality and style. Indians travel across the globe and have access to latest fashion trends, so our British style works very well with our Indian customers. We have edited our offer to cater for

the needs of our customers in India. Over 60% of our offering is sourced locally which ensures our pricing is competitive and helps us to ‘stretch the seasons’ to sell linen all year round in hotter Indian cities such as Chennai, Hyderabad and Mumbai, whilst selling knitwear and coats in colder cities of North India in the winter.

Colour is really important to Indian customers, which is why we sell four times as many colours of polo shirts and twice as many colours of linen shirts as compared to the UK.

What was it about the Indian market that made M&S identify it as an area to target for growth? India is experiencing tremendous growth and has a young population that aspires to live better and look their best. Alongside there is a familiarity with the Marks & Spencer brand. A brand like M&S has immense potential to be part of the Indian lifestyle with its outstanding quality, its innovations and the wide offering across price points for the complete family.

Is there competition from other foreign retail companies within the Indian market? Whilst there is competition in every market that we trade, we have found the increase of international brands in India has opened the market to a wider set of consumers, helping evolve their choices and therefore benefit the industry as a whole.

What is M&S’s future plans for expanding in India? India is a priority market for M&S and we are focused on growing our store presence in India. We have opened 12 new stores in 2014/15 and will continue to grow our presence across Tier I & II cities in the country in 2015/16.


INSIGHT INDIA

INDUSTRY PROFILE

Our UK office was opened around a decade ago, and we play a similar role there as we do in India. From influencing policy to

encouraging debate, engaging with policy makers and civil society, FICCI articulates the views and concerns of industry. We also provide the largest platforms for networking within and across sectors.

In January this year, FICCI was the Secretariat for the Joint Working Groups for Skills and Education, and Smart Cities, as part of the important UK-India Joint Economic and Trade Committee (JETCO) talks

As the largest and oldest apex business organisation in India, Federation of Indian Chambers of Commerce and Industry (FICCI) is the voice of India’s business and industry. Its membership is over 250,000 companies and it is often the first port of call for Indian industry, policy makers and the international business community, says Dr Jyotsna Suri, President of FICCI.

between the Indian Commerce Minister and UK Business Secretary. A combined delegation of over 30 FICCI members attended a series of discussions.

In April, when Indian Finance Minister Arun Jaitley visited London, we led a senior business delegation with him to meet institutional investors, bankers, policymakers and stakeholders to discuss opportunities in India’s growth story.

FICCI coordinated the visit for the West Bengal Chief Minister Mamata Banerjee’s hugely successful investment promotion visit to London in the British Summer, which included 95 delegates from across government, business, performing arts, media and

Above: FICCI President Dr Jyotsna Suri speaking at an investor meet in London promoting opportunities in West Bengal

An introduction to FICCI:Gathering strength


is also the third largest source of FDI into the UK, including the largest from an Asian country. And the UK is the third largest investor into India too.

Key among the FDI projects from India was venture capital fund Vistaar Group’s establishment of a post-production studio in MediaCity, Manchester. The company plans to invest £13m this year and £20m over the next four to five years. There was a notable increase into the UK new investors from India in the life sciences sector too, a sector with a total annual turnover of £56 billion.

But there was a 25% reduction in the number of Indian students recruited in the UK compared with the previous year. And as the figure shows, UK exports to India have not increased as strongly as targeted by PM Cameron’s since his announcement in 2010, although Indian exports to the UK have gone up strongly.

Both countries share a long history, and there is much potential to realise. FICCI is well placed to assist on this journey.

WHAT NEXT? Contact Pratik Dattani, UK Director, FICCI, at [email protected]

others. 21 Memoranda of Understanding were signed across education, health, urban development and industry and additionally FICCI facilitated a relationship with London Design Week to promote traditional Bengali handlooms and handicrafts.

We’ve engaged with businesses right across the UK, particularly through seminars in Birmingham, Edinburgh, Manchester and Leeds to assist businesses gain access to Invest India, the country’s inward investment vehicle.

When Prime Minister David Cameron first went to India in 2010, he aimed to double trade between the two countries by 2015. Since then, the UK diplomatic and trade promotion network in India has expanded to become the its largest in the world. And Invest India has helped many businesses from the UK navigate into the Indian market.

There are strong successes for India in Britain too. According to UKTI’s latest Inward Investment Report, the UK is the number one destination for FDI in Europe. India is now the UK’s third largest job creator, with 9,350 jobs created or safeguarded in 2014. India

‘BOTH COUNTRIES SHARE A LONG HISTORY, AND THERE IS MUCH POTENTIAL TO REALISE. FICCI IS WELL PLACED TO ASSIST ON THIS JOURNEY.’

DR JYOTSNA SURI, PRESIDENT OF FICCI

Left: Dr Jyotsna Suri, President, FICCI with Amit Mitra, Minister for Finance & Excise, Commerce & Industries, Government of West Bengal and Patricia Hewitt, Chair of the UK India Business Council


INSIGHT INDIA

INTERVIEW

Mukesh Rajani is a partner at PwC UK and has been with the firm for 33 years. He heads up the PwC UK Indian

Business Group and is a Board member of the UK India Business Council, the premier organisation promoting bilateral trade and investment between the two countries.

He has also been actively involved with India for almost 20 years and has led on many of the firm’s largest Indian inbound and outbound transactions.

Let’s start with PwC’s view of the current economic situation in India.It’s very clear that, from a macro economic perspective, India has improved quite significantly over the last year or so. Post the rebound, the 2015 forecast is seen at about 7.5% growth and for 7.9% in 2016.

So the trajectory is good. India is of course also bringing in some reforms around the Goods and Services Tax on its subsidies and financial inclusion programme. We think that potentially this could have a transformational effect and giving a boost to the economic environment.

Having said that, on the other hand we’re seeing clearly the global situation is a bit trickier today than it was a few months ago. But on the whole if you were to take a five-year view it should be positive and certainly we would expect it to be in excess of 6% over the medium term.

How is that forecast going to affect opportunities for UK business to get involved?From a UK point of view growth in excess of 6% is still very high. With growth in other countries not as spectacular as it used to be we continuously see that people are wanting to take advantage of the growth in the Indian economy and participate there. So in my view, that’s not going to distract from UK

Eyeing up Indian opportunities

companies wanting to invest in India and looking to invest in the foreseeable future. The opportunities are there and new opportunities are emerging all the time as policy changes come through.

Which key policy changes will have an effect on opportunity for UK?The most recent ones have been around changes to aerospace and defence policies, and to the insurance framework. There have also been significant investment plans around infrastructure. From a UK perspective we’re seeing a more active interest in those two new sectors that are opening up further of late. So the financial services sector is going to be more and more interested in that space. We’ve already seen a number of companies who have joint ventures in India making announcements to increase their stakes in the local joint ventures to a much higher level than they are now.

What specifically are these changes going to do in terms of bringing UK companies into the country?For example if you take insurance, the requirement was a maximum permitted shareholding of 26%. That has now gone up as high as 49%. That means British companies can participate to a much a greater extent in India. Bringing their new products in, new ideas in, and generating growth in that sector. We’re also seeing brokerage companies and others looking more at India.

For people who are not familiar with the country, the whole concept of competitive federalism, of the political make-up of India is quite difficult to understand.

As India is bringing in GST (Goods and Services Tax) we think India will be a more unified market going forward. Over time as this new legislation comes through we will see more balanced distribution of UK corporates entering India in terms of its location and which region they’re going to.

India is an exciting place for investment as a number of sectors are opening up, says Mukesh Rajani, Partner, PwC UK.

www.ukibc.com

What’s your take on India’s place in its region?I would say that historically most of the investment has gone into India to take advantage of the opportunities that exist there. People are beginning to think about using India as a base for the rest of Asia, but typically that has not been the predominant driver. But going forward, with the campaign for Make in India and so on, that might well change.

What are the downsides of looking at India as a export and investment market? India is clearly a competitive marketplace and products might require reconfiguration to suit that particular market. The price point is always going to be sensitive, but not at the expense of diluting their standards to achieve their objectives in the marketplace.

What opportunities do you see for Indian companies investing into UK?The UK is a very attractive location for Indian businesses. We have seen a substantial number of Indian companies invest in the UK and more and more Indian corporates are interested in establishing their headquarters here, using the UK as a base for investing in the rest of the world. We have to remember that the UK also offers significant other benefits in terms of location, expertise and talent and also importantly access to quality professional and business services and the capital markets. Many Indian corporates want to use UK capital markets to raise the funding for expansion in the UK, within India itself, or even overseas.

India is an exciting place for investment as a number of sectors of opening up. The Government is working hard to make sure that it is easier to do business in India than has been the case before. So to my mind, with the significant opportunities out there, there›s plenty that British companies can be doing out there and Indian corporates doing in the UK. So I think it’ll be exciting times over the next 5 to 10 years.

How competitive are the states themselves in terms of trying to attract investment from UK?Each of the states is clearly trying to make themselves more and more attractive in terms of location. In the UK we get regular visits from a variety of regions and states and their ministers to talk about the opportunities that are available in their regions and what they can do to help British companies.

What are the key sectors of industry that offer greatest opportunity to UK?In the last 15 years or so 50-60% of inward investment has been around the chemical sector, the pharmaceutical sector and the consumer products and industry sector. Aside from aerospace, defence and insurance the consumer product sector still remains high on the agenda for many. But with new initiatives around ‘Make In India’ and ‘Digital India’, infrastructure, education, advanced engineering are all areas where the UK has significant expertise.

It is a question of selecting the right states as part of your entry strategy and how you expand from that to the rest of the country.

‘FOR PEOPLE WHO ARE NOT FAMILIAR WITH THE COUNTRY, THE WHOLE CONCEPT OF COMPETITIVE FEDERALISM, OF THE POLITICAL MAKE-UP OF INDIA IS QUITE DIFFICULT TO UNDERSTAND.’



Investment remained on an upward trend in Q1-FY16 after reversing a multi-year decline in FY15, say Saurav Anand, Economist and Anubhuti Sahay, Head of South Asia Economic Research (India), Standard Chartered Bank, India.

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India’s investment cycle is showing nascent signs of recovery. Investment remained on an upward trend in Q1-FY16, led by infrastructure,

according to our analysis of capex data from the Centre for Monitoring Indian Economy (CMIE), a leading business information company. This was after investment rose in FY15 (ended March 2015) for the first time since FY09. The current trend echoes India’s investment turnaround of the early 2000s, when the government initially drove the investment cycle before the private sector took over from 2005 onwards. Reviving the investment cycle is crucial to putting India’s growth on a higher and more sustainable trajectory, in our view.

The Government is driving the current investment recovery, while private-sector investment remains soft. Railways and roads led investment in Q1-FY16, and have been flagged by the Government as the focus sectors for investment due to their high multiplier effect on growth. Renewable energy also saw increased investment. The Government’s strategy is to increase public investment in order to

attract private investors and eventually kick-start the weak private investment cycle.

In a reversal of the usual pattern, state governments’ investment exceeded central government investment in Q1-FY16. State governments’ spending in aggregate was equal to 75% of their full-year FY15 capex. The increase was not broad-based, however, and was concentrated in the two states of Telangana and Gujarat. With a higher share of central government tax revenues being transferred to state governments starting in FY16, a further increase in state government investment is possible.

Private investment remains subdued. The private sector faces significant headwinds from high corporate leverage; high non-performing assets (NPAs) and restructured assets in the banking sector; and excess capacity in some sectors. Since these issues will take time to resolve, a pick-up in private-sector investment is still two to four quarters away, in our view. We expect India’s investment growth to improve to 7.2% in FY16 from 4.6% in FY15.

The Government’s role as an enabler of investment will be crucial to sustaining the investment improvement. As more projects are announced or

Wind turbines in Jaisalmer, Rajasthan

Investing for growth

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already underway. It therefore provides better insight into current and future investment levels in the economy. The data is also timely, as quarter-end data is released without a lag.

SIGNS OF AN INVESTMENT REVIVAL Our analysis of recent CMIE data shows initial signs of recovery, particularly in infrastructure investment, after years of dormancy. Four of the five categories (except ‘completed projects’) improved in FY15, after having deteriorated every year since FY09. This positive trend continued in Q1-FY16.

Total projects under implementation as of end-June 2015 rose 8.6% y/y, the biggest increase since March 2012. Growth had bottomed out at 0% in June 2014. The value of cumulative stalled projects fell 11% between December 2013 and June 2015 to INR 8.4tn. It had risen c.140% from March 2011 to March 2014.

GOVERNMENT INVESTMENT LEADS THE REVIVALOf the two broad ‘investor groups’ driving capex – the government and the private sector – the Government is leading the current upturn. Government investments account for almost the entire increase in projects |under implementation since the start of FY15. Private-sector projects under implementation have declined in most of the quarters since 2012. Cumulative projects under implementation by the private sector fell by 9% between September 2012 and June 2015, to INR 43tn.

The private sector’s share of projects under implementation (and therefore capex) fell to 49% as of June 2015 from 60% during FY07-FY12. Concurrently, the Government’s share rose to 51% from 40% during the period, when its projects under implementation increased every quarter.

The decline in private-sector investment is not surprising. Given its weak balance sheet position, t he private sector is unlikely to become a major contributor soon (for more details, see On the Ground, 7 May 2015, ‘India leverage uncovered’). We expect the recovery in private-sector investment to be gradual and halting given high corporate-sector leverage, a weak banking sector, and low capacity utilisation in sectors to which the private sector has high exposure.

To offset weak private-sector investment, the government raised capital expenditure in the FY16 budget. By increasing expenditure the Government aims to enable more private-sector participation eventually. While the value of incremental projects under implementation in June 2015 was still only half the 2010 peak, an upturn is evident. Similar to the early 2000s, the Government is likely to have to continue to lead investment growth for several more quarters before the private sector takes over.

The value of stalled projects has declined for both the private and government sectors. New project announcements have also risen in both sectors; the

AN EXPLANATORY NOTE ON THE DATA

Before outlining the results of our analysis of the latest CMIE capex data, we provide an explanatory note on the data. It provides information on the status of ongoing investments and potential investments, grouping investment status into five categories:

1 New project announcements: This refers to the potential pipeline

2 Projects under implementation (PUI): Includes projects that are already underway, as well as potential investments where “tangible progress” has been made. For instance, if a project has received government clearance or acquired part of the land required for investment, it is placed in this category. We focus primarily on this segment to assess the investment recovery.

3 Stalled projects: Investments that face significant hurdles but still have potential to go ahead

4 Abandoned projects: Those with no chance of implementation.

5 Completed projects.

reach the implementation stage, the government will need to provide support by streamlining approvals and ensuring power availability. Continued bottlenecks in these areas could derail the investment recovery. Unfavourable external developments may also pose a downside risk to our investment forecast.

WHY IS CAPEX IMPORTANT NOW? India’s GDP growth boom from FY04-FY08 was investment-led. Growth in gross fixed capital formation (GFCF) – which includes the private and public sectors as well as households – averaged 15.7% during this period, boosting GDP growth to c.9% (under the old GDP series). Despite high growth, core inflation averaged just 5%.

India’s growth pattern changed following the global financial crisis. Average GDP growth slowed to 7% during the FY09-FY13 period as GFCF growth slowed to 7%; consumption growth remained resilient at 8.6%. A sharp slowdown in investment amid still-resilient consumption, along with high commodity prices, boosted average core inflation to 9% during ths period, even as GDP growth dipped below 5% by FY13. GFCF growth slowed further in FY14 and FY15 to just 3.8% (under the new GDP series).

This indicates that the quality of long-term growth is just as important as the level of growth. Growth that is overly dependent on consumption tends to be inflationary, whereas growth led primarily by investment reduces this risk. We therefore believe that a sustained revival in India’s GDP growth has to start from investment rather than consumption.

While proxy indicators such as the IIP capital- goods sub-index and commercial vehicle sales are widely tracked to assess investment levels, we focus on the CMIE capex data. This data provides information on potential investment across sectors and states, along with the latest status of investments



INSIGHT INDIA

increase in private-sector new announcements followed the rise in the government sector. This may indicate positive spillover from increased government spending to private investment, though the trend has yet to be confirmed.

STATES PLAYED A BIGGER ROLE IN Q1-FY16While the central government is generally the largest contributor to public-sector capex (accounting for 55-60%), investment by state Governments increased sharply in Q1-FY16 and exceeded central government investment. States’ spending during the quarter was equal to 75% of their full-year capex for FY15. However, the increase was not broad-based – it was explained entirely by the states of Telangana (the biggest contributor) and Gujarat.

The sustainability of the rise in state spending needs to be monitored. Telangana’s high investment in the initial years after state creation (it became India’s 29th state in June 2014) are likely to fade eventually, However, with a higher share of central government tax revenues being transferred to the state governments starting in FY16, a sustained increase in state government investment is possible.

INFRASTRUCTURE INVESTMENT REMAINS THE FOCUS Railways, roads and electricity (including renewable energy) have been the focus areas for investment by the central government, comprising 81% of the increase in projects under implementation since June 2014 (after Prime Minister Narendra Modi assumed power).

l New projects in the electricity sector have been concentrated in renewable energy installations (solar and wind energy parks) and capacity-building, and improvement of transmission networks. The Government has increased its focus on fuel availability for existing power plants in the past year, leading to a ramp-up in the capacity of the state-run coal-mining company. This has led to a significant reduction in stalled electricity projects. Total projects under implementation in the mining sector rose about 60% during the year ended June 2015.

l The Ministry of Railways has awarded large orders for the Delhi-Mumbai Dedicated Freight Corridor (DFC) project, a new railway network for cargo traffic. It has awarded c.USD 3bn worth of DFC projects since November 2014, up from USD 1.5-2.0bn per year during the FY10-FY15 period. Almost 50% of total planned projects for the DFC and 65% of civil contracts have been awarded. DFC aims to award most of the remaining projects by end-FY16.

l Momentum in awarding road projects has also picked up. One of India’s leading private-sector road-building companies said in a June 2015 conference call that the National Highways Authority of India (NHAI) had awarded projects worth INR 250bn in Q1-FY16, up from INR 221bn in

full-year FY15. The number of stalled road projects dropped to about 15 at end-June 2015 from close to 60 at the beginning of FY15, according to CMIE. Some stalled projects have been cancelled, and several projects became viable via debt repayment rescheduling or receipt of environmental and other regulatory clearances. The Government plans to award 273 road projects worth INR 1.26tn in FY16.

l State governments are focusing their investment on irrigation and electricity generation; these areas contributed c.88% of the increase in projects under implementation during Q1-FY16. Most of the large irrigation projects under implementation are in Gujarat (western India), Telangana and Karnataka (southern India). Large electricity projects are being undertaken in Uttarakhand and Haryana (northern India) and Telangana and Andhra Pradesh (southern India).

PRIVATE-SECTOR CAPEX OUTLOOK REMAINS SUBDUEDPrivate-sector projects under implementation have remained flat since June 2011, indicating a lack of new investment. Private projects in the manufacturing and electricity sectors have declined, while they have risen in the road, railway, construction and real-estate sectors. On new project announcements, the private sector seems to be following the Government’s lead. New projects announced by the private sector in the past year have been mostly in the renewable energy sector, commercial complexes and railways (city metro projects and the DFC). Private-sector investment in the mining sector, which has lagged so far, is likely to rise in 2016 as coal blocks auctioned to private companies in 2015 start production.

Private investors have gradually reduced their

Construction work in the tunnel for Chennai Metro Rail

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participation due to muted earnings growth and high leverage, especially in the power, metals and infrastructure sectors. The Reserve Bank of India (RBI) identified these as “stressed” sectors in its latest half-yearly Financial Stability Report.

l In the power sector, many projects have stalled in the past four years due to tariff issues and a lack of fuel availability. Private-sector projects under implementation in the sector fell 14% between June 2011 and June 2015. New private-sector project announcements in the power sector fell by more than half over the same period, despite recent announcements of new projects in the renewable energy sector. This indicates a significant decline in new thermal power projects.

l The steel sector, also identified by the RBI as a stressed sector, has seen a drop in private-sector participation on falling global demand and lower metal prices, which have made many existing steel plants unviable. Private-sector projects under implementation in the sector are down 10% since 2011, while new project announcements have fallen c.80%. Manufacturing (excluding metals) saw a sharp 18% decline in private-sector projects under implementation from June 2011 to June 2015. India’s manufacturing sector has seen a secular decline in its share of total investment over the past two decades.

DATA POINTS TO A RECOVERY IN GFCF Projects under implementation and new project announcements provide a good directional signal for GFCF. Though there are significant differences between the definitions of PUI/new project announcements and GFCF, the recent recovery in these metrics bodes well for GFCF.

The continuous increase in PUI from June 2003 to June 2007 coincided with an increase in GFCF growth to 20% from 10% y/y. Similarly, the slowdown in PUI since June 2009 is broadly in line with the slowdown in GFCF growth. Given clear signs that PUI has bottomed out and the rise in new project announcements, we expect GFCF to recover further in FY16, especially in Q1. We expect investment growth to improve to 7.2% in FY16 from 4.6% in FY15.

There are two important differences in the definitions of PUI and GFCF. First, PUI is a much broader category that includes any project where “tangible progress” (such as a key government approval) has been made, even if no investment has occurred yet. In contrast, GFCF included in GDP only includes actual investment flows. The two indicators can therefore diverge significantly,

particular in case of a sudden halt in investment (like the one seen during the confidence crisis of 2008). Such an episode is captured in GFCF but is unlikely to show up in PUI given its broader definition. Second, PUI reflects the nominal value of projects. Since GFCF measured in real terms is a better gauge of economic activity, we address this discrepancy by adjusting for WPI inflation.

CHALLENGES REMAIN The latest capex data shows clear signs of an investment recovery across most parameters. This bodes well for GFCF and thus India’s GDP recovery.

The nascent recovery needs to be nurtured, however. Projects that have been announced or started require efficient approvals and access to funding in order to ensure their completion. Land acquisition obstacles, a lack of funding, inadequate demand and the slow pace of environmental clearances are the biggest reasons for stalled projects. Recent government efforts to streamline environmental and forest clearances have helped to clear the pipeline of stalled projects recently. A renewed slowdown in this area could cause the investment cycle to decelerate.

For instance, while the railway ministry has awarded c.USD 3bn worth of projects since November 2014, 15% of the land for these projects is still to be acquired. Delays in completing land purchases could delay project execution.

Land acquisition and funding obstacles may also obstruct state governments’ plans to invest in increased power generation capacity. State distribution utilities remain under severe financial

stress, leading to a lack of demand for produced power and raising the risk that more power projects will be shelved. Unless the State Electricity Boards (SEBs) are returned to financial viability, the sector will remain vulnerable. Meanwhile, subsidised tariffs for thermal power may reduce the feasibility of investments in renewable energy, especially solar power. The solar energy tariff is almost double the existing tariff for thermal power.

The impact of global developments on domestic investment also needs to be monitored. The recent sharp decline in global metal prices, for example, is likely to curb private-sector investment in the metal sector, delaying its recovery.

‘THE LATEST CAPEX DATA SHOWS CLEAR SIGNS OF AN INVESTMENT RECOVERY ACROSS MOST PARAMETERS. THIS BODES WELL FOR GFCF AND THUS INDIA’S GDP RECOVERY.’

WHAT NEXT? Contact Saurav Anand +91 22 6115 8845 [email protected] Anubhuti Sahay +91 22 6115 8840 [email protected]


INSIGHT INDIA

INDUSTRY PROFILE

With a history going back to 1895, the Confederation of Indian Industry (CII) has been engaged in a multidimensional,

multi-pronged endeavour for accelerating India’s development, leveraging industry strengths and acumen.

With over 8,000 direct member enterprises, representing all sectors of the Indian economy, and an outreach to over 200,000 firms through affiliated regional and sectoral industry associations, the CII reaches out to all sections of industry.

The CII’s comprehensive range of interventions for economic development can be consolidated into four major enablers: 1 Policy Advocacy

2 International and Business Development3 Services for Competitiveness of Indian industry 4 Community services.

POLICY ADVOCACYAs a key stakeholder and driver for policy advocacy, the CII identifies key steps to facilitate industry and entrepreneurship and proactively works with the Government for policy formulation. Our councils and committees at the national, regional, and state levels make recommendations based on industry-wide

With a history going back to 1895, the Confederation of Indian Industry (CII) has been engaged in a multidimensional, multi-pronged endeavour for accelerating India’s development, leveraging industry strengths and acumen, says Chandrajit Banerjee, Director General, the CII.

An introduction to the CII:120 years of building business leadership

consultations which distill and align views from different sectors.

The CII has a strong agenda and experience of partnering with state governments through its state offices on economic, industrial and taxation policies. Sector-specific the CII task forces prepare vision documents that outline policy and action roadmaps for critical sectors of the economy.

INTERNATIONAL BUSINESS DEVELOPMENT The CII has evolved a very dynamic work plan for global trade and investment promotion, not only positioning India as an enriching destination but also assisting Indian industry in exploring avenues of doing business around the world. We are privileged to engage in strategic dialogues with several countries with diverse stakeholders, going beyond economic issues for a viable Track II diplomacy effort.

We have built a large number of prestigious trade platforms that bring together global and Indian companies, including small and mid-scale companies, for intensive business networking. Some of our signature trade shows include International Engineering and Technology Fair (IETF), Auto Expo, and shows on mining, railways, agriculture, and others engaging the global business community. Some of these shows are the largest in Asia in their category and altogether attract thousands of participants and millions of visitors annually.

To expand Indian industry’s global footprint, the CII holds inward and outward trade and business missions, participates in international trade shows, creates access to foreign markets and facilitates technology transfers. Our overseas business missions interact with governments, companies and academics across the world. We have inked MoUs with over three hundred organisations in more than 100 countries, and we also work closely with the World Economic Forum, and multilateral and bilateral development agencies. The CII is thus a major port of call for international businesses with an India strategy.

During the visit of the CII CEOs delegation to UK in July 2015, the CII, UK India Business Council and the High Commission of India collaborated on a ‘Make in India’ Business Roundtable in London to engage the business community in both countries on emerging opportunities


BUILDING COMPETITIVENESSWe have built an extensive institutional network of nine Centres of Excellence to offer holistic consultancy and training services to industry members and to serve as research and policy advocacy hubs. These enable several thousand enterprises each year to raise their productivity, efficiency, and sustainability. We also work to disseminate Total Quality Management, Lean Manufacturing and other competitiveness tools among Indian industry. Technology promotion, design and R&D are major objectives for us, and we have evolved a range of programmes to inculcate and strengthen tools for enterprises.

The CII engages on talent management at all levels to leverage India’s human assets. Leadership training, skill development, and innovation are some of the many areas that we have introduced to Indian industry. We are particularly pleased to engage the youth of India on platforms such as Young Indians, India@75, and so on.

COMMUNITY SERVICESFinally, under the fourth pillar, the CII Foundation converges all activity related to human development, helping firms to meet their social responsibility commitments and align with government development programs. Reaching out to non-governmental organisations, the Foundation is a platform for connectivity, undertaking capacity building, entrepreneurship development, diversity, scholarships and other initiatives.

We have taken up many initiatives in education through quality training for schools and in higher education, as well as targeted initiatives for gender equality and women’s empowerment. We also

promote sensitisation and employment opportunities for differently-abled sections of society. For rural development, the CII works on specific projects for water, sanitation, and environmental sustainability in villages of India.

THE CII IN THE UKThe UK-India relationship holds special significance for the CII, not only because of our shared historical linkages and

ideals, not only because of the momentous business exchanges between the two countries, but also because our very first overseas representative office was opened in the UK exactly 35 years ago. The CII has built a strong multi-stakeholder network in the UK, engaging the industry, academia, think tank community, and Diaspora alike in enhancing various facets of the UK-India relationship. Our business relationships have grown from strength to strength over the years, and the UK India Business Council has been among our strongest collaborators in this process. I welcome our continued partnership and congratulate UK India Business Council on this publication, Insight India.

‘WE HAVE BUILT A LARGE NUMBER OF PRESTIGIOUS TRADE PLATFORMS THAT BRING TOGETHER GLOBAL AND INDIAN COMPANIES.’

CHANDRAJIT BANERJEE, CEO, THE CII

CII leadership meets Hon’ble Prime Minister of India, Shri Narendra Modi. Seated (L-R): Prime Minister Modi; Mr. Sumit Mazumder, President, the CII; Mr. Chandrajit Banerjee, Director General, the CII; Mr. Naushad Forbes,President Designate, the CII and Ms. Shobana Kamineni, Vice President, the CII


HEALTHCARE

Dr. Rana Mehta has more than 18 years’ of experience in strategising, planning, commissioning and operations of over 50 hospitals and healthcare systems in Asia. He has worked on numerous assignments

to develop customised healthcare solutions to suit client needs within political, socio economic, geographic, and demographic imperatives.

His extensive client experience, which includes some of the largest integrated health systems and insurers in the Asia, has allowed him to pioneer innovative solutions that improve quality and cost for all stakeholders in the delivery system – patients, providers and payers.

Dr. Mehta holds Master of Hospital Administration (MHA) from Tata Institute of Social Sciences, Mumbai, India and Bachelor of Medicine, Bachelor of Surgery (MBBS), Medical College, Kolkata, India.

The Indian healthcare sector is becoming an attractive investment destination for private equity (PE) and venture capital (VC) companies, with investments coming in across the spectrum. In fact, healthcare as a sector attracted the second largest PE investment last year.

Multiple trends are driving the shift in healthcare delivery models in India, says Dr Rana Mehta, PwC.

Trends in the Indian healthcare sector

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Despite deficiencies in the current Indian healthcare model, such as accessibility, affordability and shortage of beds among other issues, there are also social and lifestyle issues that are driving the shift in healthcare delivery models.

Independent and ageing population: The elderly population is growing. China and India have the largest absolute number of elderly people in the world, with 130 million and 58.2 million people, respectively, aged over 65 in 2010. These figures are expected to double by the year 2020. Understandably, a larger geriatric population that is living longer carries its own set of health-related problems that require special infrastructure and skill sets.Rising income levels: Rising income levels lead to greater demand for quality healthcare services and increased spending on these services. Currently, healthcare spending is 7% of the overall household expenditure and is projected to grow up to 10% by 2020. By that year, there will be around 160m middle-class consumers. This is apart from the upper income group of the populace that will continue to be a prime consumer of healthcare services. Organised healthcare formats are emerging to cater to this segment.Epidemiological transitions: India faces a dual disease burden of both communicable and lifestyle

INSIGHT INDIA


diseases. By 2020, cases of cardiovascular diseases and diabetes will more than double and the number of cancer patients will rise by 25%. Mental health conditions affect about 6.5% of the Indian population, and this figure is expected to rise. Further, an increase in the number of road traffic accidents has led to a corresponding increase in injuries. Growth in insurance coverage: Today, over 16% of India’s population has some sort of health insurance cover—either voluntary or as part of the Employees’ State Insurance, Central Government Health Scheme or community insurance. However, this situation is changing dramatically, with health insurance fast becoming the preferred tool to finance most healthcare expenditure. The government’s Rashtriya Swasthya Bima Yojana, which covers unorganised workers, has promoted the development of healthcare providers in semi-urban/rural areas, as more than one-third of their revenue comes from insurance clients.Consumerism: Many individuals have already begun actively taking decisions about their healthcare, seeking information about health problems and treatment options, comparing prices and quality, switching treatments and providers, and choosing alternative and non-conventional approaches over traditional services. Many more are eager to become engaged consumers—they want greater access to information, tools and online services that will enable them to more actively manage their care, and they are open to innovative approaches to care and financing. In response to consumer expectations, providers are adopting consumer-centric approaches for care delivery and financing.Technology: Recent scientific advances and improvements in enabling technologies have opened new avenues for convergence among drugs, diagnostics and devices. Ageing populations and rising consumerism are increasing the demand for healthcare products that offer greater effectiveness and convenience. Shifting industry and market conditions are also creating new opportunities.

CONVERGENCE OF SECTORS CREATING A NEW HEALTHCARE MODELAs a result of significant scientific advancements, market demands from consumers and technology- enabled connectivity, the industry is undergoing a major structural transformation. This transformation is creating opportunities and challenges for traditional and non-traditional health-related sectors to converge around the promise of raising quality and lowering costs.

Employers increasingly recognise that it is better

to manage the health of their workforce than to manage the cost of illness. Therefore, they want their insurance providers to contribute to that effort. In response, payers are shifting the focus of their business models to wellness and prevention, in order to empower consumers and their physicians with information and tools that allow them to make better healthcare choices.

Mobile and information technologies hold great promise for keeping people healthy, managing diseases and lowering healthcare costs. A host of new players are developing easy-to-use, affordable ‘care anywhere’ devices, services, solutions and networks that are attractive to consumers.

Retailers are expanding into health and wellness sectors by setting up pharmacy and health products stores.

EMERGING MODELSThe healthcare industry is undergoing a huge transformation with the emergence of organised healthcare delivery formats such as secondary care hospitals, single specialty centres, day care surgery centres, retail pharmacies and clinics, dialysis centres, and emergency and trauma centres. Further, wellness centres that focus on preventive care have emerged.

New business models are required to unlock access to technologies and players that support preventive, acute and chronic care. These models include secondary care hospitals, single speciality centre and retail pharmacies.

SCOPE FOR PUBLIC-PRIVATE PARTNERSHIPS (PPPS) IN CREATING NEW MODELSPPP models are being used in various aspects of healthcare delivery such as trauma care (ambulance services), diagnostics, primary healthcare, and mother and child care in some states. Many pilot studies are being done on the usage of mobile and information technologies to increase accessibility in semi-urban and rural areas.

However, there are challenges in achieving a model that serves the interests of both parties while meaningfully addressing the needs of the consumer.

BIGGEST POTENTIAL BENEFICIARIES OF THIS SHIFTThe biggest beneficiaries are consumers, as they will have greater choice in seeking treatment. The organised healthcare delivery formats will provide better quality and service to consumers.

WHAT NEXT?

Contact Dr. Rana Mehta Partner , PwC IndiaLeader Healthcare

‘EMPLOYERS INCREASINGLY RECOGNISE THAT IT IS BETTER TO MANAGE THE HEALTH OF THEIR WORKFORCE THAN TO MANAGE THE COST OF ILLNESS.’

DR RANA MEHTA


INSIGHT INDIA

HEALTHCARE

Given the global focus on targeting anti-microbial resistance, hospitals worldwide are sourcing products that help them reduce or eliminate cross infection. UK manufacturing company Vernacare has created a successful

system that is used in 96% of NHS hospitals in the UK and being considered for both new-build hospitals and existing healthcare facilities across the world.

Based in Greater Manchester and focused on selling products into healthcare facilities around the world, Vernacare is the only company to manufacture this complete single use human waste disposal system, including the Vortex disposal unit and full range of medical single use products.

“Vernacare offers an alternative to re-usable systems where plastic or stainless steel bedpans are re-used and washed, either by hand, or in bedpan washers. Our system, being single use, means that patients use their fibre-moulded container once, and it is safely and easily disposed of in our environmentally-friendly Vortex machines,” says Marketing Director Emma Sheldon. “This means that the risk of cross-contamination is eliminated, as there is no risk that products which have not been adequately decontaminated remain in circulation and used between patients.

“The system was originally invented to save time and increase productivity. The original idea was created within our NHS customers, who identified a need to reduce the time it took to reprocess used badpans and other containers. Vernacare came up with a solution which plays a part in infection prevention, sustainability and cost -saving for healthcare facilities. The system helps reduce

Vernacare plays a leading role in preventing cross contamination and infection in hospitals around the world, says Marketing Director Emma Sheldon.

Disposable income


‘WE WORK ALONGSIDE KEY OPINION LEADERS IN THE FIELDS OF INFECTION PREVENTION, MICROBIOLOGY, ESTATES AND FACILITIES AND NURSING TO SHARE THE BENEFITS OF THE SYSTEM WITH NEW CUSTOMERS.’

the number of steps and the time involved in dealing with this important and critical area, to help minimise risk.”

Employing 180 people around the world and producing 150 million fibre-moulded products each year, Vernacare has attended trade missions, round table meetings and international events alongside Healthcare UK. “We engage with Healthcare UK, UKTI, UK India Business Council and CBBC to help us to understand where opportunities exist globally and how to access them. We have worked closely with these agencies to better understand the markets we enter, and to develop our networks,” says Emma.

“We successfully sell our products to many markets across the globe, with particular success in Canada, Australia and New Zealand, Italy, Spain and the Middle East. UKTI has been a fantastic partner in helping us to research and enter new markets - particularly Asia Pacific. With its help from a zero

Disposable income

www.ukibc.com

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WHAT NEXT? To find out more about Vernacare’s single-use system please contact us at [email protected] @VernacareOfficewww.vernacare.com

58 | Issue 01 | INSIGHT INDIA

THE VERNACARE SYSTEM

The Vernacare system of hygienic patient washing and toileting is a simple but highly-effective concept comprising urinals, bedpans and other containers made from renewable natural fibre. Once used, these containers, which may contain harmful pathogens from human waste, are placed into our Vortex disposal machines. Here, they’re broken down into miniscule particles and washed safely down the drains. This avoids the infection risk of using traditional re-usable products.

The Vernacare system is consistently the top choice by global hospitals because itl reduces cross infection risk l provides a system which is easy and dignified

to use for patients and nursesl delivers cost savingsl implements a sustainable environmentally

friendly systeml helping to reduce the risk of cross infection in

a sustainable way.

starting point in 2012, we now have a high share of the hospital market and sales to Singapore make up 13% of our international business. We see the Indian and Chinese markets as very exciting development opportunities – potentially, in time, our biggest international markets.”

The company has signed a MOU with Sinophi Healthcare within China that will potentially deliver £10 million of business to Vernacare over the next 10 years. “This is very positive news for Vernacare,” she says. Further afield, the 2014 India Journal of Critical Care highlights the importance of preventing hospital acquired infections; described as a ‘constant threat to hospitalised individuals.’ With manually washing bedpans in India continually accepted as common practice, the Indian market offers a unique opportunity for acquired infection prevention with the Vernacare System. Moreover risk of HCAI’s to newborn babies is high, representing a 75 percent figure in Southeast Asia for all causes of death in the neonatal period.

Vernacare supported the UK government in its response to the Ebola crisis, sending product to Sierra Leone, to support with the the set up of the field hospitals. Since Ebola is spread via bodily fluids, handling the faeces, urine or vomit of infected patients presents a risk. Vernacare’s single-use products can be disposed of more safely after use to protect both patients and healthcare workers. Its Vernagel product, which solidifies liquid to ensure there are no spills, was another key product that was used alongside Vernacare’s range of products to reduce the risk of contamination.

“We work alongside key opinion leaders in the fields of Infection prevention, microbiology, estates and facilities and nursing to share the benefits of the system with new customers,” she adds. “Much of what we do is about education, and showing how the system can help reduce the risk of cross contamination whilst making a difference to the productivity of the hospital.

“At Vernacare we are serial innovators, continually innovating to add to our diverse product range that has increased to include disposaable bed pan supports, jugs, general purpose bowls and vomit bowls - we have a Queens’ Award for innovation for our detergent-proof washbowl. We have recently launched a female urinal, the Vernafem, which is improving the dignity of patients, and our products are created with input from healthcare professionals.”

John Davie of Altra Capital has been devising PPP strategies for more than 20 years. In this invaluable handbook he demystifies the process and provides expert guidance at all stages.

The PPP Book is considered to be one of the definitive guides to the multifaceted and integrated ecosystem required to deliver successful PPP projects.

www.pppbook.co.uk

Public-Private Partnerships Unbundled


INSIGHT INDIA


HEALTHCARE

The opportunities in India account for a comparatively small proportion of the £750 million of exports. But private hospitals and healthcare in India are expanding fast and state governments are preparing to tender more of their

services as part of the quest for universal healthcare. National healthcare expenditure in India is expected to grow at an average rate of 15.8% to reach a value of $201 billion by 2017. An ageing population means more long term conditions as well as the continuing need to combat communicable diseases. The Indian government has committed to delivering 100 “smart cities” and the healthcare component of these represent a great opportunity for British healthcare.

On trade missions and incoming visits, we have met several hospitals who want to offer UK inspired training to their staff, for example, in emergency medicine and care, the human factors of clinical care, primary care or specialist nurse training. Healthcare UK is working with Universities and other training providers to establish an effective and price sensitive offer to India.

Recent training and education opportunities include:

l Family medicine training for a state government and for a private provider

Healthcare UK, the Government body to drive exports of UK health services, expertise and innovation, has helped British organisations to secure £750 million worth of healthcare contracts during 2014 to 2015, £250 million more than the target set for the year. They have identified a total of £12.7bn of opportunities in target markets in China, India, Brazil, the Gulf and similar countries.

Healthcare opportunities in India for British organisations and companies

l Training needs assessment for a Universityl Setting up a College of Nursing and other Health

Professionals for a state governmentl Consultancy in establishing and delivering a

programme for critical care for private hospitalsl Training and accreditation for doctors and allied

professionals in a brand new private hospitall Collaboration on emergency medicine for a

chain of smaller private hospitalsl Dental training in India using UK standards

and facultyl Diabetes training for family medicine doctorsl Paramedic training from a private

ambulance companyl Training in counselling for a private provider

DISSEMINATING EXPERTISEThere is huge interest in how to improve the quality and productivity of healthcare. Healthcare agencies and organisations want to benefit from UK expertise in areas as diverse as cancer screening, ambulance services, cloud based clinical records, remote radiology, assisted living and infection control.

For those with the appetite, there is the opportunity to set up a complete hospital operation in India with Indian investors. We hope to see the first of these “medical cities” projects launched this year. And the scope for UK centres of excellence - such as the Christie Hospital - to tie-up with leading


Indian healthcare institutions (mainly, but not exclusively, in the private sector) will, we hope, be one of the features of an increase in collaborative Indo-UK partnerships.

Another example has been Indian interest in services for children with mental health problems and the new developments around care and treatment – services for children with, for instance, behavioural and neurodevelopmental conditions like ADHD or autism. It’s an issue of growing concern in India, which is only just beginning to get to grips with this type of condition, and with the need to fund extra training, research and education. We have at least one UK organisation which is considering setting up a local service in Mumbai.

DRIVING INNOVATIONOther discussions have focussed on setting up a network for research and development. India is remarkably forward-thinking and innovative when it comes to healthcare, and has some truly world-class hospitals which want to partner with the UK. Collaborations in a range of areas have been discussed, including clinical research and healthcare delivery, but also high end services like complex liver transplants.

There is also great interest from Indian hospitals in fertility treatment around new developments and training in the sector and Britain’s IVF units are ready to respond to these.

Innovative technology is an area in which the UK is a recognised world leader – and it’s an area of interest shared by the Indian representatives that we meet.

Innovation is a strength of many UK companies, including in medical imaging, with new systems to look at the texture of medical images and provide

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‘THERE IS ALSO GREAT INTEREST FROM INDIAN HOSPITALS IN FERTILITY TREATMENT AROUND NEW DEVELOPMENTS AND TRAINING IN THE SECTOR AND BRITAIN’S IVF UNITS ARE READY TO RESPOND TO THESE.’

quantative data. This offers another way for medics to assess cancerous tumours and the effect of treatment rather than simply relying on what their eye can see.

There are opportunities for specialist digital healthcare companies, developing systems to help monitor people’s health using smart phones. For example, Indian healthcare professionals are looking seriously at the increasing issue of excess alcohol consumption among their population and are interested in ways to measure alcohol intake and liver health.

There is enormous interest In India in how to improve the general cleanliness and hygiene in hospitals. British expertise can promote these improvements not through a specific cleaning product, but through the installation of easily cleanable materials, improved training for staff, and by using the best cleaning tools and monitoring systems.

The opportunities are there. Together we can turn these into excellent health services for patients in India, an exciting exchange of experience and expertise and sound commercial benefit for all concerned.

WHAT NEXT?

Contact Chris Born, UKTI, at [email protected] Nithavrianakis, UKTI, at [email protected]

INSIGHT INDIA

insight india - issue one

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