China has big stake in India’s growing market: ASSOCHAM

Chinese stake in the growing Indian market is increasing massively and the current annual trade surplus of over USD 40 billion (about Rs 2,22,000 crore) may touch USD 44 billion by at the end of the current year, an ASSOCHAM analysis of the bilateral trade has shown.

Without suggesting for a moment that India should strain its   ties with China, ASSOCHAM said, “It is in the best interest of the two neighbouring countries that their relations improve and are cemented through expanding commercial engagement”.

Expressing confident the two countries would be able to resolve their strategic differences during the visit of Chinese Premier next month, ASSOCHAM said, against its mammoth imports of USD 50 billion from China alone, India’s exports of merchandise goods were far short at USD 12.41 billion during April-February, 2012-13 (the latest disaggregated data) to that country.  For the fiscal 2012-13 as a whole while imports from China may well exceed USD 57 billion while India’s exports to that country may not exceed USD 14 billion.

The trend in the financial year of 2012-13 has more or less followed that of the previous fiscal when China ran a trade surplus of USD 40 billion despite repeated concerns raised by the Indians at the highest level.

“At a time when Chinese economy, like most other economies of the world, is slowing, its exports to India would be of vital interest to the Chinese dispensation. In a way, the economic engagement is the best way to bridge all other differences. China alone accounts for over 11 per cent of India’s total imports making it a high stake commercial interest for the neighbouring country,” ASSOCHAM commented.

Electronics, machinery, precious pearls and other commodities are the principal items of import from China. In the last fiscal (11 months for which disaggregated data is available), of the total imports of USD 141 billion of five top items of imports , China alone accounted for USD 22.80 billion.

When it comes to exports, main items which are shipped to China are petroleum products, transport equipment, machinery and drugs and pharmaceuticals.

In the fiscal 2012-13, the exports to China are estimated to have been lower than that in the previous fiscal.

A large trade imbalance has been a matter of concern and should again be raised at the highest level with the Chinese leadership. The Indian exports of several items, especially drugs and pharmaceuticals face trade barriers in China.

A large-scale dumping of Chinese goods has hurt interest of the Indian businessmen and manufacturers in their own markets. Most of the damage has been done to the small and medium enterprises which find it difficult to compete with the economies of scale from aggressive exporters.  Be it toys, worship idols, lightings, tubes, the Chinese goods are all there.

In the recent past, the Chinese commercial aggression has not limited itself to small and medium scale items, but to heavy engineering. The home-grown PSU and private firms such as BHEL and L and T have suffered a lot at the hands of Chinese power equipment manufacturers. The story is somewhat similar in the telecom gear.

“Net-net, it is more in the interest of the Chinese to stay commercially engaged maintaining the best of strategic and political relations as well, “ASSOCHAM said.

West Bengal emerges on top for job generation in SMEs: ASSOCHAM

With over 43,000 jobs generated in the small and medium enterprises (SMEs) sector between April 2011 and up to February 15, 2012, West Bengal has emerged as a front-runner state to facilitate growth in the SMEs sector, apex industry body ASSOCHAM said today.

Utilizing the margin subsidy money worth Rs 52.49 crore, the state of West Bengal assisted about 5,290 SME units across the state, according to a state-wise analysis of number of SMEs assisted, margin money utilized and estimated employment generation during the aforesaid period carried out by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Over 3.25 lakh jobs were generated in the SME sector by providing assistance to a total of 35,607 SME units across India utilizing margin money subsidy worth about Rs 700 crore during the 11 months period between April 2011 and February 15, 2012,” said Mr D.S. Rawat, national secretary general of ASSOCHAM while releasing the findings of the chamber’s analysis.

“The SME sector accounts for about 45 per cent of India’s manufacturing output and 40 per cent of the total exports of the country,” said Mr Rawat. “Besides, the sector is estimated to employ about 59 million persons in over 26 million units which produce over 6,000 products ranging from traditional to high-techs items.”

Andhra Pradesh emerged the second leading state by generating about 33,115 job opportunities and assisted about 1,459 SME units utilizing about Rs 48.9 crore of the margin money subsidy, highlights the ASSOCHAM study.

Assisting about 3,205 units, Uttar Pradesh ranked third with 30,880 jobs generated in the SMEs sector with the state government utilizing worth over Rs 107 crore of the margin money subsidy, highlights the ASSOCHAM study.

Tamil Nadu emerged as the fourth leading state by creating about 27,138 jobs and assisted about 1,827 SME units utilizing margin money subsidy of over Rs 44.6 crore during the aforesaid period.
The state of Odisha ranked fifth as about 21,010 employment opportunities were created in the SME sector as 2,101 SMEs were assisted by the state utilizing the margin money subsidy worth over Rs 39 crore.

Assam assisted about 2,234 SME units and created about 17,944 jobs utilizing about Rs 24 crore of margin money subsidy.  About 15,442 jobs were created in SME sector by providing assistance to about 1,347 units in Karnataka utilizing the margin money subsidy worth over Rs 27 crore.

About 15,423 jobs were created in the SME industry of Bihar as the state government assisted about 2,442 units utilizing over Rs 50 crore of margin money subsidy. Rajasthan and Madhya Pradesh were other leading states in this regard.

SMEs term RBI's monetary policy ‘unjustified’

SMEs demand immediate interest rate cut ranging b/w 100-150 basis pts.

A whopping 93 per cent of industries in the SME sector opine that the Reserve Bank of India’s (RBI) decision to keep the interest rate unchanged was completely out of line, according to a quick poll conducted by the apex industry body ASSOCHAM.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) conducted a telephonic interview with about 100 small and medium enterprises (SMEs) across India during the last fortnight to ascertain their views on RBI’s decision of not to change the interest rates in its mid-quarter monetary policy review on June 18.

Besides, about 86 per cent of the respondents said that high rate of interests is having a negative impact on their business as their organizations droop under the burden of ever-rising lending rates and rest of them said this move will not impact their trade much as they are not heavily dependent upon bank finances, highlights the survey conducted by the ASSOCHAM Research Bureau (ARB).

“The SME sector had already been grappling with macro-economic slowdown together with global uncertainty and rising interest rates put an extra burden on these small capital organizations which are heavily dependent upon the banks for their finance requirements,” said D.S. Rawat, secretary general of ASSOCHAM while releasing the findings of the survey.

The ASSOCHAM representatives also tried to ascertain the impact of high costs of borrowing on the firms’ business to which about 43 per cent respondents said their cost of credit had increased by about 5-10 per cent while about 32 per cent respondents said their cost of credit soared by up to five per cent. While about 18 per cent did not respond, of the remaining about three per cent said their cost of credit has increased by about 10-15 per cent and four per cent respondents said cost of credit increased by over 15 per cent.

ASSOCHAM also sought the firms’ views on their investment decisions considering the decelerating industrial performance and drying investments to which about 79 per cent of respondents said their investment plans had been adversely impacted by RBI’s current move.
Apart from this, about half of the overall respondents also reckoned that investments had declined by about 5-10 per cent, while 21 per cent did not respond to this about 11 per cent said investments declined by about 10-15 per cent and an equal number of respondents said it had declined by up to five per cent. A meager seven per cent respondents felt that investments had declined by over 15 per cent.

ASSOCHAM sought the feedback of the SME industry as to how much they wanted the RBI to interest rates to help revive the growth of the industry. About 39 per cent of respondents reckoned that the apex bank should immediately cut down the interest rates by 150 basis points, while about 36 per cent said the interest rates should be brought down by 100 basis points.
According to ASSOCHAM, there are about 31.1 million MSMEs across India employing over 73 million people and produce over 6,000 different products. Besides, the sector contributes about 40 per cent of India’s gross exports and 45 per cent of country’s manufacturing output.

ASSOCHAM predicts Balance of Trade to shoot up to $262 bn in FY 2012-13

Due to high crude prices and rising gold and silver imports coupled with week Rupee value, India’s balance of trade (BoT) is projected to shoot up between USD 262-280 billion in the fiscal 2012-13, exerting further pressure on the country’s current account deficit (CAD), according to an ASSOCHAM study.
 
In the fiscal 2011-12, the country’s merchandise imports was at USD 488 billion against exports of USD 303 billion leaving balance of trade (BoT) of USD 185 billion.  Against the backdrop of weak recovery in the US economy and continuing troubles in the European markets, export shipments were up 21 per cent as there was some good performance in the initial months of the 2011-12 fiscal. 

But, imports shot up by 32 per cent thanks to high crude prices and rising gold and silver imports.  Import on these two counts  itself was a whopping USD 217 billion, accounting for  over 44 per cent of the country’s total import bill of USD 489 billion, said Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Out of the three likely scenario plotted by the ASSOCHAM study, the most likely seems to be the one where imports would grow by about 25 per cent in dollar terms and exports increasing by about 15 per cent. This would leave the country with a BoT gap of USD 262 billion,” said  Rajkumar Dhoot, MP and President, ASSOCHAM while releasing the findings of the study.

“In such a scenario, exports would grow up to USD 348 billion but import shipments would increase to USD 610 billion. Even assuming the moderate GDP expansion of 7 per cent, the crude oil imports would remain the biggest import item, as the economic activity would be required to be fuelled by the conventional sources of energy,” said Dhoot.

Despite the Budget proposal of doubling the customs duty to four per cent on gold, imports under this head would continue to exert pressure on the country’s bill.  The country’s social habit in terms of gold being one of the biggest purchases during the marriages is not going to change over night, even though the middle class families find it hard to manage.

The problem in terms of rising imports in dollar terms is expected to be worsened by the continuing pressure on rupee, which has lost well over 15 per cent in value since September. Rupee would remain weak, if efforts on war-footing are not taken to make India an attractive investment destination both for the foreign direct investment (FDI) as also for the portfolio investment through the foreign institutional investors (FII) route, highlighted the ASSOCHAM study.

Unfortunately, the events beginning to unveil after the Budget seemed to be pulling the country in the reverse direction. The FIIs have pulled out Rs 777 crore in April after staying bullish on India for the first few months of 2012. They were disappointed by several events and policy issues, including the General Anti-Avoidance Rules (GAAR) and the retro-active tax proposals. Thankfully, as suggested by ASSOCHAM, Finance Minister Mr Pranab Mukherjee has deferred the GAAR implementation by a year.

On the other hand, while the foreign direct investment (FDI) figures might look attractive in terms of growth, the base is so low that they do not mean much. In all, India attracted FDI of about USD 28.5 billion during April-February period of 2011-12 fiscal. The year-end figure could be in the range of USD 30 billion.

“Here too, potential areas which can catapult global investor confidence in India have remained on the backburner due to lack of political consensus,” said the ASSOCHAM chief.

That leaves the country look up to the services exports for retrieving the Balance of Payment (BoP) situation. The services exports largely generate business from the US economy, which is not showing definite signs of pick-up. Moreover, there are issues like protectionism and more and more road blocks being created in the export of Indian IT services to the US – be it visa fee hike or difficulties being faced by the Indian firms in getting short-term visas for their staff.
ASSOCHAM president has suggested the government to go for all out domestic policy reforms.  Whether it is Goods and Services Tax (GST), or Direct Tax Code (DTC) or banking sector reforms, not much time can be lost. These measures will boost confidence both in the domestic market as also for exporters as their transactions costs would come down making them competitive.

• Speed up Free Trade Agreement with the European Union. Exports of merchandise will get a boost in terms of getting improved  market access in products like textiles, engineering, gems and jewellery.
• Give concessional credit to exporters
• Improve the drawback rates so that taxes on raw material are not exported
• Improve trade and political relations with the neighbouring countries like Pakistan and Bangladesh. India can get increased market access at a lesser cost in terms of proximity of destinations.
• Support industry initiatives for aggressive marketing and organizing of trade and industrial exhibitions abroad.
   

Timely approvals may bring down housing costs by 25 to 40 per cent: Selja

 

"The government has formed a committee to evolve a workable strategy for reducing the time taken in approval of real estate projects which could ultimately reduce the cost of houses by 25 to 40 per cent," minister of housing and urban poverty alleviation Kumari Selja said.

It seems the prayers of the real estate bodies in India, including CREDAI and NAREDCO, have finally been heard as the government today announced formation of a committee which will formulate measures to bring down time taken in approval of real estate projects thereby envisaging price reversal by upto 40 per cent. 
 
The committee under the chairmanship of Dhanendra Kumar, former chairman of the Competition Commission of India, will submit its report in four months, she said while addressing a conference on affordable housing organised by Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“It is estimated that the cost to ultimate consumer could be 25 to 40 per cent lesser if the time of granting approval is reduced to six to eight weeks, which is quite achievable in the present day and age,” said Selja.

Leading real estate developers say about 70 approvals are required for a typical housing project which take nearly three years. The lack of coordination among multiple government agencies and delays result in higher costs which are passed on to the consumer.

The minister said the government has formulated a draft Real Estate Regulation and Development Bill for orderly growth of the sector. Besides, the recently-established Credit Risk Guarantee Fund Trust is coming up with a scheme to provide loans up to Rs five lakh for low income housing.

“The initial corpus of this fund will be Rs 1,000 crore and we hope it will catalyse about Rs 20,000 crore of affordable housing credit,” said Selja. The Union Budget for 2012-13 has allowed external commercial borrowings which will lower interest cost for developers and ensure better capital availability for low-cost housing, she said.

Arun Kumar Misra, secretary at the ministry of housing and urban poverty alleviation, said private sector can a crucial role to play in expanding the concept of affordable housing. There are, however, demand-side and supply-side constraints at present due to lack of bank credit.

Naveen Raheja, chairman of ASSOCHAM real estate committee, said the shortage of dwellings in urban India is estimated to be 25.5 million units. The poor form 90 per cent of this shortage.
“For affordable housing, partnerships may be forged among the central government, state governments, urban local bodies, people’s cooperatives and the private sector,” he said adding the definition of affordable housing should be clearly defined.

Affordable housing is generally defined as a dwelling unit of 300 square feet for economically weaker sections with annual income level of Rs 1.5 lakh and 300 to 600 square feet for lower income group with annual income of Rs 1.5 lakh to Rs 3 lakh.

ASSOCHAM secretary general D.S. Rawat said housing for all remains a key priority in India’s development agenda. “Low-cost housing offers a world of opportunities to the real estate development business that can bring in much-needed resilience to the sector.”

Others present were Susheel Kumar, joint secretary at the ministry of housing and urban poverty alleviation, R.V. Verma, chairman and managing director of National Housing Bank, Ashok Khurana, engineer member at the Delhi Development Authority, and Mr Sunil Dahiya, co-chairman of the ASSOCHAM real estate committee.

They said urban infrastructure is coming under tremendous pressure with rapid economic and industrial development across the country. While some of these are gradually being mitigated, concerted efforts are required by multiple institutions to facilitate mass development in the sector.

According to 2011 census, the country had a population of 1.21 billion of which 377 million or 31.16 per cent lived in urban areas.

Punjab can emerge as land of opportunities with private Investments : ASSOCHAM

New Delhi: Leading industry body ASSOCHAM has proposed 30-point growth strategy  to the new Government of Punjab with a view to give thrust to the small scale enterprises (SMEs) and food processing sector and achieve double digit growth in the decade.

The ASSOCHAM delegation comprising Ravi Wig, Chairman, ASSOCHAM Punjab Development Council, Ashok Khanna, Chairman, ASSOCHAM National Council on Environment & Safety and TQM and D.S. Rawat, Secretary General, ASSOCHAM met Prakash Singh Badal on Tuesday and suggested setting up of industiral clusters in Punjab  for small and medium enterprises (SMEs) involved in food processing, handicrafts, renewable energy and information technology to generate three lakh direct and indirect jobs over the next three years and help inclusive growth.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) recently signed a memorandum of understanding with the United Nations Industrial Development Organisation (UNIDO) to assist in establishing clusters of small and medium enterprises in two districts of potential states across the country.

The strategy paper on all-round Punjab development is a ready-reckoner for investors, the Centre and state governments to make it as one of the most attractive investment destinations in India with double digit SGDP growth, said Wig.  The chamber has also set up a dedicated Foundation for Development of Micro Industries and Clusterisation to promote micro, small and medium enterprises.

They said Punjab should rejuvenate agriculture, create manufacturing hubs and accelerate growth in services sector to emerge as land of opportunities. The agenda of new state government should be to prioritise building social and physical infrastructure and define role of all stakeholders and cover short-term and long-term goals to ensure speedy development.

The state may not have enough finances to develop infrastructure on its own which builds a good case for public private partnership (PPP) type of initiatives involving multilateral institutions like the World Bank and the Asian Development Bank. “The challenge before state government is to address the issue from a holistic perspective keeping in balance between agriculture and industry,” said Rawat.

To encourage effective distribution of agro-commodities, initiatives should be taken to create hub-and-spoke model under which districts and towns identified act as a hub and villages surrounding them act as spokes. This will ensure efficient distribution, reduce transportation costs, increase competition and real price discovery, benefiting the farmers.

Farmers need technology upgradation, logistic support, market intelligence and should be able to compete in international markets. The industry looks forward to stable, transparent and responsive state government so that more investments can pour in, he said.

“We would also like the state government to promote irrigation, rural connectivity, health, education and non-farm rural activities. With rich natural resources and traditional industries, however, the state holds enormous unrealised growth potential,” said Khanna.
At the same time, industries clusters can be created for micro, small and medium enterprises to ensure common facilities, thus reducing operating costs and increasing competitiveness and skill development around that sector.

The state government must facilitate contract farming by attracting investments from the private sector. Irrigation systems can be improved by employing modern technologies which are a must to boost productivity.

Special economic zones (SEZs) can be created with organic farms for herbal and medicinal plantation. A definite roadmap needs to be drafted to improve storage facilities, transport infrastructure and marketing network so that food processing industries can develop value-added products for domestic and foreign markets.

Industry-specific SEZs for information technology, biotechnology, pharmaceuticals, textiles, gems and jewellery besides manufacturing of sports goods also hold potential for growth and employment generation, said ASSOCHAM.

State-level development finance institutes like erstwhile industrial development corporations should be revived to support long-term financial needs of small and medium enterprises. Developing strategic business services like IT, IT-enabled services, finance and insurance can be catalysts of growth and enhance the share of services in gross state domestic product (GSDP).

The private sector can contribute by promoting such projects to provide industry-relevant skills to rural youth. ASSOCHAM also called for creating an enabling policy framework to rejuvenate economic activity in the state.

The state government should spell out a clear land acquisition policy with sufficient room for buyers and sellers to negotiate directly with minimal government role for attracting fresh investments from the private sector.

SEBI to reform IPO process

Capital markets regulator SEBI said today that it will reform the initial public offer (IPO) process and ensure that disclosure norms are made effective as the Indian financial markets undergo radical reforms to become globally competitive.

“We are looking at every aspect. The basic aim is to curb volatility, particularly on the day of listing,” said Rajeev Agarwal, whole-time member of the Securities and Exchange Board of India (SEBI) while addressing an ASSOCHAM conference.

“We will follow strict disclosure norms to protect investors’ interests, create enabling environment so that financial firms become global and vigorously enforce corporate governance norms.”

He said the industry should make efforts to channelise more savings into capital markets to fund capital requirements of various sectors. Only 4.6 per cent of national savings are invested in capital markets.

The country needs investments of one trillion dollars to build infrastructure in the next five years. Agarwal said even pension funds can be invested as new products evolve and regulations are harmonised so that GDP growth of nine per cent can be maintained, the industrial body said in a statement.

Meanwhile, CS Mohapatra, director (secondary markets and UTI) at the finance ministry’s Department of Economic Affairs, said the government will remove regulatory overlaps to bring financial stability and take measures to boost corporate bond market.

However, industry leaders must take lead in reducing intermediation costs by introducing new technology and improving human infrastructure. “There is no reason to be pessimistic as India is showing second highest growth rates amid global economic gloom. There is need for next generation of reforms to increase inflows from foreign institutional investors.”

Nanda Kumar, senior vice-president of the National Stock Exchange, said the current global uncertainties pose challenges and opportunities for the Indian financial sector. The industry requires innovation, efficiencies, transparency and safety to bring back investors’ confidence.

RN Dhoot, president elect of The Associated Chambers of Commerce and Industry of India (ASSOCHAM), said watershed structural reforms have taken place in the banking sector during 20 years of pro-active reforms.

“The time has come for consolidated efforts by all stakeholders for inclusive growth,” he said adding financial sector reforms can add significantly to economic growth and also make a significant contribution to the sustainability of this growth.

ASSOCHAM secretary general DS Rawat said the financial system’s ability to efficiently intermediate domestic and foreign capital into productive investment and to provide financial services to a vast majority of households will influence economic as well as social stability.

Rashesh Shah, chairman of ASSOCHAM National Council for Capital Markets, said Indian yearly savings total 500 billion dollars. The India growth story is in tact, he said, but four trends are worrisome. High inflation, rising interest rates, burgeoning fiscal deficit and the currency under pressure have led many to conclude that economic reforms are stuck for the moment.

Others present during the conference were Anil Agarwal, past president of ASSOCHAM, S.C. Agarwal, co-chairperson of ASSOCHAM National Council for Capital Markets, and Manish Kedia, director and head of debt practices at Resurgent India.