India Business

Prime Minister Narendra Modi met Facebook Chief Operating Officer Sheryl Sandberg yesterday. The goody goody reports are all over the papers today.

In a nutshell, this is what they talked about:

1. Sheryl said India is a very important country for Facebook.

2. NaMo wants to use Facebook for governance & bring more tourists to India.

3. NaMo wants Facebook to help commemorate Mahatma Gandhi’s 150th birth anniversary.

Nice.

Now we’re not sure if these things were discussed in private. But there is one particularly important issue we wish they had.

Paying Taxes

Facebook makes a bit of money from India. It isn’t much now. But it will make a lot more. And that’s going to have to be taxed– fair and square. If what Google does in India to ‘minimize tax’ liabilities is anything to go by and the treasury is in bad shape like the government says, this is a point to be stressed.

In many countries, large corporations like Google minimize taxes by setting up an office in Ireland (a tax haven) and selling advertising outside of US through the subsidiary.

Case in point: The tax department in India has alleged that it has transferred an amount of Rs 119.83 cr to Google Ireland without deducting tax at source as required by treaties between India and Ireland. That was way back in 2008-09. Since then, Google’s revenues have grown multi-fold.

As we’d pointed out earlier, once the money reaches Ireland, Irish tax laws come into effect (effective taxes are lower in Ireland). But then, the Ireland subsidiary pays out “royalties” to Google Ireland Holdings based in Bermuda.

The Bermuda entity is held by two Irish companies, one of which generates expenses which the other pays. The money is collected in Bermuda, by the other company. It goes through Netherlands, where Irish laws exempt royalties to other EU member nations. (For more, read this piece.)

Also read: Why Eric Schmidt Should Meet P Chidambaram

India’s new IT Minister Ravi Shankar Prasad spent a couple of hours listening to product startups and folks from ISPIRT yesterday. Earlier in the day, he spent time with the technology services companies.

The 3 key takeaways? Government is serious about

1. Broadband: The National Optical Fiber Network.
2. Local manufacturing of electronic goods.
3. E-governance reforms.

The focus on National Optical Fiber Network (NOFN) is something we’ve heard from the UPA government as well for the last 10 years. Unfortunately, India is still has the slowest Internet speed in Asia. When I asked the minister, he said that the UPA government only talked and the Modi government will “DO.”

Mr Prasad also holds the telecom portfolio. So I asked him: What of Mobile broadband? What I meant was 3G, 4G and such. Where am I coming from? Reliance has a pan India 4G license and has delayed launch by another year. Rest of the players are trudging along but nowhere close to meeting the rising demand. To bring in private investment, the government will have to deal with multiple disputes (including ones on taxation, privacy etc) and bring back investor confidence.

That went right over him (perhaps I should have articulated the question better).

Feeling proud of India's #ITProduct entrepreneurs.I shall be your spokesperson and ambassador.Lets make the India into a #ITProduct nation

— Ravi Shankar Prasad (@rsprasad) July 1, 2014

Now back to the question of product vs services. As you probably know already, there are two distinct camps in the Indian software industry now– the services guys (Nasscom) and the product guys (ISPIRT). It is important to make that distinction so that policymakers pay special attention to the fledgling product ecosystem. (Read: What Should Be The Role of Government in Promoting Entrepreneurship?)

Pallav of FusionCharts: My wish is to see India as an intellectual power house. Not as the backoffice of the world. @Product_Nation

— Jayadevan PK (@therealjpk) July 1, 2014

Clearly, the minister understands the difference. But he said that when he is at the ministry, he can’t afford to see things in silos. “But be assured, whatever the product industry needs from the government, will be done,” he said. Not bad for a start!

The Indian government has plans to incentivise electronic manufacturing in 8 cities.

Under the Modified Special Incentive Subsidy Scheme (M-SIPS), Ahmedabad, Aurangabad, Ghaziabad, Gandhinagar, Nagpur, Nashik and Thane have been picked to set up greenfield factories.

These incentives will be available for projects that come up within 10 years from approval, India’s Information Technology Minister Ravi Shankar Prasad said.

The Minister also said that government will setup greenfield electronic manufacturing clusters in Bhopal, Bhubaneshwar, Hyderabad, Maheshwaram, Bhiwadi, Jabalpur, Hosur and Kakkanad. (via)

Also see: Odisha Government to Set Up Rs 210 Cr Electronic Manufacturing Cluster

#Shortnews: News you could use, useful data and actionable insights in a crisp and easy format (Feedback:team@nextbigwhat.com).

The Odisha government in setting up the first Greenfield Electronic Manufacturing Cluster (EMC) in Info-valley, Bhubaneswar, under a central government scheme.

The proposed cluster in Khurda District in Odisha, is will house over 100 electronics manufacturing units, according to a statement. The Rs 210 cr project is likely to create nearly 12,000 jobs. Total investment in the cluster is expected to be close to Rs 980 cr.

Vishal Kumar Dev, CMD, IDCO (Odisha Industrial Infrastructure Development Corporation) said

In addition to this, the state government is providing attractive incentives for the ESDM sector under the recently announced state IT policy-2014.

The cluster will also have production support services like Tool room, Test & Measurement labs, Incubation centre, Training centre and common infrastructure support like power, water and ETP for the potential investors.

#Shortnews: News you could use, useful data and actionable insights in a crisp and easy format (Feedback:team@nextbigwhat.com).

The Electronics payment market has stepped out of the shell over the last two years in India. Pushed by the vision of the RBI to create a less-cash economy, entrepreneurs have innovated across the payment lifecycle. One development that has emerged out the the payment revolution is the growth in point of sales (POS) terminals.

Almost 80% of the retail market in India does not have POS installations to offer card-based payments. However, as credit card and debit card transactions grow, it creates a huge opportunity for POS installations.

According to data released by Frost & Sullivan, India is currently the 13th largest non-cash payment market in the world; with the USA and Brazil occupying first and second place respectively.

In 2013, credit, debit, and other electronic payments grew at a rate of 35 per cent from the previous year in terms of payment transactions. POS terminals shipment volumes in the country are anticipated to grow from 0.8 million units in 2013 to 1.1 million units by 2015 growing at a CAGR of 17.2 per cent.

Challenges

Despite the high consumption volume and potential for growth for POS terminals , local manufacturing is minimal. Manufacturing is restricted to assembly and is heavily reliant on imports as there is no capability in India to cater to such huge volumes.

Euro Master Visa(EMV) certifications, which are a mandate for POS terminals authorization incurs significant cost and is apparently a roadblock for local manufacturers.

In addition, there are no established standards in manufacturing, which necessitates manufacturers to make customized terminals for clients.

Looking ahead

Reduction in sales, VAT and excise duty would attract more manufacturers to consider local manufacturing, the report said.

It also added that the National Payment corporation of India could play the role of a large clearing house to do away with EMV certifications which are expensive. “Manufacturing standards and policies can be established to consolidate and create a local manufacturing set up,” the report said.

First the news: Reliance Industries is acquiring Network18 Media & Investments Limited for Rs 4,000 cr. Independent Media Trust, owned by Reliance, will acquire 78% in NW18 and 9% in TV18. This is easily one of the largest take overs in the Indian media business.

Reliance said in a press release earlier today that the acquisition will differentiate Reliance’s 4G business “by providing a unique amalgamation at the intersect of telecom, web and digital commerce via a suite of premier digital properties.”

Network18 owns In.com, IBNLive.com, Moneycontrol.com, Firstpost.com, Cricketnext.in, Homeshop18, Bookmyshow.com and broadcast channels including Colors, CNNIBN, CNBCTV18, IBN7 and CNBC Awaaz. As we’d pointed out, the digital content business hasn’t grown a whole lot in the last year.

Now we know that Reliance is dead serious about its 4G roll out. It has a whole suite of digital offerings lined up around the launch including music streaming, video calling, instant messaging and payment services.

We also know that content is set to explode with 4G connectivity. India’s appetite for smartphone and mobile data is also growing.  It is natural for the $67 bn group to not just control the pipe but also make money from the services that run on top of it (expect net neutrality debate to heat up soon). But really, a Rs 4000 cr acquisition to back its 4G play? Or is it payback time?  Network18 is had borrowed from RIL in 2012 for leveraged buyouts to expand its network earlier.  In 2012, through Independent Media Trust, RIL had invested in optionally convertible debentures from Network18’s promoter group. These can be converted to shares within 10 years from being issued (h/t: nixxin). RIL already paid for what it will now control.

What do you think?

Indian software market grew 9.9% to $ 3.78 bn in CY 2013, according to the latest report by IDC. The market research firm said that growth slowed compared to previous year due to the elections, delayed payments, lower profits from government sector and depreciation of the rupee.

The report said that Banking, Communication and Media, and Manufacturing sectors continued as the top software spenders.

Manufacturing sector is set for an impressive growth in terms of IT adoption due to continued efforts by the government to revive the collapsing sector owing to ever rising costs, high inflationary pressures and changing government policies. The market is moving towards cloud based applications.

Here are some of the other highlights of the report.

• Microsoft continued to lead the India software market with a share of 30.0% in CY2013, a jump of 1.5% compared to CY2012 owing to OS upgrades and Windows XP migration.
• Microsoft was closely followed by Oracle, SAP and IBM with a market share of 11.9%, 7.9% and 6.0% respectively for the mentioned period.
• Some of the vendors with niche specialization such as cloud or analytics fared well in terms of market penetration.
• India software market for 2H 2013 stood at INR 113.7 billion (USD 1.8 billion) and registered a half yearly growth of 6.0% over 1H 2013 and a year-on-year growth of 10.0% over 2H 2012.

IDC expects the India software market to grow at a CAGR of 10.3% over the five year forecast period (2014-2018). The growth will be primarily driven by markets such as security software, system software, enterprise applications and analytics, which continue to be the top priorities for enterprises in terms of IT investments.

Chennai exceeds all the metropolitan areas in terms for average spend in wedding photography and videography spending 22% over the national average of Rs 48,500, according to a new report.

People are willing to spend as high as Rs 5 Lakh to as low as Rs 15000 on their wedding photography and 52% of India is willing to spend more than Rs 30,000 to get clicked well.

Here’s a look at an infographic put together by the folks at flatpebble, an online service that connects photographers with prospective clients.

It also places Chennai at the top of the big-spenders pile. On an average, Chennaites spend nearly Rs 60000 on wedding photography, with Mumbaikars and Delhiites following suit at second and third respectively.

With an 25% increase in spending year on year, there has never been a better time to love your camera. Surprisingly, Delhi weddings that are known to be big and fat, seem to have a lower budget to spend on photography. That’s weird.

Among the few things that the UPA government managed to get done in its last term was to allow 51% FDI in multi brand retail. The new government wants it reversed.

The new government at the center is against Foreign Direct Investment in Multi-brand retail. Nirmala Sitharaman, the Industries minister appointed by the BJP said on Tuesday that the party is not in favor of opening up FDI in retail.

Sitharaman said

At this stage the party position is very very clear. We have explained about FDI in multi-brand retail (MBR) that it probably is not best opened up now because medium and small sized traders or small farmers have not been adequately empowered… if you open up the floodgates of FDI in MBR, it may affect them. (via)

She however said that the FDI policy by the previous government will be looked at in a “calibrated way,” and that improving exports will be a priority for the government. The BJP, which has an absolute majority in the parliament, has been against FDI in multi brand retail from the start.

The UPA government had approved 51% FDI in multi brand retail in its term, opening up the country’s retail sector for large MNCS like Tesco and Wal-Mart. But there were concerns from the opposition that it will destroy India’s small and medium businesses and lakhs of kirana stores.

From this whitepaper (pdf) published by te BJP, it appears that the BJP is staunchly against FDI in multi brand retail and it is possible that the party will reverse the Congress party led UPA government’s policy.

While BJP ruled state Rajasthan had earlier banned FDI in retail, companies like Amazon have been lobbying in the US for FDI in retail in India.

India’s ranking in ease of doing business just went down a few more points. This year, India ranked 134th, among some of the most backward nations, according to the latest Ease of Doing Business report by the World Bank which analyzed various parameters in 189 countries. Last year, India was ranked at 132.

Their economies were weighed on 10 major criteria: ease of doing, starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

India fared poorly in terms of getting credit and trading across borders. In paying taxes, the economy has improved from last year.There has been no change in the section of enforcing contracts.

Singapore still holds the numero uno position for the eighth consecutive year in the ease of doing a business category. Joining it on the top ten are Hong Kong, New Zealand, United States, Denmark, Malaysia, Korea, Georgia, Norway and United Kingdom.

Full report here.

Ahead of the 2014 general elections, the Bharatiya Janata Party has released its manifesto which promises to use technology to bring change and growth in many different areas. Overall, the party shows a great understanding of how much technology can impact the country’s growth it can use technology for governance.

Here are some of the ways in which the BJP is thinking of using technology & what we make of it.

• To control food inflation, the party has proposed to leverage technology and disseminate real time data, especially to farmers- on production prices, imports, stocks and overall availability.

The open data program taken up by the central government is doing this already. However, as we’d written before, only real time data will be of any practical use.

• The BJP wants to focus on increasing the penetration of broadband, leverage technology for e-Governmance, generate IT based jobs in rural and semi-urban areas, make technology enabled products affordable for students and pursue a mission mode project under the ‘National Rural Internet and Technology Mission.”

The UPA government has already been pushing the broadband agenda. However, India hasn’t done so great with respect to broadband penetration. The National Optical Fiber Network project is trying to connect gram panchayats and create a backbone of optic fiber network. We would love to see some action on the mobile Internet front. Prices of 3G and 4G technologies need to come down (it also has a direct positive impact on GDP growth.)

• The party also wants to roll out Gujarat’s ‘E-Gram, Vishwa Gram’ scheme nationwide and promote e-Bhasha, the national mission for promotion of IT in Indian languages.

Indian languages are tough to crack. The lack of input methods, ineffective search, interoperability and standards are a major barrier. We are seeing some great developments on the mobile.

Some of the other plans: Our take

• Deploy IT to protect India’s priceless cultural and artistic heritage, which includes digitization of all archives and museology: More partnership opportunities for Google?
• Promote ‘open source’ and ‘open standard’ software: This will have implications on companies like Microsoft.
• Mandate digitization of all government work to reduce corruption and delays: The concept of paperless office has been remained on paper for over a decade now.
• Set up High-speed digital highways to unite the nation.
• Use technology to reduce Transmission and distribution losses: The RAPDRP scheme has been doing this. Are smart grids the answer? If yes, where will the massive investments come from?
• Use mobile and e-Banking to ensure financial inclusion. 
• BJP aims to make every household digitally literate with a goal to make India the Global Knowledge hub. 
• Use technology for scientific, strategic and long term town planning – including GIS based mapping: Very sensible approach.
• Wi-Fi zones in public areas: Yay! 

100 New Cities

• The BJP will initiate building 100 new cities; enabled with the latest in technology and infrastructure -adhering to concepts like sustainability, walk to work etc, and focused on specialized domains Wi-Fi facilities will be made available in public places and commercial centres.

Specially abled

• Use technology to deliver low cost quality education to specially-abled students ‘in-home’ – through E-learning.
• Identify each and every special needs person across the country – establishing a web based disability registration system to issue universal ID for all applicable government benefits (healthcare,transportation, jobs, education etc).

Will the government issue another ID card or make use of the Aadhaar platform?

Health

Utilize the ubiquitous platform of mobile phones for healthcare delivery and set up the ‘National eHealth Authority’ to leverage telemedicine and mobile healthcare for expanding reach and coverage and to define the standards and legal framework for technology driven care.

Women

Using information technology for women’s safety.

Set up an All Women Mobile Bank to cater to women.

Education

BJP will explore ways to reduce the daily burden of carrying books to school for children, which would also entail use of technology for education as a mission mode project. 

Establish a national E-Library to empower school teachers and students

Taxation

• Provide a non adversarial and conducive tax environment.
• Rationalize and simplify the tax regime
• Overhaul the dispute resolution mechanisms
• Bring on board all State governments in adopting GST, addressing all their concerns
• Provide tax incentives for investments in research and development, geared towards indigenization of technology and innovation

Foreign Direct Investment

• Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialized expertise. BJP is committed to protecting the interest of small and medium retailers, SMEs and those employed by them. 

If BJP comes to power, there will be little hope for multi brand retailers to setup shop in India. The ban on FDI in online retail is will also stay.

Science and Technology

• Build world class, regional centres of excellence of scientific research in the field of nanotechnology, material sciences, thorium technology and brain research.
• Create an ecosystem for multi-country and inter-disciplinary collaborative research, and establish an Intellectual Property Rights Regime which maximizes the incentive for generation and protection of intellectual property for all type of inventors.
• Achieving synergy between industry and scientific research. Autonomous technology transfer organizations will be created as associate organizations of universities and national laboratories to transfer the know-how generated by them to industry.

This is key to solving India’s innovation problem.

• Set an institute of Big data and Analytics for studying the impact of big data across sectors for predictive science.

We hope the government doesn’t take up analytics on citizen data that is collected through projects like the Aadhaar and National Population Register.

The Supreme Court has just ordered the government not to share Aadhaar details with any agencies without the permission of the Aadhaar user. A three member bench headed by Justice BS Chauhan said: “If there are any instructions that Aadhaar is mandatory, it should be withdrawn immediately.”

As technocrat Nandan Nilekani braces to contest elections on the Congress ticket, this comes as another big blow to Aadhaar, the project which was led by him. The Court was hearing petitions against Aadhaar that challenged the constitutional validity of the project.

It also said that sharing Aadhaar data amounted to violation of privacy. The part where the court says Aadhaar is not mandatory is the damaging part for the multi-crore project. The other part, where it ordered not to share biometric data with other government agencies goes in favor of the UIDAI which earlier declined to share fingerprint data with the CBI.

The problem with Aadhaar?

While the National Identification Authority of India bill, which gives legal standing to the project, is still pending, the government has approved direct cash transfers to beneficiaries of government schemes through the Aadhaar platform.  The Aadhaar project, first mooted by the Planning Commission was set in motion through an executive order without any legislation backing it.

Various agencies like the police and LPG distributors have also started seeding their databases with Aadhaar numbers. Some of the services and departments also started making Aadhaar mandatory to avail government benefits. This was revoked by a court order in September. More than 56 cr Aadhaar numbers have been issued so far. Former Infosys executive who was pulled into the government to execute the project recently quit his job at the Unique Identification Authority of India to contest elections on a Congress ticket from Bangalore.

The government has spent thousands of crores of rupees on the project so far. In the last budget, it set aside over Rs 3000 cr for the project. In total, it is expected to cost the government over Rs 35,000 cr over a 10 year period to setup Aadhaar and run benefit transfers and other schemes on top of it. At this rate, benefit transfer and other benefits of Aadhaar might just remain a pipe dream. Another albatross around the government’s neck?

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Bihar & Jharkhand are some of the most backward states in the country. But here’s the good news. The two states, along with Delhi, Punjab and Uttarakhand produced the most number of employable engineers, making up the top 25% of an employability study published recently.

States of Tamil Nadu, Andhra Pradesh, Chhattisgarh continue to lurk in the bottom 25 percentile bin, given the sheer number of engineering colleges, said the The National Employability Report Engineer Graduates 2014. 

States with the highest number of colleges show the lowest percent employability, said the report by Aspiring Minds, an employability solutions company. The report was based on a sample of more than 1.2 lakh engineering students from over 520 engineering colleges.

In general, colleges in metros produce more employable candidates due to better exposure and education. According to the report, percentage wise, Delhi based colleges produced consistently better graduates for IT, engineering and Non IT roles as compared to other metros. Kolkata and Bangalore followed.

For an IT product role, 13% of Delhi engineers were found employable with Kolkata & Bangalore trailing behind at 5.7% and 3.7% respectively.

Download the full report here(pdf).

The Indian government may soon put foreign e-commerce companies like Amazon and eBay out of their misery.

The government, which has placed a ban on foreign direct investment in retail e-commerce, has started consulting various stakeholders to open up the sector and is likely to reach a verdict by the end of the financial year, according to a new report which cited official sources.

A circular (pdf) by the Department of Industrial Policy and Promotion, said that the latest consolidated FDI policy has been circulated in April 2013 (pdf here) and the next edition is scheduled to be issued on 31 March 2014.

The first edition of the consolidated FDI policy clearly bans FDI in retail e-commerce.

The document, of nearly 120 pages, says:

Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading.

The report says that the government is weighing if it should also open up FDI in e-commerce services, which will have a wider impact.

FDI in Ecommerce: The Story So Far

After returning from the G20 summit in September 2013, the Indian Prime Minister asked ministry of Commerce & Industry to examine if FDI can be allowed into e-commerce.

The country relaxed retail FDI norms in September last year to allow foreign ownership of multi brand retail in India. However, FDI was not allowed in e commerce. 

American ecommerce giant Amazon has been pushing hard to gain access to the $400 bn Indian retail market.  In February, Amazon’s global Vice President Paul Misener met India’s trade minister Anand Sharma and discussed the creation of a favorable policy environment for Amazon to do business in India. The company recently launched Amazon marketplace in India.