Start-up India: Stand-up moment for start-ups:

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1 India Economic News January 2016 Start-up India: Stand-up moment for start-ups: Prime Minister Narendra Modi has launched another flagship scheme of Govt of India, Startup India. Tax exemption on capital gains and income tax holiday for three years were among the other big-bang incentives announced to promote growth and profit. The new incentives for startups, known as start-up action plan, would include: i) Self-certification regime; ii) Hassle free Registration through mobile app; iii) No labour inspection for initial 3 years; iv)funding support worth Rs. 10,000 crores ; v) Credit guarantee fund for startups; vi) 80% rebate on patent application; vii) Income tax relief for first 3 years; viii) Exemption from Consulate General of India Munich Capital Gain Tax; ix) Easy exit with the help of the proposed Bankruptcy code (the exit clause will be included in the Insolvency & Bankruptcy Bill 2015 that will make exit possible within 90 days); x) incubation centres to support Startups across the country; x) relaxed norms of public procurement for startups Union government releases first list of 20 smart cities: The Union Government of India has announced the names of the first 20 urban areas that will be developed as smart cities with an investment of Rs 50,802 crores (approx. Euro 6865 million) has been proposed in selected smart cities and towns during the five-year period. The list includes five capital cities

2 among the 20 smart cities chosen. The selected cities will be equipped with basic infrastructure, efficient urban mobility and public transport, IT connectivity and e- governance mechanisms. In the future, the government plans to announce 40 cities each to be developed as a Smart City. Following is the list of 20 smart cities: 1. Bhubaneswar; 2. Pune; 3. Jaipur; 4. Surat; 5. Kochi; 6. Ahmedabad; 7. Jabalpur; 8.Vishakapatnam;9.Sholapur;1 0.Davangere; 11.Indore; 12.NDMC; 13.Coimbatore; 14.Kakinada; 15. Belagavi; 16. Udaipur; 17. Guwahati; 18. Chennai; 19. Ludhiana; 20. Bhopal IMF retains India forecast, cuts world growth: economic expansion would come down from 6.9 per cent in On the other hand, Indian economy is expected to grow at 7.3 per cent in The Fund scaled down world economic growth at 3.4 per cent in 2016 and 3.6 per cent in The comparative figures were 3.6 per cent and 3.8 per cent in the October outlook. The IMF cut economic growth projection of emerging markets by 0.2 percentage points, higher than one percentage point in case of advanced economies, both for 2016 and However, global growth is likely to be marginally better in 2016 and 2017 compared with 3 per cent in Centre plans sops to woo medical tourists: The IMF has retained India's growth projections at 7.5% for and each, even as it cut its forecast for the global economy by two percentage points for 2016 and 2017 calendar years on depressed oil and commodity prices. Though China's economic growth projections have been retained at 6.3 per cent and 6 per cent for 2016 and 2017 respectively, the According to Mr. Mahesh Sharma, Indian Union Tourism Minister, India plans to roll out the red carpet for medical tourists with a series of initiatives being planned. These include online approval for medical visa, accreditation of hospitals and wellness institutions and establishing fixed charges for services. The Ministry has set up three sub-committees working 2

3 under the National Medical and Wellness Tourism Promotion Board to look into regulatory, accreditation and marketing issues. The 25- member board includes experts from the related fields and chambers of commerce. The ministry also plans to set up a dedicated web portal highlighting information related to facilities and services offered by hospitals, health and yoga centres, spas, wellness institutes along with costs. Indian luxury market to cross $18.3 billion by 2016: Assocham: An Association of Chambers of Commerce of India (Assocham) study has stated that with the increasing brand awareness and growing purchasing power of the upper class in tier II and III cities, Indian luxury market is expected to cross $18.3 billion by 2016 from the current $14.7 billion. As per the study, areas such as five star hotels & finedining, electronic gadgets, luxury personal care, and jewelry performed well in the year of 2015 and are expected to grow by 30-35% over the next three years. With the luxury market expected to grow at over 25% year on year, private equity investments (PE) in the luxury segment are expected to increase and support the enhanced size of the Indian luxury market. India will be a star performer in 2016: PwC report: India will be a star performer among emerging market economies and is expected to clock 7.7% growth in 2016, outshining China for the second consecutive year, according to a PwC report, a global consultancy firm. Among the seven emerging economies (China, India, Brazil, Mexico, Russia, Indonesia and Turkey), India will be a star performer, while the Brazilian and Russian economies will contract and China will slow down, the report further said. While the G7 economies (the US, the UK, Japan, Germany, France, Italy and Canada) are expected to grow at fastest rate since 2010, led by the first two, the E7 emerging economies will grow slower than their trend rate (but still faster than the G7). 3

4 Foxconn plans to make India hub for Africa, West Asia: Taiwanese electronics major, Foxconn intends to make India a key global manufacturing hub for servicing markets across Africa and West Asia, which may result in an inflow of billions of dollars. Foxconn, which has already started making phones and televisions in India as part of its contract manufacturing business, intends to widen the engagement with the market. The world's largest electronics major is making products for companies such as Sony, Xiaomi, Gionee and Microsoft at its India units and has plans to grow the number of locations from the present ones in Andhra Pradesh, Tamil Nadu and Maharashtra. Foxconn chairman Terry Gou had last year committed a $5- billion investment in Maharashtra. Indian economy likely to grow at 7.9% next fiscal: India Ratings & Research: According to India Ratings & Research (Ind-Ra), the Indian economy is expected to grow by 7.9 per cent in the next fiscal and may progress at a similar pace over a couple of years extending beyond The agency added that the various macro parameters show that India has and is likely to perform better than its peers in the near term. Agency is of the view that even in the next five years or so, the GDP growth is likely to hover around this level of sub-8 per cent and can surpass it only if the host of policy initiatives taken by the new government actually show results. Ind-Ra expects the agriculture sector to grow at 2.2 per cent in , services sector at 9.5 per cent and industrial sector at 7.6 per cent. Against the backdrop of low inflation, stable rupee and the fact that the fiscal & current account deficits are no longer a threat, Ind-Ra believes domestic demand will remain the key driver of India s GDP growth in Consumer sentiments which were hit by a high and stubborn inflation over the last few years, though still subdued, are gradually recovering. Ind-Ra also expects the fiscal deficit of FY17 to come in at 3.9 per cent of GDP. 4

5 Apple plans to launch stores in India: Apple is now planning to bring the ambiance of Apple Stores to India - the world s second largest telecom market. Apple Inc. has filed an application with the Department of Industrial Policy and Promotion (DIPP) to open its own branded stores in India. The proposal is under examined by DIPP. It is not yet clear as to how many stores it will open in India or how much it will invest. The American tech giant as also applied for a permission to sell its products directly online following the government s easing of foreign direct investment (FDI) rules on single brand retail. The latest move by the world s largest tech firm, by market cap, shows the increased importance of India, where its sales crossed the $1 billion mark for the first time in the last fiscal, according to results filed with the Registrar of Companies. At present, Apple has a minuscule market share of under 2% in smartphone market as compared to rival South Korea s Samsung Electronics Corp., the largest smartphone maker in India, closely followed by India s home grown brand Micromax Informatics Ltd. World Bank to be anchor investor in Rail Development Fund: Suresh Prabhu: According to Minister for Railways, Mr. Suresh Prabhu the World Bank would be the anchor investor in the new Railway Development Fund, which would be used to fund modernisation of Indian railways. While announcing that the fund would be kick started soon as there is unanimity in the World Bank leadership, he added that the World Bank leadership had realized that based on the performance in the past one year, Indian Railways is in the right direction. However, Prabhu did not divulge the size of the fund, but indicated that it would be the largest ever provided by the World Bank to the Indian railways. The International Finance Corporation (IFC) would look into the possibility of revenue generation through nonrailway operation, he said. 5

6 Coke to set up plant in MP industrial area: Hindustan Coca-Cola Beverages has said it will invest Rs 750 crore in phases as the Madhya Pradesh government develops its first industrial area in public private partnership on 679 hectares about 72 km south of state capital, Bhopal. The area is to be developed, operated and maintained by a private developer. According to Audyogik Kendra Vikas Nigam (AKVN), Bhopal, the area will be developed, operated and maintained by the private player for a period of 15 years. There will be no hazardous industry and there will be a zero-discharge policy. Also, no company will be allowed to discharge effluents as the area is in the vicinity of the Narmada river. Coca-Cola [Hindustan Coca- Cola Beverages] has been issued a letter of intent for allotment of about 110 acres. The company have plans to set up six bottling lines at the site. RBI modifies norms for credit to overseas subsidiaries of Indian firms: The Reserve Bank of India (RBI) modified norms for banks to extend credit facilities to overseas stepdown subsidiaries of Indian companies to finance projects undertaken abroad. The RBI has reviewed its 2007 instructions permitting banks in India to extend funded or non-funded credit facilities to step-down subsidiaries of the overseas arms of Indian firms, and has come out with modified norms. The immediate overseas subsidiary of the Indian company, the RBI added, must be directly controlled by the Indian parent company through any of the modes of control recognized under the Indian Accounting Standards. In addition, the Indian parent company must directly hold a minimum 51% of its shareholding. The RBI also asked the banks to make an additional provision of 2%, in addition to country risk provision applicable to all overseas exposures, against standard assets representing all exposures to step-down subsidiaries. 6

7 Insurance FDI cap hike results in cash inflow in JVs: According to sources, enhancement of FDI cap to 49% in insurance sector will lead to greater flow of foreign funds into India s private JVs and an investment of Rs 6,000 crore (approx. Euro 833 million) is expected into the sector during Consequent upon passage of the Insurance Laws (amendment) Bill, foreign investors have started ploughing capital into their Indian joint ventures, raising their equity holdings. As many as 10 insurance companies have applied for regulatory clearances to bring in foreign investment of Rs 6,192 crore (approx.. Euro 860 million). They have applied to insurance regulator IRDAI and Foreign Investment Promotion Board (FIPB). According to Insurance Regulatory and Development Authority of India, the total FDI in insurance sector as on March 31, 2015, was about Rs 8,031 crore (approx. Euro 1115 million). India to build its heaviest rocket to carry 10-tonne satellites: Indian Space Research Organization (ISRO) plans to build its heaviest rocket, which can carry satellites weighing 10 tonnes into space. Currently, the space agency s geosynchronous satellite launch vehicle (GSLV MK-2) can carry satellites weighing only two tonnes. The proposed rocket would be powered by a semi-cryogenic engine that runs on kerosene and liquid oxygen. Semi-cryogenic engines are environment-friendly and bring down the cost of launches significantly. The design process for the semicryogenic engine has been completed and it is being built by Godrej Aerospace. ISRO, however, did not set a timeframe for the rocket development. 7

8 *** DISCLAIMER This newsletter is a compilation of news articles from various business e-newspapers and in no way is an endorsement or reflection of views of Consulate General of India, Munich. For queries contact: Mr. Asheesh Gupta, Consul (E & C), Consulate General of India, Widenmayer Strasse 15, Munich, Germany. cpic@cgimunich.com, Web: 8