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India and Russia to Begin Trade Negotiations
India and Russia to Begin Trade Negotiations
Giving a new dimension to their time tested relationship, India and Russia have decided to start negotiations to formulate a trade agreement between them. The agreement has been termed as a Comprehensive Economic Cooperation Agreement, which indicates that it will not be as radical as a Free Trade Agreement (FTA), but slightly short of it. Signing of such agreements brings down import tariffs between nations, and increase the flow of goods and services. Union Commerce and Industry Minister Anand Sharma says, ?his economic cooperation caan no longer be limited to purchase of defence equipment or investment in oil and gas, although these are highly valued by both countries, but must extend beyond government to government trade and investment. Our common target is to achieve US$ 20 billion in trade by 2015.
Industry experts feel that this agreement will boost trade between the two emerging economies, and herald a new dawn in their relationship. It may possibly be a roadmap for arriving at an FTA. Russia is the 12th largest economy in the world, and has the highest per capita income among BRIC (Brazil, Russia, India, and China) economies. Russia? economy grew an average of 7% per annum from 1999-2008, a growth rate similar to that of India and China. While Russia was hit by the global financial and economic crisis in 2009, it has since returned to GDP growth, and its economy is projected to grow around 4.5% per annum until 2015.
set up a two million tonnes a year iron and steel plant near Bellary in Karnataka.
REAL ESTATE
REAL ESTATE
Real Estate Sector May Bleed
The country's real estate sector may hit a bumpy road ahead due to increase in the costs of construction. This finding was revealed in a recent study conducted by PropEquity, an online data and analytics search platform that covered the Indian real estate industry. The increasing construction costs has been attributed to price hikes in the four key construction components, namely steel, cement, labour and bricks. "There is an 18% gross rise in construction cost over the last two years from 2009 to 2011. This escalation will erode the profit margins significantly," the study has found.
According to the study, the impact of
increased delivery commitment along with escalating costs will affect the delivery of residential units on time. It is estimated that delivery of 4,80,000 residential units across affordable, mid and luxury housing segments, scheduled for completion during 2011-13, will be delayed in the eleven cities. As a result, developers are likely to lose interest in projects, making delays in project execution inevitable.PropEquity has conducted an extensive study of the construction delays in real estate projects and the impact on the industry. Data points covering over 10,000 projects being executed by over 1,500 developers across 11 cities in prime residential locations have been studied, to arrive at the trends contained in the research report. The cities that were included in the study are Gurgaon, Noida, Greater Noida (north); Mumbai, Navi Mumbai, Thane, Pune (west); Bengaluru, Chennai, Hyderabad (south); and Kolkata (east).
Orissa Plans 82 MSME Clusters
Orissa Plans 82 MSME Clusters
The Orissa government is planning to develop micro, small, and medium scale (MSME) sectors in the state. It has identified 82 clusters to come up in the state, which will include wood-based industry, pharmaceuticals, plastic, textile, food processing and rice mills. "Our government wants to promote industrial activities in the state, and is aware of the important role that MSMEs can play in employment generation, development of local entrepreneurship, and removal of regional imbalance," says chief minister Naveen Patnaik.
Patnaik has also urgedthe large industries to set up industrial estates and parks where such scale of industries could
have their units. "The government and industry will have to come together to plan and create such infrastructure at locations such as Jharsuguda, Angul, Rourkela, Sambalpur, Dhenkanal, Kalinganagar, Paradip, Balasore, Rayagada and other viable locations. The Industrial Policy Resolution, 2007 of Orissa recognises ancillary and downstream industries as a thrust sector, and provides many incentives to such industries."
Informing about the current development, State Industries Secretary T Ramachandru has informed, "We are hopeful that a cluster on plastic manufacturing will soon come up in Balasore, for which a Special Purpose Vehicle has been formed. Similarly, an apparel cluster is taking final shape on 20 acres of land near Khurda." He has requested companies to set up bigger projects in steel, alumina and power, which can lend a helping hand for development of the MSME sector in the state.
GREEN BUILDINGS
GREEN BUILDINGS
Green Building Rating System Unveiled
Confederation of Indian Industry (CII) and Indian Green Building Council (IGBC) have launched the LEED 2011 (Leadership in Energy and Environmental Design) Green Building Rating System for India, indicating a new milestone in the green building movement in the country. The rating system of IGBC covers homes, commercial interiors, factory buildings, schools, special economic zones and townships. "Launched first in 2007, LEED India has received an overwhelming response from the industry. Based on the feedback and experiences of its implementation, the rating system has now been upgraded and named LEED 2011 for India. This launch would pave the way for design and construction of some of the best green buildings in India," says S Raghupathy, senior director and head of CII-Godrej GBC.
According to Raghupathy, LEED 2011 will seek to enhance awareness in energy and water efficiency baselines, and promote naturally ventilated buildings and passive technologies. In addition, it will also seek to align with local regulations and standards, apart from adopting latest standards. "India has over 995 registered green building projects with a total footprint of 606 million (60.6 crore) sft. India is now among the top three countries to have a large green building footprint. This has largely been possible because of the involvement of stakeholders of the building sector, including architects, builders, developers, manufacturers and consultants," he informs.
EXPORTS
EXPORTS
Exports Stack Up 57% in May
Maintaining the growth momentum that began last fiscal, India’s exports surged by 56.9% year-on-year to US$ 25.9 billion in May. But, with rising exports, the imports too went up by 54.1% at US$ 40.9 billion during the month, pushing up the trade deficit to US$ 15 billion for the month. "We will continue with this strong performance so that trade account deficit can be kept manageable," says Union Commerce and Industry Minister Anand Sharma. "We are facing this situation as the oil prices have sky rocketed due to a number of factors, including developments in the Middle East
in the last few months. The country’s trade gap is much larger than it had been in the last two-three years." During the first two months of 2011- 12, sectors which registered healthy growth include engineering (115%), electronics (80%), drugs (68%), petroleum (64%), gems and jewellery (23%), readymade garments (31%), chemicals (44%) and leather (21%). However, a few segments like tobacco, iron ore and fruits and vegetables recorded negative growth. N R Bhanumurthy, an economist at the National Institute of Public Finance & Policy, has observed, "The import figures are on expected lines as oil prices were exceptionally high at the time. But the export data is particularly optimistic, as the industry was not considered to be in a very good shape. It has helped offset the trade deficit to some extent as well."
On a cumulative basis, imports grew 33.3% to US$73.7 billion, while exports rose by 45% to US$49.7 billion between April and May 2011 over a year ago. The trade deficit amounted to US$23.9 billion in the two month period.
National News
FREE TRADE
Indo-Swiss FTA by Year End
The Free Trade Agreement (FTA) between India and Switzerland is expected to be signed by year end, consul general of Switzerland Rolf Frei has informed. “We hope that the negotiations on the FTA will end by this year. Being an open economy, our country will be aiming for the most liberal market access both ways in trading of goods and services. Currently, the bilateral trade between Switzerland and India stands at US$ 3.5 billion.” Switzerland’s exports to India include machine tools, pharmaceuticals, chemicals and precision instruments, while India exports textile, garments, agri products and IT services.
On the double taxation treaty between the two countries, Frei adds, “The first chamber of Parliament in Government of Switzerland has already passed it, and now the treaty is before the second chamber. We hope that it will be passed in the winter session in October.” According to him, once the double taxation treaty becomes operational, it would help the Indian government seek details of secret Swiss bank accounts of its citizens in cases of suspected tax evasion or fraud. However, the disclosures would be in accordance with due procedures, especially the widely referenced guidelines of the Organisation for Economic Cooperation & Development (OECD).
The consul general has invited the trade and investor community of the country to explore the European markets via Switzerland. “The Swiss advantage lies in being a strategic location in the neighbourhood of three of the big four EU markets - Germany, France and Italy - which make the country a logistical hub that allows 90% of EU markets to be reached in a single day, along with the highly skilled and internationally oriented labour force, and a stable political system.”
Large Number of FTAs Will Hamper Manufacturing
Expressing concern over a large number of Free Trade Agreements (FTAs) being signed by India, industry body FICCI has said that it would make India’s manufacturing sector uncompetitive. The secretary general of FICCI, Rajiv Kumar, has stated, “Since we have inked FTAs with ASEAN and Sri Lanka, people will import duty free goods from these countries that will make our manufacturing sector uncompetitive.” Under an FTA, two sides heavily reduce or eliminate duties on maximum number of goods traded between them.
He opined that instead of signing FTAs, the government should try to make similar arrangements within the country. “We need to sign one FTA with ourselves, because each state is a different country in some terms. If we market amongst ourselves, that would mean that onions from Nashik will move to Delhi much faster rather than rotting there. Apples of Himachal Pradesh will not just be controlled by five traders in Azadpur Mandi in Delhi, but can be moved all over the country.”
Kumar added that the manufacturing sector contributes only 16% to the country’s GDP, which is very low. “People will focus more on imported goods manufactured in China like Kanjivaram sarees rather than producing them in the country.” According to Kumar, the country’s economy could touch over US$ 3.5-trillion if the shares of manufacturing and agriculture sectors are increased from 16% and 14%, respectively. “Issues like land acquisition, labour and policy reforms must also be addressed immediately to boost the manufacturing sector. If these issues are not resolved in time, the entrepreneurs will shift to those sectors where no land is required or into the services sector.”
REAL ESTATE
New Acquisition Law Makes Real Estate Sector Apprehensive
The Union Cabinet has cleared a new land acquisition law, arguing that it will bridge the gaps in the existing legislation. However, the real estate industry is less enthusiastic about the new law. Commenting on the issue, the national president of the Confederation of Real Estate Developers’ Associations of India (CREDAI) says, “It is an absolutely mindless idea to bring private land acquisition under this act. There are too many points of conflict, which will only put hurdles in developing huge areas of land.”
According to some legal experts this bill seeks to replace colonial era legislation, and hopes to draw a line under a hugely sensitive issue. Further, it offers generous compensation to land owners in the form of subsistence allowances, annuity payments, employment, and a share in any future appreciation of the land. This will have to be paid irrespective of whether the land is acquired by the government or industry.
Under the new bill, the state will be able to invoke the provisions of eminent domain and public service under very limited circumstances. The ability to invoke urgency clauses has been limited to instances related to national security and natural calamities. The definition of livelihood losers under the draft bill has now been changed to mean people who have been employed in the land being acquired for three years or more. This means that squatters on public land, for instance, will not be able to seek immunity under this provision, but farm wage workers will. Also, the new law says 80% of the people affected by an upcoming project must agree to the acquisition, unless it is being done in public interest.
PAINT
Paint Industry to Touch Rs 1 Lakh Cr by 2020
The Indian Paint Association (IPA), the apex body of the country’s paint industry, has projected that the `24,000-crore Indian paint sector is likely to grow to `1,00,000 crore by 2020. “Buoyed by the vibrant domestic demand, the industry has registered a double digit growth. Different market statistics indicate that the industry, which is currently estimated at `24,000 crore, has the potential to grow to `one lakh crore by 2020,” says D P Basu, president of IPA.
IPA suggests that there is need to improve the ratio of decorative to industrial paints in value terms to match international standards. “The current ratio in India is 67:33, while the international ratio is 50:50. The burgeoning automotive industry and real estate sector are also likely to contribute largely towards the growth of the paint industry.” Basu points out that the country loses over `2,00,000 crore annually due to the menace of corrosion. “Therefore, there is a need for effective practices to control and prevent erosion, which offers a big opportunity to the paint industry to concentrate on anti-corrosive paints.”
Basu observes that in spite of opportunities and growth, the industry has been adversely affected by inflation, weak global capital markets, and higher cost of capital. He adds that paints, being categorised as hazardous, have constantly been under environmental scrutiny but hopes that the issue would be solved quickly. “The issue of lead content in paints and its ill effects on the environment has always been on our mind. The big players in the industry have already done away with lead, and by the end of this year, the whole industry would be manufacturing lead-free paints. We hope that the implementation of the goods and services tax (GST) would also benefit the industry.”
GREEN BUILDING
Green Buildings to Tackle Environmental Challenges
With the involvement of more decision-makers, construction of several new buildings, more certified professionals and new members joining the Indian Green Building Council (IGBC), the green building concept has made significantstrides in the country. But, this is only a beginning, and much more has to be done to develop new products, systems and methods in order to transcend India into a world leader in green buildings. This consensus was reached at the green building conference which was jointly organised by the Confederationof Indian Industry (CII) and IGBC inNew Delhi.
Elaborating the significance of green buildings, Dr K Karthikeyan, joint chief environmental engineer, Tamil Nadu Pollution Control Board, said, “The answer to many of the major environmental challenges like waste management, reduced use of water and energy can be found in the green building concept. Path-breaking research, development and innovation, and out-of-the box thinking is necessary to take forward the green building movement. We need to create new products using the existing materials differently, and evolve new systems.”
Delving upon the subject of products and use, C N Raghavendran, chairman, CII-IGBC Chennai chapter and partner in C R Narayana Rao & Architects, said, “Research should be undertaken on better application of rapidly reusable materials like bamboo in the construction industry. For instance, research on how to use it differently, like laminated bamboo, will lead to the development of sustainable products from renewable and home-grown materials.”
BRICKS
Automation, Innovation Buzz Words for Brick Industry
Prompted by the entry of international technology providers and producers in the country’s brick sphere, Indian brick makers, a majority of whom are SMEs, are undergoing a complete makeover through the adoption of mechanisation and innovation. There are about 35 plants across India, including semi-automatic and fully-automatic ones that are already operational. Many other modern plants are under construction. Analysts believe that increased difficulties in handling labour, maintaining quality and meeting the increased demand for better quality bricks have forced brick kiln entrepreneurs to rethink their production processes and also led to product innovation. As a result, many entrepreneurs are diversifying into resource efficient bricks (REBs) by importing machinery.
Buoyed by the experience of the early starters, more entrepreneurs are importing state-of-the-art fully automatic machinery from China and Germany for making both REBs and conventional bricks. As for deployment of machinery and REB manufacturing, lots of entrepreneurs are joining the bandwagon. Already there are 12 plants in the southern region, eight in the north, four in the west, and two in the eastern region.
Pritpal Singh, senior engineer, Punjab State Council for Science & Technology, says, “Foreseeing the potential in the Indian construction sector, major European machinery manufacturers have tied up with Indian machinery manufacturers and started operations in India. The entry of multinational brick producers like Wienerberger in Bangalore has motivated brick entrepreneurs to adoptmechanisation and production of REBs, besides setting up new units and expanding capacity.”India produces about 140 billion bricks annually, mainly through traditional production processes. The industry consumes about 24 million tonnes of coal annually, a huge quantity of biomass fuels, and up to 350 million tonnes of top soil is used every year for clay-based brick production. The industry’s CO2 emissions are estimated to be 42 million tonnes a year. Courtesy: Business Standard
