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FKCCI JOURNAL
Volume XXXV

November 2014

Issue 11

g
td

November - 2014

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Rs. 20

NOVEMBER 2014

Business magazine from Federation of Karnataka Chambers of Commerce & Industry, Bangalore

Karnataka New Industrial Policy targets Rs 5 lakh crore investment

FKCCI Office Bearers interact with Mr. Siddaramaiah,

Honble Chief Minister of Karnataka on issues relating to industrial
policy, attracting investments to Karnataka at his Residence

November - 2014
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November - 2014
Volume XXXV

November 2014

Issue 11

Business magazine from Federation of Karnataka Chambers of Commerce & Industry, Bangalore
Federation of Karnataka Chambers
of Commerce & Industry
Federation House, K.G. Road
Bangalore - 560 009. Karnataka
Phone : 080 - 22262355 / 6, 22262157
Fax
: 080 - 22251826
E-mail : president@fkcci.in
Website : www.fkcci.org
Editorial Board
President
S. Sampathraman
Senior Vice President
Tallam R Dwarakanath
Vice President
M.C. Dinesh

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In this issue
Presidents Desk

Editors Desk

Spotlight

FKCCIs China Visit Yields US$ 1

Billion+Investment

The way forward - rebooting Economy

10

Karnataka industrial policy targets

Rs 5 lakh crore investment

11

A Holistic Industrial Policy-Aimed at Moving

From Red Tape to Red Carpet: FKCCI
12

Imm. Past President

R. Shivakumar
Secretary General
Sudarshan Tirunarayan

Karnataka Government to spend Rs.700

crore to fix roads in Bangalores IT Pockets 14

Secretary
M. Lokaraj

The next round of economic reforms

22

Financial inclusion is an evolution

27

Make in India has caught the imagination

of India and foreign investors

28

v PgAz zU jPU

34

FKCCI @ Work

42

Features
Industrial Policy 13

New Monetary Policy 26

Registration of Properties 15

Economic Growth 26

Labour Law 15

SMEs as different verticals 29

Aerospace Industry 16

Coal Sector 29

Import duty for Rubber 20

Embrace China, not USA 30

Tumkur Food Park 20

Internet Revolution 31

Rural BPOs 21

Health 32

Reviews New Indt. Policy 21

Achiever 33

Indian oil refiners 23

Photo Feature 36

Make in India 24

Intellectual Property 46

Smart Cities 25

Transfer Pricing 47

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3

Presidents Desk

November - 2014
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Narendra Modi dividend may push

up growth, economy set to grow by
6.4% in 2015-16 World Bank
S. Sampathraman
President
Dear Members,
A Modi dividend could lift Indias economic growth to 6.4% in 2015-16, the World Bank
has said, referring to a possible boost to the animal spirits of entrepreneurs due to the
coming to power in May 2014 of a government perceived to be more market-friendly
than the previous one.
The Indian economy, 80% of the (South Asia) regions output, is set to grow by 6.4%
in 2015-16 after 5.6% in 2014-15. India is benefiting from a Modi dividend, noted
the World Banks bi-annual report, South Asia Economic Focus. Apart from the rather
unusual personalisation of the sources of Indias economic growth, the report is
otherwise along conventional lines.

Karnataka has launched the new

Industrial Policy 2014-2019
and the policy looks vibrant with
growth initiative in terms of jobs
skill development and incentives
and simplification of approvals.
The policy is aimed towards
the inclusive development
and growth of Industries in the
State of Karnataka encouraging
women entrepreneurs in setting
up the industries in exclusive
industrial areas. The creation of
quality infrastructure focusing
on provision for comprehensive
facilities and with a thrust on
Human Resource and Skill
Development and upgradation
is a positive step in growth
verticals and expected to
enhance the industrial growth
and also in attracting fresh
investments for the state.

Chinas Growth Will Slow to 7.2%

The World Bank calls for structural reforms and prudent macroeconomic management
for a better medium-term outcome. The Modi effect is definitely playing out as far as
capital inflows are concerned. Inflation needs to trend downwards, but the external and
fiscal positions look very promising,
The current years growth could turn out to be higher than the 5.6% estimated by
the World Bank. As far as Indias giant neighbour is concerned, the World Bank has
estimated that Chinas growth will slow to 7.2% next year, a cut from the 7.5% estimated
in April this year. The bank also does not see any threat for India because of the likely
withdrawal of US monetary stimulus over the rest of 2014 and 2015, as the economy
is now stronger in terms of its ability to manage current account.
Indias economic growth will accelerate to touch the 7% mark in 2016-17, according
to the report, which took note of recent policy measures undertaken. These include
liberalisation of foreign direct investment in railways and defence, disbanding of the
Planning Commission and its replacement by an economic advisory body, financial
inclusion as well as actions to simplify land acquisition and reform labour laws.
Indias economy turned around sharply in the first quarter of 2014-15 to grow at 5.8%,
bucking the dismal sub-5% growth of the last two years. Indias growth performance
remains strong vis-a-vis emerging market peers, the World Bank said. Private
investment is expected to pick up thanks to the new governments business orientation
and declining oil prices should boost private sector competitiveness, it added. The
Modi Dividend is coming out from the positive sentiment, as reflected in the stock
market.
All economic indicators look positive, aided by the base effect and actual recovery in
some areas. But there is a lot of resolution shown by the government in areas like fiscal
deficit and current account deficit. We expect economy to see an all round recovery
soon.
Progressive thinking with a positive attitude to support the trade and industry is the
need of the hour and the blocks are being laid now for larger vision share for the state
to occupy the top slot in the country.

S. Sampathraman
4

Editors Desk

November - 2014
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The turning point in the state

M C Dinesh
Vice President
Dear Members,
The launch of the new industrial policy 2014-2019 is expected to propel the required
momentum for the state to grow faster towards industrialization leaping into the next
phase is put into place in the right time. The government both at the centre and the
state are stable and is expected to be very growth oriented helping the industry and
trade to glitter in terms of growth and social distribution of wealth.

The clarity and the path are

visible and is expected to have
the wide reach in short span.
The direction and the delivery
approach is showcased by these
in redefining the objectives
pushing beyond the stagnated
boundaries.
The industry and trade
expectations are high and the
new strategic capabilities is
expected to mark the beginning
for such an evolution. The
commitment and the passion is
the business agenda for the next
five years making the impossible
possible. The support is sought
from the governments for these
in this entrepreneurial journey.

Karnatakas new industrial policy will set the new trend to accelerate the growth to 20%
every year leading to creation of nearly 15 lakhs jobs in the state.
The entrepreneur temperament with complimentary and supplementary efforts of the
state government, I have no hesitation to believe that with the new industrial policy,
the Karnataka will attract an investment 5 lakh crores. What is more satisfying to see
that the state government is also gearing itself for making infrastructure as one of the
top most priorities in its agenda so as to create an environment for the growth and
development of the industries.
For the first time I have seen a sense of a satisfaction from all the stake holder on the
industry policy just laid by the state government more so from the small and medium
enterprises.
The clarity and the path are visible and is expected to have the wide reach in short
span. The direction and the delivery approach is showcased by these in redefining the
objectives pushing beyond the stagnated boundaries.
The industry and trade expectations are high and the new strategic capabilities is
expected to mark the beginning for such an evolution. The commitment and the
passion is the business agenda for the next five years making the impossible possible.
The support is sought from the governments for these in this entrepreneurial journey.
This news letter has undergone some changes to make it more informative in all the
fronts with articles covering on economy trade industry banking and hope you enjoy
reading all these articles.
I would like to thank the editorial team who toiled to put all these together, many of our
clients who have advertised in this make it to look authentic in all respects.
Wish all the members and readers a very happy prosperous deepavali.
Sincerely Yours

M C Dinesh
Vice President
5

Spotlight

November - 2014
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What needed in FDI today .

Commitment to Change the mindset

apital connectedness is calculated from measures of

foreign direct investment (FDI) and foreign portfolio
equity investment into the stock market of the
country concerned. Indias decent performance on
capital connectedness is primarily on account of the huge money
that has come into the Indian stock market from abroad in the
last decade and big outward FDI flows in the form of overseas
acquisitions by Indian corporates.
The government, faced with an unsustainable current account
deficit (CAD), has been trying to encourage FDI into the country
to firm up the rupee. The effects of foreign direct investment on
local firms in developing and transition countries
suggests that foreign investment robustly
increases local productivity growth.
In the case of India, if the governments
goal is to grow the economy faster,
then its important to recognise the
necessity of FDI. There is no point
in being cagey in its efforts to
attract FDI. The naysayers should
recognise that FDI hasnt harmed
other countries that have attracted
FDI, including Japan, South Korea,
Mexico and China. For the last 10
years, global FDI net inflows have
totalled nearly $15 trillion and even
countries with populations that are
fractions of Indias are making noticeable
contributions to that figure. Brazil, with a
population less than a fifth of Indias, has seen
$461 billion in FDI net inflows in the last
decade, while Turkey, nearly one-20th Indias
size, has seen $135 billion in FDI.
India offers only a hesitant welcome
to FDI. It seeks investment in several
industries, including manufacturing,
construction, telecommunications and
financial services, but not in others like multibrand retail.
Growth results from domestic investment from savings,
from productivity improvements and from foreign investments.
Countries like China that have grown rapidly in recent decades
have taken advantage of all three sources of economic growth.
India, on the other hand, has tried to achieve growth without
much FDI.
However, Indias approach to growth is like bringing a knife to
a gunfight its destined to fail relative to other countries growth
strategies, which take advantage of FDI. To transcend from 5-7%
growth to 10-12% growth as projected, FDI is essential.
Often, regulation allows only a minority investment for fear
of losing domestic management control. For example, FDI in
insurance companies is permitted up to 49% with restrictions
6

on voting rights to ensure that

management control of an insurance
firm doesnt shift to a foreign entity.
Sudarshan Tirunarayan
Concern of loss of management
Secretary General
control is of much less importance
compared to sacrifice of economic
growth. Considering the potential of FDI to spur growth, Indias
ambivalence toward FDI is completely misplaced. If India wants
to accelerate growth, it is imperative that the country attracts
FDI in large, really large amounts.
To put Indias track record in attracting FDI in an international
context, its been at best a trickle compared to FDI into
countries like Mexico and China. In the last 10
years, Mexico has attracted $247 billion
of FDI net inflows and China $2 trillion,
compared to Indias $229 billion.
From the standpoint of an average
citizen, the comparison is worse because
Mexico is far less populous than India or
China. What matters to an average citizen
is per-capita investment. On a per-capita
basis, FDI net inflows for Mexico, China
and India are $2,017, $1,531 and $183,
respectively. No wonder the per-capita
GDP of Mexico is $10,300, China
$6,800 and India $1,500.
So how much FDI would be needed to
make a meaningful difference in Indias
economic growth rate? What is the effect
of FDI on growth? Each 1% increase in
FDI adds about 0.4% to a countrys GDP
growth. So, to boost GDP growth by about
2%, India will need FDI of about 5% of
GDP. Put another way, at the current level
of GDP of almost $2 trillion in India, about
$100 billion of FDI is required to boost
GDP growth by 2%.
For a massive increase in the growth rate by
4% to GDP, $200 billion of FDI would be needed this is about
eight times the level of GDP India currently attracts in FDI. Also,
as the economy expands, the dollar amount of FDI will have to
grow proportionately. Obviously, this becomes a challenge. For
China, its already a challenge to attract ever-growing sums of
FDI that would enable China to sustain a high rate of growth.
Chinas growth rate should continue to taper off and become
modesta life-cycle phenomenon.
Proclamations of a simplified or streamlined process for FDI
into India are not enough to attract investment. Real changes and
commitment, as well as incentives to states and bureaucrats for
actually receiving FDI, are needed. The mindset has to change
to judging the success of FDI policies on the basis of amount of
investment attracted.

Special Report

November - 2014
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FKCCIs China Visit Yields US$ 1 Billion+Investment

Yunnan to set up Industrial Park near Bangalore AND in Kunming Exclusively for Indian Companies
- M.C. Dinesh, Vice President, FKCCI

hat do business delegates from India talk about

on a long flight to China? China versus India!
Team FKCCI led by Sampathraman, President,
comprising me, M.C. Dinesh, Vice-President, and
others on the flight to Kunming, Yunnan Province, China, were
likewise engaged in a similar bout of intellectual gymnastics, but
the twist in the story was in what we ended up discussing on our
return flight to Bangalore, viz. Not India versus China, but India
AND China!
That, in short, defined the success of our 4-day tryst with China,
from September 24-28, undertaken at the behest and Invitation
extended by the Governor of Yunnan.
The China visit was a blockbuster success for the FKCCI and
Karnataka and so the story deserves to be told as it unfolded.
***
We arrived at Kunming airport - and the very
first mile of our journey took our breath away.
Instantly, everything seemed to be working
September
with clockwork precision: The hosts picking us at
24
the airport, taking us in a chauffeured car, and
chaperoning us with tail cars in tow, to our destination, a sevenstar hotel.
Kunming, the capital of south-west Yunnan province of the
Peoples Republic of China, revealed itself, bit by tantalizing bit,
beckoning us to bask in its charms. Aptly described as the City
of Eternal Spring, it has an eternal smell of flowery flagrance
about it, and naturally so, because it is the chief producer of
fresh flowers. Reminiscing about Kumming reminded me of
what Napoleon once said of China: Let China sleep, for when
China wakes up, she will shake the world. And how she has. No
other country, no other economy, at no other time in history, has
invested nearly half of its entire GDP.
Our first visit on the first day in Kunming was a meeting with
SUNPA Chairman and his team at their Telemedicine Center.
SUNPA has 5000 medical specialists, 50 000 physicians, 700
professional technicians and 700 operational sites!
Telemedicine giant eyes Karnataka
Mr Liu Yong, MD, Chairman, SUNPA Group, and his team,
impressed us deeply with their profound interest and knowledge
about the industry landscape of Karnataka. our hosts quickly
sized up the status of FKCCI as the first and most predominant
stakeholder in any business tie-ups with our State on their radar.
Incidentally, my own interactions with the Chinese in the
past and at Kunming, had revealed that when it comes to doing
business, no one does the homework better than them.
While conversing with the SUNPA team about their investment
plans, I casually intervened and told them, There may be a few
small problems here and there, but you know better than anybody

that in your Chinese language, the word for problem and

opportunity is the same !
It was an ice-breaker moment! Soon, they quickly got around
to sharing with us their plans to set up a R&D center for software
and also open a slew of Telemedicine Centers in Karnataka.
In terms of numbers, Yunnan Sunpa spoke of investing between
Rs.300-500 crore in the telemedicine segment, and anchoring
Chinese-led investments of around $1 billion in the state.
With a sense of Mission Accomplished, we visited a few R&D
and manufacturing centres in Kunming, and the Kunming Haikou
Industrial Park. We also got to know of the Dounan Flower
Market in suburban Kunming, said to be the largest in China with
daily sales of US$300,000 from the 2 million sprays of flowers.
The dinner that day showed us why the Chinese are perfect
hosts. The multi-course spread would have made a mogul blush,
with one particular dish said to be costing as much as several
thousand dollars Phew!!
Not surprisingly, we slept like a baby that night.
***
Today is the critical part of our visit, said
Sampathraman giving a pep talk to all of us, Our
September Chief Minister has reposed a lot of faith in us and
25
the next few hours are going to test our hard-sell
tactics to the hilt. The Chinese are smart operators
and so let us remember, the game is about prescription, not just
7

November - 2014
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description. We have to exploit the long tail and not look at just
one blockbuster success.
Rejuvenated and recharged by his words, we were off for our
meeting with the Development and Reforms Commission Officials,
in a clean-as-a-whistle SUV chauffeured with tail cars in tow like
state guests!
The Yunnan Council Vice-Chairman, the political head of the
province along with other senior officials from the Development
and Reforms Commission, received us warmly and without wasting
much time, took the agenda ahead, viz. fostering greater and
better business and cultural ties between Yunnan and Karnataka.
The iron is hot, and its the perfect time to strike, Sampathraman
whispered to me, and we went for the jugular, giving a quick
presentation on the iconic status of Bangalore as Indias - and
the worlds - IT hub, and on Karnatakas established status as
one of the most progressive and industrially advance states of
the country. We also pointedly recalled the good vibes that the
Chinese delegation enjoyed during their visit to the FKCCI when
their interest in collaborating with Karnataka was first kindled.
True to their renowned business acumen, the Chinese responded
with the formalizing of a brilliant proposal that was a win-win for
both Yunnan and Karnataka, viz. Set up a Bangalore Kunming
Technology Park in Yunnan for Indian IT and ITeS companies
to touch base with the local Chinese market, complemented by
an Industrial Park to be set up near Bangalore exclusively for
Chinese companies wishing to invest in Karnataka.
The Yunnan government intends to invest around 100-250
acres of land for the Industrial Park, which is to be facilitated by
the Karnataka government along with supply of water, power and
good road connectivity. The industrial park promoters expressed
their confidence of the Industrial Park attracting $1 billion
investment in four to five years from various verticals like food
processing, electronics, fertilizer and telemedicine sector.
The latest development on this front is, besides Bangalore, the
state government is exploring possibilities of allocating land for
new investors in Tumkur, Gauribidanur, Kolar, Mulbagal, among
other locations. A trade delegation from Yunnan Province will
soon arrive in Bangalore to hold further discussions on this with
the state government.

Two to Tango
Advantages from Bangalore Kunming Technology
Park in China:
Invitation for Indian IT and ITeS companies to gain
foothold in China.
IT Park developed by China within 4 kms from the
new international Airport at Kunming.
Assistance provided for land building, low interest
finance Lease, Rent subsidies.
Opening of Chinese Market for their Services.
Advantages from Industrial Park near Bangalore:
Industrial Park to come up in around 100-250 acres
to house at least 20-25 companies.
Increased FDI inflow from Chinese investment with
assured investment of US$ 1 billion from Yunnan
Province companies.
R&D Centres for various sectors, Healthcare and
Telemedicine Centres, fertilizer plant near a port,
to be set up by Chinese companies. Possible areas
of cooperation in diverse sectors such as IT/BT, high
tech R&D & Healthcare.

A series of high-level meetings were held with the Yunnan

Development and Reforms Commission officials, viz. the
Director, Deputy Director, Director of High Technology Reforms
Commission, etc, followed up by a meeting with the Directors of
Changgong New Area Administration Committee. We also took
this opportunity to felicitate the Director Mr XILIANG WANG.
Later we went on a tour of the Industrial Parks, viz. the Kunming
Information and Industrial Park, the Kunming Medical Treatment
and Industrial Park for Healthcare, the Cultural Tourism
Industrial Park, the Dounan International Flower Industrial
Park and the Ecotourism Industrial Park, and also the site of the
proposed KUNMING BANGALORE TECH PARK earmarked for
Indian companies. The government has already put up display

November - 2014
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boards clearly showing that it is earmarked for Indian companies.

Visiting this site revealed to us a text book example of Chinese
precision in planning and project management.
***
Starting your day sipping tea is a mundane
daily chore, right? Wrong! Not in Kunming! We
September discovered this at our charming little hotel - and
there is history wrapped in this little ritual too.
26
Like everywhere else in China, the Yunnan
Province has its own quaint tea drinking ceremony. While we
didnt get to actually take part in one, we got a taste of it sipping
our morning tea, in a tea set that seemed so perfectly made that
even this inanimate part seemed to animate the tea in it.
Mr Long Jiang, the DG of Science & Technology, Yunnan, and
his colleagues listened raptly to our showcasing Karnatakas
traditional prowess in science & technology, and expressed their
keenness to collaborate and engage with us in the areas of latest
scientific techniques and cutting edge technologies, agriculture,
horticulture, chemicals and fertilizers, bio-technology and other
related areas. Responding to our invitation, Mr Long Jiang said
he will very soon (in November) be leading a high-level business
delegation to Bangalore, to take up the collaboration forward.
I have to confess here that we were able to strike an excellent
rapport with our hosts. Maybe one should credit this to the soft
touch of our President! When I gently told him this, he laughed
and then added on a more serious note, Actually, the credit should
be given to our CM because our hosts see us as his ambassadors.
All the officials we engaged with, right from the Director
General, Province of Yunnan China; Director & President of
China Development Bank (CDB), Chairman and Vice-Chairman
of Yunnan Development and Reform Commission, Director
General of the Technology Park, and Mayor of Kunming City,
clearly showed their serious intent on investing in Karnataka and
over and above that, seemed to be eager about setting the ball
rolling at the earliest.
A word about going round Yunnan on-the-go. With lush green
valleys nestled amidst rustic and rugged lines of peaks, the
mountains seem like they are singing a soundless song in thousand

voices weaving ancient melodies in the frosty air. And on this, let
me add my own two-bit about the dinner that followed.
***
It was a Saturday and as befitting the occasion,
we were all caught up in a bit of the weekend
September spirit! The Chinese say, the journey of a thousand
miles begins with a small step. Well, our own
27
journey of a thousand miles ended with a small but unforgettable - weekend experience!
Kunming has a thousand touristy spots and we had picked two
among them - the Stone Forest and the Dianchi Lake. As it turned
out, we had chosen right, though making the choice was akin to
finding a needle in a haystack!
Located in the east of Kunming City, Yunnan Province, Stone
Forest is a unique natural phenomenon. Thousands of differentlystyled giant stones scattered in random fashion give it the
appearance of a deep and serene forest.
The crescent-shaped lake is serenaded by mountainous peaks
on all its sides and its shoreline is equal to the distance all the way
from Bangalore to Nanjangud - about 163 km in all!
Winding up our final day in China at the Dianchi Lake was
a perfect end to a dream tour - literally and metaphorically.
For in the outcome of this lies the realization of the dreams of
Karnatakas future economic growth.
***
9

November - 2014

Economy

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The way forward - rebooting Economy

The fact that even today saving and investment rates are at high levels despite having declined from a
much higher level reassures us that if we are able to find ways to complete projects speedily,
we shall be able to usher in rapid growth in income even in the short run.

he sharp decline in corporate investment rate has

attracted much attention. The decline has been
attributed to many factors.
The weakening of investment sentiment is traced to
certain policy decisions and more particularly to the one relating
to the retrospective application of tax changes.
This particular decision has weighed heavily on the corporate
sector. Strong efforts are needed to allay unnecessary fears.
Rebuilding confidence has to be an important part of policy. A
second reason attributed is the tight monetary policy.
Given the high level of inflation, the monetary authorities
had little choice. It is overlooked that in a period of declining
ratio of household saving in financial assets, higher fiscal deficit
automatically puts pressure on interest rate.
As inflation comes down, the monetary authorities may have
greater room for relaxing.

A decline in the efficiency of the use of capital is evident.

With an investment rate of around 30 per cent of GDP and
an incremental capital output ratio of 41 which has been the
observed ratio in the recent past, the growth rate should have
been around 7-5 per cent.
On the other hand, the actual growth rate turned out to be below
5 per cent. Obviously, this implies a steep rise in the incremental
capital-output ratio.
This may be because projects have not been completed in time
or complementary investments have not been made.
10

Given the high level of inflation, the monetary

authorities had little choice. It is overlooked
that in a period of declining ratio of household
saving in financial assets, higher fiscal deficit
automatically puts pressure on interest rate.
As inflation comes down, the monetary
authorities may have greater room for
relaxing. A decline in the efficiency of the use
of capital is evident. With an investment rate of
around 30 per cent of GDP and an incremental
capital output ratio of 41 which has been the
observed ratio in the recent past, the growth
rate should have been around 7-5 per cent.

A delay in the completion of projects will mean that output is

not flowing even after significant amount of investment has been
made on a project.
The delay in the generation of output out of investment made in
one sector may also be caused by the lack of adequate investment
in related or complementary sectors.
For example, an increase in capacity creation in the power
sector must be matched by appropriate increases in investment in
the coal sector. In adequate output out of investments could also
be due to non-availability of critical inputs.
Many power plants, for example, remain idle because of the
non-availability of gas. An early completion of projects will also
demand certain policy decisions.
Issues relating to environment and land acquisition have
assumed greater urgency.
Obviously we cannot ignore environmental concerns but we
need to work out a suitable compromise between the compulsions
of growth and concerns for environment.
The fact that even today saving and investment rates are at high
levels despite having declined from a much higher level reassures
us that if we are able to find ways to complete projects speedily,
we shall be able to usher in rapid growth in income even in the
short run. This should enable us to grow between 7 and 7.5 per
cent in the short run.
However, only a return to higher levels of saving and investment
can take us back to the growth rate of 9 per cent.

Cover Story

November - 2014

Karnataka industrial policy targets

Rs 5 lakh crore investment

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The policy proposed to form at least five industrial areas every year over an area of 5,000
to 8,000 acres. The proposed industrial corridors are expected to become the engines of
economic and industrial development over a period next 10 to 15 years.

arnataka aims to attract

investment worth Rs.5 lakh
crore in the next five years
under a new industry policy.
The policy is targetting an industrial
growth rate of 12 per cent annually and
seeks to enhance the contribution of
manufacturing sector to the state GDP
from 16.87 per cent to 20 per cent.
The New Industrial Policy for 201419 was at a function here released by
Karnataka Chief Minister Siddaramaiah
who said it will contribute for the
economic development and employment
generation in the state.
The policy proposed to form at least
five industrial areas every year over an
area of 5,000 to 8,000 acres, he said.
In order to encourage large
investments across the state, the policy
has adopted a very liberal location based
fiscal incentive package, Siddaramaiah
said.
It also proposes net VAT plus CST
based interest free loans for a longer
duration and higher ceiling limits.
Anchor industries and focussed sector

will get enhanced package with a ceiling

limit of 125 per cent of the fixed assets
created, he added.
The policy also gives special attention
to MSMEs by proposing almost double
the fiscal incentives as compared to the
previous policy, Siddaramaiah said.
It
focuses
on
encouraging
entrepreneurs belonging to SC and STs,
minority community, backward classes
and ex- servicemen.
Women also have been given special
attention to induce them to take up more
and more industrial ventures not only for
their livelihood but also for providing
employment opportunities to others,
Siddaramaiah said.
Two exclusive industrial estates and
areas for women entrepreneurs and a
reservation of five per cent in all the
industrial estates/areas for women
entrepreneurs had been proposed in the
policy.
The policy also provides adequate
attention to Hyderabad Karnataka
region with a view to create a strong
industrial base with equitable allocation

of funds for overall development of the

region.
It provides for all energy projects
including renewable energy projects to
be treated as industry and will be eligible
for all incentives as any other industry,
Siddaramaiah said.
The policy proposes to associate with
Union Government in implementing
the
Chennai-Bangalore-Chitradurga
Industrial Corridor (CBCIC) and
Bangalore Mumbai Economic Corridor
(BMEC) with the help of external
assistances from Japan and United
Kingdom, he said.
In order to take the maximum benefit
from industrial corridor, the state has
proposed four more industrial corridors,
which will be located in DharwadKoppal-Raichur,
Chitradurga-HaveriKarwar,
Raichur-Bagalkot-Belgaum
and Tumkur-Shimoga-Hassan sectors,
Siddaramaiah said.
The proposed industrial corridors
are expected to become the engines of
economic and industrial development
over a period next 10 to 15 years, he
said.
The policy aims at balanced growth
moving beyond Bangalore with conscious
effort to reach out the nook and corner
of the state and also aims at addressing
issues of concerns of the industries, the
Chief Minister said.
He said that after taking charge of
this department five state high-level
clearance committee meetings had been
conducted and proposals worth more
that Rs.50,000 crore approved.
Special package of incentives and
concessions have also been announced
for mega industries, he said.
- Source - PTI
11

November - 2014
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A Holistic Industrial Policy - Aimed at

Moving From Red Tape to Red Carpet: FKCCI
The assurance from the Chief Minister that he is industry friendly has sent the right signals to
investors in the State and abroad. The policy aims at holistic development of the State and
looks beyond Bangalore with equitable distribution of industries all over State.
positive step ushering in attracting fresh investments.
The declaration of large industrial areas and estates in
townships is expected to ease the congestion and the development
of the same under PPP mode is unique leading to faster growth
pace.
The focus on sector industries development as public utilities is
a booster much awaited for the growth of the industry in the state.
The constitution of MSME facilitation councils is appreciated
as the same is expected to meet the long demand of the trade
fraternity.
Reduction of road tax and registration tax in order to
encourage manufacture and use of green hybrid and electrical
vehicles is expected to move towards the concept of GREEN
ENVIORNMENT is a fresh buoyant idea in combating the
pollution.
The need to consider all the power projects, including renewable
energy, as manufacturing industries is expected to give a fillip to
renewable energy sector.
The special emphasis to increase the capacity utilization of ports
ri. S. Sampathraman, President, FKCCI reacting
in the state is expected to boost the export trade opportunities
to the launch of the New Industrial Policy 2014-19
and making the ports thereby as the gate way to the world.
has welcomed the policy as most progressive and
The establishment of knowledge corridors and the proposed
a key driver of employment and innovation with a
offer to non-resident Kannadiagas to invest in
clear direction in making Karnataka the brand
state is welcome as the same is expected to bring
propelling and to be the key state in the country
The immediate necessity
in the overseas fund for the development.
scaling growth to new horizons. The policy
of provision of creation of
The tax related incentives for mega investments
unveiled has innovative features that will make
quality infrastructure is
and the incentive of interest free loans in the
the state a leader in the country.
form of retention of VAT collected for 10 years,
He said attracting investment is dependent on
relevant considering the
exemptions in stamp duty, entry tax, shows the
providing the right environment to run a business
current demand and is a
keenness of the government to revive investments
efficiently. Administrative and procedural issues
positive step ushering in
in the state. All industry subsidies have been
which result from regulatory and institutional
arrangements play an important role in attracting
attracting fresh investments. increased substantially. There is a separate
policy for MSMEs.
investments and the simplification procedures
But, land prices are higher compared to other states. This
like e-filing and status on online are some of the good features.
increases cost of doing business. 99 years lease deed needs major
The policy unveiled has come at the right time considering the
amendments which the Additional Chief Secretary has promised
Make in India concept of the Central Government.
to do. MSME should get land upto 2 acres on Lease cum Sale
The assurance from the Chief Minister that he is industry
basis.
friendly has sent the right signals to investors in the State and
The proposal to abolish trade license as promised by the Chief
abroad. The policy aims at holistic development of the State and
Minister is a welcome measure. Total abolition needs to be
looks beyond Bangalore with equitable distribution of industries
considered for all Industries and Trade covered by Factories Act
all over State.
and Shop & Establishments Act.
The growth projected at 12% looks achievable considering the
The policy pronouncements made by the Honble Chief Minister
State as the investment destination followed by creation of new
is in tune with the growth agenda in placing the state in the top
employment is a industry friendly step as it benefits the creation
investment destinations in the country. Much remains to seen on
of wealth and employment.
the process of implementation as rightly said by Honble Minister
The immediate necessity of provision of creation of quality
S.R. Patil.
infrastructure is relevant considering the current demand and is a

12

November - 2014
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Stakeholders welcome
new industrial policy
A facilitation council for Micro Small and Medium
Enterprises (MSMEs) at Mysore has been
welcomed. Local stakeholders say this helps
in redressal of grievances regarding delayed
payments to MSMEs by the government.

Karnatakas new
industrial policy aims to
boost local manufacturing
The policy is also looking at building infrastructure
for promoting industries, an issue which all the
business associations have been vocal in their
meetings with the government authorities.

he new industrial policy (2014-19) unveiled by the

State government recently has been welcomed by
local stakeholders, but there is scepticism regarding
the implementation of some of the provisions.
A major demand of Mysore industrialists to bring local
industrial areas under Industrial Township Authority has been
approved in the policy. But, the key issue of amending the law to
implement the provisions of the policy remains.
Suresh Kumar Jain of Mysore Industries Association (MIA)
told The Hindu that the new policy has proposed to declare large
industrial estates in the State as Industrial Township Areas
and this includes the industrial areas in Mysore. However, the
implementation of the proposal calls for amendment of section
364-A of the Karnataka Municipalities Act 1964, and establish
industrial township authorities to manage the local industrial
estates. This may take years though the policy document has
enunciated in clear terms its constitution, Mr. Jain said.
If implemented, it will obviate the need for local industries
to pay tax at multiple points and the township authority will be
entrusted to collect the taxes. Besides, it will also be obliged to
improve the civic infrastructure in the industrial areas. Though
the industries pay taxes to the local bodies, the revenue collected
is not ploughed back for developing industrial land. There have
been instances of local industrial associations collecting funds to
repair road or install street lights, Mr. Jain said.
If notified, Hootagalli, Metagalli, Belwadi and Hebbal will
come under the industrial township authority and will be out of
purview of the local bodies. This will accelerate provision of civic
amenities to the industrial estates, which are now languishing in
neglect.
The MIA has also welcomed the new policy guideline which
facilitates the entry of private players into industrial area
development. This is an acknowledgement that the Karnataka
Industrial Area Development Board (KIADB) has failed to take
up development works like roads, sanitation and provision of
drainage, Mr. Jain said.
A facilitation council for Micro Small and Medium Enterprises
(MSMEs) at Mysore has been welcomed. Local stakeholders say
this helps in redressal of grievances regarding delayed payments
to MSMEs by the government.

arnataka government has come up with a new

industrial policy that aims to grow other cities in the
state, increase the push for local manufacturing and
also generate Rs.400,000 crore worth of software
exports by 2020.
The policy, which has been in the works since last November
aims to address the slowdown faced in the IT sector that in turn
has impacted job creation over the last few years. To achieve this
stated objective, the Karnataka government is rolling out the red
carpet to corporates to form Public Private Partnerships (PPP)
across all industries from IT to toy manufacturers.
The policy has a stated objective of growing at 12 per cent
every year, powered by manufacturing and also has an eye on
creating around 15 lakh jobs in the state. We had already
thought of a manufacturing policy much before the centre and are
looking at getting investments of Rs.5 lakh crore by 2019, said
CM Siddaramiah.
The policy is also looking at building infrastructure for
promoting industries, an issue which all the business associations
have been vocal in their meetings with the government authorities.
Five industrial areas every year, covering an area of 5000-8000
acres, with the support of power and water in these regions will
be provided, he added.
The Karnataka government is also looking at PPP in establishing
this industrial zones. There were goodies for the Micro, Small and
Medium Enterprises (MSME), which contributes 8 per cent of
Indias GDP. Special attention has been given to MSMEs and
we propose to double the fiscal incentives when compared to the
previous policy, Siddaramiah said. Also, the government has
earmarked 22.5 per cent of allotable land to SC-ST entreprenuers
and two exclusive industrial estates for women entreprenuers and
a reservation of 5 per cent has been proposed.
Stating cateogorically that many mining-related projects,
which got a nod in the earlier Global Investor Meet have been
stalled for a lack of clear policy of the state with regard to mining,
said Siddaramaiah.
The government has also proposed industrial corridors all over
the state and also laid emphasis on ease of doing business, such
as reducing inspections, online submission of forms to boost the
investment morale in the state.

- Source - Business Line

- Source - Business Line

13

November - 2014

State Business News

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Karnatakas Siddaramaiah government to spend

Rs.700 crore to fix roads in Bangalores IT Pockets

ll those living on the outskirts of Bangalore might

soon see their roads get a facelift. Karnatakas
Siddaramaiah government wants to shift the
focus a little bit away from core Bangalore areas,
and improve the condition of major roads and important link
roads in the outer areas of the city by spending Rs.700 crore
on them.
Some of the areas that will benefit from this approach
will be information technology pockets of Bommanahalli
and Mahadevapura besides Dasarahalli, KR Puram,
Rajarajeshwarinagar, Yeshwanthpur, Byatarayanapura,
Yelahanka, the Bangalore South assembly segment, and
parts of Anekal.
Last year, we had spent more on the roads in the core
areas. This time we want to improve the conditions of roads
in the peripheral areas that are within the Bruhat Bangalore
Mahanagara Palike (BBMP) limits, Transport Minister
Ramalinga Reddy, who is also overseeing Bangalore affairs,
told Economic Times. This will help improve roads in places
like Electronic City that have large presence of IT firms,
and Peenya which has several industries. Chief Minister
Siddaramaiah has directed the finance.
More funds for parks & footpaths
The funds, according to the transport minister,
will be released under the Chief Ministers
Nagarothana project.
We will use another Rs.300 crore for
improving other facilities like parks,
playgrounds and footpaths all over the
city.
The government, Reddy said, has
set up a high-power committee under
the chairmanship of Additional Chief
Secretary D Satya Murthy. Once the
Cabinet approves release of funds,
the road revival proposal does not
have to go before the BBMP council.
The committee will straightaway
approve it paving way for tendering
of projects.
The roads on the peripheral
city areas have been
damaged, and had
invited lot of
media

14

criticism. We want to give a facelift to them. We want to

complete the work by April-May next year, well before the
onset of monsoon, Reddy said.
The government is also spending Rs.200 crore on the Tender
SURE (Specifications for Urban Road Execution) project in
12 important roads, and another Rs.600 crore on making
six major corridors including the one between Whitefield and
MG Road, signal free. We will complete both Tender SURE,
and signal-free projects by mid-2015, Reddy said.
Signal-free Corridor in West
The BBMP has taken up an eight-lane signal free corridor
connecting the western parts of the City with the central
business district at a Rs.115 crore cost of the corridor will
help residents of areas such as Rajaninagar, Mahalaxmi
Layout, Basaveshwara Layout and Vijayanagar reach KR
Circle within minutes. The project involves use of some
railway land, and hence got delayed.
This project will take about 18 months to complete,
Reddy said.
After DV Sadananda Gowda took over as the railway
minister, he directed the railway authorities to clear
all hurdles for this project.

November - 2014

Revised value will

fetch Rs.2K cr more
This revision is uncalled for. The market is still recovering from
last years sluggish growth. We thought the new government
would offer some solace, but its only coming up with a deterrent.

Estd. 1916

about 30-60% higher than guidance values in Bangalore. We

are aiming to bring it to a standard 30%.
Realty primer: Theres a huge difference between the guidance
value and market value of property in several areas of Bangalore,
as also in other major cities and towns of the state. The central
valuation committee has been continuously working to bridge the
gap.
On paper, most properties are transacted at the guidance value,
which money changes hands at the higher market value.

FKCCI welcomes proposed

amendment exempting small
factories from labour law perview
The exemption on inspections and the allotment of
identification number eases the administrative hassles
and the reforms in this regard is well appreciated.

egistration of properties is among the top three

revenue generators for the state, and the government
is keen to tap this revenue source.
The state treasury received Rs.6,100 crore from
stamp duty and registration charges during the last fiscal, and
two-third of this came from registration of properties. With new
guidance values in place, the government expects to raise an
additional Rs.2,000 crore.
Realtors unhappy: The real estate industry is obviously not
amused. Realtors said increasing guidance values to bring them
on par with market values in one go would scare away prospective
buyers, especially from the middle-income group, as properties
will become unaffordable.
This revision is uncalled for. The market is still recovering
from last years sluggish growth. We thought the new government
would offer some solace, but its only coming up with a deterrent,
The realtors are not against increasing guidance values, but
concerned about how it is evaluated. The government doesnt
have a scientific way to fix guidance value as it simply goes by
the thumb rule of satisfying the state treasury. It would be wise
to take the current market situation and bank rates and other
factors into consideration, before deriving the guidance value for
each area.
However, revenue officials said current market values are

ri S. Sampathraman, President FKCCI welcoming

the recent proposed amendment exempting the small
factories from the labour law purview said that the
recent draft amendment announced by the Labour
Ministry will protect the small industries from the cumbersome
legal procedures including the industrial disputes act and
minimum wages act.
Small factories will heave a sign of relief as unions cannot
force unnecessary closure of the unit on frivilious grounds. This
has been a bane for the SSI units as many units have closed the
operations due to the unethical tactics of the labour unions.
The exemption on inspections and the allotment of identification
number eases the administrative hassles and the reforms in
this regard is well appreciated. The proposed amendments are
expected to be compatible and beneficial to the labourers in the
present scenario in the industrial sector. The improved safety of
workers and doubling the provision for overtime are welcome
features.
15

November - 2014
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Aerospace industry - A review

Indias current MRO market size is estimated to be around USD 750 million. As per Boeing itself, the
market is expected to grow at 7% CAGR for the next 7 years to reach USD 1.2 billion by 2020.

ndia, with its growing aircraft fleet size, strategic

location advantage, rich pool of engineering
expertise, and lower labour costs has huge potential
to be a global MRO hub.
At present, Airlines operating in India get nearly 90% of
their MRO done abroad, mainly due to cost advantages resulting
from the comparatively high tax burden, cumbersome operating
procedures, and the inadequate MRO service facilities available
in India.
Indias current MRO market size is estimated to be around
USD 750 million. As per Boeing itself, the market is expected
to grow at 7% CAGR for the next 7 years to reach USD 1.2
billion by 2020. With the fleet size likely to double by 2020, the
need for a strong domestic MRO industry is critical and not just
desirable.
A strong MRO industry could achieve the following
benefits in next 10 years:
Create thousands of Jobs for Aerospace engineers and other
professionals.
Save and earn foreign exchange by attracting national and
international carriers to Indian MROs.
Reduce dependency of Indian carriers on other countries for
their MRO requirements.
With the induction of more aircraft in India every year
and the existing ones getting aged, the opportunities for
employments, saving in foreign exchange, and the revenue
earned by taxes will increase every year.
Make India an attractive MRO hub in this part of the world.
Central Government, State Governments, and various other
agencies imposed taxes and levies on the Indian MRO industry
at various points in time without considering the overall impact
of these on the development and growth of the industry.
At present Domestic scheduled carriers outsource most of
their MRO activity to thirdparty service providers outside the
country. Its a matter of major concern that Indian carriers find
it more cost effective to fly empty aircrafts and crew to overseas
MRO hubs for maintenance of their fleet. At present, Indian
MROs are mainly equipped for Line maintenance. We need to
build more sophisticated facilities and upskill our workforce to
do the heavy maintenance work which is mostly outsourced now.
Very recently even Air India, like all private Indian carriers
started depending on MRO facilities located in South Asia, South
East Asia, and the Middle East. MRO business worth nearly
USD 450 million has been estimated to be outsourced by the
scheduled carriers to other countries in FY 12. This is a colossal
loss of revenue, employment, and loss of revenue through taxes
to the government which also foregoes the corporate tax on the
profits of these overseas MRO service providers.
In the absence of a welldeveloped MRO base in India, there
are currently around 40 overseas MRO providers approved by
the Directorate General of Civil Aviation (DGCA) to conduct
16

work on Indianregistered aircrafts, in locations such as the UK,

Germany, France, Romania, Jordan, Israel, the UAE, Sri Lanka,
China, Singapore, Malaysia and Australia, while the plans by
some of the large global MRO players to set up base in India are
yet to materialize.
Recommended initiatives that could boost the Indian
MRO industry:
Review the collective implications of various taxes imposed
by the Central and State Governments especially VAT on
MRO industry.
Review the procedural hurdles faced by MROs in importing
spares, using the services of foreign experts, creation of
necessary infrastructure etc. and address issues immediately
to put Indian MROs on the growth trajectory.
Review the Aircraft maintenance engineering courses
available in India for their suitability in meeting the skill
sets required by the industry.
Encourage setting up of comprehensive MRO facilities in
India to take care of the growing requirements of aircrafts
operating in India.
The government would earn significantly larger revenues from
the multiplier effect of MROs, generation of local employment
and the growth of ancillaries. The State government would
earn VAT on every rupee spent by employees on consumption
goods plus get a share of the income tax, excise duty, and
service tax paid by such employees to the Central government.
Every incremental job yields incremental revenue for the State
government.
Some of the positive measures taken by the government
over the past few years:
Extension of time period for consumption/installation of
parts, and testing equipment imported for Maintenance,
Repairs and Overhaul (MRO) of aircraft by MRO units from
3 months to one year.
MRO industry for the first time is allowed to go in for ECB.
The Royalty charged by the AAI, from MRO, reduced from
36.3% to 13%.
Testing equipment can now be imported duty-free by the
MROs.
While the above measures have helped the industry, it
needs more support to capitalize on the enormous business
opportunities available.
Some of the important corrective measures suggested
are:
Review of the VAT charged on MROs with a view on the
sustainability of the business when VAT is paid along with
other taxes and levies.
States should consider extending benefits like exemption
from State electricity duties, Stamp Duty, land benefits, etc.

November - 2014
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to attract MROs.
Review of the Service tax imposed on MRO industry
considering the fact that when MRO work is done abroad,
the Airlines need not pay any tax at all.
Airline industry is primarily a service industry, thereby, full
Cenvat credit for MRO activities should be extended to the
airlines without any restriction since airlines, at times may
not be in a position to claim full credit.
Rationalize the Customs duty exemption on import of MRO
tools and consumables: The existing Customs exemption
covers only parts and testing equipment for MRO operations.
Review of royalty charged by AAI on MRO: The Airports
Authority of India (AAI) charges 13% royalty from Indian
MROs, which renders them uncompetitive. This is over and
above the rents that MROs pay to AAI for use of the airport
premises. A royalty over the rent is only making Indian
MROs more uncompetitive.
Simplify and standardize the Customs requirement to
produce certificates from end-user airlines for import of
aircraft parts: Under Customs law, MROs are granted
exemption from Customs duty for import of aircraft
spares, subject to submission of requisite documents in
the prescribed manner to the satisfaction of the Customs
authorities. While importing spares, Customs authorities at
different airports have varying requirements of documents,
many of which are tedious and impractical.
Customs should allow 24x7 clearance of aircraft parts at six
major airports: Unlike for air cargo at major airports, the
Customs department has fixed working hours for clearing
aircraft spares. This further leads to delays in custom
clearance which is critical in quick turnaround especially in
situations like AircraftonGround (AOG). A 24x7 window
for custom clearance of aircraft spares would go a long way.
Distinguish MRO as a separate category through amending
Aircraft Rules: MROs have been clubbed with Ground
Handling Agencies (GHA) for security and other related
procedures at the airport. There is no distinction made
between these two very distinct services. This causes
avoidable issues related to airport passes, etc. and
subsequently delays. MRO, by definition, should be declared
a separate category by the Government, through amendment
of Aircraft Rules, 1937.
Accord infrastructure status to MRO industry: The MRO
is an integral part of the airport infrastructure. The
government may consider extending tax benefits on lines of
80IA to MRO.
Encourage airports to support MRO as a strategic activity:
The MRO facility has to be located at the airport itself theres no choice! The Government should take a holistic
view and should ensure that adequate space is mandatorily
allocated at Indian airports for MRO. Else certain airport
operators may take a narrow view of the same and allocate
precious airport land for other commercially attractive
activities. Globally, all major airports have dedicated MRO
hubs that also lead to higher revenues for the airport by way
of higher aircraft movements and hangar rentals.
Provide SEZ status to MRO hubs: The government should
encourage Indian airport operators and Indian carriers to
partner with MRO providers and develop Aerospace Parks

at the airports. These Parks could be dedicated for MRO

and aerospace manufacturing activities with unrestricted
access to the runways. The government should accord
Special Economic Zones (SEZ) status for such Parks, treat
goods and services produced therein as deemed exports
and provide full tax exemptions.
Develop globally competitive skills and capabilities: Given
the industry challenges, not many MRO players in India
possess globally competitive endtoend capabilities. Very
few players have global certifications from USAs Federal
Aviation Administration (FAA) or European Aviation Safety
Agency (EASA) or UAEs General Civil Aviation Authority
(GCAA) to undertake heavy maintenance works on Airbus
and Boeing jets. The Government of India may consider
reimbursing 3050% of the cost of obtaining global
certifications as an incentive to the industry.

At present Domestic scheduled carriers outsource

most of their MRO activity to third party service
providers outside the country. Its a matter of
major concern that Indian carriers find it more
cost effective to fly empty aircrafts and crew to
overseas MRO hubs for maintenance of their fleet.
Finally:
A strong MRO industry is critical to the growth of the
aviation sector in India. It produces employment, and
revenue to the government through taxable outcomes.
India has a huge potential to be a global MRO hub due to
its growing aircraft fleet size, strategic location advantage,
rich pool of engineering expertise, and lower labour costs.
It is a matter of major concern that Indian carriers find
it more cost effective to fly empty aircrafts and crew to
overseas MRO hubs than to get them serviced in India.
This is because Indian aircrafts can simply fly to competing
countries, buy spares and get the maintenance done, and fly
back, without paying any taxes to the Indian government.
A coordinated effort by the government, airlines, airports
and the Indian MROs to strongly promote the Indian MRO
industry is the need of the hour. Civil Aviation Ministry may
appoint a Inter Ministerial Group to support the MROs in
facing the challenges and capitalize on the opportunities
available.
India, with its growing aircraft fleet size, strategic location
advantage, rich pool of engineering expertise, and lower labour
costs has huge potential to be a global MRO hub.
At present, Airlines operating in India get nearly 90% of
their MRO done abroad, mainly due to cost advantages resulting
from the comparatively high tax burden, cumbersome operating
procedures, and the inadequate MRO service facilities available
in India.
Indias current MRO market size is estimated to be around
USD 750 million. As per Boeing itself, the market is expected
to grow at 7% CAGR for the next 7 years to reach USD 1.2
billion by 2020. With the fleet size likely to double by 2020, the
need for a strong domestic MRO industry is critical and not just
desirable.
17

November - 2014
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Karnataka
Aerospace Industry
Aerospace players are looking to
Karnataka to be an aerospace hub for
manufacturing and for MRO activities.

arnataka is becoming one of Indias most dynamic

states! The State government is positioning
Karnataka as a major investment destination for a
range of industries that include IT, auto, steel and

aerospace.
While Karnatakas economy largely depends on agriculture
with 71 percent of the population engaged in farming, the State
has become a key contributor to industrial growth given the
presence of several industries, such as aerospace, manufacturing,
electronics, software, biotechnology, small and medium scale
industries, etc. To embark upon balanced regional development,
the State government plans to utilize infrastructure initiatives to
help further boost growth and employment.
Bangalore, referred to as Indias Silicon Valley, accounts
for approximately 38 percent of Indias software exports. The
software industry is expected to generate USD 20 billion by
2010. Karnataka earned USD 17 billion (INR 74,929 crore)
from software exports last fiscal (2008-09) as against INR
60,800 crore the previous year, registering a 23 percent growth
in rupee terms and 21.5 percent in dollar terms.
Another industry that the State Government is focusing on
is the aerospace sector. This industry continues to draw large
investments in the aerospace sector as it prepares to meet
rising global demand. The sector will see robust growth due to
a combination of positive macroeconomic factors, the presence
of aerospace skill and expertise, favourable Government policies,
and domestic and global aerospace majors investment and
18

expansion plans in the State. Aerospace players are looking to

Karnataka to be an aerospace hub for manufacturing and for
MRO activities and are Entering into joint ventures with overseas players
Establishing captive R&D and manufacturing centers
Providing components, landing gear, IT design and
outsourcing services, etc. to global aerospace majors
Establishing Special Economic Zones to harness the States
inherent advantages

Karnataka as an Aerospace
Hub - Advantages
The Government-funded Indian Space Research Organization
is headquartered in Bangalore, and shares good synergies
with other firms operating in aviation and aerospace sector.

ith the establishment of Hindustan Aeronautics

Limited (HAL) in Bangalore in 1940, Karnataka
has come to be regarded as a pioneer in the
aerospace industry. The State is positioned as an
aerospace destination due to the activities of numerous aerospace
companies and PSUs engaged in manufacturing, design and
development, and Maintenance, Repair and Overhaul (MRO). In
addition, several educational, scientific and technical educational
institutions are fostering domain expertise in IT, engineering and
design skills that can be leveraged by aerospace majors.
Presence of scientific and technical institutes
The presence of scientific and academic institutions, such
as the Indian Institute of Science and Indian Institute of
Management, enable the development of well qualified
technical experts who can be absorbed into aerospace majors
operations. (Almost 1,500 acres are being provided to the

November - 2014
Estd. 1916

Indian Institute of Science to set up its second campus in the

Chitradurga district.) The city also boasts of other prestigious
colleges and research institutions.

focused on component manufacturing, tooling and testing

equipment, and assembling. These companies meet the demand
of HAL, NAL and ISRO in addition to global aerospace firms.

Deep aerospace expertise

The Karnataka UdyogMitras paper entitled Aerospace
Industry in Karnataka (March 2010) puts forth that most
of the development of Indias aerospace sector has been
concentrated in Bangalore. The CII report entitled Vision
2015: KarnatakaA Global Aerospace Hub supports this
by saying that the establishment of HAL in Bangalore in
December 1940 by WalchandHirachand and the Maharaja
of Mysore heralded the beginning of Karnatakas aerospace
industry. Other important organisations include Indian Institute of Science and Council for Scientific
Industrial Research that offers opportunities in research
and training for aeronautical graduates.
The Government-funded Indian Space Research
Organization is headquartered in Bangalore, and shares
good synergies with other firms operating in aviation and
aerospace sector.
The Aeronautical Society of India formed a platform where
engineers, industrialists and professionals could work
together for the industry.
Major aerospace organisations are located around
Bangalore, including HAL, National Aerospace Laboratories
(NAL), QuEST Global, Taneja Aerospace and Aviation
Ltd, Dynamatic Aerospace, Air Works India Engineering
Pvt. Ltd., The Society of Indian Aerospace Industries and
Technologies, etc. An existing supply chain ecosystem has
been developed by these organizations.
Indias flagship aircraft manufacturing and aviation research
organizations are located in Karnataka, including:
Hindustan Aeronautics Limited (HAL)
National Aeronautical Laboratory (NAL)
Aeronautical Development Agency (ADA)

Government support
The State Government is investor-friendly and has simplified
procedures and fast tracked approvals through Single
Window Mechanism.
Companies can also receive assistance from Karnataka
UdyogMitra.
The Government is building airstrips and helipads in almost
all districts.
Karnataka is one of the most progressive states in terms of
the business environment for international investors.

IT expertise and skill sets

Since independence in 1947, Bangalore has developed into
one of Indias major economic hubs and is today known as
the Silicon Valley of India. Karnataka boasts the presence of
major IT companies such as HCL, Infosys, Tata Consultancy
Services, Wipro, QuEST, etc. Karnataka-based professionals
have developed deep IT domain experience. Bangalore is the
worlds fourth-largest technology cluster.
Manufacturing expertise
Bangalore is a leader in heavy manufacturing due to the
presence of PSUs, software companies, aerospace companies,
telecommunications companies, machine tools manufacturers,
heavy equipment manufacturers, defence establishments,
etc. Bangalore serves as headquarters to several public
manufacturing heavy industries such as HAL, NAL, Bharat
Heavy Electricals Limited (BHEL), Bharat Electronics
Limited, Bharat Earth Movers Limited (BEML) and Hindustan
Machine.
Proximity to vendor base
There are approximately 2,000 small and medium enterprises

This industry continues to

draw large investments in the
aerospace sector as it prepares
to meet rising global demand.
The sector will see robust
growth due to a combination of
positive macroeconomic factors,
the presence of aerospace
skill and expertise, favourable
Government policies, and
domestic and global aerospace
majors investment and
expansion plans in the State.

Opportunity for related services

Bangalore operates one of Indias busiest airports as reported
in the CII report entitled Vision 2015Karnataka: A Global
Aerospace Hub. As such, there is tremendous potential for
activities in MRO and ground handling, and the manufacture
of ground support equipment.
Other advantages
Bangalore has a location advantage in terms of talent
availability in IT, engineering and aerospace, proximity
to industrial hubs like Pune, Hyderabad and Chennai, and
connectivity to road, rail and air.
Fairly peaceful multi-cultural State that embraces different
cultures.
Favorable climate, congenial environment for private
investors, cosmopolitan lifestyle, excellent health care and
education facilities.
19

November - 2014
Estd. 1916

Rubber growers in Karnataka

seek hike in import duty

Work on food park at

Tumkur in Karnataka
completed: Rinac

ubber growers in Karnataka have urged the Centre to

increase the import duty on natural rubber to 75 per
cent from the existing 20 per cent.
To discuss various issues related to rubber growers
in Karnataka, a State-level conference of rubber growers will be
held at Puttur in Dakshina Kannada district on September 5.
Price crash
Addressing presspersons, Gopalakrishna Bhat, president of the
organising committee of the conference, said the price of natural
rubber has come down from Rs.220 a kg in August 2012 to
Rs.128 a kg now. One of the reasons for the crash is the import
duty on natural rubber.
He said the import duty on rubber is 20 per cent or Rs.30 a kg,
whichever is lower. Such a low entry barrier leads to the import
of poor quality rubber into the country, affecting the prospects
of domestic rubber growers. The government should increase the
import duty to 75 per cent, he said.

Planters body
N Sharath Bhandary, president of the Rubber Producers
Association, Puttur, said rubber planters in Karnataka do not
have an organisation to take up their issues.
The conference of rubber growers in the State at Puttur is
expected to form All-Karnataka Rubber Planters Association,
he added.

ngineering solutions company Rinac India has

announced the completion of an Integrated Food
Park at Tumkur in Karnataka.
The food park was commissioned by the Future
Group at an overall cost of Rs.18.6 crore and the project was
inaugurated by the Prime Minister Narendra Modi.
The Food Park is the first of its kind, and a state-of-the-art
facility with farm to fork capability. The park offers facilities
for dry and wet processing with collection centres and fruit &
vegetable processing centres under the same roof, Rinac India
said in a statement.
The park has been established in the 9,000 sq meters and
comprises of pressurised fruit ripening chambers, packing,
grading facilities, ready-to-eat processing facility, quick freezer,
chill and frozen Warehouse, pulp storage area and other facilities
also, the statement added.
This facility is compliant with global industry certifications
such as US Food and Drug Administration (FDA) and Good
manufacturing practices (GMP).
The Food Park has been set up as a public-private participation
venture by our Future Group and the Centre and the Karanataka
Government. The Food Park will act as the back-end kitchen and
Farm-to-Fork link for the Groups food business, Future Group
Chairman Kishore Biyani said.
Rinac an integrated engineering solutions company deals in
warehouses, rack assisted storage, mezzanine assisted storage
and others.
The company is currently in the process of executing another
two food parks and six integrated cold chain projects across the
country.

- Source - Business Line

- Source - Business Line

Rise in imports
Giving details about the import of natural rubber into the
country, Bhat said India imported 81,545 tonnes of natural
rubber in 2008-09, which rose to 3.25 lakh tonnes in 2013-14.
The country imported 1.61 lakh tonnes in the first three
months of 2014-15. Around 42,500 tonnes of natural rubber was
imported in August 2014 alone, Bhat said.
Going by the current trend, the country would import around
4-6 lakh tonnes during 2014-15, he added.
Stating that the annual demand for rubber is around 15 lakh
tonnes in the country, Bhat said one-third of it is met by synthetic
rubber and the remaining by natural rubber.
The country produces around 8.4 lakh tonnes of natural rubber
against the demand of 10 lakh tonnes, he said.

20

November - 2014

Karnataka drafts policy on

rural BPOs; Cabinet nod soon

Estd. 1916

President FKCCI
reviews new
industrial policy

The creation of quality infrastructure focusing on

provision for comprehensive facilities and with a
thrust on Human Resource and Skill Development.

olicy
The New Industrial P
the
2014-19 approved by
ould
Karnataka cabinet w
help in the inclusive
owth
development and gr
tate
of Industries in the S
of Karnataka.
- S Sampathraman

he Govt of Karnataka is drafting a new Rural

BPO Policy in tandem with stakeholders such as
industry body Nasscom and rural BPO majors such
as DesiCrew Solutions Pvt Ltd and RuralShores
Business Services Pvt Ltd.
We will be presenting the Rural BPO Policy that we are
preparing with inputs from all stakeholders to the Cabinet for
approval very soon. The policy will help to revive Rural BPOs
said Tanusree Deb Barma, Director, Directorate of IT&BT. She
told reporters at an event to announce the decision to co host ITE.
biz with CeBit India.
She said, of the 36 Rural BPOs that were given incentives
to start operations by the State, only five are functional today,
because the rest were unable to sustain the cost of operations
after the government incentives ran out.
Bangalore ITIR project ready for take off
The Bangalore Information Technology Investment Region
(ITIR), which has not taken off since it was announced a few
years ago, is all set to take shape with the State Govt convening a
meeting to take the project forward.
We convened an important meeting to discuss the ITIR
project which is spread across 10,500 acres of land near the
Kempegowda International Airport and have made up our mind
to complete the ITIR project as per schedule. We have already
given in-principle approval to 30 companies that have registered
for the ITIR and are processing hundreds of applications from
companies who want to register for the same. We are targeting to
complete I Stage of ITIR by 2020 and II Stage by 2032. When
ready, the ITIR will generate 40 lakh jobs (direct and indirect),
today Karnatakas IT industry already employs 40 lakh people
said S R Patil, Minister for IT, BT, S&T, Govt of Karnataka.
He said the State is targeting to produce $40 billion worth
of electronics locally, which constitutes 10 per cent of the $400
billion import bill on electronics that the country will incur from
electronic imports by 2020.
- Source - Business Line

Sampathraman, President, Federation of Karnataka

Chambers of Commerce and Industry (FKCCI) has
said that the New Industrial Policy 2014-19 approved
by the Karnataka cabinet would help in the inclusive
development and growth of Industries in the State of Karnataka.
In a statement to media in Bangalore, Sampathraman said
the policy also encourages women entrepreneurs in exclusive
industrial areas. The creation of quality infrastructure focusing
on provision for comprehensive facilities and with a thrust on
Human Resource and Skill Development and upgradation is a
positive step in growth verticals and expected to enhance the
industrial growth and also in attracting fresh investments, he
added.
Members of the FKCCI have said that the new policy highlights
some areas wherein the PPP model for the establishment of
Industrial areas are given encouragement followed by ease on
allotment of land for Industrial Development through KIADB.
Government originally came out with a change in the policy of
allotting land only on lease basis for 30 years period, said a
member.
21

November - 2014
Estd. 1916

National Business News

The next round of economic reforms

The recent flurry of policy decisions comes at a time when there were questions being raised
whether Modi could actually convert his impressive rhetoric into action.
is possible only if the states partner
with New Delhi. Many areas that need
policy attention are constitutionally the
responsibility of the states. A new report
by Neelkanth Mishra of Credit Suisse
points out an interesting fact: the election
results from Maharashtra and Haryana
mean that the Bharatiya Janata Party
(BJP) now rules states that collectively
account for nearly half of the total output
of the Indian economy. The Congress
controls states that account for barely a
tenth of Indian gross domestic product.
Modi has the political opportunity to
push through reforms in at least the most
important states in terms of economic
dynamism if not political heft.

ndia has a new political

geography
providing
economic reformers a unique
opportunity
The Narendra Modi government
has taken many welcome steps in the
past few days. Diesel prices have been
freed. Gas prices have been increased
to attract the private investment that is
essential for India to reduce its energy
dependency. There have been small but
important steps towards labour market
reforms. The coal ordinance could
be an initial move towards eventual
denationalization. Direct cash transfers
to consumers of subsidized liquefied
natural gas are back. There is some
discussion on how to restructure the
rural jobs scheme.
There is a pattern here. The Modi
government seems to be using its political
capital judiciously. The focus does not
seem to be on the sort of dramatic
reforms that many had expected after
the national elections. The new gas price
is clearly a compromise, and rightly so
since a doubling of gas prices would
have given a price shock to an economy
in which inflation has just begun to drift
down. The changes in the labour laws
will help loosen the grip that inspectors
have on factories but they are still far
22

from easing hiring and firing. Yet, the

direction is clear.
The recent flurry of policy decisions
comes at a time when there were
questions being raised whether Modi
could actually convert his impressive
rhetoric into action. The splendid rally in
equities that began after the first opinion
polls showed Modi in the lead had
begun to lose momentum. The research
reports published by various investment
banks over the weekend suggest that the
financial markets have once again begun
talking about a reforms push.
The first budget of the Modi
government lacked policy direction.
Much of the initial work done by the new
government was administrative, with
projects being rescued from the policy
quagmire that the previous regime left
behind. The work done in the first few
months should be seen as the first stage
of getting the Indian economy back on
track. But that alone could never have
sufficed. The recent policy decisions
should then be seen as the next stage. The
finance minister is out of hospital, a new
team is in place in his ministry and two
important state elections are over. The
months leading to the next budget should
hopefully see more policy changes.
Modi has often said that change

The first budget of the Modi

government lacked policy direction.
Much of the initial work done by the
new government was administrative,
with projects being rescued from the
policy quagmire that the previous
regime left behind.
A look at the political map of India
shows an interesting new geography:
the old divide between the northern
and southern states seems to have been
replaced by a new alignment of western
versus eastern states. The BJP is now
the main political force along almost the
entire western half of the country, which
also happens to be the more economically
dynamic part. Another way to look at
this new political geography: the BJP
now controls almost the entire belt along
which then prestigious Delhi-Mumbai
industrial corridor is being built. Of
course, it has still to form a government
in Maharashtra while Delhi, where the
BJP is the largest party, continues to be
under presidents rule.
The fact that the BJP is now the main
political force in the western half of the
countrywhich is also more prosperous
and urbanizedprovides a unique
opportunity for the Modi government to
step on the policy accelerator.

India to take Moscow route to channel oil

November - 2014
payments to Tehran

ndia oil refiners payments to Iran, which continue

to be stymied by sanctions on Tehran despite interim
leniency shown by the US and five other world
powers to the Persian Gulf country, may finally get
easier with Moscow agreeing to play intermediary. Russia, which
recently signed an agreement with Iran for oil purchases from the
West Asian country, would institute an oil swap mechanism with
India that will mean that practically New Delhi will have to pay
Russia for Iranian oil with Moscow assuming the risk of routing
the funds to Tehran.
The new arrangement, sources said, may be part of a package
deal encompassing defence and energy sectors that India and
Russia are slated to negotiate in detail during President Vladimir
Putins visit to India in December. Indias immediate payment to
Iran of $900 million in two tranches beginning next week will be
made through the existing mechanism where Indian oil companies
deposit funds in rupees in an Indian bank.
Iran then appropriates the money based on a series of backto-back transactions in different currencies that are initially
channelled through the Reserve Bank of India (RBI).
Indian oil refiners combined dues to Iran currently stand at
close to $6 billion. Frozen oil revenues from India and elsewhere
have been a problem for Iran for the last few years.
The difficulty in making payments has also resulted in India
cutting down its oil purchases from Iran drastically in recent
years: Of Indias total oil imports of 189 million tonnes (mt) last
year, just 11 mt or 5.8% came from Iran. India had imported
over 21 mt of crude from Iran in 2009-10.
According to sources privy to the discussions between India
and Russia, the idea is to streamline payments for oil shipments
from Iran. They added that energy security, besides defence trade,
will be topping the agenda of Putins visit to India. Both sides
are working on a vision document that will be released during
the summit where energy security will be a highlight. It will be
dealing with three major areas: gas pipeline; oil pipeline and
most importantly getting the Iranian crude oil to India through
Russia, said an official.
As per the current mechanism for payment that has seen many
alterations due to the sensitivity of the matter, India deposits the

Estd. 1916

Indian oil refiners combined dues

to Iran currently stand at close to $6
billion. Frozen oil revenues from India
and elsewhere have been a problem
for Iran for the last few years.
funds in rupees in an Indian bank, which is later utilised by Iran
to pay for its imports from India.
PSU refiner Mangalore Refinery and Petrochemical (MRPL)
consumes most of the Iranian crude oil in India, followed by the
Ruias-promoted Essar Oil. The countrys biggest refiner Indian
Oil Corporation uses little volume of Iranian crude oil.
After the sanctions on the Islamic country by Western powers
for its alleged nuclear activities in 2012, India has reduced its
imports from Iran and started buying more from other suppliers
such as Colombia, Mexico and Venezuela. In FY14, India bought
11 mt of crude oil from Iran and volumes are likely to remain the
same in the current financial year.
In 2009-10, Crude oil imports from Iran were to the tune of
21-20 mt, which reduced to 18-50 mt in 2010-11; 18.11 mt in
2011-12; and 13.14 mt in 2012-13.
Indias proposed payment of $900 million to Iran will be on top
of $1.65 billion it had paid in June-July this year. Iran and the
US, China, France, Germany, Britain and Russia agreed in July
to extend a six month interim accord until November 24 as they
could not meet a July 20 deadline for concluding a long term deal
to end their nuclear dispute.

23

November - 2014
Estd. 1916

A clean-up for Make in India

A web of policies, laws, rules, regulations and variable practices, have earned India a poor ranking of 134 out
of 189 countries in the World Banks Ease of Doing Business in India index. This report highlights the fact that
regulatory hurdles, red tape and corruption provide little incentive to the private sector to invest in innovation.

ts time to sweep away the pervasive red tape that

makes India one of the most difficult places in which
to do business.
The Clean India campaign can serve as an
inspiration and a metaphor. After all, we also need to clean up
the maze of regulations to enable a success of the Make in India
campaign. Both need a blitzkrieg approach.
A web of policies, laws, rules, regulations and variable practices,
have earned India a poor ranking of 134 out of 189 countries in the
World Banks Ease of Doing Business in India index. A mammoth
task such as building millions of toilets can be achieved if there
is a regulatory clean-up across all levels of
government Central, State
and local.

Bank-Economist Intelligence Units Creative Productivity Index,

we are 14th in a list of 24 economies. This report highlights the
fact that regulatory hurdles, red tape and corruption provide little
incentive to the private sector to invest in innovation. Without
innovation, there cannot be manufacturing growth.
Other than the regulatory burden there are issues, such as
infrastructure, fiscal matters, education, health, civil service
reforms, labour, and land and economic regulation which need
to be addressed. But
one major issue
is to enable

As with the Clean India project, the Make in India project

requires will, a national campaign and a huge change in mindset.
This includes getting rid of fears surrounding the endeavour to
industrialise, create jobs and entrepreneurs, and ameliorate
poverty.

entrepreneurs to start new factories and run them without the

hurdles they face on a daily basis. For SMEs it is a huge task; big
investors are able to overcome hurdles more easily, given their
deep pockets.
We need big investment which creates opportunities for SMEs
upstream and downstream. FDI policies are being liberalised,
yet there are many hurdles. We also need to ensure that Indian
investment is domesticated, rather than flee abroad. After the
recent Supreme Court order cancelling all captive coal mining
licences, one CEO remarked: It is not the time to Make in
IndiaIts time to run from India.

Pervasive red tape

The strong will demonstrated by Prime Minister Narendra
Modi and supported by his ministers, needs to percolate to the
grassroots. This energy is percolating to our States and local
bodies, but in driblets. The challenge for the Central Government
is to orchestrate a sustained national campaign, handholding the
States in this endeavour. This would, in turn, involve getting the
States to handhold the local bodies.
We have set a target to increase the share of manufacturing
from 15 per cent to 25 per cent by 2025, but there is little
progress as of now. On the other hand, our competitiveness has
tumbled to 71 in 2014 from 60 among 144 countries, according
to a World Economic Forum report. On the Asian Development
24

Three brooms needed

Ease of doing business will not improve automatically. It needs
a structural revolution, and what better way than to create a
clutch of brooms to improve the macros and clean up the red
tape as well.
The first broom is to clear reservations about trade and
investment liberalisation. We need to get into global value chains,

November - 2014
Estd. 1916

We have set a target to increase

the share of manufacturing from
15 per cent to 25 per cent by
2025, but there is little progress
as of now. On the other hand, our
competitiveness has tumbled to
71 in 2014 from 60 among 144
countries, according to a World
Economic Forum report.
as over 60 per cent of international trade takes place through
this route. Our international trade is not really enmeshed into
value chains. That can happen only if we open our borders to
foreign trade and investment, and not just for our consumption.
Simultaneously, we need to strengthen our regulatory regimes
through an optimal approach rather than a heavy-handed
approach, to ensure that gains are not cornered by a few.
The second broom, or a set of them, would have to clean up red
tape. This requires a multi-pronged and multi-level approach. The
first step is to invite businesses and other stakeholders to share
their views on the hurdles faced by them on a website created at
the Centre and in each State and offer incentives for them to do it.
The second is to collate the same, prepare a map and publicise the
effort. The awareness generated will lead to a mindset change. The
third step is to carry out regulatory impact assessments (RIAs)
with cost benefit analysis of the changes proposed. Of course, one
will have to deal with vested interests in the process.
Thinking out of the box
A business development and reforms commission at the Centre
and in the States headed by cabinet ministers and armed with
RIA instruments can push out-of-the-box thinking and action.
The third set of brooms will be needed to clean up the mess in our
local government. For example, India ranks very low in the area
of construction permits. Clearing this jungle will lead to better
governance. For the low ranking on contract enforcement, the
judiciary needs to be incentivised to cut the delays in settlement
of disputes.
Like drivers being the major cause of road accidents, lawyers
are mainly responsible for judicial delays. The Chief Justice
should look into the matter.
Finally, changing mindsets will need a campaign from the
top leadership at all levels. Indian bureaucracy lacks a sense
of proportion. For instance, allowing a used after-shave bottle
of 103ml in the hand baggage when checking in for a flight as
against the rule of 100ml will not cause a catastrophe.
But to get ahead in these areas, we need radical and structural
reforms in our civil service and systems.

Smart cities have to be

inclusive and equitable
places to live in

io de Janeiro has invested about U.S.$14 million

to monitor the city in real time. Data from 30
agencies stream into an operation centre from where
responses to emergencies and accidents are efficiently
coordinated Madrid plans to invest about U.S. $20 million in a
technology platform to manage a range of public services such
as street maintenance, lighting and waste management. Using a
sophisticated supplier management model, it pays each service
provider according to the level of services provided. Many cities
have focused on reducing energy consumption and offering
convenient transport service. Some like Tokyo are experimenting
with technology to help the visually challenged to move safety.
Special white canes to move safely. Special white canes with
embedded sensors, which pick up signals from electronic tags and
markers placed at strategic places in the city, help the disabled
navigate.
Large investments
Such smart city programmes require large investments and a
thorough integration of various systems. Industry and cities have
to come together and introduce innovative products. Against
these complex demands, how will the proposal to set up smart
cities fare?
First, the sum allocated in the budget for the programme about
Rs.70 crore a city is grossly inadequate. Unless the amount
provided is only seed money to kick-start the programme, and
more funds are to be sanctioned later, the smart city project
would be non-starter. Second, without the promise of good central
funds, the State governments, too, may not take this initiative
seriously. Since land development is a State subject, enthusiastic
participation of the State is crucial. If the plan is to enable the
private sector to participate in a big way, then the State has to put
in place a detailed framework to guide investment and demarcate
responsibilities. Funds are only one part of the problem. The
key challenge would be to overhaul urban governance and
infrastructure, both physical and digital.
Expensive real estate?
There is also a potential danger in the Indian approach to smart
cities. The government views them as small Greenfield enclaves
on the outskirts. This has probably been done for convenience,
but they have the danger of turning into expensive and exclusive
gated communities.
If the state overlooks the existing city and privileges new
enclaves, the cities will be split into two unequal halves, and the
smart city project would turn out to be an expensive real estate
meant to serve a few. Smart cities cannot only be about displaying
technology and delivering services; fundamentally, they have to be
inclusive and equitable places to live in.
The urban future depends on making cities intelligent, and that
applies equally to both new and old parts of the city.
25

November - 2014
Estd. 1916

Finance Ministry, RBI to

unveil new monetary
policy framework by Feb 1
8-member
panel
has
been
finalized
by
the
Finance
Ministry
to
complete the formalities for
implementation of the new
Monetary Policy Framework
Agreement by February 1.
However, it will be left to
the Reserve Bank of India
to decide on the date of
implementation.
The proposed framework
aims to change the monetary policy formulation and will also
focus on inflation targeting. Traditionally, the monetary policy
formulation is a closed-door affair in the RBI. But, with the new
system, an eight-member Monetary Policy Committee will now
take a call on the policy, and the central bank will then implement
it.
The Finance Ministry is writing to the RBI seeking its
comments on the proposed policy. The proposal will then be
placed in the public domain before finalising the agreement,
according to a senior Finance Ministry official. The RBI is likely
to be asked to respond by October 31. The endeavour is to sign
the agreement by February 1, 2015, to show that one of the key
Budget announcements has been implemented, the official added.
Finance Minister Arun Jaitey, in his Budget speech on July 10,
had said, It is also essential to have a modern monetary policy
framework to meet the challenge of an increasingly complex
economy. Government will, in close consultation with the RBI,
put in place such a framework.
The proposed framework is based on a combination of
recommendations by FSLRC (Financial Sector Legislative
Reforms Commission) and the Urjit Patel Committee, along with
inputs from the Rajan Panel on Financial Sector Reforms.
It is one of the biggest non-legislative actions on the
suggestions given by FSLRC, the official added.
As recommended by the FSLRC, the committee would comprise
the Governor and a Deputy Governor (in-charge of monetary
policy), besides five members from outside and a Government
nominee. The decision will be based on the majority view to be
established through voting. However, the Government nominee
will not have voting right and will simply provide inputs from the
Government.
The official said once the draft framework is finalised, an
agreement will be signed between RBI and the Finance Ministry.
This will be the second agreement for a big shift after both sides
signed an agreement for ways & means in 1997.
The proposed policy framework has also drawn inspirations
from the UK. It also prescribes the proceedings of Monetary
Policy Committee to be made public with a time lag and proper
attribution.
26

Economic growth is
picking up, says Rajan

he economic growth is picking up and fundamentals

of economy are good, according to Reserve Bank of
India (RBI) Governor, Raghuram G Rajan.
We are expecting 5.5 pc growth this year which
go up little more to 6 pc next year to touch 7 per cent later, the
RBI Governor said while interacting with the students at Indian
School of Business (ISB).
The Current Account Deficit had come down and some pick up
was seen in the industrial growth though the shutdown of Nokia
manufacturing unit in Chennai had adversely impact the Index of
Industrial Production (IIP) to some extent.
Though the gold had gone up a little last month, it was mainly
due to the festival season and the non-oil and non-gold exporters
were still doing well. The RBI and Govt were successful in
controlling inflation as indicated by bonds, Rajan said.
When asked on sustainability of growth rate and the likelihood
of reaching the growth targeted by Prime Minister Modi, he said:
The Prime Minister has an ambitious agenda for India. In the US,
I was told by the investors about the buzz he created. The level of
expectations is high. But to sustain growth we need to think how
to reform the system.
On the implementations of the recommendations of the
Financial Sector Legislative Reforms Committee (FSLRC) report
and perceived threat to the autonomy of RBI he said the apex
bank had cardial and friendly relationship with the Government.
The RBI was presently discussing a host of issues with the
Government including the monetary policy framework, the ways to
make the objectives of the central bank more effective in inflation
control and the modalities of determining various processes.
Interest Rates
Responding to a question on whether the tweaking of interest
rates to tame inflation was a blunt policy tool, the Governor
responded by agreeing that it was blunt tool but indicated that
there was no better option available. Both monetary policy and
fiscal policy were important to control inflation.

Taxation and corporate

November - 2014

Financial inclusion is an evolution

Estd. 1916

The new NDA government wants to distribute banking facilities to vulnerable sections of people.
Under the Pradhan Mantri Jan Dhan Yojana, each customer will get a RuPay debit card, with an in-built
accident insurance cover of Rs.1 lakh and an overdraft facility of Rs.5,000.
bank accounts have been active in the
last quarter. The financial inclusion
programme may add a few million more
inoperative accounts which may invite
frauds.
Instead of incentivising people, the
banks should access the potential of
different sectors and devise effective
products to activate credit cycle. The
real financial inclusion will happen if
people have the pleasure of earning
surplus income from their hard work.
For that, the government has to control
inflation as high inflation in food items
erodes peoples surplus. There is an
urgent need to look at Indias 47.4 lakh
artisans who still have the potential to
earn foreign currency.

he banks should access

the potential of different
sectors and devise effective
products to activate credit

cycle.
Financial inclusion is more an
evolution than a targeted mission. It
happens when the common man is able to
generate surplus from entrepreneurship.
Financial inclusion takes root when
honest extension service officials provide
quality services to people. This evolution
takes shape when the policeman allows
an illiterate villager to lodge an FIR
against the village bully and when the
judges deliver justice to make innocent
people feel there is no jungle raj.
The evolution happens when the basic
amenities like health centre, schools,
roads, market and transportation etc
contribute to extend the productivity
hours of people. In fact, financial
inclusion coheres around peoples
productivity. Providing banking products
and services without creating a climate
for entrepreneurship is like putting the
cart before the horse.
Post-independence,
India
has

witnessed a huge entrepreneurship

loss across the country due to political
interference in the day today economic,
cultural and social life of the villagers.
Loan mela, loan waivers and freebies
distribution has already created an
iceberg of idle energy which cannot
be dismantled easily. Besides, the
repayment ethics among people has
deteriorated due to populism.
The new NDA government wants
to distribute banking facilities to
vulnerable sections of people. Under
the Pradhan Mantri Jan Dhan Yojana,
each customer will get a RuPay debit
card, with an in-built accident insurance
cover of Rs.1 lakh and an overdraft
facility of Rs.5,000. Giving Rs.5000 OD
facility each to 75 million people may
create a wilful default size of Rs.37,500
crore. The cost of maintenance of each
savings bank account including issue
of ATM cards and pass books will be
around Rs.350 per year which will cost
banks Rs.2625 crore per annum. As per
RBI, there are already more than 10
million inoperative accounts. The recent
inter-media survey found only half the

Financial inclusion is more

an evolution than a targeted
mission. It happens when
the common man is able
to generate surplus from
entrepreneurship. Financial
inclusion takes root when
honest extension service
officials provide quality
services to people.
What they need today is the basic
training how to market their product
directly in global craft bazaars. Indias
export of handicraft and luxury items
grows at around 16 per cent per annum.
Here, the young generation does not
want to pursue their family profession
due to low return and lack of social
recognition. If an artisan can work hard
for five years to learn bidri or silver
filigree craft he can quote any price for
his product. If 121 crore Indians make a
habit of using a few handicraft products,
it would generate employment to the
tune of lakhs and good foreign currency.
27

November - 2014
Estd. 1916

The Make in India idea

is fine and it has got off
to a dream start. But now,
the Government needs to
prioritize and set the right
goals. Growth or jobs? We
need to pick.

is grand vision of turning

India
into
a
global
manufacturing hub, along
with the promise to ease red
tape, develop key infrastructure and ease
clearances and other factors which have
kept India at the bottom end of the global
ease of doing business rankings, have
served to rekindle hope that the promise
that India showed in the early years of
the millennium will still be fulfilled.
The Make in india campaign is in
fact, outstanding marketing. Look at the
achievements; there is already near-total
national consensus that manufacturing
growth is the way to go for a better
future. Those muttering about climate
change and environmental impact are
already dubbed negativist cassandras.
There is also consensus that for
this growth to happen, there has to be
substantial investment infrastructure.
The whole tortured hand-wringing over
inclusive growth, and social sector
spending witnessed during the latter
part of the UPA regime has already been
forgotten.
So much so, economics are already
pleading with the Modi administration
to not water down the National Rural
Employment Generation Scheme arguably the most successful of the
various wealth transfer schemes any
government has attempted over the years,
once which has played a significant part
in the secular growth in rural incomes
witnessed over the past decade and one
of the real drivers of the India growth
story. Its back to (though not overtly
articulated) Reaganomics will take care
of28
the rest.

Make in India has caught

the imagination of India and
foreign investors
Faith in delivery
There is also the belief that this
administration will deliver on its promise
to cut red tape, somehow rein in an
activist judiciary, control its taxmen and
overall, reduce the intrusive presence
of government in business. Never mind
that there has so far been little concrete
action on any of these fronts.
This is actually a good thing.
Expectations always drive outcomes.
Set expectations to positive and you
are going to get positive outcomes. So
I dont really have any problems with
the idea of Make in India or the sales
job that has been done with it. By all
means, let us roll out the red carpet for
investors, give them the incentives and
the infrastructure needed to make their
investments succeed and grow.
But what are we, as a country, getting
out of this? What are the desired
outcomes of this campaign? This is
where greater clarity is required from the
Government. What is needed is a clearer
prioritization of goals. Are we looking for
more foreign investment, which will help
cut our current account deficit? Are we
aiming to ratcher up our GDP growth a
few notches? Or are we looking for more
jobs for the millions who are joining the
workforce every year?
Confusing signals
This is where the signals get more
confusing. Speaking to the diasporain
Madison Square Garden, Modi appeared
to indicate that growth is primary
objective. If you want human resources
and low cost production, come to India.
The objective reproduce the China story
in India. Make India a manufacturing
hub, and transform the face of the
country from a predominantly rural one
to a predominantly urban one, with a
100 new smart cities. The idea to push
the share of manufacturing in Indias
national output from the current 15 per
cent to around 25 per cent.
Back home, at the investors meet in
Indore, the message was different, India
needs to create jobs, he stressed. In fact, he
said, creating job opportunities for youth
is the biggest goal; of the Government.
We have to create maximum jobs. This
is a nation of the youth. The agriculture
industry and service sectors have to get
equal importance. Which included some

of Indias biggest industrialists.

So what do we want? Growth or
jobs? Manufacturing or agriculture or
services? Of course, one could argue
that we want all of them. We want more
high-paid manufacturing jobs. We want
to make more of the stuff that we pay to
import now here. We want agriculture to
grow and we want services to grow.
And one could also argue, with some
justification, that these wants are
achievable. After all, over the past two
decades in particular, our services sector
has exploded, out manufacturing sector
has grown, and so has agriculture. If it
isnt broke, why fix it?
Time to fix it
Because it is breaking down. Before
it came into power, the BJP successfully
made a meal out of the UPAs two-tenure
tract record of jobless growth. The
spectacular surge in growth seen during
the golden period of post-reform India
saw near double digit growth without a
corresponding upsurge in jobs millions
of jobs were lost, in sectors as diverse
as plantation to textiles, as the economy
shifted its demand supply topography.
Indias wide, horizontal base of small
and medium scale enterprises, which is
the actual backbone of industrialization
in India, has been decimated by reforms.
Unable to compete with cheap imports,
unable to attract the capital to invest
to enable it to compete, and unable to
attract the talent to scale up its quality
and innovation. What is quality and
innovation. What is their place in Make
in India?
The Make in India, website offers
an attractive buffet of investment
opportunities. From automobiles to
biotechnology to renewable energy
to yoga and wellness, it showcases
investment opportunities and highlights
the growth prospects in these sectors.
Most of them have the potential for
attracting large investment in hightechnology areas. But how many of these
sectors will result in the kind of scaling
up of jobs that Modi hopes for, and
indeed, the country needs?
The Make in India idea is fine and
it has got off to a dream start. But now,
the Government needs to prioritize and
set the right goals. Growth or jobs? We
need to pick.

November - 2014
Estd. 1916

Centre may treat

medium, small business
units as different verticals
The Government may do away with a single definition of MSMEs
and is considering defining these units on the basis of different
verticals, a long-standing demand by a section of the industry.

o enable medium, small and micro enterprises

(MSMEs) to grow, there is a need to look at
different verticals, said MSME Secretary
Madhav Lal, addressing the two-day CII Global
SME Business Summit.
The summit, attended by 400 delegates, including 13 foreign
ones, also saw the release of a report on an Action Agenda for
MSME growth by the Confederation of Indian Industry (CII).
Lal, however, said a decision on revising the definition would
only be taken after consulting all stakeholders, including State
Governments, industry associations and experts.
Changes in the Act
He said changing the definition would require a change in
the MSME Act 2006, adding that despite definitional issues,
the sector has shown impressive growth through the years,
contributing about seven per cent to the countrys GDP.
At present, all MSMEs in the manufacturing sector are defined
by a single definition - investment in plant and machinery of up to
Rs.25 lakh as micro, up to Rs.5 crore as small and up to Rs.10
crore as medium enterprises. For the services sector, the limit is
Rs.10 lakh, Rs.2 crore and Rs.5 crore, respectively.
Once the definition is revised, the capital investment limit,
turnover and employee number etc, may be higher for units
engaged in, say, auto ancillaries, aerospace, defence sectors
among others, than those making garments, furniture etc.
On the Rs.10,000-crore venture capital fund (VCF), announced
in the Budget, the MSME Secretary said it will basically flow
from the shortfall with banks in priority sector lending.
Talks are on with the Finance Ministry and SIDBI and the
funds contours will be ready in a month, he added.
Earlier, in his keynote address to the delegates, RC Bhargava,
Chairman, Maruti Suzuki India, said it was only because of
SMEs that the car-maker existed today. When we started, not a
single component was made here. Now, 75 per cent of our inputs
are brought to our vendors.
Boosting growth
Bhargava urged the Government not to club all MSMEs under
a single definition if it is looking at boosting manufacturing
growth in line with the Prime Ministers call for Make in India.
Business cannot be improved through subsidies. The level
of competitiveness has to be raised, he said, adding that there
was need to segregate industries that will contribute to modern
manufacturing.

FKCCI says Government

falls short of reforms
for coal sector
A welcome move is that it will assist private players
to bring in new technology and modernize coal mines
which will go a long way in reducing coal shortage.

r S Sampathraman President FKCCI said that the

Cabinet clearance to e-auction of coal blocks to
end users is a step in the right direction. This is
particularly so because end users in the first round
of e auctions will be power, steel and cement units. It is gratifying
that government has left an enabling provision in the ordinance by
which it can decide on additional commercial use at a later date.
Unfortunately the government has fallen short of its big bang
reforms for coal sector by not touching issues of coal linkages
and pooling of fuel prices and just restricting to e-auction of coal
blocks. There is also no preferential treatment to existing owners
who are set to lose their blocks.
A welcome move is that it will assist private players to bring
in new technology and modernize coal mines which will go a long
way in reducing coal shortage. A decision on linkages for power
plants where no letter of assurance has been signed and linkages
are not in place is a big lacuna.

29

November - 2014

International Business News

Estd. 1916

Embrace China,
not USA

Reduction of incomes of
the developed countries is
necessary to increase our share
and this will only be possible if
China and India join hands

rime Minister Narendra Modi has been trying to bring

foreign investment from NRIs and multinational
corporationsfrom the United States in particular.
But the bonhomie is superficial. The standoff on
major contentious issues continues. The US has not relented on
the increase in fees for H1B visas. A permanent solution to the
food subsidies being given by the developing countries has not
been found.

This has held up progress in the WTO. There is no softening of

stand by US companies on making investments in Indian nuclear
power sector. Obama has not agreed to pressurise Pakistan to
refrain from abetting cross-border terrorism. Neither has he
given a concrete assurance of supporting Indias case for a
permanent seat on the UN Security Council. Modi has not only
failed in securing anything concrete or substantial from President
Barack Obama, nor has he been able to soften him up on the
continuing standoffs. Perhaps the US is riled by Modis decision
to buy increased quantities of oil from Iran.
30

The lack of progress is indicative of different world visions of the

two countries. The US wants to maintain its dominance in world
economy while India wants greater share of the pie in conformity
with her growing prowess. Basic question is of distribution of
global income between the developing and developed countries.
Presently, about 25 per cent people living in the developed
countries get 75 per cent of the global income while 75 per cent
people living in the developing countriesincluding China and
Indiaget about 25 per cent of the global income.
The advent of colonialism led to reduction of Chinas share to
two per cent and Indias share to one per cent at the time of our
independence. We have been able to make only small progress
in last 60 years of win-win cooperation with the developed
countries. Indias share of the global income has seen a paltry
increase from one to two percent. Reason for this slow progress is
that we have been trying to increase our share without seeking a
reduction in their share.
At this pace of win-win approach, it will take many thousand
years for us to get our legitimate share of 75 per cent of the
world income. Reduction of incomes of the developed countries
is necessary for us to increase our share and this will only be
possible if China and India join hands.
America has advanced technologies while China has cheap
labour and large savings. We can access advanced technologies
by befriending America. On the other hand, we can gain through
manipulation of the world markets by befriending China. We have
to assess whether advanced technologies will be more beneficial
for us or manipulation of the world markets.
Americas technological supremacy is eroding. That country has
not been able to make any major commercially viable invention
after the internet. Moreover, America has transferred most of the
advanced technologies to India and China through FDI. We have
been able to generate desi version of certain technologies that
were denied to us by America.
Indias advantages
The supercomputer and cryogenic engines for our space
missions are case in point. Research work too is being increasingly
transferred to India to avail of the low wage rates of the scientists
here. Future technological inventions are more likely to take place
in India. India will have some access to these even if the patents
are held by foreign companies. Surely, America still has control of
some advanced technologies like the patriot missiles and stealth
aircrafts but these are few and getting fewer. Correspondingly
the benefit to be derived by us from friendship with America will
become progressively less.
Benefits from friendship with China are of an altogether
different nature. China and India have the winning combination
of advanced technologies and cheap labour. American companies
are unable to compete with us. Americas exports are declining.
The US government is running massive budget deficits. America
has had to borrow huge amounts of money from us to keep its
economy afloat. China has a comfortable foreign exchange
reserve of US Treasury Bonds. Our holdings of these bonds is also
substantial though about one-fifth of Chinas. China and India
can sell their holding in the open markets. That will lead to a
crash of the US dollar.
It will not do to run after the PIOs. These gentlemen have
abandoned their motherland and are reaping benefits from the

November - 2014
Estd. 1916

The Network revolution! Internet of Things (IoT)

mart economy is now becoming a reality!!

We can track office appointments on our smart
kitchen glass table, our smart sensors on vehicles
provide navigation and also help us with safety
solutions and infotainment, smart devices have revolutionized
health care and made it more affordable.
The world economy is operating at real time information and
is changing the IT landscape and thereby business. While data
intelligence is one of the key drivers, security of data is the key
focus of worldwide businesses across sectors. Among the many
supply chain models that are experimented, Internet of Things
(IoT) model is the most closest to reality.
Though IoT started with the factory automation, it has evolved
into a smart technology solution to reduce human error, save
time, improve efficiency, conserve resources and optimize the
performance of a physical system.
The many sectors that find use with the IoT technologies
are the logistics and supply chain, healthcare, manufacturing,
crime investigation, traffic monitoring, etc. Smart cities and
communities with an improved daily life index (DLI) is one of
the products of IoT technology. London has embraced smart
technology to lessen carbon-dioxide emissions in residential
and commercial buildings. Spain uses soil-humidity sensors to
allocate and manage water storage levels. This helps in detecting
when the land requires irrigation for sustainable water use. Korea
uses smart solution to detect and prevent crime in the continent.
In a recent report, the McKinsey Global Institute considers the
Internet of Things to be one of the most disruptive technology
trends of the next decade, with sweeping implications for
businesses and policymakers. The report estimates the potential
economic impact of the Internet of Things to be US$2.7 to $6.2
trillion per year by 2025 through improved operational efficiencies

anti-India policies implemented by the US. The PIOs gain when

the US increases H1B visa fees. They will face less competition
from newer immigrants from India. The PIOs will get more jobs
in the US farm sector if India dismantles her food subsidies. PIOs
will get more jobs in the US nuclear power companies if India
dilutes her Nuclear Liability Act.
Win-win cooperation is not possible with the US. Instead of
looking west, we must look east and seek cooperation of China
on following issues. One, we must make a common strategy for
using our holdings of US. Treasury Bonds and making America
to bow to our demands. Two, we must make cartels for the export
of natural resources like ores, timber, potash, etc. Three, we must
make a call for removing the patents regime from the WTO.
Lastly we could ask for free movement of natural persons.
Resources of the world belong to all the people of the world.
Every human being should have the right to enter any other
country. National governments may require the immigrants to
follow the culture and spirit of their country but they should not
have the right to bar their entry. These agreements will lead to
the establishment of a just world order and also provide huge
benefits to India.

as well as new revenue-creating products and services.

India, the 3rd largest Asian economy is on a smart city spree
as well !! The Government has recently announced developing
100 smart cities with increased connectivity, lifestyle and ease
of doing business opportunities across the country. About 7 midsized well connected urban spaces including Tumkur are identified
in Karnataka for the smart city project.
- To be continued

GUIDING

ENTERPRISES
TO A BETTER WAY FORWARD

Estd. 1916

FEDERATION OF KARNATAKA CHAMBERS

OF COMMERCE & INDUSTRY
31

November - 2014

Health

Estd. 1916

Home Remedies
for Allergies
Common allergy symptoms include
sneezing, runny or stuffy nose, itchy
irritated eyes, or fever, which can
last several days. Most remedies,
prescription and homemade, will reduce
symptoms without curing the allergy.

ith the arrival of spring, allergies increase

dramatically. The best known, and most
widespread, allergy is to pollen, often called
seasonal allergy. We can fight them naturally,
and cope with most symptoms. Sometimes its necessary to
consult your doctor, who may refer you to an allergist for
a complete examination to determine the degree and causes
of allergies. You may respond well to medications if needed.
Common allergy symptoms include sneezing, runny or stuffy
nose, itchy irritated eyes, or fever, which can last several days.
Most remedies, prescription and homemade, will reduce
symptoms without curing the allergy.
One guideline for reducing allergies is to avoid weakness
in the immune system. It can help to strengthen the bodys
defenses to better respond to the attacks.
Eat at least the recommended amount of vitamin C
according to the FDA, its found in fruits and vegetables
including kale, oranges, grapefruits, strawberries,
pineapple, lemons, berries, and tangerines. Its better
to eat the whole fruit rather than synthetic capsules of
vitamin C whenever possible.
Enjoy probiotics like kefir and yogurt. We have over
400 bacterial species in our bodies, most in our large
intestine, many of which play an important role in
preventing a wide range of disease. Probiotics are live
microorganisms in food that have a beneficial effect on
health. Kefir is made from fermented milk, bacteria, and
yeasts that help reduce allergic symptoms and strengthen
the immune system. These are what is commonly known
as good bacteria.

32

Keep plenty of fish in your diet, enjoy at least three times

a week, opting at least once for oily fish like salmon and
sardines that provide anti-inflammatory omega-3 fatty
acids.
Enjoy onions, leeks, and garlic to enhance breathing.
In some cases, allergies cause nasal congestion, eating
these foods helps fight that.
Tips to try to relieve allergy symptoms:
1) Breathing steam using herbs like chamomile, lemon
balm, or eucalyptus help open breathing pathways.
2) Eat chili peppers, capsaicin is in garlic and hot peppers,
it stimulates nasal secretion which helps get rid of the
stuff clogging your nose.
3) Avoid being outdoors for extended periods of time
during seasonal changes, especially on windy days and
in the morning.
4) If youre allergic to mold keep your home clean and dry,
fix water leaks when they happen, and regularly clean
refrigerator gaskets, which can accumulate fungi.
5) Skin allergies can be caused by make-up, soaps, and
detergent.
Drink plenty of water, dehydration causes fluid retention
which increases mucus.
To relieve and reduce swelling aloe vera works wonders,
and is healthy, fresh, natural, and affordable.
Courtesy
PositiveMed-Team

Achiever

November - 2014
Estd. 1916

Achiever acclaimed - Success Stories to Inspire

I thought of starting something in software services. I settled on building a platform for businesses to
display their products via dedicated Web pages. I named the venture, IndiaMart InterMesh. The idea
was to help the small and medium enterprises in the country market their products and services.

he idea was to help

T-shirts highlighting our brand.
the small and medium
We offered businesses free listings
enterprises in the
on our platform. Once their
country market their
company profile was on the Web,
products and services, says Dinesh
it would start generating business
Agarwal-CMD of Indiamart.
queries from potential customers
I come from a family of
from across the globe. We would
businessmen, but I had no plans of
monitor the response and our sales
becoming one. So, after acquiring
our business started growing, we
a B.Tech degree in computer
had to deal with several issues and
science from the Harcourt Butler
the most irksome among these was
Technological Institute, Kanpur, I
looking for bigger office space. This
took up a job as systems analyst at
is the reason that between 1996
HCL Technologies.
and 1999, we changed four offices.
For five years, I worked with
Besides, for every employee who
other firms in India and then
was hired, we had to invest nearly
moved to the US, where I worked
Rs.50,000 since it involved the
for three years with CDOT. I was
purchase of a new computer and
drawing a good salary and leading
relevant accessories, which proved
a very comfortable life, but I
rather expensive. Though most of
could not picture myself doing
the queries related to our clients
the same job all my life. I felt like
businesses would come to us via
starting my own venture. As all my
emails, very few clients. So we had
relatives and friends were based in
to save the query, take a printout
India, I decided to return in 1996.
and fax it to the respective client.
Since I was a computer analyst
It was quite cumbersome, but we
and among the early Internet
managed.
users, I thought of starting
In 1998, we opened our second
something in software services. I
office in Mumbai. By 1999, we
settled on building a platform for
had added around 1,000 clients
businesses to display their products
to our list. The firm had a staff of
via dedicated Web pages. I named
nearly 100. One of the things that
the venture, IndiaMart InterMesh.
has helped our business grow is
Mr. Dinesh Agarwal, CMD, Indiamart
The idea was to help the small and
the dedication of our employees.
medium enterprises in the country
Several of the staffers who had
market their products and services. I had purchased a flat in
joined us at the launch of the company are still with us. After the
Delhi while I was working and set up my office in the flat in 1996.
US terror attack on 11 September 2001, our business revenue
I had a saving of Rs.40,000 and it was invested in the business.
fell by nearly 40 per cent. It was tough to pay salaries.
I faced several challenges. The computers were costly and few
In 2007, we invested Rs.7 crore to purchase a two acre plot in
businesses used them. So, convincing customers to first buy
Noida and build a new office. We have around 1 crore products
computers, which, in turn, would help in the promotion of their
and almost 15 lakh suppliers. As many as 1 crore buyers visit the
business was quite a task. Besides, the Internet speed was very
companys platform every month. Building on the platform for
slow in those days. Uploading and downloading small files would
suppliers, we also created a buyer-dedicated forum in 2011. A
take several hours. Still, we managed to get fast-food chain,
buyer can post his requirement on the platform and our search
Nirulas, as our first client. The deal was to develop and manage
technology can help him find the right supplier. We see a huge
their website for an annual fee of Rs.32,000.
potential in this venture.
I employed a few marketing and sales personnel to help
In 2013-14, the company generated a turnover of around
generate business. We came up with an innovative way of
Rs.200 crore.
marketing. We began holding exhibitions at Pragati Maidan, in
We are growing at an year-on-year average of 30 per cent and
New Delhi, to showcase our services, with the staffers wearing
are hopeful of maintaining this growth momentum.
33

Road Map

November - 2014
Estd. 1916

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34

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sv CPvUz Dg,
m, DAi v DgU. F
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MAz zVgz Cz MAz
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djVg DAiU v
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F DAiU Jg nU Uw
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v vP zsUzg jP
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ggd Ai CrAi
rvganAi P zgvg
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vAv rPz, PU

sgvz i zAi El rzU

Dv jP CqVgz sv CPvUz
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v Cg jPU vwgv. E Fqjz
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ZgU, zsAi U
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t UtVz.
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Cg CPvAi Dzsgz
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Utlz zs zgPAv
iqz, z PqqjU
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Pz, AiP Pz g,
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CU PAiPU, RV
Aig qAiwg CvZg,
PlAP uAi At
iq l eAi

November - 2014
Estd. 1916

EqP. CAWnv PPg

Pt, GzUPz ,
wg zAiU D. U
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rvP P U PAz Pg
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Dzg zz zAv
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PU Pgwz. zAv
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JA jPAi zsAz Aq
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UV zAv d zAiP
Cg NU vP GzU
PP. eP Pvz a
DgU qAiP. sgvz
gs wAi zsj, sgvz
vAiigU PUjP GvU
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rP. EAz z
sg Pvz Gv zs
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szAiPVP.
sgv LwP gAgAz
Prz z. E zAi
DP g z
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DP V
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Ezg Cx zz wAijU
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DAiiq Pg v Cz
q Pz wU jzAv.
Avg r-Demographic dividend,
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CxUP. CAzg AiP dg
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zz it PAiz
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force) PP QAi rPAi
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r Ai PgtUz
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vg PAi.

zv, jU, v d, gUg, Ev s MzVPqz,

Aig, P, zg v jd-Vjdg Pt, CASvg
CU PAiPU, RV Aig qAiwg CvZg,
PlAP uAi At iq l eAi
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zAiU D. U i UjP rPU Cg rvP P
U PAz Pg AidAi gzg evU Czg juPj
CU U Pg PAiP JAz F Uz DAi.
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qP. zz AiiU
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GzAv Cz wAi
zsjP, zz DyPvAi
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gP. zz DUwg
AwP CPtP z Prt
PP. jg gPu, Rd Aw
zP, zAi PgP PvP Mv
r Cz gQ v
n PUP. RV
jg AgPuU a MvqP.
U MAz zz iAVt
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3r P Azgzz.

EAv i jPU d
Aivg. qv ,
GzU , P
v P Dzsjv ZlnPAi
Crz, sv
sU C, Pt, GzU,
DgU, sZg ,
CAvjP- sAivzAi
iqz. Mmg zz
ig fz Utlz
(quality of life) zsguAiiUP
Jz zU v
PgAz v v
AiPvAz Ai jP.
EwZU gU gg
Pg A U
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PAiRjAi g vP
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djAiv eUz P
erPzz g Pv.
35

Photo Feature

November - 2014
Estd. 1916

FKCCI Office Bearers participation in the unveiling of the new

statue of Mahathma Gandhiji at Vidhana Soudha

Courtesy Call on Mr. Shamanur Shivashankarappa,

Honble Minister for APMC, GoK

Economic Lecture on Energy Savings - A Low Hanging Fruit for SMEs

FKCCI Office Bearers Deepavali wishes to Mr. Siddaramaiah,

Honble Chief Minister of Karnataka at his Residence
36

Interactive Meeting with Mr. S R Venkatesh, KAS,

Controller of Legal Metrology, GoK at FKCCI

November - 2014
Estd. 1916

President & Members of the Managing Committee of FKCCI visited the FKCCI Stall at Mysore Dasara Exhibition, Mysore

FKCCI President & Mr. M Maheshwar Rao, IAS, Commissioner for Industrial Development, GoK at the
National Foundation Day of the Republic of Korea & inauguration of the Korea Business Centre, Bangalore.

Workshop on e-initiatives under K-VAT Act with reference to uploading of purchase & Sales
37

November - 2014
Estd. 1916

Members & Officer Bearers of Mysore Chamber of Commerce & Industry felicitated Mr. S Sampathraman, President, FKCCI at Mysore.

Mr. S Sampathraman, President, FKCCI addressing the Delegates at the Inauguration of Transcending Asian Borders - TAB 2014 &
Launch of Indo Japanese Skills Development Council organized by Asian Arab Chamber of Commerce at Bangalore

Release of New Karnataka Industrial Policy 2014-19 at Vidhana Soudha

38

November - 2014
Estd. 1916

Mr. S Sampathraman, President, FKCCI discussing with

Mr. Siddaramaiah, Honble Chief Minister of Karnataka

Mr. S Sampathraman, President & Mr. R Shivakumar, IPP, FKCCI

interacting with Ms. K Ratna Prabha, IAS, Add. Chief Secretary, I&C
Dept & Mr. Siddaramaiah, Honble Chief Minister of Karnataka

Courtesy Call on Mrs. Nirmala Seetharaman, Honble Union Minister of State for Commerce, GoI at Bangalore

Courtesy Call on Mr. Gaurav Gupta, IAS,

Commissioner for Industrial Development, GoK

Mr. M C Dinesh, Vice President, FKCCI inaugurating the

Seminar on Rotary-Industry Interface at Hubli
39

November - 2014
Estd. 1916

Interactive Meeting with H.E. Gulliermo Rubio Funes, El Salvador Ambassador to India at FKCCI

Release of Business Sustainability souvenir at Oxford College of Engineering at the seminar

NPA Standing Committee meeting by Rajya Sabha Members organized by Canara Bank & Corporation Bank at Bangalore
40

November - 2014
Estd. 1916

FKCCI delegates along with other Industrys Association representatives attending the Meeting with Chairman &
Members of the Committee on the petitions of Rajya Sabha at Bangalore

Meeting with Mrs. Nirmala Seetharaman,

Honble Union Minister of State for Commerce, GoI at Bangalore

Lighting the Lamp by Sri Sri Shivakumar Swamiji, Siddaganga Matt,

& Mr. Tallam R Dwarakanath, Sr. VP, FKCCI at the Grain Merchants
Association Annual General Meeting at Tumkur

Mr. Sudarshan TN, Secretary General, FKCCI released the

souvenir of the Conference on Innovations in Indian Financial
Sector towards Economic Growth organized by
Maharani Ammanni College for Women, Bangalore

Workshop on Total Quality Management by Dr. Manjunath, Dean,

Nitte Institute of Technology organized by FKCCI
41

November - 2014

FKCCI Event Reports

Estd. 1916

Interactive Session on

Enhancing Employability Quotient

15th October 2014 at the Cabinet Hall, FKCCI

Interactive Session on Enhancing Employability Quotient

& Signing of MoU at FKCCI

FKCCI organized an Interactive Session on Enhancing

Employability Quotient on 15th October, 2014. Mr. Ramkumarr
Seshu, Chairman - Skill, Education & HR Committee, Mr. B P
Shashidhar, Chairman, MSME Industry, Mr. Jeba Kumar - Co
Chairman - HR Committee, Mr. Srinath Birur, Co-Chairman
- Skill Committee Mr. Suresh Babu, CEO & MD, iTwine
Technologies were among the distinguished guests.
Sr. Vice President, FKCCI Mr. Tallam R Dwarakanath
welcomed the guests with a bouquet and inaugurated the Session.
In his inaugural address he highlighted on the current trends
on employability and the increasing number of talents being
produced in the country every year across domains. He stressed
on the seriousness of the above scenario, the various reasons
for poor employability, the approaches and the awareness to be
taken by the students, institutions and the employers.
Mr. B P Shashidhar, Chairman, MSME Industry laid importance
for students these days to understand and realise the structural
gaps in the system and also their personal inefficiencies. He
stressed on the fact that without a strong foundation and stability
neither the employer nor the employee can achieve a win-win
situation.
Mr. Ramkumarr Seshu, Chairman - Skill, Education & HR
Committee quoted a couple of his experiences during his earlier
days while recommending the Students to be Future Ready.
With a clipping on the current mindsets of the countrys youth,
he quoted that the responsibility lies with the HR to identify
the right kind of people. Students also need to understand the
importance of structured assessments and appropriate guidance
to move in the right career path.
Mr. Ram also stated that, the talent evaluation or employability
testing can never be a standalone project and is credible only
when performed on a national benchmark.
There are no short cuts to bridging this gap. Immediate
identification and quantification of the gap, short term vocational
42

band-aid and long term structural interventions in education

can serve considerably in bridging it. Approach has to be to
create an ecosystem to help identify employability gaps, provide
quantitative and qualitative feedback at various levels be it an
individual, institutional, regional or national level to help bridge
the employability gap in a constructive manner. Vocational and
skill based courses also help enhance niche skills required in
corporates that are typically looking for specific skills.
On the other hand, aptitude, language and personality skills
vary across roles within the same industry too. A student aware
of his or her strengths and areas of improvement can work in the
right direction to enhance their employability quotient.
The interaction session saw participants from various
institutions and corporates. Couple of students also participated
in the interactive Session. Mr. Jeba Kumar - Co Chairman - HR
Committee, Mr. Srinath Birur, Co-Chairman - Skill Committee,
Mr. Suresh Babu, CEO & MD, iTwine Technologies were the
others who provided innovative insights on the modes to enhance
employability.

Awareness Programme
on e-UPaSS

An Awareness Programme on E-UPaSS was organised by our

affiliated Assn., viz., The Bangalore Wholesale Food Grains &
Pulses Merchants Assn. at APMC Yard on 17th October 2014.
Dr. B.V. Muralikrishna, JCCT (e-Audit), ACCT, CTO, LVO 050,
GoK and Mr. B.T. Manohar, Chairman, State Taxes Committee,
FKCCI, were the Guest Speakers at the programme.
During the interactive session e-UPaSS with reference to
dealers dealing in exempted goods not covered by C Form were
discussed.
Mr. Ramesh Chandra Lahoti, President, The Bangalore
Wholesale Food Grains & Pulses Merchants Assn. presided over
the programme.
Tax Practitioners & Auditors were participated on behalf of
their clients.
Members of the Association were also actively participated in
the discussion.

November - 2014
Estd. 1916

Workshop on

Continuous Improvement practices (Kaizen)

& Problem Solving Tools
FKCCI organized a one day workshop on Continuous
Improvement practices (Kaizen) & Problem Solving Tools on
17th October, 2014. Dr. Manjunath, Professor and Director of
Nitte School of Management, Yelahanka, Bangalore was the
resource person. Secretary General, FKCCI Mr. Sudarshan
T N inaugurated the workshop. In his inaugural address he
highlighted the importance of TQM and its relevance today even
though it was developed in Japan immediately after Second
World War. He quoted the contributions the great TQM Gurus
Deming and Juran and spoke about advantages of TQM to
business organizations. He welcomed the resource person and
participants from various organizations.
Dr. Manjunath explained in detail the basic concepts and
TQM and the evolution of TQM philosophy. He explained how
TQM transformed Japanese economy. The workshop focused on
seven tools of quality, namely Check sheets, Pareto Diagram,
Histogram, Cause-Effect Diagram, Control charts, Scatter
Diagram and Flow Charts. Each tool was discussed in detail
and the resource person explained the participants how these
tools can be used for solving day to day operational problems by
quality circles and quality improvement teams. The participants

were also made to work in group activities to understand how the

tools can be effectively used. The session was highly interactive
with many participants participating in discussions.

Economic Lecture on Energy Saving

- A Low Hanging Fruit for SMEs
Mr. Ramesh Shivanna, Chairman, Energy Committee, FKCCI
extended a hearty welcome to all the dignitaries and said that
energy is a basic requirement for development in all the sectors
of the economy - agriculture, industry, services, transport,
commercial establishments, and residences. Consequently, with
the tremendous progress in technology, our surrounding has
been expanding exponentially and consumption of energy in
different forms of energy has been steadily rising all over the
country which has increased our dependence on fossil fuels and
electricity.
Saving energy doesnt mean to stop all activities. Saving
energy means decreasing the amount of energy used while
achieving a similar outcome of end use. Using less energy has
lots of benefits he added.
Mr. M G Prabhakar, Advisor, Energy Committee said that the
rising energy costs can lead to higher production and distribution
costs for businesses, eroding competitiveness and profitability.
SMEs are particularly vulnerable due to limited resources and
tight operating margins.
Mr. S Kannan, Managing Director, Amset Energy systems Pvt

Ltd, in his address said that better understanding & awareness

of our environment, energy generation and consumption could
lead to minimizing the carbon emissions especially by the Small
and Medium Enterprise. He explained the usefulness of Energy
Audits by which enterprises may be able to make substantial
reduction in their energy consumption by adopting simple
methods.
Mr. Subodh Kumar, Executive - Programmes, Friedrich
Naumann Stiftung Fur Die Freiheit, briefed about their role in
climate change initiatives. He said this topic is increasingly being
brought up and there are genuine concerns to address this issue.
Dr. A Selvraj, Chairman, TANSTIA - FNF Service Centre
gave an over view of TFSC and importance of climate change
activities. He said that the aim of this program was the simple
ways that could lead to a better and efficient use of energy in
the units of SMEs.
Through this programme, FNF has been able to reach a
wider audience from the private sector and create awareness
on the importance of saving energy, thereby contributing to the
reduction of carbon emissions in the environment in Karnataka.
43

November - 2014
Estd. 1916

Interactive Meeting with

Mr. Harsha P.S. IPS, MD, KSTDC & Mr. B J Hosmath, IFS, MD,
Jungle Lodges & Resorts Ltd.

Address by Mr. Harsha P S, IPS, Managing Director, KSTDC and Mr. B J Hosmath,
Managing Director, Jungle Lodges & Resorts Limited.

Address by Mr. Harsha P S, IPS,

Managing Director, Karnataka State
Tourism Development Corporation and
Mr. B J Hosmath, Managing Director
Jungle Lodges and Resorts limited was
held on 21st October, 2014 at 5:00 p.m.
in the Cabinet Hall of FKCCI.
Mr. S Sampathraman, President
FKCCI, in his welcome address extended
a warm welcome to Mr. Harsha P S, IPS,
Managing Director, Karnataka State
Tourism Development Corporation and
Mr. B J Hosmath, Managing Director
Jungle Lodges and Resorts limited and
said that Tourism plays an important role
in economic development and creation
of jobs in India. The Approach Paper
of the 12th Five Year Plan prepared by
the Planning Commission highlights the
need to adopt pro-poor tourism for
increasing net benefits to the poor and
ensuring that tourism growth contributes
to poverty reduction. Tourism plays a
key role in socio-economic progress
through creation of jobs, enterprise,
infrastructure and revenue earnings.
The Planning Commission has identified
tourism as the second largest sector in
the country in providing employment
opportunities for low-skilled worker.
He also mentioned that the tourism
infrastructure should be developed based
44

on carrying capacity and sustainability

principles for which professional
agencies should be employed. A special
emphasis should be given in creating
rural tourism clusters and tourism
parks by adopting strategies based on
convergences of resources he added.
Mr. B Amaranath, Chairman, Tourism
Committee, FKCCI, in his observation
made the following points.
He urged to give representation to
the chambers in KSTDC and JLR. He
also requested to provide the minimum
basic civic amenities like approach
roads, sanitation, drinking water,
healthcare facilities, safety and security
and protection to the visiting tourists.
He mentioned that to attract the large
number of tourists it is quite essential to
provide them all the latest and modern
communication facilities like; bus-stand
with advance reservation facilities for
journey by roads, Railway and Airways
further, ATM facilities and safe custody
of their belongings of the tourists.
He informed that FKCCI has proposed
to organize the a National Seminar on
Role of Swachatha in developing Indian
Tourism at Bangalore and requested
for the support of Tourism Department.
Mr. Harsha P S, IPS, Managing
Director, Karnataka State Tourism

Development Corporation (KSTDC) in

his address said that Karnataka State
Tourism
Development
Corporation
(KSTDC) is an entity was set up by
Government of Karnataka to promote
tourism within the state. The aim of
KSTDC was to provide infrastructure,
conveyance and other facilities to tourists
visiting Karnataka. Part of mission is
also to promote unknown tourist spots
in Karnataka. The corporation conducts
tours - tours of predetermined places at
predetermined times. The KSTDC owns
some hotels and guest houses which
are on par with the best private hotels,
he added. He informed that Hunar se
Rozgar tak scheme in association with
Institute of Hotel Management was
initiated to empower rural youth (both
boys & girls) and encouraged to join
the hospitality industry which in turn
improve employment opportunities.
He requested the members of FKCCI
to come forward to adopt public toilets
and amenities in & around tourist
destinations in the State to make these
destinations more tourists friendly. He
also said that it would be a great if
FKCCI could join its hand in creating
necessary infrastructure for the
development of Tourism in Karnataka to
attract more tourist. He also mentioned
that government is willing pay the for
maintenance of tourist destination
provided if stake holders come forward
to take up this opportunity.
Mr. B J Hosmath, IFS, Managing
Director, Jungle Lodges & Resorts
made a presentation on Eco Tourism.
He said that conservation of natural
resources was major concern and they
encouraged the guest in their lodges &
resorts to adopt measures to minimize
the deterioration of nature. He also said
that conservation of water, energy was
major area of concern especially in eco
tourism.
After a lively interaction the meeting
concluded with vote of thanks by Mr.
Tallam R Dwarakanath, Senior Vice
President, FKCCI.

November - 2014
Estd. 1916

Interactive meeting with

Mr. S R Venkatesh, KAS,

Controller of Legal Metrology, GoK

Sri Tallam R. Dwarakanath, Senior Vice President, welcomed

the Chief Guest and thanked him for agreeing to participate in the
Interactive Meeting in spite of his busy schedule. In his welcome
address the Sr. Vice President raised various general issues
relating to Legal Metrology which is prevailing in Karnataka.
It is seen that the legal metrology department plays a vital role
in verification of stamps, weights and measures, auto rickshaw
meters, petrol and diesel bunk stations etc. The department
ensures that the public interest is safeguarded by ensuring fair
price and delivering correct quantity of goods and supplies.
Sri Bharath Kumar R. Shah, Chairman, Internal Trade & APMC
Committee in his observation raised key issues which require
immediate attention relating to the Acts, namely, Standards of
Weights and Measures Act, 1976 and the Standards of Weights
and Measures (Enforcement) Act 1985, are mainly focused on
ensuring that all weights or measures used for trade or commerce,
for industrial production or for protection of human health and
safety are accurate and reliable so that users are guaranteed
of their performance and quality as well as the consumer gets
the right quantity which he pays for. He also mentioned that the
major multinational companies are not strictly following the
colour code combination of Red and Green on the packings,
which signifies whether the product contains any animal product
/extract. Sri S.R. Venkatesh, KAS, Controller of Legal Metrology,
GoK., in his address mentioned that it is planned to provide new
auto meters to the auto rickshaws very shortly to curb cheating
by the auto drivers to its passengers. He also mentioned that
there are more than 1 lakh autos in the city, and it is not possible
to install tamper proof meters to all these existing meters,
however all new autos coming on the road will be installed with
the tamper proof meters. He also said that in petrol bunks the
metering is tamper proof, however the customer should be alert
in ensuring that the meter is zero while the petrol is being filled.
He said that there is no provision to control problems relating
to E-commerce with the present rules. Govt. of India has started
working on controlling problems on E-commerce.
He mentioned that if people feel that they are cheated
in weights and measures by the traders they can lodge the
complaints with the department.

Congratulations !!!!
Dr S Phillip Lewis has been
awarded the Regional Supplier
award by BOSCH INDIA Bangalore.

Dr S Phillip Lewis CEO of Electro Mech Corporation is receiving the

Regional Supplier award 2014 by BOSCH INDIA Bangalore.

Dr S Phillip Lewis CEO of Electro Mech Corporation

Bangalore has been awarded the Regional Supplier award
2014 by BOSCH INDIA Bangalore.

A self made man Dr Phillip Lewis is

accredited with many number of International
and National awards for Innovation, quality,
invention, holding price line to name a few.
He is the Past President of FKCCI.
A self made man Dr Phillip Lewis is accredited with many
number of International and National awards for Innovation,
quality, invention, holding price line to name a few. He is the
Past President of FKCCI.
FKCCI is proud to congratulate him on his receiving the award
and his visions will inspire the industry fraternity greatly.

45

November - 2014
Estd. 1916

Intellectual Property

For the greater common good

The scope of the competition and intellectual property regimes may be starkly different from one another, but in the
industrial set-up today they surely coincide. Intellectual property driven by the goal of innovation seeks to serve this
end by defining legal boundaries of the property and allowing the owner to appropriate rents by excluding others.

armony between intellectual property rights and

the competition law can ensure economic and social
welfare.
Earlier this month, the Competition Commission
of India (CCI) revealed its intentions of bringing under its
scanner the patent settlement deals between Swiss drug-maker
F Hoffmann-La Roche and Cipla over a lung cancer drug and
between US multinational Merck Sharp and Dohme Corp (MSD)
and Glenmark Pharmaceuticals concerning a diabetes drug.
This move was preceded not too long ago by a case involving
complex issues of licensing of standard essential patents.
This trend evinces the Commissions willingness to venture
into a divergent regime of intellectual property, which focuses
on producer gains driving dynamic efficiency through innovation.
Consumer welfare
Modern competition law adopts an approach based on
economic effects. In the Indian context, this is termed as the
appreciable adverse effect.
The effect is measured in terms of efficiency and welfare
standards. While it is often easy to mistake the underlying
objective of the competition law to be regulation of anticompetitive business behaviour, this is but a means towards
meeting the ultimate end of
maximisation of consumer
welfare. In India, consumer
welfare is one of the underlying
goals of the competition
legislation.
Consumer
welfare
is
defined as the maximisation
of consumer surplus realised
through economic benefits
received by consumers of a
particular product as measured
by its price and quality. Hence,
an effective competition law is
one that prevents increases in
consumer prices and restriction
of output or deterioration of quality which are often a result of
the rent-seeking anti-competitive conduct of monopolies.
Accessibility and affordability are two of the core functions
of the competition law. And this is where the competition law
significantly interfaces with the intellectual property regime to
address the impacts of the exclusions conferred by intellectual
property laws.
Global drug-makers have been increasingly entering into
negotiations with generic companies to keep their drugs off
the market. While such agreements are not illegal, if they end
up stifling domestic competition allowing the brand owners
46

to continue to enjoy monopoly rents, they can hugely impact

consumers by restricting access and compromising affordability.
This dreaded impact motivates the CCI to dig deeper into such
agreements for the first time in India.
Apprehending an adverse impact on the competitive market
process and the resulting impact on consumers, the Commission
has reportedly revealed its intentions to examine the impact of
injunctions that were obtained over the past year by Novartis
and Merck against many domestic drug-makers directed at
preventing them from selling copies of diabetes drugs.
IPR and competition
The scope of the competition and intellectual property regimes
may be starkly different from one another, but in the industrial
set-up today they surely coincide. Intellectual property driven by
the goal of innovation seeks to serve this end by defining legal
boundaries of the property and allowing the owner to appropriate
rents by excluding others.
If the protected intellectual property is necessary for the
production of a good, it gives the owner the right to exclude
others from producing this good, which ultimately subverts the
competitive process in the given market. The curbing of the
anti-competitive impact of such legally-conferred monopolies is
understood and has evolved well
under the doctrine of essential
facilities.
An essential facility is
understood as an input or
factor of production that
has no economically viable
substitute(s) so that the owner
of the input is able to exercise
market power in the output.
This concept rose to prominence
with the case of dominance
of Microsofts Windows as the
de facto operating system for
computers all over the world.
The European Court of
Justice (ECJ) in its 2004 ruling on Microsoft held that
Microsofts refusal to disclose interoperability information
created significant barriers to market entry, owing to indirect
network effects, and is thus an abusive conduct. Therefore, the
interoperability decision was seen as the remedy to the denial of
an essential facility to other operating system developers.
In India, even though the doctrine does not find explicit
mention, the Indian Competition Act has sufficient structure for
the judiciary to invoke it. Similar to the European legislation, the
Act has clauses that prohibit the abuse of a dominant position.
Section 4 (c) asserts that denial of market access to others by a

November - 2014
Estd. 1916

dominant player would be an abuse of dominant position.

Two to tango
The CCI recently took up such a matter on a complaint by
Micromax Informatics against Swedish telecoms equipment
maker Ericsson for alleged abuse of dominance in the licensing
of its standard essential patent. Much like an essential facility, if
a companys patented product becomes an established standard,
then the patent is known as a Standard Essential Patent (SEP).
There exist no non-infringing alternatives; which means it faces
no competition from other patents until that patent becomes
obsolete due to new technology/inventions.
Companies with SEPs that possess such market power have
the ability to engage in exclusionary or exploitative practices
harmful for their competitors as well as consumers.
To this end, standard setting organisations require owners
of patents covered by the standard to grant licences on fair,
reasonable and non-discriminatory (FRAND) terms. The
complaint filed by Micromax alleged that Ericsson who was a
holder of an SEP was licensing this patent at exorbitant and
unfair terms. The Commission not only directed the matter for
further investigation but tried to determine applicable royalty
rates a herculean task in itself.

Economic efficiency measured in terms

of static (short-run) and dynamic (longrun) is an indicator of welfare and this is
where the two systems digress.
While these exercises were in their preliminary stages,
they were commendable. Both intellectual property and
competition interface with varied yet significant consequences
for consumers be it the innovative IT markets often featured
by standardisation and the creation of network effects in the
interest of consumers, or the pharmaceutical markets where
both social concerns and potential innovations are imperative
considerations.
Two fundamental questions for both are determining how
welfare should be defined and how the welfare goals should be
implemented. Producer welfare rises as the amount producers
receive exceeds the costs incurred.
Consumer welfare rises with the difference between the
amount consumers must pay and the amount they are willing to
pay. Economic welfare is typically the sum of the two. Economic
efficiency measured in terms of static (short-run) and dynamic
(long-run) is an indicator of welfare and this is where the two
systems digress. While the competition law focuses largely
on enhancing static efficiency, intellectual property seeks to
promote dynamic efficiency. To this end, one is seen as curbing
monopolies (economic) and the other as promoting monopolies
(legal). Needless to say, intellectual property and competition
are essential tools of economic welfare.
What is needed is for regulators to recognise this
complementarity and work together towards finding the optimal
balance on which economic growth is hinged.

Sensible Ruling on
Transfer Pricing

he Vodafone verdict brings greater tax certainty.

The Bombay High Court has done well to strike
down the tax demand on Vodafone that arose from
treating a seemingly underpriced rights issue of
shares as a transfer pricing irregularity. The ruling brings more
clarity and certainty to Indias transfer pricing regime that had
spooked foreign investors and is, therefore, welcome. Rules
require all cross-border transactions between group companies
to be valued at arms length or as if the transaction is with an
unrelated company to ensure that multinational companies do
not use transfer prices to shift profits out of India to countries
that have zero or low tax rates. Vodafones dispute with the tax
department is on whether the issuance of shares gives rise to
income.
In 2008, Vodafone India issued equity shares at a premium
to its holding company in return for influsion of funds for its
telecom operations. The company said its a capital account
transaction and, hence, doesnt affect its income. However, both
the tax department and the dispute resolution panel held that
the income tax law does not prohibit charging a tax on capital
receipts. Thats plain wrong. The high court receipts. Thats plain
wrong. The high court has made it clear that a capital receipt
is not income, unless it is capital gains. This means only profits
made from the sale of shares or assets can be charges to tax, not
the issuance of shares. Other technicalities become redundant.
The ruling removes ambiguity and helps resolve over two
dozen similar transfer-pricing disputes. The government should
not challenge the present ruling in the Supreme Court. Clear tax
rules and a modern tax administration without arbitrariness will
strengthen Indias case against profit shifting by MNCs. MNCs
today can choose between safe-harbour rules and advancepricing agreements to compute transfer prices and transactions
within group companies, and taxmen will accept the prices
declared by the company. However; our tax officers would need
intensive training to deal with the transfer-pricing regime as
transactions within group companies are becoming increasingly
complex in a globalization economy.
47

Membership

November - 2014
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Welcome New Members!

Applications received towards Ordinary & Patron Membership for the month of October - 2014
Sl.
No.

Name & Address

Area of Business

Category
Membership

Name of the
Representative

Small Scale Manufacturing Activity

1

M/s. Mill Master Machinery Pvt Ltd

Bangalore - 560 091
E-mail: jaykumar@millmastrerindia.com

Rice Processing
Machineries

Manufacture
Small Ordinary

Mr. Jayakumar B K
Director

M/s. Phytotech Extracts Pvt Ltd

Bangalore - 562 149
E-mail: hariharan@phytotech.in

Standardised
botanical extracts

Manufacture
Small Ordinary

Mr. Venkitachalam H, MD
Mr. Kanchana Hariharan
Director

M/s. Rossell Techsys,

(A Division of Rossell India Ltd)
Blore - 66, E-mail: rossell@rosselltechsys.com

Mnfrs. of Wire
harness

Manufacture
Small Ordinary

Mr. Prabhat Kumar B, COO

Mr. V Srinivasan
Sr. Vice President

M/s. Universal Surgicals

Bangalore - 560 091

Mnfrs. of Export of
Surgical Sutures

Manufacture
Small Ordinary

Mr. Pavan D C, Partner

Mr. Shivagangaiah K G
Partner

M/s. Merrick Industries Pvt Ltd

Bangalore - 560 058
E-mail: pbikram@merrick-inc.com

Large Scale Manufacturing Activity

Mnfrs of Coal Feeder

Manufacture
Large
Ordinary

Mr. Yeshwant Chorpade

Managing Director
Mr. A Giridhar, Director

M/s. S3V Vascular Technologies Pvt Ltd

Mysore - 570 017
E-mail: yashas@s3vvascular.com

Mnfrs of cardio
vascular stents

Manufacture
Large
Ordinary

Mr. N G Badari Narayan

Dr. Vijaya Gopal
Kalindhi Narayan
All Directors

M/s. Vishwas Concrete Products Pvt Ltd

Bangalore - 560 002
E-mail: info@vishwasgroup.org

Mnfrs.of Ready Mix

Concrete

Manufacture
Large
Ordinary

Mr. B R Vishwas
Managing Director
Mr. Usha Reddy, Director

M/s Vishwas Construction Industries Pvt Ltd

Bangalore - 560 002
E-mail: info@vishwasgroup.org

Mnfrs.of Processors
& Suppliers

Manufacture
Large
Ordinary

Mr. B. R. Vishwas, MD
Dr. H P Madhusudan
Director

Flower Export

Trade Small
Ordinary

Mr. Noolu Dilip Kumar

Business Development
Manager
Mr. Advait Choudhary
Business Development
Manager

Small Scale Trading Activity

9

M/s. Dexler Holdings Private Limited

Bangalore - 560 071
E-mail: dilip.kumar@dexlerholdings.com

10

M/s. Perfect Liners

Shimoga - 577 201
E-mail: perfectliners@rediffmail.com

Medical Equipments,
automobile spare
parts & iron ore
Supplier

Trade Small
Ordinary

Mr. Najathulla Kalim

Proprietor

11

M/s. Shree Glass & Plywood

Bangalore-10, E-mail:kalpesh@shreeglass.com

Trading in Plywood,
Glass

Trade Small
Ordinary

Mr. Kalpesh Parekh, Partner

Mr. Neeta Parekh, Partner

12

M/s. Sri Vinayaka Bar & Restaurant

Bangalore - 560 038
E-mail: agvenu@rediffmail.com

Bar & Restaurant

Trade Small
Ordinary

Mrs. Latha Venugopal

Partner
Mr. A.R. Raghupathi, Partner

13

Sri Vinayaka Wines

Bangalore-38, E-mail: agvenu0918@gmail.com

Retail Wine Business

Trade Small
Ordinary

Mr. A.G. Venugopal

Proprietor

48

November - 2014
Estd. 1916

Sl.
No.

Name & Address

Category
Membership

Name of the
Representative

Service Small
Ordinary

Mr. Swapnil Jain, Director

Sujitdas Biswas, Director

Logistics

Service Large
Ordinary

Mr. B. R. Vishwas, MD
Dr. H P Madhusudan
Director

Petroleum Dealers

Service Large
Ordinary

Mr. Manjunath G
Partner

Area of Business
Small Scale Service Activity

14

E2E Projects Pvt Ltd, Bangalore - 560 102

E-mail: swapnil.jain@e2eprojects.com

I T Services

Large Scale Service Activity

15

M/s. Dithi Infrastructure Private Ltd.

Bangalore - 560 002
E-mail: info@vishwasgroup.org

16

M/s. Vigneshwar Filling Station

Bangalore - 562 123
E-mail: manjunathvfs@gmail.com

Large Scale Service Activity Patron

17

M/s. CADABAMS
Bangalore - 560 082
E-mail: sandesh@cadabams.org

Health Care Services

Service Large
Patron

Mr. Cadabam M Ramesh

Director
Mrs. Sudha R Cadabam
Director
Mr. Sandesh R Cadabam,
CEO

Profession

Mr. Rakesh Prabhu, Partner

Mr. S.R. Arun, Senior Partner

Profession
18

M/s. ALMT Legal

Bangalore - 01, E-mail: rprabhu@almtlegal.com

IP & Legal Services

49

November - 2014
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50

November - 2014
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51

November - 2014
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52

November - 2014
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Arivu

Cj...

- Ramesh Shivanna, Chairman

Energy (Conventional & Renewable) Committee, FKCCI

Pride without aspiration is like King without

Kingdom.
What we are today is because of the aspiration
of yesterday. Without aspiration we wouldnt have
reached where we are now. I am not from the
business family, but my success in my business as
an entrepreneur, educationist and social services is
because of my aspiration.
My understanding is, aspiration is need not be
achievable. Aspiration is the dream, which I dont
know what way it is achievable. But, I could see the

blue print of the dream what is going to be. If you

know the what way then it is called expectation.
The aspiration and expectation has lot of difference.
Aspiration leads to creating mode. Whereas
expectation leads to begging mode. Aspiration is the
basic element of experiencing the growth, where as
expectation is the basic element for embracing the
sorrow.
When you expect, you tend to depend on other,
When you aspire it will inspire within. Aspiration
is an inner nature that is seeking its outer
expression. Aspiration leads to fulfillment. Even if
it is not pleasing, aspiration will be satisfying. But
expectation is unsatisfying. Expectation is an enemy
of life for it makes beggar not a creator. Where as
the aspiration makes you a creator.
Aspiration is the key to beautiful and holistic life.
Always aspire in the life, dont have expectation.

53

November - 2014
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Services offered by FKCCI

Certification of Export Documents including Certificate of Origin and Visa
Recommendation letters for business promotion visits abroad.
Expert advice on diverse subjects such as industrial growth, monetary and
fiscal policy, exchange rate policy, economic planning, taxation and corporate
laws.
Redressal of general / common problems of members at Central / State
Government levels and other institutions.
Access to FKCCI periodicals / publications like the FKCCI monthly bulletin
Mysore Commerce. etc.

54

November - 2014
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55

Registered
KARBIL No.67459/97 (Regn. No. CPMG/KA/BGS-343(2012-14) Posted at Mail Business Centre, Bangalore GPO, Bangalore - 560 001 on 5th of every month, Pages 52+4=56

November - 2014
Estd. 1916

Printed by Sri P.S. Venkatesh Babu, Edited & Published by Sri N.S. Srinivasa Murthy, FKCCI, owned by Federation of Karnataka Chambers of Commerce and Industry,
56
Published from Federation House, K.G. Road, Bangalore - 560 009 and Printed at Omkar Offset Printers, No. 3/4, 1st Main Road, New Tharagupet, Bangalore - 560 002.