India is keen to design and build more of its own military kit

On an industrial estate in Hyderabad in south India, work is underway on developing advanced technology that replicates the experience of driving a tank through a war zone or using firearms against enemies in jungle terrain.

Zen Technologies is a two decade-old Indian company that designs and manufactures training equipment used by the country’s armed forces, including flight, combat vehicle and hand grenade systems.

But India is keen to see firms designing and building more home-grown military equipment beyond simulators.

India is one of the world’s largest importers of weapons and manufacturing is still at a nascent stage, but there are strides being made in the defence sector as the country finally starts to try to break away from its dependence on imports.

“For the first time in the history of Indian defence procurement the importance of design and development has been recognised by the ministry of defence,” says Ashok Atluri, the managing director of Zen Technologies, who is very optimistic that India can transform itself into a top producer of weapons. “This is going to ensure huge inflow of funds into research and development and will ensure that the scientific talent in India is engaged in developing cutting-edge technologies in defence. India can become a hub for trail-blazing defence exports from being a destination for outdated defence equipment.”

He says Zen has its own plans to “grow its exports business and emerge as a reliable indigenous defence player for supplying products to the Indian and global market”.

New Delhi has hugely ambitious targets to reduce its defence imports. Narendra Modi, the prime minister, has said that its aim is for India to manufacture 70 per cent of its weapons at home by 2020. Currently, it relies on imports for about 70 per cent of its equipment, which is extremely costly for the country.

Mr Modi is pushing for India to become a global manufacturing centre under his “Make in India” campaign, and the defence and aerospace industry is a key part of this. Two years ago, India opened up the defence sector to 49 per cent foreign direct investment (FDI) from a previous limit of 26 per cent. In June this year, the government liberalised the rules even further, permitting FDI of 100 per cent in the sector.

The role of the private sector in India’s defence industry is growing and Indian firms are eager to cash in the opportunity.

“Tata, Mahindra, Hero and Reliance are spending a lot on enhancing the defence manufacturing in India, bidding for big contracts and partnering with foreign companies to assemble or manufacture in India,” says Ajay Pal Singh, who used to work as a scientist for India’s Defence Research and Development Organisation before becoming an entrepreneur.

Larsen and Toubro (L&T) and Godrej are other Indian firms that have entered into weapons manufacturing.

But Mr Singh says that for the time being at least Indian armed forces need to keep buying from abroad to “stay modern”.

Over the next eight to 10 years, about US$200 billion is to be spent on defence capability expansion, and a further $150bn on ramping up homeland security capability, according to Roland Berger Strategy Consultants.

“India is seeing significant growth in the aerospace and defence opportunity currently,” says Wilfried Aulbur, the managing partner for India at Roland Berger. “On an extremely broad level, this growth is due to the combination of three major factors, which are sustained geopolitical threats, increasing internal security threats and significant spends needed to address the need for new equipment as well as for addressing obsolescence related issues.”

India recently proposed a $15bn deal where it would buy up to 300 fighter planes from abroad on the condition that the aircraft are made in India with a local partner, Reuters reported a week ago, citing air force officials. India’s air force desperately needs to boost its operational strength after it reduced an order with France’s Dassault for fighter jets to just 36 planes from an original order of 126. In a major development for India’s defence industry, Reliance a month ago announced a joint venture with Dassault to help build the planes.

American military industries firm Lockheed Martin is talking to India about partnering with the country to produce its F-16 jets in India, according to reports. The US is the second-biggest supplier of arms to India after Russia, which India has been heavily dependent on for arms imports since the Soviet era.

And Sweden’s Saab has indicated that it would be keen to make its Gripen fighter jet in India.

The Reliance Group chairman Anil Ambani said a couple of weeks ago that Reliance has identified two sites in the central state of Madhya Pradesh for setting up defence manufacturing facilities.

India last month signed defence deals with Russia worth billions of dollars, including for Russia’s S-400 air defence missiles and for four warships, as well as an agreement for Russian Helicopters and India’s Hindustan Aeronautics to jointly produce military helicopters to be used by India.

Ketan Makhania, the head of India defence collaboration at Cyient, an Indian engineering company, says that the ratio of imports to indigenous production is improving and that defence exports are set to grow as India increasingly focuses on ramping up manufacturing within the country.

But there is more that will need to done to inspire confidence in Indian defence equipment, experts say.

“The absence of credible quality assurance and a certification agency and process is one of the main challenges when we talk of defence manufacturing in India,” Mr Makhania says.

There are promising signs that there is scope for much growth, with the UAE showing interest in India’s defence manufacturing industry. Last year, India and the UAE revealed plans to cooperate on defence issues and manufacturing following a visit by Mr Modi to the UAE, when the two countries announced plans for a $75bn fund to invest in Indian infrastructure and production of military equipment and space technology. Reliance Defence and Abu Dhabi Ship Building last year signed an agreement to look at a possible strategic partnership to build naval ships for the GCC.

With British prime minister Theresa May’s three-day visit to India starting today, there are expectations that defence deals between the UK and India could emerge.

But there are hurdles that the sector is facing.

Mr Singh says that the “massive corruption involving imports results in more inclination to buy [from abroad rather] than build” weapons in India.

Creating indigenous technologies is also difficult, he says. India for the past 30 years has been trying to produce its own single-engine fighter plane, but only two of these Tejas combat jets have been delivered, despite there being an order for 140 aircraft.

“Our neighbourhood is one of the most disturbed ones in the world, so India prefers to be prepared all the time, rather than affording a gestation period for development and manufacturing of new technologies,” Mr Singh says. “And the research and development budget is too low compared to any other large country.”

India lags very far behind Russia, France and China as a defence exporter, he adds. Still, he does see potential for the market. “I think India will slowly increase its share of global defence exports, but it will still remain small for the next few years.”

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India targets local arms sector

On an industrial estate in Hyderabad in south India, work is underway on developing advanced technology that replicates the experience of driving a tank through a war zone or using firearms against enemies in jungle terrain.

Zen Technologies is a two decade-old Indian company that designs and manufactures training equipment used by the country’s armed forces, including flight, combat vehicle and hand grenade systems.

But India is keen to see firms designing and building more home-grown military equipment beyond simulators.

India is one of the world’s largest importers of weapons and manufacturing is still at a nascent stage, but there are strides being made in the defence sector as the country finally starts to try to break away from its dependence on imports.

“For the first time in the history of Indian defence procurement the importance of design and development has been recognised by the ministry of defence,” says Ashok Atluri, the managing director of Zen Technologies, who is very optimistic that India can transform itself into a top producer of weapons. “This is going to ensure huge inflow of funds into research and development and will ensure that the scientific talent in India is engaged in developing cutting-edge technologies in defence. India can become a hub for trail-blazing defence exports from being a destination for outdated defence equipment.”

He says Zen has its own plans to “grow its exports business and emerge as a reliable indigenous defence player for supplying products to the Indian and global market”.

New Delhi has hugely ambitious targets to reduce its defence imports. Narendra Modi, the prime minister, has said that its aim is for India to manufacture 70 per cent of its weapons at home by 2020. Currently, it relies on imports for about 70 per cent of its equipment, which is extremely costly for the country.

Mr Modi is pushing for India to become a global manufacturing centre under his “Make in India” campaign, and the defence and aerospace industry is a key part of this. Two years ago, India opened up the defence sector to 49 per cent foreign direct investment (FDI) from a previous limit of 26 per cent. In June this year, the government liberalised the rules even further, permitting FDI of 100 per cent in the sector.

The role of the private sector in India’s defence industry is growing and Indian firms are eager to cash in the opportunity.

“Tata, Mahindra, Hero and Reliance are spending a lot on enhancing the defence manufacturing in India, bidding for big contracts and partnering with foreign companies to assemble or manufacture in India,” says Ajay Pal Singh, who used to work as a scientist for India’s Defence Research and Development Organisation before becoming an entrepreneur.

Larsen and Toubro (L&T) and Godrej are other Indian firms that have entered into weapons manufacturing.

But Mr Singh says that for the time being at least Indian armed forces need to keep buying from abroad to “stay modern”.

Over the next eight to 10 years, about US$200 billion is to be spent on defence capability expansion, and a further $150bn on ramping up homeland security capability, according to Roland Berger Strategy Consultants.

“India is seeing significant growth in the aerospace and defence opportunity currently,” says Wilfried Aulbur, the managing partner for India at Roland Berger. “On an extremely broad level, this growth is due to the combination of three major factors, which are sustained geopolitical threats, increasing internal security threats and significant spends needed to address the need for new equipment as well as for addressing obsolescence related issues.”

India recently proposed a $15bn deal where it would buy up to 300 fighter planes from abroad on the condition that the aircraft are made in India with a local partner, Reuters reported a week ago, citing air force officials. India’s air force desperately needs to boost its operational strength after it reduced an order with France’s Dassault for fighter jets to just 36 planes from an original order of 126. In a major development for India’s defence industry, Reliance a month ago announced a joint venture with Dassault to help build the planes.

American military industries firm Lockheed Martin is talking to India about partnering with the country to produce its F-16 jets in India, according to reports. The US is the second-biggest supplier of arms to India after Russia, which India has been heavily dependent on for arms imports since the Soviet era.

And Sweden’s Saab has indicated that it would be keen to make its Gripen fighter jet in India.

The Reliance Group chairman Anil Ambani said a couple of weeks ago that Reliance has identified two sites in the central state of Madhya Pradesh for setting up defence manufacturing facilities.

India last month signed defence deals with Russia worth billions of dollars, including for Russia’s S-400 air defence missiles and for four warships, as well as an agreement for Russian Helicopters and India’s Hindustan Aeronautics to jointly produce military helicopters to be used by India.

Ketan Makhania, the head of India defence collaboration at Cyient, an Indian engineering company, says that the ratio of imports to indigenous production is improving and that defence exports are set to grow as India increasingly focuses on ramping up manufacturing within the country.

But there is more that will need to done to inspire confidence in Indian defence equipment, experts say.

“The absence of credible quality assurance and a certification agency and process is one of the main challenges when we talk of defence manufacturing in India,” Mr Makhania says.

There are promising signs that there is scope for much growth, with the UAE showing interest in India’s defence manufacturing industry. Last year, India and the UAE revealed plans to cooperate on defence issues and manufacturing following a visit by Mr Modi to the UAE, when the two countries announced plans for a $75bn fund to invest in Indian infrastructure and production of military equipment and space technology. Reliance Defence and Abu Dhabi Ship Building last year signed an agreement to look at a possible strategic partnership to build naval ships for the GCC.

With British prime minister Theresa May’s three-day visit to India starting today, there are expectations that defence deals between the UK and India could emerge.

But there are hurdles that the sector is facing.

Mr Singh says that the “massive corruption involving imports results in more inclination to buy [from abroad rather] than build” weapons in India.

Creating indigenous technologies is also difficult, he says. India for the past 30 years has been trying to produce its own single-engine fighter plane, but only two of these Tejas combat jets have been delivered, despite there being an order for 140 aircraft.

“Our neighbourhood is one of the most disturbed ones in the world, so India prefers to be prepared all the time, rather than affording a gestation period for development and manufacturing of new technologies,” Mr Singh says. “And the research and development budget is too low compared to any other large country.”

India lags very far behind Russia, France and China as a defence exporter, he adds. Still, he does see potential for the market. “I think India will slowly increase its share of global defence exports, but it will still remain small for the next few years.”

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Cyrus Mistry's ouster from Tata jolts India Inc

MUMBAI // The unexpected and unexplained ousting of the chairman of India’s Tata Sons, Cyrus Mistry, has sent shockwaves through the business world in India and could have negative implications for corporate India’s reputation among international investors, analysts say.

“The sudden and rather ungracious exit of Cyrus Mistry is indeed a very unusual corporate happening, and has rightly raised eyebrows,” says D Venkat, a leadership expert and chief executive of Strides HR Consulting, based in Chennai.

Last Monday, the announcement that Mr Mistry, 48, was being ousted from the group as the chairman, to be replaced in the interim by former popular chairman Ratan Tata until a permanent replacement could be found over the next four months, came as a huge surprise to many, with no details provided on why the board made the decision.

Tata is by far one of the most powerful and diverse business houses in India. It is almost 150 years old, owning names such as Jaguar Land Rover and Tetley tea, with interests spanning from IT services to property, aviation and consumer products.

The group, which is made up of about 100 companies, had revenues totalling US$103 billion in the financial year from April 2015 to March 2016 and employed 660,000 people.

“The shocking removal of Cyrus Mistry from the chairmanship of Tata Sons is a negative from the corporate governance perspective,” says V K Vijayakumar, the chief investment strategist at Geojit BNP Paribas. “It was done without grace. Nobody expected this from the Tata Group.”

He says that the lasting impression that international investors take from this would largely depend on how the situation evolves.

“The Tatas have had a great reputation – not just among domestic investors, also among foreign investors, an unblemished track record,” said Mr Vijayakumar. “If some clarity emerges and there is a peaceful reconciliation and the issue does not go to the court, then the damage will be limited. If the situation escalates to a legal tussle, there will be damage.”

When Ratan Tata retired at the end of 2012, Mr Mistry succeeded him, becoming only the second person from outside of the immediate Tata family to take up the position of chairman. Mr Mistry, who is an Irish citizen, is the son of construction tycoon Pallonji Mistry, who runs the Shapoorji Pallonji Group, which has a major stake in Tata.

Mr Mistry himself has said he “was shocked beyond words” at being pushed out and that he was not given any explanation. In a five-page leaked confidential letter which was emailed to the board and printed by the Indian press, he described himself as “a lame duck”.

The move “has done my reputation and the reputation of the Tata Group immeasurable harm”, he wrote.

Mahesh Singhi, the founder and managing director of Singhi Advisors, says that Mr Mistry’s removal “is indeed a watershed moment for the Indian Inc”.

“The exit at such a critical pos­ition could have certainly been handled in a better manner,” he says.

Stock market investors have clearly been shaken by the decision. Shares in Tata Motors tumbled during the week by more than 8 per cent from about 560 rupees on Monday to 512 rupees, while shares in other Tata companies including IT services consultancy Tata Consultancy Services (TCS) and Indian Hotels have also fallen sharply.

“Investors will be jittery,” said Abhimanyu Sofat, the vice president research at India Infoline, a financial services company headquartered in Mumbai. “It could be months or even years before you know what has actually transpired between the two parties.”

Mr Venkat, meanwhile, believes that although there is speculation that “performance and lack of so-called strategic dir­ection are attributed as reasons for Mr Mistry’s removal, that argument doesn’t hold water”.

The rift was created by differing opinions on how the group should be run, and the fact that Mr Mistry was not a Tata did not help at all, he believes.

“Cyrus’ exit is more to do with cultural issues within the group,” Mr Venkat says. “Most of the company CEOs have gotten used to being managed by Ratan Tata himself, and in a sense may not have been too comfortable to the aggressive performance-oriented culture, purportedly driven by Cyrus during his tenure.”

Given that most top leadership is in-house and Mr Mistry was probably seen as an “outsider” did not play to his favour, he says.

Mr Mistry’s departure would certainly have a short-term impact on the group, but because Ratan Tata was already largely calling the shots, business may continue as normal for many of the companies, he adds.

Mr Mistry stated that he inherited a raft of challenges when he took on the role of chairman of Tata and “without meaning to air a laundry list”, he outlined these in his letter. Among them was the “debt overhang” caused by foreign acquisitions made under Ratan Tata. He said he did not believe that he was removed “on the grounds of non-performance”.

He pegs the writedowns that the conglomerate could suffer at about $18 billion.

He cited the Tata Nano, designed to be the world’s cheapest car, as a major flop and a money guzzler. He said that he was pushed into approving deals made by Ratan Tata on the joint venture for an airline venture with Air Asia, and a few months later he was pressured to conclude a deal to launch its Vistara airline with Singapore Airlines.

The Indian press has said that one of the things that has irked Ratan Tata was Mr Mistry’s strategy for Tata Steel to sell off its European assets, in particular its loss-making assets in the UK, an acquisition that was made by Ratan Tata. Mr Mistry reportedly also riled Tata Trusts when he made a $1.4bn acquisition of Welspun’s solar farms under Tata Power without seeking their approval.

Apoorv Ranjan Sharma, the co-founder of Venture Catalysts, says that Mr Mistry is likely to have been shunted because “the business ideologies were different” resulting in “a conflict”.

“Tata is known for expanding businesses and building communities around them and the observation seems to be that last couple of moves taken by Mr Mistry were not in line with that.”

However, Mr Mistry’s departure may not directly hit the performance of Tata’s companies, despite the huge controversy surrounding the event, some analysts say.

“It is a fact that last year the group turnover declined and debt increased,” says Mr Vijakumar, “But this is not a phenomenon confined to the Tata group alone. Short-term poor performance is normal during times of economic and business slowdown. In recent times, only TCS and Tata Motors have been the only major wealth creators from the Tata stable.”

How the various Tata companies perform following Mr Mistry’s exit, however, will largely depend on other external factors, according to Mr Vijayakumar.

“From the market perspective nothing has changed,” he says. “Tata Motors will continue to do well since the new launches are doing well and the pound depreciation is a major positive. The performance of TCS will be muted since the IT industry is facing headwinds. The outlook for these companies is unlikely to be impacted by the decision to oust Mistry.”

Mr Vijayakumar points out that with Mr Mistry’s dismissal and any impact it might have on perception of corporate India, “we would have to distinguish between the hit that corporate India took when we had the Satyam episode for instance, which was a case of manipulation. Not just corporate India, there were scandals such as Enron in the United States. But this issue is nothing in comparison. There is nothing below the belt.”

The other question on everyone’s lips now is who will eventually take over as chairman, a move which will watched with interest by international investors.

A few internal candidates, namely Noel Tata, chairman of Tata’s retail arm Trent, and TCS chief executive Natarajan Chandrasekaran, and JLR head Ralf Speth, are among those being considered, sources told Bloomberg News on Thursday.

“Coming to the replacement, in all probability the group and Mr Ratan Tata personally will settle down with an insider,” Mr Venkat says. “There would be a panel that will do a broad search, but finally I don’t see anyone from outside the group.”

An empire of cars, telecoms and commodities

Tata Steel

Cyrus Mistry is understood to be behind the decision to try to sell Tata Steel’s loss-making UK business. Analysts have said that Mr Mistry’s departure from Tata raises questions about whether Tata Steel will now continue with the strategy of disposing of its European assets. Ratan Tata steered the takeover of Corus, an Anglo-Dutch steel firm, in 2007 for US$12 billion, which included the British Steel assets. The UK business was put up for sale in March. Ratan Tata is said to be firmly against selling off the assets.

Tata Docomo

A legal battle is raging between Tata and Japan’s NTT Docomo, which is suing Tata in the US and the United Kingdom and also with litigation in the Delhi High Court. Docomo invested $2.2bn in Tata Teleservices in 2009 under a deal that Tata would buy back Docomo’s shares at least 50 per cent of the price paid in five years’ time. Docomo decided to exit India in 2014, but Tata declined to pay the price asked for the shares. There has been speculation that this issue contributed to the decision to remove Mr Mistry from the group.

Tata Motors

Cyrus Mistry is known to be a car enthusiast. But the company has continued to face challenges of weak sales, steep losses and a poor brand perception. The Nano, launched as the world’s cheapest car in 2009 with a price tag of 100,000 rupees, failed to ever really take off. Following his departure, Mr Mistry said that Ratan Tata would not pull the plug on the loss-making venture for emotional reasons. The bright spot is Tata bought Jaguar Land Rover from Ford for $2.3bn in 2008. The deal was met with some scepticism as it took place during the global financial crisis and was followed by plunging sales. But under Tata’s control, the business was turned around.

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India weddings a billion-dollar industry

MUMBAI // With less than two months to go until her wedding day, Divya Rastogi from New Delhi, is eagerly awaiting the nuptials, but she is also feeling the pressure of organising the celebrations.

There is much to be done for the three-day event, which will culminate in 500 guests gathering near the Taj Mahal in Agra for the main reception. And of course it all comes at a cost. The budget for the wedding is 3 million rupees (Dh164,700).

“Indian weddings are not just one-day celebrations,” says Ms Rastogi, who works as a safety specialist in the oil and gas sector. “It’s a huge thing in India.”

The bride and groom are buying five different elaborate outfits for the occasion, as well as jewellery, particularly gold, which is an intrinsic feature of Indian weddings.

And the kind of wedding Ms Rastogi is having would be considered to be fairly typical of a middle-class celebration these days.

As the wedding season gets under way, businesses that depend on the wedding sector are reaping the benefits of rising spending.

“With the economy booming in India, Indians are now spending their income on extravagant weddings like never before,” says Ashay Desai, the general manager at Blue Sea, a banquets and catering company based in Mumbai.

There are “no expenses spared” when it comes to weddings, he says.

Weddings are an important indicator of social status and wealth in India.

“Due to the surge in number of big fat weddings, segments like catering, decoration, wedding planners, jewellery, photography, make-up, have witnessed a significant boom.”

Widely quoted estimates peg the wedding industry in India as being worth US$40 billion a year and growing at about 20 per cent annually. Experts say that weddings cost up to 200m rupees for industrialists.

“On average, a person in India spends one-fifth of their wealth on wedding functions,” says Mr Desai.

The growth in the wedding industry is being fuelled by the expanding middle class and a young population. The number of millionaires and billionaires in India is also rapidly increasing.

Even the wedding invitations are often tome-like, elaborate products that are designed to impress guests. Taking this to the extreme, a mining baron, Gali Janardhan Reddy, from the south Indian state of Karnataka, in recent days has attracted a lot of attention with the invitations he has sent out for his daughter’s wedding. The boxed invitation includes an LCD screen, which features a video of the bride- and groom-to-be and Mr Reddy lip-synching to an Indian song.

“There is always a growing desire among Indians to plan or have the most lavish weddings,” says Karan Anand, the head of relationships at Cox & Kings, a luxury travel company. “A wedding is seen as the most important and once-in-a-lifetime event in India and affluent Indian families like to splurge millions of rupees; everyone wants to have a wedding that’s talked about.”

Mr Anand explains that it is becoming more and more popular to host “destination weddings”, for which family and friends travel to attractive locations in India or abroad for the nuptials.

In India, Goa is a popular destination for Indian beach weddings and the palaces and forts of Rajasthan are also sought after, while Bali and Dubai are desirable spots for weddings overseas.

Indians use this as an opportunity to make “a style statement” and to tap this growing market, the company offers services to create complete wedding packages from the invitations to venues and food and entertainment, he says.

“The well-heeled Indian wants to set a trend and create an impression by hosting the wedding reception in some exotic locale.”

At a small wedding fair held in Mumbai last weekend, stalls were doing brisk business as families flocked to the event to shop for clothes and jewellery for the wedding season, which runs from October to December.

MM Studio, a fashion boutique in Mumbai, was at the event, selling glamorous, brightly coloured lehengas (bridal skirt) and saris, priced at up to 70,000 rupees.

“There are so many things that happen and so many people related to the Indian wedding – from the bride and groom to the cousin’s family,” says Mannata Gupta, the merchandiser and buying head at MM Studio. “It’s a huge affair. Everyone will go out shopping to buy new outfits because now people in India really want to keep up with the latest trends.”

Mr Desai at Blue Sea has noticed that Indians are becoming more adventurous when it comes to menu options and catering.

“Clients are asking for new dishes, exploring cuisine of the countries which they have travelled to, to create uniqueness in the wedding catering menus,” says Mr Desai. “Innovative food set-ups and decorations are trending across all weddings as every function is unique.

From fine dining food concepts to street food concepts and counters for various themed events of weddings are being made.”

There are also a number of other industries that have emerged to cater to the booming wedding industry in the e-commerce sector, including wedding planning portals and matchmaking matrimonial websites such as Shaadi.com and Bharat Matrimonial that allow individuals to connect with potential partners for marriage.

In many cases, it will be the parents who manage the profiles of their offspring on the websites and try to find partners that they deem to be suitable, often determined by details that are shared such as how fair their skin colour is, or which caste they are from, how much they earn, with arranged marriages still very much commonplace in India.

One of India’s more traditional matchmakers is Radhika Shah, who runs Radhika’s Matrimony, based in Ahmedabad in the western Indian state of Gujarat. Spotting a lucrative opportunity, she moved out of the fashion industry to become a matchmaker four years ago. She travels the country, meeting prospective brides and grooms and their families. Her basic fee is 50,000 rupees, and then she charges families 200,000 rupees to 500,000 rupees once a successful match is made.

“Now love marriages are failing and there tend to be too many divorces, so there is a shift back to arranged marriages,” says Ms Shah.

She has a team that conduct background investigations on the prospective brides and grooms.

“In one case, there was a family in Delhi that had BMWs and Audis, but we found out that they had rented all the cars because they wanted to get a girl from a very, very affluent family.”

Meanwhile, India’s wedding planning market alone is set to reach 1.6 trillion rupees by 2020, according to research by Ken Research, an industry intelligence firm based in Gurgaon in the Delhi area. It describes the wedding sector as a “recession-proof industry”. There has been a sharp increase in the number of wedding planners, who charge 10 to 15 per cent of the budget for the wedding as their consultation fees, according to the research.

For Ms Rastogi, she says that this is the one area that they managed to save some money, on a wedding in which costs are spiralling. Rather than opting for a wedding planner, her family are working relentlessly to pull off a spectacular wedding for the happy couple.

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India wants gas to power economic growth

MUMBAI // India is so committed to getting its population to switch to natural gas that a few weeks ago the government launched a catchy Bollywood-style song to promote the fuel.

India’s appetite for liquefied natural gas (LNG) is set to surge over the coming years, driven by the country’s need for power, sharply lower prices of the fuel and a push by the government to increase the usage of gas as a proportion of its overall energy mix. Natural gas is considered to be a relatively clean fuel.

“India is now emerging as the largest driver of global LNG demand growth,” according to a report published by financial group Citi this month.

India is the fourth-biggest importer of LNG after Japan, South Korea and China with its imports coming primarily from Qatar.

The country’s expanding economy and urbanisation are driving India’s rising energy needs.

Demand has been rising rapidly and Citi forecasts that India’s LNG demand could almost double over the next four years amid a glut in global supply. It increased from 14 million metric tonnes to 16 million tonnes in the last financial year, which ended in March, over the previous financial year, and it has the potential to reach 30 million tonnes in four years, according to the bank. By 2025, demand is set to increase to 50 million tonnes a year.

“The government is also doing its bit, putting in place measures to expand gas infrastructure, including smart cities, new pipelines and terminals,” Citi says. It adds that the “oncoming glut” in LNG globally means that it is likely to be a buyers’ market over the next few years. LNG spot prices are down by 60 per cent compared with two years ago.

Power is the biggest driver of the demand for LNG in India, serving as a substitute for coal in electricity generation, and it is also used in the production of fertilisers. The bank expects India’s dependence on gas imports, which have risen to 45 per cent from 23 per cent over the past five years, to rise to 51 per cent over the next three years.

Last month, Dharmendra Pradhan, the country’s minister for petroleum and natural gas, launched the #Gas4India campaign to increase the country’s use of gas. The campaign has a Facebook page and theme tune.

“Besides the move to enhance gas production, the government is promoting a nationwide gas grid and setting up gas infrastructure,” Mr Pradhan says. “New LNG terminals are also coming up. India has entered into long-term contracts and acquired assets abroad to ensure the unhindered supply of gas at reasonable prices.”

The aim is to more than double the share of natural gas in India’s energy basket to 15 per cent from 6.5 per cent. The country is under pressure from the international community to reduce its carbon emissions and a switch to gas could help in this process.

“India is well behind most of its developed and developing nation counterparts in terms of gas usage, especially at the retail level. Almost two-thirds of India’s gas is still consumed by the fertiliser and power industries,” according to Citi. In Thailand, for example, natural gas comprises about 40 per cent of the energy mix, while in Argentina it is just below 50 per cent, while the UAE is at about 60 per cent.

“For instance, most of rural India still relies on traditional sources of cooking fuels – wood, cow dung, kerosene, biomass – while urban India primarily relies on liquefied petroleum gas,” according to Citi. “While natural gas can be a potent source of energy, which can be used for various purposes such as cooking, transportation, industrial uses, etc., this would need to be driven by enabling gas supply to households as well as industries, for which a robust city gas distribution network would need to be set up.”

Qatar is by far the biggest supplier of LNG to India, at 8.5 million tonnes a year.

RasGas of Qatar supplies the fuel to India’s Petronet under a 25-year contract, which started in 2004. This year, India managed to renegotiate the price to US$5 a unit from $12.

“They lowered the price and increased the volume, so it sounds like a healthier relationship,” says Akshay Randeva, the director of strategy and business intelligence at the Qatar Financial Centre Authority.

Exporters of natural gas are facing increased competition amid heavy global supplies. Countries such as Australia and the US are also major exporters of LNG. Projections by the International Energy Agency show that Australia and Africa will each be providing more LNG to India than Qatar by 2030.

It emerged earlier this year that India is looking at setting up an LNG terminal in Iran to ship natural gas from Iran to India.

“Despite its massive gas reserves, Mena’s role in the global supply of natural gas is diminishing,” according to Apicorp Energy Research. “A major factor behind this trend is the increasing amounts of LNG becoming available from new sources of supply, forcing the major LNG exporters in Mena to adjust their export strategies in order to maintain their market share in Europe and Asia.”

But India’s lack of infrastructure to support the natural gas segment is a hurdle, analysts say.

“The major challenges are the port facilities to discharge and process the LNG,” says Mike van Croonenburg, the chief executive of Petrol Storage Broker, a project-management consultancy.

“The onshore pipeline infrastructure needed in order to transport the natural gas to the end users is also a major infrastructural challenge.”

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India’s ambitions to become a global manufacturing hub are gathering pace, with more major brands starting to make their products in the country.

Huawei, a Chinese tech company, last week started manufacturing its Honor smartphones at a plant in Chennai in collaboration with Flex India, a global electronics manufacturer.

Meanwhile, it also emerged that China’s Lenovo was considering manufacturing laptops in India.

These developments are seen as a victory for prime minister Narendra Modi’s flagship campaign, Make in India, which is aiming to boost manufacturing in the country to create jobs and support economic growth.

“The smartphone landscape in India is growing every day and such initiatives by technology leaders will help accelerate the growth of local manufacturing industry in India,” said Ravi Shankar Prasad, the minister of information and technology, during the inauguration of Huawei’s manufacturing facility. The plant will have the capacity to make 3 million units by the end of next year.

Jay Chen, the chief executive of Huawei India, said the start of manufacturing is “an affirmation of our commitment to India and supports the Make in India campaign”.

Apart from electronics, there are signs of traction in other industries too. Saab Group, a Swedish aerospace defence company, is aiming to produce fighter jets in India, The Hindu Business Line, an Indian business newspaper, reported on Monday. The same day, India’s Reliance Group announced a joint venture with the Rafale fighter jet manufacturer Dassault of France.

But India’s manufacturing sector is facing headwinds, according to a recent research note published by Capital Economics.

“High on the list of priorities is pushing through measures to ease land acquisition laws and increase the efficiency of the labour market,” said Shilan Shah, the India economist at Capital Economics.

But he explained that reform in these areas was likely to be hindered by political opposition. He added that sentiment had however been boosted by the passage of the goods and services tax (GST), a new simpler tax regime.

“Once implemented, the GST should help to ease complexities in the domestic tax system and boost domestic trade.”

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Indian companies faces challenges as credit quality improves

The credit quality of Indian companies improved in the first half of the year, but headwinds such as slow global growth mean the recovery will be put to the test. There were 646 ratings upgrades and 553 downgrades of corporate debt in the first six months of the financial year from April to September, according Crisil Ratings, an Indian agency which is part of Standard & Poor’s.

This means that for the first time in the past 10 half-years, India’s corporate credit ratio rose above 1, where the value of debt upgraded is more than those downgraded.

The focus now shifts to the sustainability of the improvement, said Somasekhar Vemuri, a senior director at Crisil Ratings.

“The investment cycle is yet to pick up, there hasn’t been a mat­erial deleveraging in corporate balance sheets, and weak assets continue to mount in banking,” he said.

“To boot, global growth is also weak. Fresh rate cuts by the Reserve Bank of India, their transmission by banks, government’s continuing policy support, pace of implementation of reforms, and any sharp swings in rupee against the US dollar will be the other key monitor­ables.”

The RBI is holding its first monetary policy meeting under its new governor, Urjit ­Patel, with the announcement on interest rates scheduled to be made this afternoon, which will be closely watched.

Crisil said that upgrades were concentrated in con­sumer-linked sectors and the pharmaceuticals industry.

“Downgrades were mainly in the investment-linked sectors such as construction, industrial machinery, real estate and metals,” Crisil said.

It added that in the near term, the consumer sector would get a boost from what has been a near-normal monsoon, which helps to increase spending in rural areas, while investment- linked sectors would remain under pressure.

Separately, the Canadian pension fund manager CDPQ on Monday unveiled plans to invest up to US$700 million into the restructuring of stressed assets in India and private debt over the next four years, as it entered into a partnership with Edelweiss Group, a financial ser­vices company based in Mumbai.

Stressed assets have proved a headache for banks in India, as a number of companies have become highly indebted.

Rashesh Shah, the chairman and chief executive of Edelweiss, said stressed assets were “a problem and an opportunity in India”.

“With the recent reforms, like the bankruptcy code, the government has provided a good platform to start unlocking these assets by restructuring, resolving, providing additional capital and bringing the asset back into a productivity scen­ario in the country,” he said.

The partnership would acquire stressed assets from banks, restructure debt, give them additional financing and turn around companies, he said. It would also provide finance to high-growth Indian companies and entrepreneurs.

Michael Sabia, the president and chief executive of CDPQ, said that India was “one of its top priorities” because of its economic growth potential and the fundamentals behind this, such as structural reforms that were taking place, the expansion of the middle class and “the growth and the growing soph­istication of India’s financial sector”.

Tata Power and ICICI last month announced they had partnered with CDPQ, alongside the Kuwait Investment Authority and State General Reserve Fund of Oman, with an initial capital of US$850 million, to invest in power projects in India that were nearing completion or already operating, targeting acquisition of controlling stakes in thermal, hydro and transmission assets.

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Survival of the fittest as India telcos battle over 'new oil'

MUMBAI // The launch of Reliance Jio in India’s already competitive telecoms market has created a frenzy.

Companies are locked in aggressive price wars and a bitter feud is raging between Jio and rival operators over regulatory issues. As the battle intensifies, companies will have to fight for their survival, analysts say.

A US$84 billion airwave auction, which launched on Saturday, could be critical in determining the fate of operators, as they compete for spectrum to expand in the 4G data market.

Reliance Jio, part of Reliance Industries, an oil products-focused conglomerate controlled by Mukesh Ambani, India’s richest man, stormed into the market earlier this month, offering free calls for life, what it described as the world’s cheapest data and three months of free services. Mr Ambani has described data as “the new oil”. Reliance has ploughed more than 1.3 trillion rupees (Dh71.74bn) of investment into Jio so far.

“Jio is turning out to be a game changer,” says Ambarish Gupta, the chief executive and founder of Knowlarity Communications, a cloud telephony company. “Jio’s entry will give a boost to the consolidation to the industry. Weaker players will find it difficult to survive and hence will either merge or get acquired.”

Other observers note that they may be forced to exit the market completely.

Other operators have been rising up to the challenge, cutting tariffs in recent weeks. On Monday, Vodafone India cut its 3G and 4G data prices for new users to as low as half the rate of Jio, at 25 rupees a gigabyte. BSNL, a state-owned operator, has promised free voice calls for its users from next year, while Bharti Airtel has slashed data tariffs.

Vodafone, with it headquarters in the UK, armed itself in preparation for the spectrum auction, pumping more than $7bn of equity into its Indian subsidiary in the past six months.

There is a lot at stake, considering the demographics, with a population of more than 1.2 billion, more than half of which is under 25, and an expanding middle class.

“The telecommunications sector in India has grown exponentially to become the second largest network by subscribers in the world,” according to a report by KPMG.

It highlights that the sector contributes about 6.1 per cent to India’s GDP and directly creates about 2.2 million jobs and is one of the highest contributors of foreign direct investment (FDI) to the country. Meanwhile, investment into the industry has surged by about 220 per cent in the past four years, the report reveals.

Beyond price wars, there are other disputes brewing.

“The entry of Reliance Jio has also opened some contentious issues around various regulatory matters, principally around interconnect, which have pitted the major operators against Reliance Jio,” says Rajan Mathews, the director general of the Cellular Operators Association of India (Coai), a lobby group that has the major operators as its members, including Jio.

Letters to the Telecom Regulatory Authority of India (Trai) that have been made public show Coai describing Jio as “a backdoor operator”, while Jio has accused existing operators of “cartelisation”.

The arguments, between Jio and the three major telcos, are over interconnect points, tariff norms and number portability. Jio is maintaining that it has not been given enough interconnect points by Bharti Airtel, Idea and Vodafone, which, it says, results in millions of call failures a day when its users phone these other networks.

Reliance said in a statement on Tuesday that the call drops had “caused severe hardships to Indian customers”. “Airtel’s contention that the congestion has been caused by large-scale subscriber acquisition by [Jio] is not only unreasonable but also anti-competitive,” it said.

There has been some consolidation in the telecom sector in the past few years, with the number of operators reducing from 12 to five principal operators, says Mr Mathews. This consolidation is expected to continue.

“An effect that Reliance Jio has had is to hasten the consolidation in the market in order to compete with Jio,” says Mr Mathews. “Reliance Jio’s 4G network has been a differentiator but this is quickly being matched by competitors. Revenue growth is expected to be subdued but not materially altered as data usage by customers picks up. The major effect will be on profitability and margins which will continue to face downward pressure for at least the next four to six quarters.”

Tata announced earlier this year that it was looking for a buyer.

“It is expected that the top three or four will generate enough profits and market share to remain in business, while there will be increased pressure on the others to further consolidate or exit the market,” says Mr Mathews.

Meanwhile, the airwave auction will add to telcos’ already large piles of debt, says Mr Gupta. And it is not only Jio’s competitors that are suffering because of the rivalry. “How much and when will Reliance benefit from its telecom venture remains to be seen because Reliance is also incurring a huge cost on challenging the incumbents,” Mr Gupta says.

“Competition is indeed going to increase in the coming months. The consumers are going to benefit from the pricing war but it is yet to see how sustainable this model is.”

Telcos will be forced to go beyond simply offering the best prices. “With the consumer mindshare and loyalty switching at the drop of a hat, telecom operators must undividedly focus on what truly matters: delivering unparalleled customer experience,” says Mr Gupta. “The recent technology investments by Airtel and Vodafone on data analytics exemplify this. I believe, in the end, the winners in this game will be the ones who offer consistent and reliable experiences and not necessarily free services.”

Srividya Kannan, the founder and director of Avaali Solutions, a consulting and technology implementation services company based in Bangalore, says that Jio “is shaping the future of the marketplace” and is “forcing a shift towards a better network … and importantly acceleration in the movement towards 4G”.

She says that the telecom sector “remains the epicentre of growth and innovation for India”.

It is “the smaller and over leveraged telcos [that] will be most impacted”, Ms Kannan says.

“While in the short run, [the entry of Jio] may force existing providers to recalibrate their tariffs and put pressure on the earnings margin, in the mid to long run, this will definitely lead to a significant increase in volumes. There is also likely to be very aggressive bids in the upcoming spectrum auctions – a double whammy given that pressure on margins is also coming at a time of higher capital expenditure.”

Ultimately, there is a silver lining, Ms Kannan points out.

“The good news is that in a high-level context, all this is in complete alignment towards a truly digital India.”

Also, while Jio’s launch has been creating friction with other operators, its launch has led to something of a mending of ties between Mukesh Ambani and his younger brother, Anil. Mukesh was forced to hand over the telecom division, Reliance Communications, to Anil Ambani in 2005 as their late father Dhirubhai Ambani’s group was carved up between them amid a family feud.

Anil Ambani told shareholders on Tuesday that amid sharing of spectrum, towers and networks, there was a “virtual merger” between Reliance Communications and Jio. “Anil Ambani & Mukesh Ambani are working hand in hand to create the India that Shri Dhirubhai Ambani dreamt of”, Anil’s Reliance Group posted on Twitter.

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WhatsApp case reveals India's need for law to protect data privacy

India needs new data privacy laws, experts say, as a court case with WhatsApp has brought the issue into sharp focus.

WhatsApp last month revised its privacy policy to allow the Facebook-owned messaging app to share data with Facebook and permit targeted adverts.

Two students filed a public litigation in the Delhi High Court to try to get the policy reversed. The court ruled that because the policy would only come into effect on September 25, all data before that should be deleted. It also resulted in the court asking India’s telecom regulator, Trai, to look at bringing WhatsApp and other messaging services under the statutory regulatory framework. But the students did not succeed in winning the case to get the WhatsApp policy reversed.

“In addition to laws for data privacy and security, what is required to be done on priority is to educate the end user of the implication of such usage,” said Srividya Kannan, the founder and director at Avaali Solutions, based in Bangalore.

India is a key market for Facebook and WhatsApp given the rapid growth of smartphone and internet use. WhatsApp in its defence has said that users are under no obligation to use the app.

The number of internet users in India is estimated to have reached 402 million by the end of last year, meaning that India has passed the United States with the second-largest number of internet users in the world. Only China is ahead, according to the Internet and Mobile Association of India and the research group IMRB International.

“Data privacy is an intrinsic risk to the usage of any of the social media applications,” says Ms Kannan. “User data including perhaps the phone number could be compromised for commercial marketing, advertising. For enterprises, while social media is a great means of customer service, this is a double-edged sword and must be designed to prevent leakage of business sensitive information.”

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Mahesh Tejwani, the president of Vivekanand Education Society, talks about the challenges India is facing with water and how this is affecting the economy.

What are some of the factors behind the water problems that India is facing?

With the country facing two years of weak monsoon rains, water tables across the country have been severely depleted and a lack of replenishing initiatives at the government and private sector level to suitably boost water reserves have led to severe stress situations. Factors responsible for water problems include the lack of holistic planning accorded to water conservation issues. A shortfall in properly trained water technology professionals equipped with the requisite scientific knowledge is a critical anomaly which has led to poor analysis of water issues and finding solutions to them. At the grass-roots level, there is a growing tendency to waste water, not giving a thought to storage issues and shortage problems. Neglect of city piping systems often leads to corrosion of pipelines, resulting in bursting of pipelines and huge wastage of the precious commodity. A lack of policy-based initiatives to find artificial water sources in the face of rapid depletion of natural water sources is also making the Indian water crisis a dismal reality.

What implications do the water issues have for the country’s economic growth prospects?

A coordinated water policy and synergy between different stakeholders is the need of the hour to find sustainable solution to the water problem. With the increasing dumping of effluents in river basins by companies, water tables are getting rapidly polluted. This, in turn, means that highly contaminated water is being used for growing crops, compromising the health of citizens and putting a severe strain on the health budget of the country. With crops failing on basic safety standards, exports of agricultural items are likely to take a hit with countries blacklisting purchases. With the severe depletion in water tables, industries like coal, which require vast amounts of water, will be hugely affected. This can have a cascading effect on the electricity generation capacities of power companies and negatively effect the energy situation of the country. 

What needs to be done to solve India’s water problems?

Urban housing societies and educational institutions should increasingly resort to water harvesting techniques. Water conservation initiatives must be given increased priority at all levels of the administration. There must be increased sharing of water resources between states to tide over potential water crises. Modern, cost-effective infrastructure must be utilised for storage and transport of water leading to less wastage and optimum utilisation. Water resources data should be digitised so that an accurate documentation and data of water assets can be maintained. From preschool years, a judicious approach to water use should be inculcated in children.

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