Transforming Indian Agriculture Through Increased Mechanization

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THOUGHT LEADERSHIPS/WHITEPAPERS
Transforming Agriculture
Through Mechanisation
A Knowledge Paper on Indian farm equipment sector
It is expected to employ
approximately 205 million
people by 2019-20.
Agriculture and allied sectors contribute approximately Rapid urbanisation
growing population and
growth of other sectors
promising employment
is impacting the farm
productivity.
By the year 2050, the annual food grain production
would need to grow to 333 million tonnes from the
levels of 257 million tonnes recorded in 2014.
The size of the farm equipment
sector is estimated at approximately
US$ 6.5 billion and has seen strong
growth in recent years.
Problems such as small and scattered land holdings,
affordability and financing of farm equipment, poor
levels of procurement mechanism, poor after sales
service and over dependency on tractors instead of
other kinds of machinery are some of the challenges.
India, with a mechanisation level between 40-45 percent, lags in
comparison to other BRIC countries such as Brazil and China.
Agricultural machinery market in
India is estimated to grow at a
CAGR of over 10 percent during
the period 2013-18.
US$ 6.5 billion
Use of proper equipment can
increase the farm productivity by
up-to 30 percent and reduce the
input cost by about 20 percent.
333 million
14 percent to India’s GDP
The Indian market is dominated by 1,500
micro units, 2,500 small-scale units
and 250 medium-sized companies.
Tractor accounts for most of the farm
mechanisation in India. Country is also the
largest market in the world for tractors.
Indian thresher
market remains
largely unorganised.
Foreword
To feed the ever-growing population that stands at 1.2 billion currently, India continues to face a significant challenge in its agriculture
sector. The ever growing demand of farm produce is further challenged by a number of factors:
• Sluggish growth of total cultivable land in the country.
• India is gradually transforming in to services and manufacturing hub – a fact evident from the increasing contribution of services and the
manufacturing sectors to the GDP.
• Rapid urbanisation has further led to migration of farm workers.
I believe that the only way to overcome these challenges is to increase farm mechanisation. This would increase the agricultural yield and
reduce the manual efforts to a large extent.
Studies conducted by Ministry of Agriculture suggest a direct correlation between the increased yield and farm mechanisation. This will
lead to increased savings in farm inputs such as seeds, fertilisers and drudgery etc.
Grant Thornton India LLP, in association with FICCI, through this report provides an analysis of agricultural equipment market in India
including significant information about leading players of the industry. It also highlights the challenges and presents recommendations
on how the various roadblocks can be overcome. We hope the report will encourage more discussions around Government’s vision for
sustainable agriculture and suggest how this industry will play a crucial role in achieving that.
Indian agriculture has marked its presence at the global level. India ranks among the top countries in the world in production of a number
of crops including rice, wheat, sugarcane, fruits and vegetables. However, despite this potential, two prime bottlenecks that have emerged
and can become insurmountable problem in the foreseeable future are the stagnant productivity per hectare and shortage of agriculture
labour. There is ample evidence which suggests that productivity improves dramatically with usage of more farm power. It has been further
estimated that use of proper equipment can increase the productivity by up to 30 percent and reduce the cost by about 20 percent.
Indian agriculture has since beginning of year 2000 moved far and wide beyond production of basic food grains. Indian farmer is fast
adapting farm mechanisation than ever before. The sale of tractors in India cannot be taken as the only measure of farm mechanisation but
to a greater extent it reflects the level of mechanisation. Indian tractor industry has emerged as the largest in the world and accounts for 1/3
of total global production.
While opportunities in Indian farm machinery sector are immense, the sector faces challenges on several fronts. Unlike other agricultural
sectors, farm mechanisation sector has a far more complex structural composition. It has been observed that the sector’s performance
depends on the interplay of factors, that include, financial aspects such as capital and rate of interest, lack of data, small and scattered land
holdings etc.
Innovation in farm machinery sector will drive the next phase of agricultural growth in the country. The Government of India has been
encouraging mechanisation through different policy interventions. The technologies that have evolved in the farm machinery sector in last
few years have enormous potential to realise the vision of ‘Make in India’ initiative which promotes innovation and investment.
The knowledge paper examines the current status of the farm mechanisation in India. The paper also identifies the problems in farm
equipment sector and reflects suggestions and opinions of various stakeholders collected through structured interviews. Subsequently,
the report proposes measures for transforming Indian agriculture through mechanisation. It also profiles the best practices of various
countries. FICCI has always thrived in providing thought leadership. We wish this report helps in opening up another facet to the
emergent knowledge base of the farm machinery sector.
Rahul Kapur
Partner,
Grant Thornton India LLP
A. Didar Singh
Secretary General,
FICCI
4 | Transforming Agriculture Through Mechanisation Transforming Agriculture Through Mechanisation | 5
Mechanisation
Over 95 percent of agricultural activities are have been mechanised in Canada. The
productivity has increased both because of mechanisation and improvements and
innovations through biotechnology. Canadian farmers buy over US$ 2 billion worth of
machines and implements annually, including an average of 19,000 tractors, 3,500
swathers, 4,000 grain combines and balers, plows, dickers and other tillage and
harvesting tools. Farming is carried out using seeding equipment, hay and forage
equipment, grain-harvesting equipment and tractors in large extents.
Government support
Cash advances are provided to young farmers and new entrants. The whole farm profit
is subsidised rather than crop prices or farm revenues. The agricultural policies are
restrictive in Canada but the farmers benefit in the form of higher output prices, less
competition. There are loans and credit facilities at low interest rate to purchase farm
equipment.
Mechanisation
In the US, 95 percent of the farming is mechanised. The
level of mechanisation can be gauged by the fact that a
farmer who supplied food for 26 persons in 1960 supplies
food for 144 people as a result of higher levels of farm
mechanisation. Almost all the farm activities in the US are
carried out using advanced machinery and equipment.
Farmers make large capital investments, from US$ 97,000
for a 160 horsepower tractor to US$ 170,000 for a 4-wheel
drive model.
Government support
US government heavily subsidises grains, oilseeds, cotton,
sugar, and dairy products.
Farmers receive subsidies in the form of direct payment,
price supports, regulations that set minimum prices by
different characteristics, export subsidies, import barriers in
the form of quotas, tariffs etc.
Mechanisation
France boasts a 99 percent level of mechanisation, with 54 percent of
the metropolitan France under agriculture comprising of total 680,000
highly mechanised farms. The market for agricultural equipment is large
amounting to about Euro 6.3 bn. Most of the agricultural equipment used
for farming include tractors, combine harvesters, balers and haymaking,
self-propelled forage cutters, soil tillers and agriculture transport
vehicles.
Government support
French farmers rely on Europian Union subsidies for half their income.
The exports are subsidised and farmers also get subsidies to import
agricultural machinery and equipment.
Canada
Unites States of America
France
Mechanisation
Japan is one of the most agriculturally mechanised
nations in Asia Pacific region and the tractor power
per hectare of agricultural land is 7 HP which is at
par with that of the US, the UK and France. The
main equipment used comprises of bush cutter,
plant protecting machinery, walking type tractor,
tractors, rice transplanters and grain combine
harvesters.
Government support
Government subsidies for agriculture in Japan
amounted to US$ 68,266.5 in 2014. Government
grants subsidies to the farmers on the loss
incurred to make them competitive in the market.
Government impose high import tariffs on
agricultural imports.
Mechanisation
China has around 60 percent of farm activities mechanised. Main agricultural equipment used
include tractors, combine harvesters (self-propelled and tractor-mounted), rice transplanters and
cotton processing machinery. Level of mechanisation for various activities such as ploughing,
planting and harvesting levels are 76.1 percent, 49.2 percent and 46.9 percent, respectively.
Government support
The Government of China provides subsidies on agriculture equipment and machinery purchase,
which is approximately 30 percent of the price of the equipment.
Both direct and indirect subsidies are given to the farmers. Direct subsidy includes mainly price
subsidies whereas indirect subsidies are in the form of remitting agricultural tax, special discount
rates etc.
China
Japan
5925
7524
5851
3625
6134
3020
7340 7074
5891
4170
6105
2962
0
10000
United States France China Canada Japan India
2012 2013
Yield per hectare
Figure 13: Country wise relative productivity
Source: World Bank estimates
There is direct relationship between the productivity level and farm mechanisation. Countries with higher levels of farm
mechanisation are able to increase their productivity and therefore are better equipped to meet their demand factors.
India’s demand factors are likely to rise dramatically. Thus, there is a need to enhance the level of farm mechanisation in the
country.
Section II:
Farm equipment
sector – An
overview
The revenue generated by the agriculture equipment industry in Asia
was US$ 88,075.9 million in the year 2013, registering a CAGR of 16.1
percent during 2008 -2013.
Global spotlight: Share of agriculture in GDP vs. level of mechanisation
Source: World Bank Indicators, CIA Fact book, Mechanisation and Farm Technology Division of Department of Agriculture and Cooperation, Trading Economics, FAO Yearbook 2013
USA
1 percent
95 percent
Brazil
5 percent
75 percent
Russia
4 percent
80 percent
China
10 percent
48 percent
India
14 percent (rounded from 13.9 percent)
40 percent
Western Europe
<5 percent
95 percent
Share of Agriculture in GDP Level of farm mechanisation
Mechanisation has been identified as a key tool to increase the production globally.
As our market too is considerably reliant on increasing agriculture produce, further
promotion of farm mechanisation is essential
It is estimated that the global demand for agricultural equipment will reach nearly US$ 200 billion by 2018, with Asia
contributing more than 60 percent to the total.
4.6 Concept of Custom Hiring
Centres (CHCs) for farm equipment
Custom hiring of farm machinery (CHCs) was introduced
in Indian agriculture in as early as 1912. Organised move
to promote multi-farm use of agricultural machinery was
made in mid-1960 when Agro-Industries Corporations were
established within the states.
CHCs are a unit comprising a set of farm machinery,
implements and equipment for hiring by farmers. These
centres give farm machinery on a rental basis to farmers who
cannot afford to purchase high-end agricultural machinery
and equipment, apart from servicing old machinery. Farm
machineries/equipment available at CHCs include tractor,
rotavator, multi-crop thresher, MB plough, cultivator,
leveller blade, blade harrow, seed cum fertilizer drill,
knapsack sprayer, power weeder, winnowing fan, electronic
balance, repairing tools.
These units are generally located in close proximities to
large and small land holdings, which supply machinery and
equipment to villages close to it reducing transport cost and
transportation time.
States such as Punjab, Haryana, Uttar Pradesh, Uttarakhand,
Gujarat, Maharashtra, Karnataka and TN, which are
highly mechanised, have maximum number of registered
and unregistered CHCs catering to the machinery and
equipment requirements of the farmers.
Other states do have operational CHCs but farm
mechanisation still remains a serious concern. Custom
hiring centres, in order to work effectively and efficiently
require a sound infrastructure setup for its operations, which
include all weather roads, spatial distribution of machinery
ownership and servicing network.
The government also recognises the value of these centres
and the role they can play in mechanisation of farm
operations. As a result, establishment of farm machinery
banks for custom hiring is one of the core components of the
Sub-Mission on Agricultural Mechanisation (SMAM) and
government provides financial assistance for setting them up.
However, there is a need for enhanced participation from
the private sector in an endeavour of setting up CHCs and
capacity building. Only then the subsequent upskilling and
training can bring a sustainable and more inclusive growth.
Global perspective:
Custom hiring of agricultural machinery in China
The Government of China pays great attention to
farm mechanisation, recognising and appreciating its
importance. It has launched a number of policies in
support of custom hiring of agricultural equipment.
In 2004, congress adopted the ‘Law on Promoting
Agricultural Mechanisation of the People’s Republic
of China’ and in 2010, released the ‘Opinion on
Promoting Sound and Fast Development of Agricultural
Mechanisation and Agricultural Machinery Industry’.
Under these, the responsibilities of all levels of
government and agricultural authorities were outlined
with respect to promoting agricultural mechanisation
in their respective regions and measures and
requirements for promoting custom hiring of equipment
were laid out.
China also has a subsidy policy for farmers, which has
promoted farmers’ willingness to purchase machinery,
which in turn, has laid a solid foundation for custom
hiring. There are number of steps the government took
to help foster custom hiring and as a result. Statistics
from the year 2013 show that China had 5.24 million
machinery service-providing households, 168,000
organisations, 201,000 machinery maintenance
plants and stops, and 7,000 intermediary service
organisations. In particular, machinery cooperatives,
specialised in cooperative use of machinery have
seen strong growth. Custom hiring of farm machinery
including leasing, cross-region operations, order
placement and contract management, has met the
diversified needs of the farmers.
Below are just some examples of innovations in agricultural equipment that came about to address specific but real issues
farmers face on the farms on a daily basis:
Innovation is intrinsic to agriculture. Ever since humans discovered the technique
of multiplying wild seeds into food and other products, an unbreakable relationship
between agriculture and creativity was born. India presents unique opportunities
with its small land holdings, variety of climatic zones and different soil types across
different regions. Thus, innovation is essential for Indian agriculture as a result
of the above-stated factors. In order to adapt to these, furthering the innovative
spirit among all stakeholders (individual farmers to large-scale manufacturers) is
necessary.
Key Innovations in the industry
value chain for efficient farming
Mobile groundnut thresher-cum-collector:8
The machinery was invented on account of the farm labour scarcity. Non-availability of farm labour during peak season
of sowing and harvesting delays the collection and ultimately results in yield losses. To overcome these problems, a tractor
mounted PTO powered mobile thresher was developed. This has a separate chamber for collection of groundnut pods
and stalk. The manufacturer of the machine was awarded at the 7th National Award Function of the National Innovation
Foundation – India (NIF) in 2013.
The salient features of this innovation are:
• Provision of storage chambers and feeding mechanism making it suitable for threshing while moving around the field.
• It reduces time and labour cost.
Source 8: Information on innovations and images used are from the National Innovation Foundation – India (NIF)
http://www.grantthornton.in/globalassets/1.-member-firms/india/assets/pdfs/eima_agrimach.pdf

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Emerging Challenges to Legitimate
Business in the Borderless World
The current scenario
1.1. Counterfeiting and smuggling - an
overview of concepts
International Trademark Association “Counterfeiting”
is a practice of manufacturing, importing/exporting,
distributing, selling or otherwise dealing in goods, often
of inferior quality, under a trademark that is identical to or
substantially indistinguishable from a registered trademark,
without the approval or oversight of the registered
trademark owner. Counterfeits are most commonly called
“fake goods” or “knock-offs.” Many well-known and
successful brands, spanning across industries are victims of
counterfeiting.
Counterfeiting is different from traditional trademark
infringement or passing off, which involves, inter alia, the
selling of products under confusingly similar trademarks or
service marks.2
International Anti-Counterfeiting Coalition
Counterfeiting is a federal and state crime, involving the
manufacturing or distribution of goods under someone
else’s name, and without their permission. Counterfeit goods
are generally made from lower quality components, in an
attempt to sell a cheap imitation of similar goods produced
by brands consumers know and trust.3
Smuggling, often synonymous to illicit trade and
counterfeiting is a criminal offense of bringing into or
removing from a country those items that are prohibited or
upon which customs or excise duties have not been paid.
Smuggling is the secret movement of goods across national
borders to avoid customs duties or import or export
restrictions. It typically occurs when either the customs
duties are high enough to allow a smuggler to make a large
profit on the clandestine goods or when there is a strong
demand for prohibited goods, such as narcotics or weapons.4
there are huge profits made out of the trade. Worldwide, the
periphery of smuggled goods has come to include almost
any item that one could think of, ranging from food items
to mobiles, DVDs, arms and weapons, medicines, alcohol,
cigarettes and tobacco products etc.
1.2. Impact of counterfeiting on
stakeholders
The World Economic Forum’s Global Agenda Council on
illicit trade is of the view that the practice encompasses a
wide variety of illegal activities including smuggling and
activities that cause a negative impact on the economic,
social, environmental or political landscape.
Owing to the intricacies and mounting issues posed by
counterfeiting and smuggling, there has emerged a parallel
economy that operates alongside, but at the same time is
increasingly overlapping with the legitimate economy. This
parallel economy results in:
• Distortion of markets;
• Regulatory burden;
• Funding criminal organisations or international terrorist
groups and
• Promotion of global economic disparities.
Beyond doubt, illicit trade poses a threat to various
stakeholders including the government, consumers,
manufacturers and the national security of the respective
country. While some consequences are immediate or can be
reasonably well assessed, there are others which are hidden
and difficult to comprehend. These, unfortunately, may
have a much deeper impact constituting global supply chain
vulnerabilities, risk to the social fabric and undermining the
economic system of nations.
Research suggests losses caused by counterfeit products amounts to US$ 700 billion globally.
2. What is counterfeiting, International Trademark Association, April 2015
3. What is Counterfeiting, IACC
4. Smuggling, Legal-dictionary
Manufacturers
• Sales and profit margins are hit
• Loss of goodwill and prestige
• Dilutes the brand
• Loss of consumer trust in the brand
• Additional costs in monitoring and consequent
legal proceedings against infringes
Consumers
• Pay a higher price for an inferior product
• Health hazards
• Potential loss of time and effort in product returns
(if available)
Economy
• Huge losses in terms of tax revenues for government
• Loss of legitimate employment
• Reduced GDP
• Reduced expenditure on research and development
Government
• Expenses by various agencies in tracking the criminals
and judiciary proceedings thereof
• Loss of taxes (direct and indirect)
Key impacts of
counterfeiting
Figure 1: Key impacts of counterfeiting
6 | Emerging Challenges to Legitimate Business in the Borderless World Emerging Challenges to Legitimate Business in the Borderless World | 7
1.5. Market size
The problem of counterfeiting, piracy and smuggling in India is
spread across industries. Moreover, it has continued to extend within
organised and unorganised sectors. These practices are not novel to the
Indian landscape and recent developments suggest these being widely
carried out, with fake products consumed in virtually all countries and
hence the concern becoming increasingly global than ever before.
1.5.1. Growth and magnitude of illicit trade, escalating
globally
Information provided by Havocscope suggests global estimate of
piracy at around US$ 657.76 billion in 2012. The total availability of
counterfeit products in the US was at US$ 225 billion.34
Researches suggest that China is the “global capital” of counterfeit
products, with 8 percent of its GDP contributed by manufacturing/
producing counterfeit goods. With respect to India, the problem is
affecting almost every sector drastically including entertainment,
apparel, medicines, software, finance, manufacturing, FMCG,
automobile parts and electronics.35
Unfortunately, several parts in
India are exploited by perpetrators to serve as transit destinations upon
smuggling goods from various countries.
As counterfeiting becomes an economic problem and an international
concern with dramatic growth globally, there continues to be a
constant battle of various stakeholders against the perpetrators,
especially governments and manufacturers, who find themselves in a
tight spot.
The magnitude of the problem is such that it encompasses not only
exclusive goods, but items, that we, as consumers use regularly. This
not only causes a serious risk to the health but also has disastrous
repercussions on the economic growth. With a multiplier effect,
production of fake goods pulls out the inducement to innovate or
invest and with violation of intellectual capital across segments,
research and development efforts go in vain.
The scope of illicit activities is expanding with each passing year. It
encompasses infringement of intellectual property rights (IPR) over
trademarks, copyrights, patents etc.
The volume of trade that passes through ports is ever increasing and
the advancement in technology has constantly allowed counterfeiters
to deploy new tactics and evade the law enforcement agencies.
Further, it is difficult to put across exact numbers for each segment
but researchers suggest the growth has grown exponentially and
across sectors.
Table 6: Global impact of counterfeit and Piracy Growth in the counterfeit industry – A closer look at the Indian market
Global round-up - Counterfeit and Piracy
• International Chamber of Commerce (ICC)
estimated the global economic and social
impacts of counterfeiting and piracy to have
reached US$ 1.7 trillion in 2015. The losses
are primarily on account of lost tax revenues
and increased spend on enforcement.
• While international trade in fake
products accounts for more than half of
counterfeiting and piracy, it was estimated
to reach US$ 960 billion in 2015. Domestic
production and consumption was
estimated between US$ 370 billion and
US$ 570 billion. Specifically with respect to
digitally pirated music, movies and software,
the figure was estimated at US$ 240 billion
in 2015.36
34. The Global Growth of Counterfeit Trade, Havoscope
35. ‘Counterfeiting costs India US$ 7.8 billion annually’, Hindu Business Line
36. Impacts of counterfeiting and piracy to reach US$ 1.7 trillion by 2015, ICC, 2011
• According to Business Action to Stop
Counterfeiting and Piracy (BASCAP),
the global value of counterfeit and
pirated goods, was estimated at
US$ 650 billion in 2013. By 2015,
the number is likely to be doubled.
• The World Intellectual Property
Organisation (WIPO) estimates
counterfeiting is costing the global
economy more than US$ 100 billion
a year.
• World Customs Organisation (WCO),
account for roughly seven to nine
percent of global trade of pirated
and counterfeit goods.
1.6. Current trends and best practices to combat
counterfeiting and smuggling
1.6.1 Trends
A report by a leading industry body suggests the market for fake goods
being driven largely by web shopping portals. This accounts for over
25 percent of the overall market for fake luxury products in India.37
While e-Commerce websites are hailed for the range and discounts
they offer, the medium has come under scrutiny for encouraging sales
of counterfeit products.
The modus operandi of producing fake goods is also moving ahead
with newer means adopted by perpetrators to smuggle goods and
produce counterfeit goods. In addition to that, one can find luxury
brands even in product categories not manufactured by the original
brands. A classic example in this context is Harley Davidson
deodorants.38
Trends in counterfeiting and smuggling
• Dynamic industry with rising complexities
• Online marketplace an easy target
• Technology advancement acting as a catalyst
to produce near replicas
• Lack of adequate enforcement procedures
• Tactics deployed in illicit trade taking a giant
leap
• Reported losses of counterfeit goods on a
steady rise
• Rising toll on health and wellness
37. http://www.business-standard.com/article/companies/buyers-love-for-discounted-luxury-products-spawns-fakes-online-114021501176_1.html
38. Counterfeit luxury products and how to recognise the genuineness, Economic Times, 23 July 2015
Source: A leading industry body
Source: FICCI CASCADE
• A leading industry body suggests that
counterfeit luxury retail market in India
likely to double to INR 5,600 crore
by 2015. The current fake luxury
products market is estimated around
INR 2,500 crore.
• The counterfeit luxury goods market
is expanding at a CAGR of as high as
45 percent.
• Online commerce is a significant
contributor to this growth accounting
to over 25 percent of all fake luxury
goods sold. The online luxury market
worth INR 17,000 crore is growing at
over 20 percent.
• Counterfeit and smuggled goods in
categories such as alcohol, personal care
products, tobacco, mobiles and mobile
components, automobile components,
and computer hardware and software
rose from INR 72, 900 crore in 2012 to
INR 1.05 trillion in 2014.
• The above increase is approximately a
44 percent growth and the growth rate
surpasses the overall market growth of
the country.
• The overall counterfeit market is reported
to be increasing at 44 percent a year,
around four times the speed of the FMCG
market; it was estimated to be worth
some INR 1.05 lakh crore in 2014.
1.3. Key drivers of the trade and associated implications
1.3.1. Drivers of counterfeiting and smuggling
Smuggling strives on high tax differentials that prevail between neighbouring areas; in addition to weak border controls,
and import restrictions typically on goods in high consumer demand. These factors result in the thriving of an illegal
parallel economy.
One of the critical causes of activities such as smuggling and counterfeiting is the existence of price differences between
various markets. These highlight a significant gap in consumer purchasing power in different countries and as a result, act as
an instigator to produce and distribute counterfeit goods in their local market.
Further, certain new technologies are supporting such activities as they allow easier reproduction of IPR bearing products
and goods, and facilitate reproduction of products in nearly every industry. Additionally, lack of political will and
inadequate enforcement at various levels encourages the practice.
Figure 3: Drivers of counterfeiting and smuggling
Price differentials in various markets resulting
in purchasing power mismatch
Legal and regulatory vulnerabilities
Lack of stringent enforcement Differential in import tariff across nations
Technological advancement leading to ease of
creation of replicas
Consumer obliviousness
Law enforcement authorities today face a daunting challenge
with the magnitude of activities around counterfeiting.
Counterfeiters have now started adopting novel methods to
prevent their detection. The severe impact of these activities
include:
Downfall of local industries
Smuggling drastically cuts prices of locally manufactured
goods thereby destroying the market for local products,
resulting in local industries to breakdown. The impact of
the problem is to the extent that it leads to unemployment.
Manufacturing employs a substantial percentage of skilled
and unskilled labour in the country and this sector is
the most hit. Moreover, the challenge is bigger for local
manufacturers for whom the struggle continues in the unfair
but highly competitive market.
Loss of revenue
Central and state governments suffer heavy losses by way
of loss of sales tax, customs and excise tax etc. These losses
run in several crores and there is an additional effort to seize
smuggled goods by various agencies further adding to the
cost for the exchequer.
Breeding ground for criminal activities
Often financial gains are further deployed for illegal
activities such as drug trafficking and other organised
crimes. Research also suggests that terrorist activities are
supported by these gains, indicted a lot of activity being
used to supplement wrongdoing. For instance, The Financial
Action Task Force (FATF) conducted a study into money
laundering and terror financing associated with the illicit
trade in tobacco, wherein the WCO Secretariat and several
WCO member administrations participated. It suggested
that money laundering and terror funding was consequential
to illicit trade in tobacco.8
Dilution of brand value and firm reputation
Inferior products tarnish the reputation of the manufacturer
and dilute the brand image over time. Manufacturers lose
their trust as consumers unknowingly buy fake products.
There also lies a significant effort later for manufacturers to
take its due in legal proceedings.
Curtails innovation
Increasing magnitude of counterfeited and smuggled goods
discourages companies to invest and deploy resources in
product innovation. Lack of adequate measures to protect
intellectual property rights by way of patents, copyrights,
trademarks etc. curbs the willingness to innovate or spend
on research and development.
1.3.2. Implications of counterfeiting and smuggling
Counterfeiting and smuggling have a far reaching impact on individual stakeholders, which rapidly percolate to the entire
economy. Smuggling weakens the local industries, legal imports and impacts government exchequer by way of revenue
loss in form of duties and levies. It leads to breeding of a parallel economy which is detrimental to the development and
well-being of the citizens. The criminal networks behind smuggling and counterfeiting extend to activities such as the
manufacture, export, import and distribution of illicit goods.7
Counterfeiting,
piracy and
smuggling
Figure 4: Impact of illicit trade
Impacts multiple
stakeholders, the
government exchequer
and economy at large
Impacts:
• Innovation
• Investments
• National security
• Brand reputation
• Health and wellness
7. UNODC
8. Illicit Trade Report 2012, WCO
Other measures include close cooperation with law
enforcement, brands and industry associations to police
counterfeits. EBay partnered with the fashion industry on
the “You Can’t Fake Fashion” campaign. The company
has policies against counterfeiting and is said to take strong
action against merchants when the brand owner reports
counterfeits.
d. Collaborate to ensure brand enforcement
e-Commerce businesses must work in collaboration
with brand owners and governments as well as associate
themselves with international bodies that enforce IPR.
Further, on its own account, online marketplaces must
strengthen their IP portfolio and conduct regular audits to
ensure that brand trademarks are not illicitly used online.
e. Need for stringent regulations
The standard of regulation in e-Commerce industry
undoubtedly needs to be raised. Electronic commerce
dispute resolution in India is also required to be
strengthened. The present litigation system in India is not
conducive to the industry in realising its complete potential.
The proposition of establishing an executive agency ‘Central
Consumer Protection Authority’ (CCPA) to protect and
enforce the rights of consumer in the new Consumer
Protection Bill signals a progressive development in this
direction.67
Lessons for the Indian marketplaces
Though, there exists a stringent anti-counterfeit policy in
place, still how effectively is the policy being addressed,
especially given the scale at which these businesses operate
is a question that remains unanswered. Moreover, Indian
online marketplaces can certainly incorporate lessons from
the comprehensive measures taken by global players like
Alibaba.
Online marketplace being the first point of reference for the
customer to the product, it is not undermining to say that
the marketplace must take complete accountability for its
customer. Ensuring authenticity of goods, a check on the
seller’s credentials cannot be transferred to the seller or the
consumer.
Lessons learnt – Alibaba’s battle
against counterfeiting
Investment in people and processes
• Invested over RMB1 billion (US$ 160.7 million) focusing on
tackling counterfeit and enhancing consumer protection from
2013 till November 2014.
• A task force of over 2,000 spearheads the counterfeit effort.
There were plans to increase this number by another 200 in
the past year.
• Enlisted around 5,400 volunteers to assist with daily online
surveillance and selective inspection.
Working closely with brand owners
• Cooperated with 1,137 brand owners and to identify and
remove IP-infringing goods from our marketplaces (as of
September 2014).
• Use of sophisticated technology
Data mining to analytics, group uses advanced tools to track
transactions infringing IPR. By using transaction data and
mapping technology, it found that more than 60 percent of
counterfeit watches and jewellery originate from Southern
China, while 60 percent of counterfeit outdoor sporting goods
are from Southeast China region and 50 percent of counterfeit
apparel originates from Eastern China.
Expanded coalition of international associations dedicated
to IPR protection
• Signed MOUs with major international associations to protect
IP rights.
Redressal of complaints and strict penalties gives sellers a time of upto three days to refute the imposed allegations and
before taking any serious action. In case of failure to do so, the group then penalises through various means including
• de-listing products immediately,
• adopting a name and shame policy,
• arranging for the seller to reimburse the buyer and
• ban the seller from another storefront on Alibaba’s marketplaces.
67. Your story
Source: Alibaba.com
Penalties for culprits
2.3 Legislative framework in e-Commerce
and the required policy interventions
Growth of electronic commerce has created the need for
robust and effective regulatory mechanisms which provide
an impetus to the legal infrastructure in the country. The
state of legislative framework in the space of e-Commerce
is lax in India and need for a separate e-Commerce law has
been felt by and large in order to protect consumer rights.
One of the steps in this direction, The Consumer Protection
Bill, 2015’ which was approved by the Union Cabinet is
delayed, with the Parliamentary panel examining it and
has been given an extension till the Budget session next
year. This proposition if progresses timely, would serve
as a respite to protect consumer interests to the rapidly
growing e-Commerce industry. The Bill seeks to create a
‘consumer protection authority’ which will have the power
to initiate class suit against defaulting companies to fast-
track the redress of consumer grievances. It provides for
a comprehensive framework for protection of consumer
interest and the legislation will replace the age old Consumer
Protection Act, 1986.68
A look at the existing framework
Current mechanisms come within the purview of cyber
law in India and due to the growing complexities posed by
e-Commerce, the need for this framework to evolve is now
crucial than ever before. India’s close counterpart China,
has specific laws to protect consumers in e-Commerce by
way of the seller providing information on product origin,
quality, performance, price etc.
There is absence of a specific e-Commerce legislation in
India and thus in the current scenario, other laws including
the IT Act, Indian Contract Act, Companies Act, 2013,
intellectual property etc. govern the landscape.
Laws in India need to take a fresh look which take into
consideration the unique conditions prevailing in the
dynamic marketplace to stand steady against the trials and
tribulations thrown up by e-Commerce.
• One of the key cyber laws which regulates e-Commerce
activities in India is the Information Technology Act,
2000. The scope of this cyber law which was passed
in 2000; encompasses, norms of online contract
formation, legal recognition of electronic records and
communication, cyber contraventions and regulation of
certification authorities.69
The Act however has some grey areas; it deals with the
concept of violation of privacy in a very limited sense
(from a handling of data perspective) and this creates the
need for a specific data protection legislation in India
which is currently not present. While e-Commerce
websites operating in India are ‘intermediaries’ as per
the provisions of the IT Act, the Act itself exempts
intermediaries from any liability in respect of third-party
information, data or communication link hosted by it.
• At present, most complaints with respect to e-Commerce
are referred to the Department of Consumer Affairs.
However, the sector’s operations are increasingly complex
to be under the purview of any single ministry. Therefore,
the need for ‘a clear demarcation of the activities of
e-Commerce to be handled by different departments’ has
been felt and thus the need to demarcate the jurisdiction of
various departments.70
• Consumer Protection issues are undoubtedly significant
in context of e-Commerce as it is a platform to connect
buyers and sellers and hence laws governing their
relationship is critical. Unfortunately, there is no
separate consumer protection law which regulates online
transactions.71
• As the Indian marketplaces merely provide a platform
to connect buyers and sellers; legally, their liability is
not subject to quality of the product offered as these are
sourced from a third-party. A grieved consumer may
however, resort to returning defective goods and that is
when the marketplace’s product return or refund policy
come into picture. Within this gamut also, what seems to
be lacking is the right of a consumer to claim any damages
within the Consumer Disputes Act, 1986.72
e-Commerce regulations have a long way to go in India
and inching closely towards this journey is the recent
proposal of the Department of Consumer Affairs to bring
e-Commerce businesses under the purview of multiple
government agencies. The proposal for final consideration of
a Committee of Secretaries (CoS) could bring e-Commerce
under the purview of up to nine government agencies
and regulatory bodies; including RBI, Home ministry,
Department of Revenue in the Finance ministry, and
Ministry of Corporate Affairs. The proposal, if becomes
a reality, would provide much needed spirit to the legal
framework and a surge of optimism for many such prompt
and effective actions in the future.
68. New consumer protection bill to get delayed, Live mint, 30 November 2015
69. http://www.smsvaranasi.com/insight/e-Commerce_laws_in_the_indian_perspective.pdf
70. http://articles.economictimes.indiatimes.com/2015-01-30/news/58625464_1_ecommerce-industry-finance-ministry-traditional-retailers
71. Nishithdesai
72. Mondaq
THOUGHT LEADERSHIPS/WHITEPAPERS (Contd.)
http://www.grantthornton.in/globalassets/1.-member-firms/india/assets/pdfs/emerging_challenges_report.pdf
http://ficcicascade.com/past-events-details.php?newsid=203

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Transformative Evolution:
From ‘wellness’ to ‘medical wellness’
tourism in Kerala
A whitepaper on the trends and recommendations for enhancing medical value
tourism in the State of Kerala
October 2015
Global healthcare landscape Medical Tourism Corridors
North America South America North Africa SE Asia GCC AND CIS UK
• Supply>Demand
• High quality of
infrastructure
• High insurance
penetration
• High cost of
healthcare for un/
under insured
• Large number of
tourists travelling to
the US for complex
surgeries.
• Demand>Supply
• Moderate insurance
penetration
• Pockets of world
class health
infrastructure
• Few pockets of
world class health
infrastructure like
Brazil
• Demand>Supply
• Lack of facilities
• Low insurance
penetration
• Growing economic
footprint
• Growing economic
footprint and
corporate
penetration
• Demand>Supply
• Lack of facilities
in less developed
regions while
Thailand, Singapore,
Malaysia have
good medical
infrastructure
• Strong tourism
corridor
• Low insurance
penetration
• Demand>Supply
• Lack of facilities in
most regions
• Strong tourism
corridor with South
Asia
• High affordability
• Low insurance
penetration
• Local demand ~
Supply
• High quality of
infrastructure
• Largely self
sufficient healthcare
economy
• high quality of
healthcare
Other major corridors are Turkey, Israel, Brazil, Indonesia, South Korea
Mexico
JCI hospitals 9
# of MTA in 2014 NA
% saving vs US ~40%
Key strengths Dental/Cosmetic
Major Source US and Canada
Costa Rica
JCI hospitals 2
# of MTA in 2014 ~100k
% saving vs US ~50%
Key strengths Dental/Cosmetic
Major Source US, Canada and EU
India
JCI hospitals 25
# of MTA in 2014 ~350k
% saving vs US ~80%
Key strengths Tertiary care
Major Source GCC, Africa
and S.Asia
Taiwan
JCI hospitals 16
# of MTA in 2013 ~200k
% saving vs US NA
Key strengths Health checks
Major Source China
Thailand
JCI hospitals 45
# of MTA in 2014 ~900k
% saving vs US ~50%
Key strengths Tertiary and
cosmetic
Major Source Japan, US and
GCC
Singapore
JCI hospitals 21
$mn MTA
earnings
C$900mn
% saving vs US 30-35%
Key strengths Tertiary
Major Source SE Asia and US
Malaysia
JCI hospitals 13
# of MTA in 2013 ~700k
% saving vs US ~60%
Key strengths Cosmetic, secondary care
Major Source Indonesia and GCC
8 | Transformative Evolution: From ‘wellness’ to ‘medical wellness’ tourism in Kerala Transformative Evolution: From ‘wellness’ to ‘medical wellness’ tourism in Kerala | 9
International
airports
Average population
per Nurse Kerala/India
Average population per
registered doctor Kerala/India
Avg population served per Govt
hospital Bed Kerala/India
03
138/472 792/1,319
918/1,833
Registered
AYUSH hospitals
1,581
% of foreign travelers
availing wellness
treatment in Kerala
30%
Government certified
Green and Olive leaf
Ayurveda centers
>100
The Kerala Advantage
The Infrastructure Edge
Despite being a small state in terms of geographical area,
Kerala boasts of 3 well spread out international airports in
Kochi, Trivandrum and Calicut with direct connectivity
with all GCC countries and most Asian countries. In terms
of medical infrastructure the public health system in the
state fares much better than the national average, resulting in
the state recording among the lowest IMR and MMR in the
country.
Qualified manpower surplus
The state with the highest literacy rate in the country, is
also considered as the “Nursing hub” for regions West of
Europe. While several other states have increased the number
of nursing institutions to produce an equal or higher number
of quality nurses, the demand from the state continues to
remain one of the highest.
Playing the wellness card
Kerala has been synonymous with wellness & Ayurveda and
with the State taking ample measures to certify Ayurveda
centers and hospitals under the Green and Olive leaf banner
to ensure consistent and world class quality. More and more
foreign tourists, especially from developed countries throng
the state to avail such services.
Kerala’s
position in
the global and
domestic MVT
landscape
Overall Tourism revenue in
Kerala - 2014
Kerala’s share of total tourism
revenues in India - 2014
Kerala’s share of Tourism Foreign exchange
earnings in India – 2014
$4bn c.10% c.5%
Kerala FTA trend
in 2001
to
2 lakh arrivals
over 9 lakh in 2014
State Tourism Contemporaries
Some may argue that the foreign tourism stats in the state are largely attributable to its popularity
as a wellness destination, others can comprehend this as an opportunity for the state to extend
its tourism status from mere tourism to medical tourism. With exemplary MVT performance by
adjoining states and adjoining countries, Kerala is poised to monetize its wellness status by laying
an equal emphasis on building accredited infrastructure and utilising state bred medical talent to
provide world class medical facilities capable of attracting a floating medical population.
The India Advantage
Cost competitiveness
According to an MTA patient survey report, nearly 80% of the demand for medical tourism is driven by cost savings..
Availability of Nationally/Globally Accredited Institutions.
JCI accreditation is considered the gold standard in global health care and provides quality conscious patients confidence
and security about clinical outcomes. The more accredited hospitals a country has, the better its positioning in the global
medical tourism arena. Even insurance companies that consider financing procedures undertaken abroad mandate JCI as
a necessary condition. While JCI is globally recognized, hospitals certified by national boards such as NABH also tend to
meet global standards in clinical outcomes and processes and India boasts of over 300 such facilities offering immediate care
of seekers.
Market size based on
Hospital revenue projections Footfalls
c.1100000
MTA in 2020
US$6000 -7000
per patient
c.420000
MTA in 2015
~US$ 7 bn ~US$ 7.7 bn
Share of revenues from
international patients
20%
Target hospital revenues
US$ 35 bn
Revenues from hospitals
with foreign tourist focus
~25%
Private Hospitals
Revenues
US$ 140 bn
Share of private hospital
revenues.
~80-85%
Hospitals Revenues
US$ 165 bn
FY20
FY20
% savings in other countries vs United States
Sample treatments India Thailand Singapore Malaysia Mexico Costa Rica South Korea
Hip Replacement 84% 73% 73% 78% 69% 74% 77%
Knee Replacement 79% 76% 69% 80% 64% 74% 71%
Spiral Fusion 77% 61% 32% 56% 45% 58% 56%
Heart Valve
Replacement
94% 93% 91% 94% 80% 80% 72%
Gastric Bypass 62% 33% 25% 56% 39% 39% 31%
Face-lift 72% 57% 30% 57% 58% 64% 52%
Rhinoplasty 53% 31% 23% 44% 55% 44% 23%
Heart Bypass 95% 92% 86% 93% 80% 82% 77%
Countries Number of JCI
accredited facilities
India/Kerala 25/2
Thailand 45
Singapore 21
Malaysia 13
Indonesia 20
Israel 20
South Korea 26
Sri Lanka 2
Taiwan 16
Costa Rica 2
Mexico 9
States NABH hospitals
NCR >70
AP 45
MH 33
KA 28
TN 27
GJ 23
KL 23
PJ 23
RJ 10
WB 9
OR 5
THOUGHT LEADERSHIPS/WHITEPAPERS (Contd.)
http://www.grantthornton.in/globalassets/1.-member-firms/india/assets/pdfs/grant_thornton_report-transformative_evolution.pdf
http://www.cii.in/PublicationDetail.aspx?enc=E7k0W9YhS4VmOvRsg9JmWiCWmTmnKHfaYcBspuuB9k7J3+mofhlClUimfMXc/CnyOdfp+/
s0ivbVKMU3na/AzGDqCKrgpk60InLKYMQlUHLozhoAoj5EFMroE8RYaJnccokPM5GvMCaYWyN+1rEytAugwdW6xh22Apmt3UKuE-
4vSJ4IG+0wioDzfi6OZCVrw

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INFOGRAPHICS
It is expected to employ
approximately 205 million
people by 2019-20.
Agriculture and allied sectors contribute approximately Rapid urbanisation
growing population and
growth of other sectors
promising employment
is impacting the farm
productivity.
By the year 2050, the annual food grain production
would need to grow to 333 million tonnes from the
levels of 257 million tonnes recorded in 2014.
The size of the farm equipment
sector is estimated at approximately
US$ 6.5 billion and has seen strong
growth in recent years.
Problems such as small and scattered land holdings,
levels of procurement mechanism, poor after sales
service and over dependency on tractors instead of
other kinds of machinery are some of the challenges.
India, with a mechanisation level between 40-45 percent, lags in
comparison to other BRIC countries such as Brazil and China.
Agricultural machinery market in
India is estimated to grow at a
CAGR of over 10 percent during
the period 2013-18.
US$ 6.5 billion
Use of proper equipment can
increase the farm productivity by
up-to 30 percent and reduce the
input cost by about 20 percent.
333 million
14 percent to India’s GDP
The Indian market is dominated by 1,500
micro units, 2,500 small-scale units
and 250 medium-sized companies.
Tractor accounts for most of the farm
mechanisation in India. Country is also the
largest market in the world for tractors.
Indian thresher
market remains
largely unorganised.
4,300 to 11,500
Total Tech startups are expected to increase
to 11,500 in 2020 from 4,300 in 2015
Complex tax
environment
28 Yrs.
Average age of startup
founders is 28 Yrs.
9%
9% of total startup
founders are women
800 to 2,000
Average no. of new tech startups
have moved from 480 in 2010
to 800 in 2015. Expected to
increase to 2,000 in 2020
40%
The number of incubators
has grown by 40% to
110 during 2014-15
50% (approx.)
Approx 50% growth in share
of female entrepreneurs in
the last 12 months
43% (approx.)
# approx 43% of total
startups are Tech-based
60% (approx.)
approx 60% of new jobs
were created by SMEs
during 1993-2013
Double
doubled in the last 12 months
Metro cities
Majority of startups and/or
investors are from Metro cities
3rd Largest
India is 3rd largest startup hub
Stringent
regulatory/policy
atmosphere
Yes
No
Maybe
59.46%
8.11%
32.43%
1. Post implementation of RERA, what the are major changes that you expect to see while making
real estate dealings?
2. As an investor in real estate, do you think RERA will boost the governance hold on the sector and
eventually lead to increase in foreign (FDI) and domestic investments into the sector in near future?
64.86%
Transparency and authority
Long process time
Same as earlier
17.57%
17.57%
More than 60% of the respondents feel that,
going forward, transparency will increase in real
estate dealings.
Close to 60% of the respondents feel that RERA
will increase the governance hold in the sector
and lead to increased investments.
http://www.grantthornton.in/globalassets/1.-member-firms/india/assets/pdfs/eima_agrimach.pdf
http://www.grantthornton.in/globalassets/1.-mem-
ber-firms/india/assets/pdfs/the_indian_startup_saga.pdf
http://www.grantthornton.in/globalassets/1.-mem-
ber-firms/india/assets/pdfs/real_estate_regulation-act.pdf

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