CII Communique August 2016 (Vol.38 No.8)

Edited, printed and published by Chandrajit Banerjee, Director General, CII, on behalf of Confederation of Indian Industry fromThe Mantosh Sondhi Centre,
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Journal of the Confederation of Indian Industry
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Contents Volume 38 No. 8 August 2016
cover story
05 Current Scenario and Recent Developments
The Indian taxation system has undergone tremendous reforms during the last decade.
The tax rates have been rationalized and tax laws have been simplified, resulting in better
compliance, ease of tax payment and improved enforcement. The international taxation
scenario, too, has evolved in recent times. Our cover story looks at the dynamic tax
scenario, encompassing interesting contemporary topics like tax policy, BEPS, GST, and
PoEM, to provide an insightful overview of the tax arena in the country.
panorama
03 Prime Minister Modi addresses
India-South Africa Business Forum
Mindspace
15 The Financial Architecture for MSMEs in India
21 Inspections and Regulatory Enforcements for MSMEs
PERSPECTIVE
26 ‘A pre-paid energy regime could be a game-changer’
focus
29 Global Slowdown could challenge India’s Exports
plus...
sECTORSCAPE
engaging with
the world
Portfolio
REGIONAL REVIEW
... AND MORE
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Communiqué August 2016 | 3
panorama
india and the world
C
II led a 54-member delegation, including 22 CEOs,
to South Africa, on the occasion of the visit of
Mr Narendra Modi, Prime Minister of India, on
8 July.The delegation comprised of senior representatives
from member companies representing sectors such as
FMCG, healthcare, banking and finance, mining, water
management, infrastructure, manufacturing, power and
energy, and agriculture, among others.
Mr Narendra Modi and Mr Jacob Zuma, President of
South Africa, addressed more than 250 business leaders
from both countries at the India – South Africa Business
Forum.The Prime Minister highlighted the existing Indian
investment in South Africa and the immense potential
to strengthen it further. He invited businesses on both
sides to find new ways to diversify the trade basket in
order to complement each others’ needs, and thereby
benefit the people of both countries.
Echoing and adding to Prime Minister Modi’s sentiments,
President Zuma announced that the two leaders have
set an ambitious goal to increase bilateral trade to
$18 billion by the year 2018. Achieving this target will
require an increase in private sector deliberations as well
as government focus on the resolution of barriers that
are impeding the expansion of trade, he said.
Earlier, the India-South Africa CEOs Forum met in
Pretoria. Fourteen CEOs from the Indian side and
more than 30 CEOs from South Africa discussed
issues impacting bilateral trade and investment, and
made recommendations to enhance collaboration in
sectors like financial services, pharmaceuticals and
healthcare, mining, manufacturing, infrastructure and
energy, and education and medical schools. Mr Adi
Godrej, Past President, CII, and Chairman, Godrej
Group, who was the Indian Co-Chair of the Forum,
and his South African counterpart, Mr Vivian Reddy,
Founder, Edison Group, later reported back on the
discussions to the leaders at the India-South Africa
Business Forum.
Mr Ramesh Abhishek, Secretary, Department of
Industrial Policy and Promotion (DIPP), addressing the
CEOs Forum, provided the perspective of the Indian
Government on future economic engagement with
South Africa. Earlier, the Indian members of the CEOs
Forum had an exclusive interaction with representatives
of DIPP, to discuss specific issues they are facing while
doing business with South Africa.
The deliberations in both Forums positively expressed
the need and openness to collaborate between Indian
and South African companies. During the visit, eight
MoUs were signed between Indian and South African
companies, a testimony to the keenness of India and
South Africa to engage with each other.
Prime Minister Modi addresses
India-South Africa Business Forum
Narendra Modi, Prime Minister of India; and Jacob Zuma, President of South Africa, with Adi Godrej, Past President, CII, India Co-Chair,
India-South Africa CEOs Forum, and Chairman, Godrej Group (left), and Vivian Reddy, South Africa Co-Chair, India-South Africa CEOs Forum,
and Chairman, Edison Power Group (right) at the India-South Africa Business Forum in Pretoria
Ramesh Abhishek, Secretary, DIPP; Adi Godrej, and
Chandrajit Banerjee, Director General, CII,
at the India-South Africa CEOs Forum in Pretoria

COVER STORY
taxation
The Indian taxation system has undergone
tremendous reforms during the last decade.
Tax rates have been rationalized and tax laws have
been simplified, resulting in better compliance,
ease of tax payment, and better enforcement.
To top it all, the passage of the 122nd
Constitutional
Amendment Bill on the Goods and Services Tax
(GST) in Parliament offers hopes that the
much-awaited GST implementation in
April 2017 may become a reality.
The international taxation scenario has also evolved,
with India playing an active role in the Base
Erosion and Profit Shifting (BEPS) initiative, and
gradually making BEPS a part of the Indian tax
curriculum. Corporate residence now has a new
determining parameter, where its Place of Effective
Management (PoEM), in that year is.
In this dynamically-evolving tax scenario, our cover
story encompasses interesting contemporary topics
like tax policy, BEPS, GST, and PoEM, to provide an
insightful overview of the tax arena in the country.
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‘GST is India's most significant
tax reform in decades. It is
expected to usher in a harmonized
national market of goods and
services and shall lead to a
simplified, assesse-friendly tax
administration system. Once
implemented, it will subsume
all of the central and State-level
duties and taxes, thus making
the country a national market,
and would contribute significantly
to the growth of the economy.
CII anticipates that the
implementation of GST would
reduce transaction costs and
boost GDP by 1.5 to 2%.’
Dr Naushad Forbes,
President, CII, and
Co-Chairman, Forbes Marshall

6 | August 2016 Communiqué
COVER STORY
T
axes are a necessary compulsion for citizens
and entities earning revenues. With dynamic and
buoyant tax revenues, a nation can undertake
the imperatives of poverty elimination, social security,
and creation of public goods such as infrastructure,
education and healthcare.
India’s gross tax revenues to the Central Government
have more than doubled from ` 6.2 lakh crore in 2009-10
to ` 14.6 lakh crore in 2015-16. The ratio of gross tax
revenue to Gross Domestic Product (GDP) has drifted
upwards from 9.87% in 2011-12 to 10.74% in 2015-16.
Within this, the shares of direct taxes and indirect
taxes have remained more or less constant. Corporate
taxes contribute more than a third of the total gross
tax revenues, while customs duties, union excise duties
and service taxes bring in about 44%.
Recognizing the need for widening the tax base, the
Government has progressed towards simplification of
tax administration and improving tax dispute resolution.
Thus, the Indian taxation system has undergone
tremendous reforms during the last decade. Tax rates
have been rationalized while tax laws have undergone
simplification, resulting in better compliance, ease of
tax payment, and better enforcement. The process of
rationalization of tax administration is on-going as well.
The introduction of the Income Disclosure Scheme
2016 to provide an opportunity to assessees to come
forward and disclose their income and assets is another
step forward.
CII is greatly enthused by the outcome of the recent
meetings of the Empowered Committee of State
Finance Ministers, and welcomes the release of the
Model Goods and Services Tax (GST) Law. The passage
of the Bill by both Houses of Parliament is indeed major
progress in the implementation of the much-awaited
GST, and encourages Industry to plan for India’s most
significant tax reform in decades to become a reality
with effect from 1 April 2017.
During the last few months, the Government has been
dynamic in its approach, and has invited comments and
suggestions from Industry on a number of taxation
matters ranging from GST to Place of Effective
Management (PoEM), Real Estate Investment Trusts
(REITs), Income Computation and Disclosure Standards
(ICDS),Corporate Social Responsibility (CSR), Safe
Harbour rules, the Justice R V Easwar Committee on
Income Tax Simplification, Foreign Tax Credit, Minimum
Alternate Tax (MAT) for IndAS compliant companies,
Indirect Transfer Provisions, General Anti-Avoidance
Rules (GAAR) and the India-Mauritius Double Taxation
Avoidance Agreement.
CII has submitted detailed suggestions on each of
these issues, capturing industry perspectives. Through
its pre and post-Budget memoranda each year, CII also
compiles, evaluates and shares recommendations with
the Government.
CII supports the Government agenda for bringing in a
stable and predictable system of tax reforms and many
of our recommendations have found place in the final
legislations. For example, CII has been advocating the
deferment of ICDS for another year, and the Government
has agreed to postpone its applicability with effect from
1 April, 2016.
CII has made many key recommendations on Direct
Taxes to the Government, which include:
• The corporate tax rate should be brought down to
22% (all inclusive).
• Minimum Alternate Tax (MAT) should be abolished in
view of the removal of all incentives or, alternatively,
the rate should be brought down to 10%.
• The backlog in relation to pending applications to the
Authority for Advance Rulings (AAR) and Advance
Pricing Agreements (APA) should be cleared to
strengthen the investor community’s confidence
in the ability of the system to provide clarity
expeditiously.
• Rollback provisions in the APA scheme should be
issued at the earliest, as these are effective October
2014 as per statute. Also, the draft provisions should
Current Scenario and
Recent Developments
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be circulated to the public for consultation.
• The Tax Administration Reform Commission (TARC)
recommendations should be implemented.
• The fiscal benefit available to new infrastructure is very
clear in Section 80IA of the Income Tax Act in the present
form. However, suitable clarity is required as to whether the
Section extends to cases of upgrading the existing set up,
as well. The Government should make suitable amendment
in the Section to make it amply clear that the upgradation
of existing infrastructure is also eligible for the benefit of
Section 80IA, so that there is no ambiguity with regard to
claims.
• It will be extremely useful if the authorities can put together
a handbook on Transfer Pricing guidelines/ methods, on a few
significant issues like intangibles, inter-group and intra-group
services, selection of comparable and appropriate methods,
etc, in line with the Organization for Economic Co-operation
and Development (OECD) guidelines.
• The investments made by Alternate Investment Funds (AIF)
should be deemed ‘capital assets’ (similar to the amendment
made by the Finance (No 2) Act, 2014) in the definition of capital
assets under Section 2(14) of the Act, to include securities
held by foreign portfolio investors. Accordingly, the income
earned by the AIFs therefrom should be taxable under the
head ‘capital gains’ or ‘income from other sources’ and not
‘business income.’
• Dividend Distribution Tax (DDT) rate should be reduced from
15% to 10%.
On Indirect Taxes, CII has made, inter alia, the following
recommendations to the Government, which are yet to be
effected:
• Continuation of 10% peak rates of customs duty to provide
protection to indigenous industry which suffers from certain
disadvantages like higher rates of interest and power, etc.
• When the duty rate on inputs is higher than the duty rate
on finished products, the duty structure becomes anomalous,
which needs to be corrected.
• Continue the general rate of 12.5% excise duty.
• Allow credit of the Swachh Bharat cess and its utilization
against payment of excise duty/ service tax.
• Withdraw the National Calamity Contingent Duty on motor
vehicles and crude oil.
CII is hopeful that these, as well as other recommendations, which
benefit both Government and Industry, would be evaluated and
considered by the Government on a continuous basis. CII will
continue to support the Government in its journey towards tax
reforms in the country, and bring to light the views of Industry,
for mutual benefit.
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COVER STORY
India Inc pins
hopes on
tax reforms
Industry is looking forward
to a clear roadmap for a
transparent, stable and
certain tax environment
I
n the current difficult global environment,
India has the fortune to stand out for a
growth that’s amongst the highest in the
world.The sound economic growth has been
built on the foundation of well-crafted macro-
economic policies and the Government’s
commitment to do what is needed to provide
an enabling environment for investments.
Taxation policies have been an integral part
of the reform measures undertaken by the
Government towards this objective.
India’s tax policy is guided by a multiplicity of
objectives. In line with global trends, India has
announced its intent to lower the tax rates.
To enhance its tax-GDP ratio to fund social
and infrastructure programs, a concurrent
focus has been on expanding the base and
preventing base erosion. Significant effort
is also being made towards lowering tax
uncertainty, improving the ease of paying taxes,
and providing a transparent, stable and certain
tax environment for attracting investments.
Undeniably, the most awaited reform is the
implementation of the Goods and Services
Tax (GST). The consultative approach of the
Government while framing the laws and
regulations has been noteworthy. There is
active discussion between the Government
and the stakeholders on issues in the current
draft which need to be ironed out.
The Finance Minister has announced the

COVER STORY
rationalization of corporate tax rates from 30% to 25%,
along with a gradual removal of various incentives in the
next 3-4 years. Industry is now looking for a clear roadmap
that will include the removal of the legacy surcharges that
add 3-4% to the tax burden. The Dividend Distribution Tax
and the Minimum Alternate Tax (MAT), with a creeping
increase to nearly 20%, significantly enhance the effective
corporate tax burden. It may be time to re-visit the classical
system of dividend taxation, namely taxing shareholders
at applicable slab rates above the minimum threshold, so
as not to burden small shareholders. Also, clear indication
about the phased removal of MAT accompanying the
reduction in the corporate tax rate will make the corporate
tax system simpler and more attractive.
It is notable that, in recent months, the Government
has kept its word about following a non-adversarial tax
regime. Any issues that created uncertainty, such as
the levy of MAT on Foreign Institutional Investors, were
quickly resolved. Similarly, the Government took Cabinet
approval not to appeal against a favorable order passed
by the Bombay High Court ruling against the transfer
pricing adjustments carried out by the tax administration
in respect of the fresh issue of shares by a subsidiary
of a foreign company in India.
To bring about simplification and certainty, the tax
department has issued a number of clarifications on
contentious issues. There is now greater certainty on
the characterization of the investment portfolio of the
tax-payer as capital gains instead of business income,
rather than leaving it to the discretion of the assessing
officer. Similarly, there is clarity on automatic stay of
the tax demanded on assessment upon payment of
15% of the demand, if the tax-payer prefers an appeal
against the assessment.
Also welcome is the substitution of the low threshold
with a risk-based evaluation for the selection of cases
for transfer pricing scrutiny, putting greater emphasis on
qualitative rather than quantitative factors. Rules have
been issued for a special taxation regime to facilitate the
location of fund managers of offshore funds in India. The
consultative approach of the Central Board of Direct Taxes
on the applicability of the proposed General Anti Avoidance
Rules (GAAR) effective 1 April, 2017 is also welcome.
Many recommendations of the Easwar Committee for
simplification of laws have been adopted by the Income
Tax Department. It is hoped that its suggestions such
as withdrawal of provisions on ICDS, which have the
potential for creating litigation and uncertainty for tax-
payers and conflict with Government’s objective of
creating an environment for ease of doing business in
India, will also be considered favorably.
India has been actively involved in the OECD discussions
on the BEPS Action Points and has already introduced
some changes by way of common country-by-country
reporting, master-filing documentation, and an equalization
levy for advertising revenues earned by foreign companies.
Going forward, recommendations relating to interest cost
disallowance, tax avoidance measures, and transfer pricing
based on value contributions, may be considered. However,
we must guard against over-complicating the law, which
may trigger fresh disputes. Balancing the need for attracting
investments in the Indian economy while adopting the
recommendations under the BEPS agenda will be crucial.
Another welcome move has been the settling of the
long-standing controversy of exemption from short
term capital gains to foreign investors investing through
Mauritius. Providing for a phased withdrawal of capital
gains exemption and grandfathering past investments
proves the Government’s determination to bring certainty
in taxation and provide a level playing field to all foreign
investors in respect of their capital gains taxation in India.
There are indications that capital gains tax exemption
provisions will be revisited for other treaties, including
Singapore and the Netherlands.
A number of tax changes implemented over the last
couple of years seek to revive growth and investment
and promote domestic manufacturing. In this endeavor,
the reduced tax rate for new manufacturing companies,
extending the benefit of deduction for employment of
new regular workmen, and changes to the customs
and excise duty rates on inputs, are expected to have
a significant impact on India’s manufacturing sector.
Going forward, the Government should iron out persistent
on-the-ground issues such as unreasonable demands
and summoning of senior executives and directors of
companies over minor issue of interpretation of the law.
Further, improvement in the dispute prevention/ resolution
mechanisms like the Advance Pricing Agreements (APAs)
and Authority for Advance Rulings (AARs) will provide
much-needed relief to the tax-payers.
In the words of the Finance Minister, India has fashioned
tax policies for the 21st
century. Its tax administration
cannot afford to lag behind.
This article was contributed by Rajiv Memani,
Chairman, CII National Committee on Taxation, and
Chairman, India Region and Emerging Markets,
Ernst & Young LLP

COVER STORYCOVER STORY
B
ase Erosion and Profit Shifting (BEPS)
refers to tax planning strategies that exploit
gaps and mismatches in the tax rules to
artificially shift profits to low or no-tax locations
where there is little or no economic activity.
This undermines the fairness and integrity of tax systems
because businesses that operate across borders can use
BEPS to gain competitive advantage over enterprises that
operate at a domestic level. Moreover, when taxpayers
see multinational corporations legally avoiding income tax,
it undermines voluntary compliance by all taxpayers.
The BEPS project came into existence in November 2012
when the Finance Ministers of G20 countries expressed
the need to contain the increased level of shifting of
profits to tax-friendly jurisdictions with minimal change in
the manner of carrying out business operations. Pursuant
to this, in February 2013, the Organization for Economic
Co-operation and Development (OECD) published its first
formal report on BEPS. The crux of the report indicated
that, due to lack of coordination between the tax
administrators of countries and inconsistent tax practices
and interpretations, multinational companies legitimately
structured their business models using profit shifting
arrangements by deploying multiple tax-saving techniques,
leading to tax leakages. Also, with a significant shift in
the manner in which business is being carried out around
the world, the current interpretation and adoption of tax
regulations have somewhat become redundant.
For instance, e-commerce transactions have shrunk the
world in such a significant manner that companies do not
require physical presence in a country for undertaking
business activities. These transactions do not fall within
the meaning of Permanent Establishment (PE) agreed
under the tax treaty laws between two countries.
This enables entities to account for their profits in a
jurisdiction where the taxation is the least.
The report was an eye-opener for the nations of the
world. The need to tackle BEPS was approached with
greater conviction. In July 2013, the OECD developed a
BEPS in India
comprehensive action plan to tackle BEPS in a holistic
manner. As part of this approach, it was intended to
develop 15 Action Plans that would be implemented
by countries that had agreed to form part of the BEPS
project. Some of the issues/ areas which these Action
Plans focused on were – addressing the tax challenges of
the digital economy, prevention of treaty abuse, artificial
avoidance of PE, enhancing effectiveness of dispute
resolution mechanisms, country-by-country reporting
under transfer pricing, transfer pricing of intangibles,
etc. These Action Plans centered around three aspects:
coherence of tax outgo at the international level,
realignment of taxation and substance, and transparency,
coupled with certainty and predictability.
Post this, drafts of the Action Plans were issued from
time to time and the G20, OECD and other participating
countries worked together to provide their views. After
two years of intensive work, most of the proposed plans
were completed, and final reports were issued in October
2015.The final BEPS package containing recommendations
has been divided into four broad categories: Minimum
Standards, Strengthening Existing International Standards,
Common Approach, and Best Practices. The Action Plans
were also divided into these categories.
The OECD is now working on finalizing Action Plan
15 on Multilateral Instruments. Work on this project is
intended to be completed by the end of this year. This
‘master document’ would update the global network of
more than three thousand bilateral tax treaties entered
into between countries.The Multilateral Instrument would
ensure implementation of BEPS measures in tax treaties
in a seamless manner without requiring the countries to
individually renegotiate their bilateral tax treaties.
However, even though a comprehensive multilateral
instrument is being created, this does not preclude countries
from agreeing to amend their tax treaties through bilateral
negotiations. 2016 is a crucial year since the manner of
implementation of the BEPS project by countries would
begin to unfold. The participating countries are likely to
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The BEPS action plans aim to address the tax challenges of today’s
inter-connected and digital world

COVER STORY
initiate implementing the BEPS suggestions
gradually in their tax regimes.
India has collaborated and contributed
in a significant manner throughout the
genesis of these Action Plans by the
OECD. Also, India is amongst the front-
runners in implementing some of the
suggestions made in these plans. In the
Finance Act 2016, India has introduced
certain key provisions which have a
live connection with the BEPS project,
such as Country-by-Country Reporting
(CbCR) and equalization levy on digital
advertisements, which are in alignment
with the Action Plans on Transfer Pricing
and taxation of digital transactions.
In addition to these steps, the much
talked-about tax treaty between India
and Mauritius has been amended.
The amendments are in line with the
intent to prevent base erosion through
treaty shopping. Recent media reports
have suggested negotiations are in
progress for amending treaties with
Cyprus, Singapore and the Netherlands.
These developments reinforce that
India is not leaving any stone unturned
for adopting the BEPS principles in a
proactive manner.
With limited tools available as of now
for interpreting these new provisions, it
would be interesting to wait and watch
as to how the Indian tax authorities
would react to these changes. This
is imperative, especially when India
is trying to make a conscious effort
to create an investor-friendly business
environment. A larger thrust on
implementing and interpreting these
changes in a mature manner would help
India remain competitive in the global
business arena.
This article was contributed
by Neeru Ahuja, Chairperson,
CII Sub Group on BEPS, and
Partner, Deloitte Haskins &
Sells LLP.
GST: An idea whose
time has come
I
ndia’s Goods and Services Tax (GST) has seen a chequered journey
for the last six years. Successive governments have been trying
to create consensus with the spirit of cooperative federalism to
implement this historic indirect tax reform to create a common market,
removing cascading, to spur domestic manufacturing and exports.
We are now at the cusp of this reform becoming a reality. The
present Government engaged with the entire political spectrum and
the States through the forum of the Empowered Committee to create
a consensus for the smooth passage of the Constitution Amendment
Bill in Parliament. The Government’s intent is evident from the fact
that the Union Cabinet has endorsed crucial amendments to the Bill,
addressing the concerns of the States and the Opposition, namely,
removal of the 1% origin tax, compensation to the States for 5 years,
and changes in the construct of dispute resolution. The removal of the
1% origin tax will go a long way in assuaging Industry’s concerns of
this imperfection in a destination-based regime.
The only area of dispute that remains is the capping of the moderate GST
rate within the Constitution Amendment Bill. The States clearly opposed
this move in the Empowered Committee meeting on 26 July 2016 and thus
have set the stage for capping of this rate in the law in some form.
Another important milestone has been the release of the Model GST Law
for stakeholder consultation.The law has been an honest attempt given the
dual GST structure, although the convergence of Center and State legacy
mind-set has resulted in provisions which will require improvements. CII
engaged with policy-makers through its tax and industry committees to
try and improve this draft law with suitable recommendations.
One of the key objectives of the GST regime is to eliminate the
significant cascading of taxes that prevails in the current Central and
State levies. It is heartening to note the attempt by the Model GST
Law to widen the input tax credit pool, though some minor changes
are required to ensure complete clarity.
The second aspect is valuation provisions. Going forward, the GST
envisages the concept of ‘transaction value’ for the supply of goods
and services which will be a departure from the MRP-based taxation
The GST is an indirect tax reform that will have
various touchpoints across a business, and will
require significant management bandwidth in
its implementation journey
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Taxation
in INdia
Taxation
in INdia

COVER STORY
This article was contributed by Harishanker Subramaniam, Chairman,
CII Core Group on GST, and National Leader- Indirect Tax Services,
Ernst & Young LLP
prevalent in excise/ customs for goods across several sectors like FMCG,
retail, consumer electronics, and pharma, etc. This will create valuation
challenges especially on inter-company stock transfers/ transactions.
Services transactions would be even more onerous with such provisions.
In a GST-like regime where tax will be charged at every stage of value
addition across the B2B chain with credit flow, it may be better to explore
an invoice value/ payment system to avoid disputes.
With dual GST, the Services sector, especially telecom, financial services
and several others, will now have to deal with multiple registrations on
the basis of their presence and supplies in the States. This would be an
issue from a compliance and ease of doing business perspective. These
sectors have had several interactions with law-makers to explain their
predicament. A potential solution is to explore the ‘large tax payer unit’
model to carve out a regime with minimal registration at the primary place
of business, and use IGST for inter-state transactions to ensure revenue
to the States, on the basis of the nature of the transactions. This will
require engagement by these sectors with the States to evolve a simpler
compliance model, which addresses the concerns of the States.
The ‘Place of Supply’ rules for both goods and services is another important
feature of the GST Law that requires thorough understanding to ensure
that these provisions do not impede the credit flow in the envisaged
GST model. Equally important are transition provisions. Businesses will
have inventories of both inputs and finished goods embedded with legacy
taxes and duties on the date of transition. It is critical that the provisions
are such that there is minimal credit loss, failing which this could have
significant cost implications for Industry. Dispute resolution mechanism
is another area that requires changes for early certainty and speedier
resolution to avoid the current regime of protracted litigation.
While feedback and engagement on the Model GST Law is critical, it is
equally important to understand the GST compliance construct. The GST
Network (GSTN) will play a key role in this space as all compliances will
be electronic, including the critical aspect of input tax credit-matching.
Periodic engagement with the GSTN is more of a dialogue process with
several interactions in a month through prescribed returns.
This will require companies to look at their IT capability to report correctly
and consistently across their value chain. Timely and proper transaction
reporting with timely tax payments both by companies and their vendors
will become critical from a monitoring perspective for effective utilization
of credit to avoid cash flow issues.
The GST is an indirect tax reform that will have touchpoints across
business, and will require significant management bandwidth in its
implementation journey. It offers organizations an opportunity to reorient
their business structure and leverage costs.
Place of
Effective
Management
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Taxation
in INdia
Taxation
in INdia
Corporate residence
now has a new
determining parameter–
where its place of
effective management,
in that year is, in India
T
here is plenty of prose in PoEM,
the acronym for ‘Place of Effective
Management’, a legal provision
applicable w.e.f 2016-17 onwards.
Essentially, corporate residence now has
a new determining parameter– where
its place of effective management,
in that year is, in India. That means
the place where key management
and commercial decisions that
are necessary for the conduct of
business of an entity as a whole are,
in substance, made.
Brought into the statute to align with
global concepts, besides countering shell
companies outside India but controlled
and managed from India, the law will
be supplemented by guiding principles,
expected to be finalized shortly.
Conceptually, PoEM is not unfamiliar.
It is an eligibility criterion under the
Tonnage Tax provisions, besides
representing a tie-breaker test in Double
Taxation Avoidance Agreements, to
resolve cases of dual residence. The
OECD, under its recent BEPS paradigm,

recommends that dual residence be resolved mutually by
the competent authorities of the two countries concerned,
applying relevant factors, including PoEM.
The draft guidelines essentially provide a two-pronged
examination for determining PoEM, while mentioning
that the exercise would be driven by the facts and
circumstances of each case, and that substance would
override form. Also, activities over each previous year
will be considered, as against a snapshot approach.
The primary test covers ‘active business outside India’
(ABOI) which is achieved when
• Passive income (income from transactions where
both the purchaser and sale of goods is from / to
associated enterprises, and income by way of royalty,
dividend, capital gains, interest or rental income) is
less than 50% of total income
• Less than 50% of the company’s total assets are
situated in India
• Less than 50% of the total number of employees
are situated in India or are resident in India
• Payroll expenses incurred on such employees are
less than 50% of its total payroll expenditure.
(Average data of previous year and two years prior
to be considered.)
An ABOI situation coupled with clearing a basic Board
of Directors test that requires a majority of meetings
to be held outside India, shall lead to a presumption
of PoEM outside India.
However, if it is established that the holding company
or other Indian residents exercise their powers of
management of the company, and not the Board, then
the PoEM will be in India.
The alternate test is a two stage process which
involves
• Identifying the persons who actually make key
management and commercial decisions for the
business
• Determining the place where such decisions are
made.
The guiding parameters include the location where the
board of directors meets regularly, and the directors
exercise the authority to govern and make the key
decisions. Ideally this would be where the head office
is situated, or predominant activity is carried out. For
determining the head office, the guidelines envisage
different degrees of decentralization of management
and provide for alternate parameters such as the place
where the senior management is predominantly based,
or meets, or normally returns to, or where the highest
level of management and support staff are located.
It recognizes that technology can render physical presence
redundant and suggests that the residence of the persons
taking key managerial and commercial decisions could
be a factor. If the authority to make key decisions is
delegated to senior management or committees and
routinely ratified by the board, the location of the original
decisions will represent the PoEM.
The secondary factors for determining PoEM include
the place where the main and substantial activity is
carried out, or the place where the accounting records
are kept.
The guidelines state that conclusive evidence of PoEM
in India would not be constituted merely on account of
a wholly-owned foreign subsidiary, or some directors
residing in India, or the local management for Indian
activities being situated in India, or support functions in
India that are preparatory and auxiliary in character.
PoEM, as a residence test, could have multiple
consequences, intended and unintended, and needs
to be applied as a tax avoidance deterrent rather than a
revenue-mopping exercise. Considering the magnitude of
its impact, a safe harbor may be justified based on, for
example, the tax rates of the other countries involved,
or income amounts, listed companies, etc.
Shareholder activities such as providing guidelines, polices,
co-ordination, monitoring or decisions by the holding
company on the sale or modification of rights attached to its
investments, dissolution or liquidation of the company, etc
need to be clearly excluded from the realm of PoEM.
The definition of ‘passive’ vs ‘active’ income may merit a
review in the context of the established role of entities
in a structure, for instance, holding companies, IP
holding or finance companies, and their typical income
streams and activities.
The wide and subjective sweep of coverage portends
some challenges in implementation. Tax payers need to
map out their PoEM situation, and educate stakeholders,
besides maintaining adequate documentation to support
their position, in order to prevent an unwarranted
PoEM label.
This article was contributed by S Gayathri,
Member, CII National Committee on Taxation, and
Senior VP & Head Direct Taxation, Essar
Energy Business
COVER STORY

The Financial
Architecture for
MSMEs in India
Mindspace
msmes
T
he Micro, Small and Medium Enterprises
(MSME) sector is a critical component of India’s
growth story, making significant contributions
to GDP, employment and exports. Born out of
individual skills and initiatives, with a low per unit
cost of production, MSMEs display high operational
flexibility, good propensity to adapt to technological
advancements, and strong capacity to innovate
and utilize locally available human and material
resources, which highlights the importance of these
organizations for the nation’s economic prosperity and
social development.
According to estimates by the Ministry of MSME, these
enterprises contribute around 38% of the national GDP,
45% of the overall exports and 40% of the national
industrial output. Around 51 million MSMEs spread
across the country provide employment opportunities
to around 120 million people.
In spite of their crucial role in shaping the country’s
economic landscape, access to finance continues to
threaten the vitality and viability of enterprises in this
sector. The gravity of the issue can be estimated by
the fact that around 93% of all MSMEs are outside
the coverage of formal financial channels. According
Key Issues and Government Action

Mindspace
The Greening of
Indian Industry
to a report by the International Finance Corporation
released in November 2012, there was a total finance
requirement of `32.5 lakh crore in the MSME sector,
which comprised of `26 lakh crore of debt demand
and `6.5 lakh crore of equity demand. Of the overall
finance demand, 78%, or `25.5 lakh crore, was either
self-financed or from informal sources. Formal sources
catered to only 22% or `7 lakh crore of total MSME
debt financing.
As per data from the Reserve Bank of India,
aggregate credit outstanding from scheduled
commercial banks to MSMEs has in aggregate
increased from `6.87 lakh crore in 2012-13 to
`9.66 lakh crore in 2014-15, a compounded annual
growth of 19%. However, the share of the sector in
net bank credit has steadily declined over the years.
The problem is more serious for micro enterprises
requiring small loans, and first generation entrepreneurs.
Equity as a source of financing is under-utilized, and
the prevalence of investment by venture capital and
angel investors is low, due to lack of awareness about
MSMEs as well as the absence of formal governance
structures.
MSMEs in India thus rely on friends and family as
sources of equity.They also face the problem of delayed
payments from their buyers, which are mostly large
corporates. This adversely impacts their working capital
as well as their next cycle of production by affecting
their ability to service existing debt. MSMEs lack
adequate information about the various schemes and
benefits offered by the Government. In some cases,
they lack the technical know-how and the necessary
wherewithal to furnish the required information to avail
these schemes.
There is a need for widening the delivery of credit.
Formal financial institutions face challenges in credit risk
assessment of MSMEs, due to the absence of financial
information, including historical cash flows, credit track
record, and tools to assess credit risk. Outreach to
MSMEs, on-boarding them as customers, building
up transaction and credit history, and scaling up the
utilization of various schemes available is challenged by
the lack of a formal legal structure, the non-corporate
nature of much of the sector, and the absence of a
centralized database and system which can be used to
target and track these enterprises.
In an attempt to analyze the financial travails of this
sector, the Department of Financial Services set up
a ‘Committee to Examine the Financial Architecture
of the MSME sector,’ under the stewardship of Mr
KV Kamath, President, New Development Bank, and
Past President, CII, in October 2014. The Committee
suggested measures to open up the flow of funds to
MSMEs by developing technology-driven platforms for
financial inclusion, the establishment of a receivables
financing platform, a seven-fold increase in the
corpus of the Credit Guarantee Trust for Micro and
Small Enterprises, and expansion in the coverage
of credit bureaus to include a wider range of credit
institutions.
Other top recommendations by the Committee include
the creation of an apex national MSME authority to
target registration, build linkages between stakeholders
and act as a grievance redressal forum; ensure a
bank account for every registered MSME; push for
compliance simplification in the Companies Act, LLP
Act and the Income Tax Act; and increase equity flow
through dedicated MSME funds.
The Government has launched the MUDRA Bank with
a corpus of `20,000 crore and a credit guarantee
fund of `3,000 crore to fund small and micro units.
Set up as a subsidiary unit of SIDBI, the Bank has
already succeeded in reaching out to a large number
of micro enterprises.
About 1.5 crore new entrepreneurs have received
financial support from various banks and microfinance
institutions to set up small businesses under the
Pradhan Mantri Mudra Yojna, which was launched last
April to support small entrepreneurs. Overall, 3.22
crore new as well as existing entrepreneurs have
been sanctioned loans, with women entrepreneurs
accounting for about 78% of the total number of
borrowers. Funds like the India Aspiration Fund and
the SIDBI Make in India for Small Enterprises further
add to the financial options made available for MSMEs
by the Government.
The national agenda to promote the healthy growth
of domestic MSMEs needs to cover a wide range
of topics, such as encouraging market access,
productivity enhancement, providing a sound
competitive environment, formalization of informal
MSMEs, capacity development, a concessional
business regulatory environment, and technology
adaptation for innovative MSMEs. Access to finance
needs to form a crucial pivot of such comprehensive
national MSME policies.

E
xpanding the financial access of MSMEs has
long been a focus of CII’s MSME developmental
roadmap. Recognizing the importance of
expanding the financial access of Indian MSMEs as
well as to ensure that these enterprises are provided
with credit at cost effective rates to meet their
demand for working capital as well as for expansion
and diversification, CII has set up an online MSME
Finance Facilitation Center (CII FFC). The Centre was
launched by Mr Kalraj Mishra, Minister of Micro,
Small and Medium Enterprises, in the presence of
Mr Madhav Lal, Secretary, Ministry of MSME, in New
Delhi in June 2014.
The Center provides advisory and credit facilitation
support to MSMEs, operating as a one-stop-shop,
aggregating financing options from multiple large
financial institutions. MSMEs can apply for their fund
requirements through an online portal set up at mycii.
in and gain access to multiple banks and NBFCs
partnered by the Center, including the State Bank of
India, Indian Overseas Bank, ICICI Bank, Indian Bank,
Federal Bank, SIDBI, DHFL, Muthoot Fincorp, Reliance
Capital and Religare Finvest,
among others.
The CII FFC has received a very
encouraging response: business
proposals worth over `700 crore
from a diverse range of sectors
have been processed through
the Center since its launch in
June 2014.
Further, it has also been observed
that delays and other issues
related to credit delivery to
MSMEs are primarily due to
a lack of understanding of the
various schemes offered by the
banks and financial institutions as well as the procedures
and documentation required for processing credit from
the banks. In order to enhance the financial literacy
of Indian MSMEs, the CII FFC generates awareness
amongst Indian MSMEs by organizing conferences,
roadshows, and online webinars. It has also created
an online FFC Academy which provides sessions on
topics like financial management, credit rating, costing,
project management, etc.
The CII FFC roadshows bring stakeholders together and
facilitate discussions on measures required to bridge the
demand–supply gap in MSME financing. The Center has
organized more than 25 roadshows across the country,
enabling MSMEs and bankers to interact with each
other and understand each other’s concerns, and share
information on various financing products and schemes.
A series of such awareness sessions have been held
in Tier II and Tier III cities across the country.
The Center has launched MSME Credit Rating Services
as a new vertical to create awareness amongst MSMEs
about ratings, and advise them on practices to follow
to improve their ratings. The Center has partnered
with CRISIL, and discussions
are in progress to partner with
other leading rating agencies this
year. CII FFC is also planning to
launch new services like SME
Compliance & Advisory Services,
and SME Insurance.
CII has submitted its inputs to
the KV Kamath Committee, the
Standing Advisory Committee
by the Reserve Bank of India,
and other governmental and non-
governmental bodies. Some of the
recommendations include:
• Allow 120 days for MSMEs
Expanding Financial
Access for MSMEs
Kalraj Mishra, Minister of MSME, at the launch of the
CII SME online Finance Facilitation Center in New Delhi
in June 2014, with Madhav Lal, Secretary, Ministry of
MSME; Chandrajit Banerjee, Director General, CII, and
representatives of some partnering banks
Mindspace

Mindspace
The CII FFC is a financial construct for
MSMEs, making funding considerably
easier to obtain in all corners of the country
T
he globalized nature of business has led to the emergence
of boundary-less markets which are only conducive to the
growth of the most competitive businesses capable of
attuning themselves to the changing environment. Lack of access to
adequate and timely credit at competitive cost significantly hampers
the comparative advantage that Indian MSMEs enjoy owing to their
flexibility in operations, low unit cost, use of regional and local
resources, etc. Pervasive efforts are needed to leverage and improve
upon the existing MSME financial architecture in order to create a
new financial construct wherein financing is considerably easier to
obtain, available in all corners of the country, and at competitive
rates of interest.
In this regard, the CII Finance Facilitation Center attempts to provide
a critical service by addressing the demand supply gap in MSME
funding and spreading financial literacy amongst Indian MSMEs. The
resounding success of this initiative is evident in the processing
of loans worth `700 crore. The Center is continuously evolving,
and will soon penetrate other crucial areas in the MSME funding
space such as credit ratings, insurance, and financial reporting and
compliances.
In the backdrop of emerging needs, new financial services are
needed to address the challenges of technology upgradation and
modernization, marketing finance, infrastructural facilities, venture
capital, microfinance and factoring assistance. The incidence of NPAs
in MSMEs is sizeable and this aspect needs to be addressed. An
efficient system of receivables factoring/discounting must also be
developed for addressing the recurring concern of delayed payments.
Expanding the access to finance for MSMEs will not only provide a
concerted push to the MSME sector but will also generate collateral
benefits for the financial
sector, boost employment
generation, and support the
economic growth of the
country.
Promoting Financial Literacy
Sreekant Somany is Chairman,
CII National MSME Council, and
CMD, Somany Ceramics Ltd
for classification of Non-
Performing Assets
• Limit interest on
b o r r o w i n g t o a
maximum of base rate
plus 2.5%
• Set up dedicated banks,
as well as equity funds,
specifically for MSMEs
• Increase the corpus of
the Credit Guarantee
Trust Fund for Micro
and Small Enterprises
(CGTMSE) Scheme
seven-fold from `4,000
crore to about `28,000
crore over the course
of five years
• Implement the Trade
Receivables electronic
Discounting System
(TReDS)forthediscounting
of MSME bills
• Reserve 25% of fund
allocation for women
entrepreneurs.
Given the importance
of MSMEs in the Indian
economy, all stakeholders
must come together and
act in synergy to assist
in identifying strategies to
expand the availability of
equity funds for MSMEs
through various existing and
new financing options.
To e n a b l e M S M E s
to contribute 50% of
India’s GDP by 2024, it
is necessary to create
an enabling financial
environment. Sustained
focus on development
of the MSME space is
critical to sustain the value
generation process through
the supply chain, and for
the overall economic health
of the country.

Mindspace
I
nspections and regulatory enforcements
are critical for the smooth functioning
of businesses. These visits or checks
are conducted by authorized officials on
products or business premises, activities,
documents, etc to verify and promote
compliance with various official regulatory
requirements across a range of areas,
including labor laws, taxation, health, safety,
and environment protection.
However, inspections in India have often
been found to be excessive, imposing
significant costs on businesses. The
multiplicity of laws and compliances combined with
a poorly-integrated inspection system is especially
burdensome for Micro, Small and Medium Enterprises
(MSMEs) which lack scale economies to deal with the
costs and other requirements of a plethora of rules
and inspections. A manufacturing company in India,
on average, has to comply with nearly 70 laws and
regulations. As many as 40 inspectors and government
functionaries are authorized to visit factories per annum
under various laws and acts!
CII organized a Policy Dialogue Session on ‘Inspections
and Regulatory Enforcements for MSMEs in India’ on 11
July in New Delhi to facilitate discussion on measures to
simplify and rationalize the inspection system and reduce
the regulatory enforcements for Indian MSMEs.
The complicated and cumbersome inspection system
in India, especially for MSMEs, is due to the opacity of
the rules, lack of coordination between national, State-
level and local compliances, duplication and multiplicity
of procedures and regulations, and lack of adequate
training and qualification criteria for inspectors.
In order to tackle the problem of Inspector Raj, the
Government has announced a host of labor reforms
which include initiatives such as the Shram Suvidha
Portal for online compliance for 16 out of 44 labor laws,
the Random Inspection Scheme, amendments to the
Apprentice Protsahan Yojna, etc. Although these are
significant steps in revising the inspections system in
the country, sustained efforts are required to rid Indian
industry of the prevailing Inspector Raj.
Mr Ashok Saigal, Chair, Sub-Group on Ease of Doing
Business, CII National MSME Council, and MD,
Frontier Technologies Pvt Ltd, urged the participants
at the roundtable discussions to identify and focus
on key priority areas for inspections and regulatory
enforcements applicable to MSMEs, and deliberate on
measures to simplify and rationalize these. He listed
the priority areas as labor laws, sales tax, income tax,
environment and pollution-related compliances, and
export-import related compliances.
The discussions centered around providing
recommendations to address the key challenges with
respect to each of the priority areas identified.
Key Recommendations
Environment and pollution-related compliances
• Building enhanced awareness amongst MSMEs
regarding various environment and pollution-related
compliances
• Leveraging technology to develop computerized
Dr Alka Kaul, Chair, Sub-Group on Women Empowerment, CII National MSME Council,
and Director, Horizon Industrial Products Pvt Ltd; Ashok Saigal, Chair, Sub Group on
Ease of Doing Business, CII National MSME Council, and MD, Frontier Technologies
Pvt Ltd; and Sujith Haridas, Deputy Director General, CII, at the MSME Policy Dialogue
Session, in New Delhi
Inspections and Regulatory
Enforcements for MSMEs

Mindspace
systems for compliances
• Notification of ‘White Category’ enterprises, which
are low risk and can be exempted from environment
and pollution-related compliances, at the national
and State Level
Simplification of labor compliances
• State-level labor law reforms
• Linkages between departments for sharing
information common to compliances
• Drafting of a model simplified Shops and
Establishments Act to be shared with State
Governments
Tax-related compliances
• Abolition of the submission of hard copies of various
documents
• Timelines for clearances and returns
• Greater flexibility to MSMEs for meeting compliance
requirements
Mr. Indranil Choudhury, Co-Chair, Sub-Group on Ease
of Doing Business, CII National MSME Council, and
CEO, Lexplosion Solutions Pvt Ltd, suggested some
additional measures towards improving the ease of
doing business for MSMEs and promoting a healthy
and vibrant economy. These include revocation of
redundant and obsolete laws, reduction and eventual
abolition of paper-based transactions for compliances,
single window online systems, enhanced sharing of data
and information between different regulatory authorities
appointed by the Government, and shifting the focus
of inspections from collection of fines and penalties to
greater compliance, among others.
The discussions highlighted that the key challenge
for Government is to develop and apply enforcement
strategies that achieve the best possible outcomes by
achieving the highest possible levels of compliance,
while keeping the costs and burden as low as possible
for organizations, especially MSMEs. This will be crucial
for inspections to achieve their desired outcome, which
is to improve the efficiency of businesses, rather than
placing disproportionate burden on them.
A
Publication
ThereforeIwanttoappeal[to]allthepeopleworld
over, from the ramparts of the Red Fort, ‘Come, make
in India’, ‘Come, manufacture in India.’
PRIME MINISTER SHRI NARENDRA MODI
Speech on Independence Day of India, 15 August 2014
For price and orders, please contact corporate.communications@cii.in
With Insights From:
Adi Godrej Cyrus P Mistry Sumit Mazumder
Adil Zainulbhai Deep Kapuria Sunil Kant Munjal
Anant J Talaulicar Hari S Bhartia Sunil Mathur
Banmali Agrawala Jamshyd N Godrej TV Narendran
B Prasada Rao Naushad Forbes Venu Srinivasan
Chandrajit Banerjee Rahul Bajaj Vinayak Chatterjee
C Narasimhan Sanjay Lalbhai YC Deveshwar

the ‘Make’ Procedure in detail and seek clarifications.
Senior officials from the Ministry of Defence and the
Indian Armed Forces also made presentations on potential
‘Make’ Projects for Industry’s participation.
Incubation of UAV Technology in India
Given the projected requirement coupled with the
recently-issued tenders for acquisition of various
types of Unmanned Aerial Vehicles (UAVs), CII and the
Directorate General of Artillery, Indian Army, organized
an interaction on ‘Incubation of UAV Technology in India’
on 5 July in New Delhi.
Industry was invited to make presentations on its
capabilities in the UAV sector during the session. To
enable companies to gain maximum benefit from this
platform, a parallel technology and product display was
also organized to demonstrate Industry’s capabilities to
the end users. The event was well attended by senior
officials from the Indian Army, Indian Air Force, Indian
Navy, Indian Coast Guard, paramilitary forces, IIT Chennai
and Kanpur, and CEOs of global and Indian defence and
aerospace companies.
Sectorscape
Defence
CII Delegation to Farnborough
International Airshow 2016
The Farnborough International Airshow (FIA) is a global
showcase for the aerospace industry, and attracts a truly
international audience. A CII Defence and Aerospace
Industry delegation, led by Mr Baba Kalyani, Chairman,
CII National Committee on Defence, and Chairman,
Bharat Forge Ltd, and Mr S P Shukla, Co-Chairman, CII
National Committee on Aerospace, and Group President,
Mahindra & Mahindra, visited FIA 2016 from 11-17 July,
in London, UK.
The delegation had several key engagements with
various country pavilions like UK, USA and Canada. The
CII members also visited Cranfield University to study
the latest technological advancements in the defence
and aerospace sector.
The visit to the House of Commons, included a brief
about cloudBuy and www.ciitrade.com. The delegates
also had a meeting with Mr Navtej Sarna, High
Commissioner of India to the UK, in London.
Session on ‘MAKE’
The Ministry of Defence approached CII to organize a
session on ‘Make’ Procedure (DPP 2016) and Potential
Projects under ‘Make’ Category’ with Mr Ashok
Kumar Gupta, Secretary (DP), Ministry of Defence.
The unprecedented event on 25 July in New Delhi
marked the beginning of a new era in the sector, with
the Ministry of Defence reaching out to Industry to
facilitate the ease of doing business, and bring in the
much-needed transparency.
The closed-door session with the top management of over
80 companies, was held to enable them to understand
Baba N Kalyani, Chairman, CII National Committee on Defence, and
Chairman, Bharat Forge Ltd; Ashok Kumar Gupta, Secretary (DP);
Surina Rajan, Additional Secretary (DP); and Sanjay Garg, Joint
Secretary (DIP), all from the Ministry of Defence, at a session on
‘Make’ in New Delhi
Members of the CII Delegation with Navtej Sarna, High Commissioner of India to UK, in London

Healthcare
2nd
Health & Immunization
Conference
The 2nd
Health and Immunization Conference, with
the theme of ‘Leveraging the last mile opportunity in
Immunization’ was organized by CII recently in New
Delhi, in partnership with Godrej & Boyce.
The global effort to use vaccination as a public health
intervention began when the World Health Organization
(WHO) launched the Expanded Program on Immunization
in 1974. The Ministry of Health and Family Welfare
launched the Universal Immunization Program in 1985
- a major public health intervention in the country
and one of the largest immunization programs in the
world. In the inception phase the goal was to extend
immunization services to cover 85% of all children and
100% of pregnant women by 1990.
“The Government is targeting to immunize 85% of
the child population in the country in the next two
years,” stated Dr Jagdish Prasad, Director General,
Health Services, who was the Chief Guest at the
conference. Mooting a synergy of policy between
the Government and Industry in the health sector,
he said the Government is ready for all types of
linkages and partnerships - with Industry, international
players, civil society organizations, and innovators, to
achieve 100% immunization. Cold chain logistics and
management need to be developed for far-flung areas
and this is where we need innovations from the private
sector. These innovations must be cost effective and
affordable, he said.
Dr Prasad visited the Innovation
Gallery which showcased
the work of innovators from
across India in the space
of strengthening cold chain
technologies and logistics,
a critical cog in the wheel
for delivering successful
immunization programs.
“Immunization and healthcare
is of critical importance as a
part of the entire mission of
‘Health for All.’ Therefore, a
high degree of accuracy and
efficacy in delivery of vaccines
is crucial,” said Mr Jamshyd
Godrej, Past President, CII,
Immunization Cover in India
India runs one of the largest immunization programs
across the globe and its biggest success has been the
polio immunization campaign.Today, India is polio-free
– a goal achieved by consistent and strong political
will and support from multiple stakeholders, including
international co-ordination. However, much remains to
be done: the current immunization coverage is 62%,
against a sustainable threshold of over 80%. India
faces a huge challenge in ensuring immunization to
its 27 million new-born every year. Nearly 44% of
young children do not get the full schedule of vaccines
and are at risk of contracting life-threatening diseases
(and causing disease outbreaks in their communities).
Every year, one million children in our country die
before they are five years old.
and MD & Chairman, Godrej and Boyce.
Dr Nachiket Mor, Director, India Country Office, Bill and
Melinda Gates Foundation, emphasized that the solution
lies in innovation. To provide affordable and quality
healthcare, we need to innovate with technologies
within the cold chain management system, and target
to vaccinate every child, he said.
“Adult and adolescent vaccines are areas that require
work, and can bring a big impact in healthcare delivery.
The barriers to be addressed are lack of awareness,
difficulties in regulatory set-up, limitations in access
and affordability, and manufacturing and distribution
challenges,“ felt Mr K G Ananthakrishnan, Co-Chair,
CII National Committee on Pharmaceuticals, and Vice
President & MD, MSD Pharmaceuticals.
Key Recommendations
• Increase use of Information Technology to develop
user friendly sustainable solutions.
• Adapt best practices
of different sectors to
strengthen the immunization
supply chain.
• Collaborate for expanding
partnerships beyond the
traditional Public Private
Partnership (PPP) model.
• Promote pilots and
operational research.
• S e t - u p / d eve l o p a n
innovative model vaccine
center in the PPP mode.
• Leverage CSR initiatives
for strengthening the
immunization program.
Dr Nachiket Mor, Director, India Country Office, Bill and Melinda
Gates Foundation; Jamshyd Godrej, Past President, CII, and MD &
Chairman, Godrej and Boyce; Dr Jagdish Prasad, Director General,
Directorate General of Health Services; and K G Ananthakrishnan,
Co-Chair, CII National Committee on Pharmaceuticals, and
Vice President & MD, MSD Pharmaceuticals, at the
2nd
Health & Immunization Conference, in New Delhi
SECTORSCAPE

PERSPECTIVE
energy
T
he Walkman was a stellar invention. The Ipod
went a step further, and today’s smartphones
have ensured that a gramophone or a tape
recorder is consigned to a place of respect in our
collective memory. Sony and the likes of Apple in the
internet era have succeeded in transforming consumer
behavior. Music can now be carried on person in highly
efficient electronic devices. Sound quality has improved
and one’s favorite music is just a click away. The way
music is created, packaged, marketed and consumed
has been transformed.
While our nation grapples with multiple challenges
on the social and economic front, it is imperative
that reforms usher in a change in consumer behavior
to realize the intended impact. Efficient economic
outcomes will be difficult to achieve without concomitant
changes in consumption patterns. A case in point is the
Central Government’s repeated attempts at pulling the
discoms out of the red. No amount of isolated financial
restructuring and introduction of new technology can
bring in consumer discipline.
Populism will have its way and a large chunk of
consumers will continue to pay a tariff much below
the cost of the service. It would be great if the in-built
cross subsidy of the annual tariff order could offset the
subsidy, but that’s a distant dream. Discoms depend
heavily on budgetary support from State Governments
and borrow much beyond their means from the market.
On an average, billing efficiencies are nothing to write
home about, and collection efficiencies can drive a sane
banker to the verge. Losses are blamed on agriculture
and, in the absence of real time technology-driven
monitoring, it has become very difficult to ascertain
who is consuming what and paying for how much.
Being power surplus by no means implies that we should
use the resource inefficiently. There is an urgent need
to ring in far greater consumption and measurement
discipline. While reforms like Supervisory Control and
Data Acquisition (SCADA) are a welcome step, they
fall short of impacting the consumer psyche. The focus
should be on measures which impact the drawing room
decision of a consumer. To that end, pre-paid energy
has the potential to impact consumption behavior across
a broad spectrum.
While the utilities stand to gain in terms of reduced
interest burden, theft reduction, better planning for
short term energy purchases, arrear realization and
lower bill collection costs; from the consumer’s
perspective, a pre-paid recharge would imply greater
consumption discipline and economy. In addition, a
built-in ‘Time of the Day’ tariff a la the STD tariffs
of yore, is expected to modify consumption behavior
during peak hours, thereby positively impacting capacity
peaking.
However, the introduction of a pre-paid regime comes
with a set of challenges. Pre-paid meters are priced
3-5 times higher than single phase digital meters. A
utility would be required to bear the one-time cost
of swapping existing digital/electromechanical meters
with pre-paid meters. A distribution company with
about 30 lakh consumers would have to deploy a
phased investment of about `800-1,000 crore on
meters alone. Secondly, vending cost driven by choice
of technology and location of recharge needs to focus
on consumption ease. Vending machines/recharge
counters located at public common services centers
‘A pre-paid energy
regime could be a
game-changer’
Pre-paid energy has the potential to impact
consumption behavior across a broad spectrum

may be a good beginning.
Another challenge which merits concern is the
number of tariff lines which can be programmed
into the meter and the possibility of tariff revision
during a recharge period. This may be addressed by
limiting the recharge period and guaranteeing tariff
for the period of recharge. In addition, a flexible
approach towards the credit limit across slabs may
be warranted as different consumption patterns
impact the distribution network/billing differently.
Finally, arrears collection can be eased into the new
regime by pre-programming a percentage of recharge
towards outstanding arrears.This methodology can be
put to good use in government offices. Government
is the biggest defaulter. Assumed transfer pricing
within the Government on account of budgetary
support to discoms continues to put the latter under
financial duress.
Not only will the discoms be equipped with a
tool to recover long-pending arrears, this will also
provide Government with an effective check on
pilferage and theft. Industry should be the next
door to be knocked at, followed by domestic
consumers.
Internationally, while England has been the pioneer
in adopting a pre-paid energy regime, countries like
Bangladesh, South Africa and New Zealand have
benefitted largely in terms of changed consumer
behavior and collection efficiency improvements.
The financial sector’s exposure to gencos and
discoms runs into lakhs of crores of rupees.There is a
need for UDAY reforms today, as the previous versions
of financial restructuring could not impact discom
efficiency to the desired level. If distribution companies
continue to seek out incremental measurement-
oriented reforms, another financial restructuring is
round the corner.
We need a game changer a la Walkman.
We need more responsible consumption. While not
a panacea, pre-paid energy may directionally be the
right approach to impact consumption behavior for
the good.
This article by Kartikeya Misra, Director,
Industries, Government of Andhra Pradesh,
was first published in the Financial Express on
27 July. The views are personal.
PERSPECTIVE

T
he outlook for India’s exports could be challenging
for the current year as GDP growth rates in India’s
top ten export partners are expected to decelerate.
India’s exports contracted for 18 consecutive months
till May 2016, but saw positive growth in June, raising
hopes that the slide may have bottomed out.
India’s export performance during 2015-16 was impacted
by the slowdown in global growth and trade, the drop in
oil prices, and exchange rate fluctuations. As global growth
following the Brexit referendum and China’s slowdown will
moderate further, proposed policy measures on the trade
facilitation and trade promotion side must be intensified
to alleviate the challenges faced by exporters.
The International Monetary Fund (IMF), in its
post-Brexit World Economic Outlook of July 2016, reduced
the forecast for world growth by 0.1 percentage point,
to 3.1% for 2016. The world trade volume of goods and
services is expected to grow at a slower pace of 2.6%
in advanced markets in 2016, as compared to 3.8% in
2015. In emerging economies, the volume of trade would
pick up pace from 0.6% in 2015 to 2.9% in 2016.
India’s top ten export partners – USA, UAE, Hong Kong,
China, UK, Singapore, Germany, Saudi Arabia, Bangladesh
and Sri Lanka – accounted for half of its total exports in
2015-16. GDP growth rates in eight of these ten countries,
barring Germany and Bangladesh, are expected to fall in
2016 as compared to 2015, according to the IMF.
In 2015-16, Indian exports to all ten of its top export
destinations contracted. While the contraction in exports
to USA was the lowest at (-)4.8%, it was the sharpest
for Saudi Arabia at (-)42.7%,largely on account of the
steep fall in exports of petroleum products. Exports to
FOCUS
exports
China too declined by over 24%!
Post-Brexit forecasts show that the US, India’s largest
export destination, will grow at a marginally slower pace in
2016. As the US accounts for over 15% of India’s exports,
we could target further building exports to that country.
India’s second largest market, the United Arab Emirates,
is forecast to deflate in 2016, and exports to that country
could remain subdued due to a decline in oil prices
as forecast by the IMF. Exports to Hong Kong depend
strongly on diamonds, which experienced a sharp drop
in value as well as volumes in 2015-16.
India’s exports to China comprise a large proportion of primary
products and prices can be expected to remain around
current levels for these, going forward. Moreover, China’s
demand for these commodities depends on its policies on
stockpiling and dealing with excess capacities. GDP growth
in China was 6.7% for the first half of 2016.
With its top ten export partners comprising just half of
its aggregate exports, India should devise strategies for
boosting exports to smaller export destinations.
In terms of items, the export value of petroleum
products, India’s top export item, came down by over
$26 billion in 2015-16 as compared to the previous year.
This comprised more than half of the aggregate value of
decline in exports. The IMF expected oil prices to drop
by close to 16% in 2016 in its July Outlook update.
The Government ratified theWorldTrade Organization (WTO)
Trade Facilitation Agreement in April and is in the process
of establishing the National Committee onTrade Facilitation.
The Committee would help to fast-track export clearances
and streamline administrative procedures, adding to the
ease of doing business and lowering transaction costs.
Global Slowdown
could challenge
India’s Exports
This article was contributed by Sharmila Kantha, Principal Consultant, CII.
GDP growth rates in eight of India’s top ten export markets are expected
to fall in 2016, calling for intensified policy measures for trade facilitation
and promotion

Engaging with the World
A
high-profile CEOs delegation, led by Dr Naushad
Forbes, President, CII, and Co-Chairman, Forbes
Marshall, visited the UK from 6 - 7 July. The visit
aimed to restore confidence in India-UK business ties,
despite the turmoil in the markets caused by Britain’s exit
from the European Union (EU).The delegation of 22 CEOs,
one of the largest from CII to the UK in recent times,
met with diverse stakeholders – including government,
parliamentarians, industry and academia, to strengthen
the overall strategic and economic imperatives.
CII’s annual conference on ‘The Future of India-UK
Economic Relations,’ supported by the Confederation
of British Industry (CBI) and regional partner, Scottish
Development International (SDI) was held to coincide
with the visit of the delegation. Mr Chandrajit Banerjee,
Director General, CII, opening the proceedings, urged
the business community to focus on a positive outlook.
While the current scenario is challenging in many ways, it
is also full of great promise and opportunity, he said.
Dr Naushad Forbes called on the two governments to
seize the unprecedented opportunity and negotiate a
fresh trade agreement, given the first mover’s advantage
in the current scenario.
Mr Jo Johnson MP, UK Minister of State for Universities
& Science, UK, expressed the intent to continue the
strong collaboration with India in science and technology
“Through our commitment to build on our research
collaborations we will ensure both countries lead the
world in new technologies, new scientific endeavours
and new discoveries,” he said.
The panel lists in the business session featured senior
members of the CII delegation, including Ms Shobana
Kamineni, President Designate, CII, and Executive
Vice-Chairperson, Apollo Hospitals Enterprise Ltd, and
Mr Rakesh Bharti Mittal, Vice President, CII, and Vice
Chairman, Bharti Enterprises. Nearly 200 participants
attended the conference from a cross-section of
stakeholders – British, Scottish and Welsh companies,
Indian companies in the UK, and representatives from
UK government departments, chambers of commerce,
CII CEOs Delegation to the UK
Sir Dominic Asquith, High Commissioner of India to the UK; Keith Brown MSP, Cabinet Secretary of the Economy, Scotland;
Dr Naushad Forbes, President, CII, and Co-Chairman, Forbes Marshall; Jo Johnson MP, Minister of State for Science and Universities, UK;
Navtej Sarna, High Commissioner of India to the UK; Chandrajit Banerjee, Director General, CII, and Carolyn Fairbairn, Director-General, CBI,
at CII’s annual conference on ‘The Future of India-UK Economic Relations’ in London
Raghu Kailas, National Chairman, CII Young Indians, and MD, Unimo Exports Pvt Ltd; Sumit Mazumder, Immediate Past President, CII,
and CMD, TIL Ltd; Dhruv M Sawhney, Past President, CII, and CMD, Triveni Turbine Ltd; Shobana Kamineni, President Designate, CII, and
Executive Vice Chairperson, Apollo Hospitals Enterprise Ltd; Rakesh Bharti Mittal, Vice President, CII, and Vice Chairman, Bharti Enterprises;
Ajay S Shriram, Past President, CII, and Chairman & Sr Managing Director, DCM Shriram Ltd, and Mark Runacres, India Advisor for the
Confederation of British Industry

engaging with the world
both British and foreign, investment/ development
agencies, city councils, academics and media.
The CII delegation met with Rt Hon Sir Desmond
Swayne, Minister of State for International Development,
UK, to discuss collaborations in capacity-building and
skill development. CII members also interacted with UK
MPs, including Ms Seema Malhotra, Mr Alok Sharma,
Ms Valerie Vaz, Lord Karan Bilimoria, Baroness Virginia
Bottomley, Mr Mark Pritchard, Mr Bob Blackman and Mr
Stephen Timms, at one-on-one meetings, and during an
exclusive India interaction at the House of Commons.
The bipartisan interaction of CII leadership with MPs
and Peers in Westminster, held in collaboration with the
Indo-British APPG, and supported by Grant Thornton,
infused new ideas and energy. The MPs and Peers were
presented with copies of ‘India Meets Britain 2016,’ a
report on the 800+ fastest-growing Indian companies
in the UK, which boast a collective turnover of GBP 26
billion, and support 110,000 jobs.
A select group of special guests from government,
industry and institutional partners attended a grand CII
reception at Westminster Abbey, a majestic and historic
venue, to celebrate CII’s 121st
anniversary.
On Day 2, the delegates interacted with the Commonwealth
Enterprise and Investment Council, to facilitate SME
partnerships and met new CommonwealthFirst Export
Champions, a group of 25 innovative, mid-sized businesses
who will soon be on their first trade mission to India,
supported by CII. Rt Hon Hugo Swire, Minister of State
for the Foreign and Commonwealth Office, UK, also
addressed the gathering.
A meeting at the Royal Society brought forth science and
technology applications for meeting India’s societal and
development challenges. Prof Lord Kumar Bhattacharyya,
Chairman, Warwick Manufacturing Group
joined the discussions on utilizing India’s
academic institutions as R&D hubs,
fellowship exchanges, satellite imaging for
agricultural monitoring, and other applications
in manufacturing and technology.
CII and International Unit collaborated on
an Industry-University roundtable with vice
chancellors/ Pro-VCs/ deans and academics from
15 leading UK universities. Hosted by Dame Nicola
Brewer, Vice-Provost (International), University College
London, the discussions ranged from education policy
and reversing the decline in Indian students at UK
universities, to enhancing academic collaboration by
faculty, student and intern exchanges, and explored the
possibility of a joint internship program.
Lord Mayor Alderman, the Lord Mountevans of London,
hosted the CII delegation at a CII-City of London FinTech
Investors Roundtable.The discussion examined the benefits
of investing in fintech start-ups in London, as well as the
possibilities of innovation–based collaboration with India.
The delegation also met Mr Rajesh Agrawal, recently
appointed Deputy Mayor of London, for an in-depth
discussion on the implications of Brexit on Indian
companies in the UK and in India.
Prince Andrew, Duke of York, who met the delegation
at Buckingham Palace, expressed optimism about the
UK’s economic and strategic future post-Brexit, and
about developing the India-UK economic relationship
further. The discussions spanned the ongoing work
under the ‘Pitch at Palace’ Foundation, set up to
support entrepreneurs from around the globe through
mentorship and network-building.
As a grand finale, for the visit, Mr Navtej Sarna, High
Commissioner of India to the UK, hosted a dinner
reception at India House. He invited the business leaders
to share their candid views and observations about
the mission and on the way forward. The majority of
them were optimistic and positive, keen to seize the
moment, albeit uncertain, and made a case for both
sides, at the Government and Industry-level, to forge
deeper bilateral economic ties.

first person
T
he dates for the CEOs delegation
to the UK, CII's annual exercise to
reinforce India-UK economic and
strategic relations, were set for the first
week of July. The overall agenda for two
days, spanning 14 specific meetings with
a host of diverse stakeholders, planned
over the last 4 months, down to the last
detail, was set.
In the last week of June, Brexit happened.
The British Prime Minister resigned. And then,
nearly half the Shadow Cabinet resigned!
As we absorbed the initial shocks and
turbulence from governments and markets
alike, many asked, is this the right time
to visit the UK for this goodwill exercise?
Will the UK have time for India right now?
Will we achieve anything?
While we contemplated canceling the visit,
we quietly tried to feel the pulse behind
the scene.
A noted MP, now a junior Minister in the
new Cabinet said at the time, "If I was
luke-warm about meeting the Indian CEOs
delegation earlier, I am definitely hot about
it now." I think that, pretty much, sums
up the future of UK-India relations in the
post-Brexit era: hot.
Needless to say, we went ahead with
the delegation's London visit, and we
were met, well, warmly. We expected the
agenda to unravel like a ball of yarn, but
surprisingly, very little changed.
At the annual CII UK conference on ‘The
Future of UK India Economic Relations,’
supported by the Confederation of
British Industry and regional partner,
Scottish Development International, Jo
Johnson, Minister of State for Science
and Universities, started by saying that
Brexit does not mean that the UK would
become more inward-looking. “I want to
reassure you about any uncertainty as the
UK enters a new phase... more than ever
we are going to be an outward-looking,
adventurous, optimistic country,” he said.
He also announced that the India-UK
Technology Summit, a major bilateral
initiative to be held from 7-9 November
this year in Delhi, would go ahead with
the UK's full support, as planned.
Our meetings over the next day and a
half only confirmed this notion of UK's
openness and optimism.
First, we met nearly a dozen MPs and
Peers at Westminster, including Desmond
Swayne, Alok Sharma, Bob Blackman,
Mark Pritchard, Seema Malhotra, Stephen
Timms, Valerie Vaz, Karan Bilimoria, and
India and the UK
Building on Fundamental Strengths
Our overall economic and strategic
engagement with the UK has shifted with
Brexit. But the emerging opportunities are
encouraging, says Dr Naushad Forbes

Virginia Bottomley, among others.
All of them recounted interests or close
personal ties to India, with new ideas
and energy to infuse into the bilateral
relationship. On top of the agenda was
focus on the possibility of fresh India-UK
trade agreement negotiations, which may
now be easier to accomplish at a bilateral
level. We discussed enhancing tourism
between the two countries, collaborating
on skills and capacity-building programs,
and even tying up cultural elements with
business, to celebrate 2017 as the UK-India
Year of Culture.
An outstanding meeting brought together
representatives from several leading British
universities.The opportunities to collaborate
seemed limitless and we all wished we
had had more time to interact.
We met with the Commonwealth
Enterprise and Investment Council and
discussed collaboration for small and
midsized businesses. Over 25 SMEs have
been identified by the Council to be led
into their first trade mission to India. The
companies showcased their innovative
business ideas for application in India
and for building partnerships with Indian
companies.
A meeting at the Royal Society proved
that there was much untapped potential
in utilizing science and technology-based
solutions to address global and societal
challenges in development.
We learned more about the Fintech
ecosystem in the City of London at a
meeting with the Alderman, the Lord Mayor,
and fintech investors and entrepreneurs.
An impromptu meeting with the just-
appointed Deputy Mayor of London, Rajesh
Agrawal, assured the business community
that London will always stay open for
business, and that they were making every
effort to ensure London's access to single
market benefits.
An outstanding dinner hosted by our High
Commissioner, Navtej Sarna, brought our
visit to a close, with an opportunity for
a final sharing of views. All agreed that
the timing of our visit was fortuitous.
We stressed the importance of India
approaching the UK as an old friend that
could be relied upon.
We should not, however, discount real
uncertainties that businesses are faced
with. Indian companies operating in the
UK have expressed concerns on single
market tariffs, passporting rights, the
patenting and IPR regime, and ease in
global talent mobility, all of which will
be determined, bit by bit, in the terms
of the UK's exit from the EU. They will
have to adjust to the new reality of life
outside the EU.
We must keep a close eye on unfolding
developments and emerging policies, and
take every opportunity to communicate our
top priorities to policy-makers in India and
the UK as Brexit proceeds.
The swift appointment of a new Cabinet
under Prime Minister Theresa May is
an encouraging start, lending some
stability to a fragmented landscape.
The appointment of a Brexit Minister
will ensure that the interests of the
business community, domestic and
foreign companies in the UK alike, are
well considered, and the appointment
of the International Trade Minister will
be key to taking forward any discussion
on bilateral trade and investment
agreements.
Our overall economic and strategic
engagement with the UK has shifted
with Brexit. But considering emerging
opportunities in building a fresh trade
pact, strengthening technology and
innovation collaboration, enhancing
tourism, encouraging fintech, enabling
entrepreneurship, and exploring untapped
potential, everything does seem like
‘business as usual.’
The fundamental strength of our relationship
with the UK is the base on which we
must build.
Dr Naushad Forbes is President, CII, and
Co-Chairman, Forbes Marshall

Hungary
Ties with Hungary
CII and the Embassy of Hungary organized a meeting
of Mr Péter Szijjártó, Minister of Foreign Affairs and
Trade, Hungary, with a very small select group of CEOs
on 5 July in New Delhi.
The CEOs, representing the automotive, renewable
energy and water sectors, discussed the possibilities
and opportunities for cooperation and investment in
Hungary, as also for Hungarian companies to invest
in India.
Mr Madhav Shriram, Chairman, CII Delhi, and Deputy
MD, DCM Shriram Industries Ltd, spoke briefly on the
positive changes taking place in the Indian economy
through various reforms and campaigns undertaken by
the Government.
Indonesia
CEOs Delegation to Indonesia
Dr Naushad Forbes, President, CII, and Co-Chairman,
CII CEOs Delegation with Saleh Husin, Minister of Industry, Indonesia, in Jakarta
Péter Szijjártó, Minister of Foreign Affairs and Trade, Hungary, and
Madhav Shriram, Chairman, CII Delhi, and Deputy MD, DCM
Shriram Industries Ltd, at an interaction in New Delhi
Forbes Marshall, led a high profile delegation of Indian
CEOs to Jakarta, Indonesia, on 18-19 July. The visit
aimed to enhance economic engagement between the
two countries, considering the huge potential which
still remains untapped and new opportunities that
have emerged. The visit was also a follow-up to the
India visit of the Indonesian Transportation Minister
in February.
The delegation had call-on meetings with Mr Saleh
Husin, Minister of Industry; Mr Ignasius Jonan, Minister
ofTransportation, and Coordinating Minister for Economic
Engagement with India; Mr Thomas Trikasih Lembong,
Minister of Trade; and Mr A M Fachir, Vice Minister
for Foreign Affairs. They also interacted with Mr Tamba
Hutapea, Deputy Chairman, Investment Coordinating
Board of Indonesia (BKPM), and members of the ASEAN
Secretariat based in Jakarta.
A business session with the Chairmen and members
of the Chamber of Commerce and Industry (KADIN),
and the Indonesian Employers Association (APINDO),
was organized on 18 July.
Speaking at the session, Dr Forbes stated that with
bilateral trade of $15.9 billion in 2015-16, Indonesia
has emerged as India’s largest trading partner in
the ASEAN region. There is considerable potential
for expanding trade between the two countries in
automotive components, automobiles, engineering
products, IT, pharmaceuticals, bio-technology and
healthcare, he said.
Mr Adi Godrej, Past President, CII, and Chairman,
Godrej Group, highlighted the potential areas for
collaboration between the two countries and the
initiatives and reforms undertaken by the Government
of India.
The visit included a Business Meeting with the Jakarta
City Government, organized by the Embassy of India in
association with CII, with the Governor of Jakarta as
the Chief Guest. There were presentations on specific

Portugal
Horasis India Meeting
CII, along with Horasis, the City of Cascais, and the
Portuguese Government, co-hosted the 8th
edition
of the Horasis India Meeting on 3-4 July in Cascais,
Portugal.
The Horasis India Meeting gathered a host of decision-
makers from business and government from Portugal,
Europe and other parts of the world, to discuss India's
role in the global economy and to shape the country's
future direction.This meeting assumed importance in the
wake of the changing realities of the global economic
stage and the sustained growth momentum that India
has begun to gain over the last 24 months.
Addressing the Meeting, Gen (Dr) V K Singh (Retd),
Minister of State of External Affairs and Overseas
Indian Affairs, India, observed that, despite excellent
ties and constructive cooperation in multilateral fora,
bilateral trade and investment relations between India
and Portugal, while warm, are well below potential.
“While this is perhaps reflective of the global economic
situation, it demonstrates fairly clearly that our two
countries need to do much more to tap into the
tremendous economic opportunities and synergies
that exist between us. With shared commonalities,
Indian businesses need to look at Portugal as a key
European trade and investment partner and a cost-
competitive entry point and launch pad for their forays
into European and Lusophone markets across the world,”
he suggested. He also spoke about the reforms taking
place in the Indian economy, and the steps taken to
ease the process of doing business.
Gen V K Singh said that the EU has emerged as India’s
largest trade partner as well as a leading partner in
India's transformative socio-economic agenda. The
EU and its Member States are actively collaborating
with India in its ambitious flagship initiatives, and
forging 'win-win' partnerships that provide commercial
opportunities for European businesses while contributing
Augusto Santos Silva, Minister of Foreign Affairs, Portugal, Gen (Dr) V K Singh (Retd)
MInister of State of Foreign Affairs and Overseas Indian Affairs, India, Dr Frank Jurgen
Richter, Chairman, Horasis, and Chandrajit Banerjee, Director General, CII,
at the Horasis India Meeting at Cascais
Dr Naushad Forbes, President, CII, and
Co-Chairman, Forbes Marshall; Miguel Pinto Luz,
Vice Mayor of Cascais and the city administration,
and Dr Frank Jurgen Richter, at the Cascais
Town Hall
Rakesh Bharti Mittal, Vice President, CII, and Vice Chairman, Bharti Enterprises Ltd; Shobana Kamineni, President Designate, CII, and Executive
Vice Chairperson, Apollo Hospitals Enterprise Ltd; Ricardo Costa, MD, Expresso; Gunjan Sinha, Chairman, MetricStream, and Rajive Kaul,
Past President, CII, and Chairman, Nicco Engineering Services Ltd, at the Horasis India Meeting at Cascais
sectors like waste water treatment and management,
renewable energy, and IT.
Presentations on the Indian economy and the
opportunities for collaboration were made during the
business meetings.

to India's socio-economic development, by bringing
in much-needed best practices, investment, skills,
technologies and human resources. India and the EU
are now working together for enhanced collaboration
in key areas, including security, counter-terrorism, trade
and investment, energy, science and technology, health,
water, and stepped-up mobility for legitimate travelers,
he said.
Mr Manuel Caldeira Cabral, Minister of Economy,
Portugal, discussed how the two nations can forge closer
links through cultural exchanges and investment.
Dr Naushad Forbes, President, CII, and Co-
Chairman, Forbes Marshall, who led a 20-member
CII CEOs delegation to the Meeting, highlighted
India’s attractiveness as an investment destination
for Portuguese and other companies. The Indian
Government, he said, has been working on ‘tweaking
the system’ in order to make it easier to do business
in India. Initiatives such as Make in India, Digital India,
and Skill India, combined with a concerted effort to
improve the ease of doing business, are beginning
to bear fruit, he observed, pointing out that India has
moved up 12 notches in the World Bank’s Ease of Doing
Business Report. FDI inflows have expanded by 23%
in 2015-16 to $55.4 billion, which reflects international
investor confidence in India, he said.
Portugal, said Dr Forbes, has potential as a strong
economic partner for India and as a base for Indian
companies in Europe, given its trading ties with Britain
and the EU and its good relationships with its ex-colonies
and many countries in Africa.
The deliberations at this edition of the Horasis India
Meeting suggest that the end of the tepid growth period
Nirmala Sitharaman, Minister of State (Independent Charge) of Commerce & Industry,
India, and Denis Manturov, Minister of Trade and Industry, Russian Federation,
inaugurating the INNOPROM exhibition in Ekaterinburg, as Devendra Fadnavis,
Chief Minister of Maharashtra, Vasundhara Raje, Chief Minister of Rajasthan, and
Chandrababu Naidu, Chief Minister of Andhra Pradesh, look on
RUSSIA
CII Business Delegation to INNOPROM
Innoprom is the main international Industrial trade
fair in Russia, organized every year to showcase
Russian and global engineering innovations. This year,
India was the partner country at the fair, held from
11-14 July in Ekaterinburg, with strong representation
from the Government of India, at both the Central and
State level.
Ms Nirmala Sitharaman, Minister of State (Independent
Charge) of Commerce and Industry, with a number
of senior Government of India officials, Ms Vasudhara
Raje Scindia, Chief Minister of Rajasthan, Mr
Devendra Fadnavis, Chief Minister of Maharashtra, and
Mr Chandrababu Naidu, Chief Minister of Andhra
Pradesh, with teams their respective governments, and
a 25-member CII business delegation, led by Mr Shiv
is near and hopes of a steady recovery beginning 2017
are well founded, said Mr Chandrajit Banerjee, Director
General, CII.
The members of the delegation shared their perspectives
on various subjects at sessions of the Horasis India
Meeting, including those relating to globalization and
the rise of India, innovation, renewable energy, ‘Make
in India,’ agri and food processing, manufacturing, and
infrastructure, etc.
During the two days in Cascais, the delegates also met
and interacted with Mr Manuel Caldeira Cabral, and
Mr Augusto Santos Silva, Minister of Foreign Affairs,
of Portugal, as well as with Mr Miguel Pinto Luz, Vice
Mayor of Cascais and the city administration.
Signing of the MoU between CII and the Moscow
Regional Development Corporation

CII Communique August 2016 (Vol.38 No.8)

CII Communique August 2016 (Vol.38 No.8)

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CII Communique August 2016 (Vol.38 No.8)