Brick and mortar businesses will be dead by 2023: Amitabh Kant
In an increasingly digitalized world, the brick and mortar business in India may cease to exist in the current form by 2023, said Niti Aayog, CEO, Amitabh Kant on Saturday. Speaking at the TiE Delhi-NCR and Lufthansa organized Startup Expo, Kant said brick and mortar businesses will move towards ecommerce, which means companies will be increasingly driven by technology. “India is the only country with a billion mobile phones and biometrics. In the last 6-7 months we have added almost 28 crore bank accounts. In the last 45 years we have given license to 19 banks but in the last nine months we have given licence to 23 payment banks, and many of them are telecom companies including Paytm and Airtel. The brick and mortar sector will go dead,” said Kant. As products and services move online and the world gets connected, traditional businesses will have to go digital, something that is already clearly visible in the retail industry. “We are just close to $ 18-19 billion market in e-commerce and take it from me we will be a $300 billion market by 2023. E-commerce is at the very beginning of its radical revolution and as the Internet and smartphones grow, you will also see leapfrog in technology. ” Kant went on to explain that similarly the traditional banking sector in the form of brick and mortar presence banking will face a decline. “It will all be mobile, telephonic transaction. India will leap frog again. This is because today we are about 350 million using the Internet but 2020-23 there will be about 1 billion people in India using the Internet. Similarly, usage of the Internet will increase with more people on smartphones. A billion Indians with access to the Internet, biometric and using the smart phones we will radically alter the world,” said Kant Kant added that even manufacturing world is getting digitised and the small and medium enterprises must understand that it is digitisation of manufacturing process which will lead to higher level of productivity. “Across the world, whether you look at trends in Japan, US or Germany, everywhere is getting digitised. It is inevitable.” Quincy Wilson Authentic Jersey
GST will smooth the way for e-commerce companies: Report
Implementation of GST will help resolve various issues concerning taxation and logistics with regard to e-commerce business, which has been recording rapid growth in the country, says a study. The e-commerce space has rapidly evolved but several challenges have surfaced primarily in areas of taxation, logistics, payments, internet penetration and skilled man power, the CII-Deloitte report on ‘e-commerce in India A Game Changer for the Economy’ said. “In taxation, for example, the lack of a uniform tax structure leads to several issues such as double-taxation or impediments in the free flow of goods across the country. However, the ensuing Goods and Services Tax (GST) is expected to help in overcoming these challenges through a uniform tax structure,” it said. Clearly defined rules for e-commerce transactions in GST and a consultative approach while framing these rules will be favourable to both, the government as well as e-commerce companies, it added. It also said timely and effective implementation of programmes like Digital India, Make in India, Startup India and Skill India will support the e-commerce ecosystem to overcome the challenges related to ineffective rural internet penetration and lack of skilled manpower. The report has recommended several measures including in the areas of direct and indirect taxes to promote this sector. It said documentation requirements should be simplified for applying tax treaty provisions such as declaration by the payee, as opposed to tax residency certificate; and simplified mechanism should be in place to obtain lower or nil withholding tax certificates for the companies, without requiring payer details. “Unutilised business losses of e-commerce companies should not be lost even if the shareholding of the company changes by more than 49 per cent. Increasing the number of years within which the tax holiday can be availed by startups in the e-commerce industry,” it suggested. The indirect tax environment in terms of policy as well as administration would also be the key towards unleashing the potential of the industry in India. “The indirect tax laws need to be evolved and re-designed to consider the changing business dynamics of e-commerce since the activities involve high volume and low-value supplies,” it said adding a central committee needs to be constituted to oversee the implementation of a conducive environment. States and local bodies should ensure that a comprehensive tax is uniformly interpreted, and implemented for facilitating the growth of the sector, besides GST laws should take into consideration the actual nature of the transaction to determine tax liability of the sellers. Michael Fulmer Jersey
Single-brand FDI: Govt to review norms
The government is looking to review the requirement for mandatory local sourcing of 30% of the goods sold by overseas players, who have entered India through the single-brand retail window. The issue has come back to the fore after some global players like H&M flagged their concerns to the government. During a recent meeting with government officials, the Swedish company, which is the world’s second largest fashion retailer, pointed out that India is a large sourcing base for the company to meet its global business needs and the mandatory domestic purchase requirement was a hurdle for players setting up shop in the country. H&M, which is opening several stores, is the latest player to air its concern against the policy. Sources said some of the complaints appeared genuine, especially when there was large volume of international purchases from India for the global supply chain. Several other players such as Zara and Marks & Spencer are already operating in the same space as H&M, which is seen as a late entrant. “If companies are sourcing voluntarily, why do we need these restrictions which seem to belong to a different era?” said a source, suggesting that the entry of international players was already resulting in opening of stores and creation of jobs in the retail sector. While allowing 100% FDI in single-brand retail, the UPA government had originally stipulated mandatory 30% sourcing from the small scale sector. But the clause was later amended after companies such as IKEA, the multinational furniture and home accessories giant, said it was not feasible to operate in the country with these restrictions. Carve-outs have been made for segments such as “high technology” goods, paving the way for the entry of the likes of Apple. After the change, IKEA alone has committed to invest close to Rs 12,500 crore in opening stores and creating infrastructure across the country. But a fresh change in the sourcing policy may not be easy given that a section of officers within the government is of the view that such requirements are essential to promote domestic manufacturing and boost the ‘Make in India’ campaign. Logan Shaw Jersey
More ecommerce will trigger big innovations in India: Study
Expansion of India’s ecommerce industry will trigger innovation in payments and delivery models as well as enable better use of technology such as wearables, drones and artificial intelligence, a study by Confederation of Indian Industry and Deloitte has said. In the report titled ‘e-Commerce in India: A Game Changer for the Economy’, CII director general Chandrajit Banerjee said the ecommerce industry has been directly impacting micro, small and medium enterprises and has a favourable cascading effect on other industries. “It is helping connect small merchants with customers across India. Long-term impact of this on the economy would be increase in employment, growth in export revenue, better products and services to customers and increase in tax collection by exchequers,” the report said. Increasing internet and smartphone penetration are expected to boost expansion of ecommerce sector in tier-II and tier-III cities, the report said. It said the biggest challenges to the industry’s growth have surfaced primarily in areas of taxation, logistics, payments, internet penetration and skilled manpower. “Going forward, the most important thing is the collaboration between the government, industry and academia to improve efficiencies in ecommerce,” said Viresh Oberoi co-chairman of CII’s national committee on ecommerce. “We are engaging with the government in states and at the Centre to help create an enabling environment for the industry,” he said. The number of online shoppers in the country grew 95% between 2013 and 2015, and the number is expected to reach 140 million by 2018 and 220 million by 2020, the report said. According to the report, the number of online shoppers in India as a percentage of total internet users grew to 11% in 2015 from 9% in 2013. It is expected to reach 36% by 2020. “From an investment perspective, considerable funding in the e-commerce ecosystem has led to emergence of new business models across B2B, B2C, logistics service providers, payment wallets, digital advertising and analytics,” Neeraj Jain, partner at Deloitte Touche Tohmatsu India LLP said. He said these investments have enabled the ecommerce companies to leverage leading technology and related practices to reach out to millions of new online customers by delivering services more effectively and efficiently. Nigel Bradham Womens Jersey
E-commerce boom: Investors turn focus to profitable growth
As the e-commerce market grew by leaps and bounds in the last four years, investors have shifted their focus to profitable growth to achieve stability, a CII-Deloitte report says. According to the report, e-commerce B2C segment has grown significantly, leading to creation of many ‘unicorns’. “However, focus of investors going forward seems to have shifted to profitable growth to achieve stabilisation of the economic model,” said the report titled ‘e-Commerce in India – A Game Changer for the Economy’. It further said the primacy on profitable growth seems to be leading to collaborations and partnerships across the value chain with the aim of optimising costs. It forecast that since the e-commerce B2B segment is showing signs of rapid digital adoption, this is likely to feed the significant rise of MSMEs and entrepreneurs from the Indian hinterland. With a push from investors for profitability and early break-evens, the leading e-commerce companies are seen to be cutting down their burn rates by as high as 50 per cent. “This aggressive drive comes at a point when capital is becoming scarce for top venture-backed online retail companies. There is also a reduction in dependence on discounts as a growth strategy,” the report added. The e-commerce industry is expected to form the biggest chunk of the Indian Internet market with a value of approximately USD 100 billion by 2020. According to the document paper, the e-commerce growth has been brought about by increasing Internet and smartphone penetration in not just metros, but in tier two and three cities. Mobile devices are further expected to drive sales through online platforms over the next 5 years, it said. Za’Darius Smith Jersey
Ecommerce companies like Flipkart, Amazon may fail to meet vendor sales norm this year
Leading ecommerce companies may not be able to comply immediately with the recent stipulation to cap any vendor on their platforms at 25 per cent of total sales. They will only be able to do so after the current financial year ends, said people aware of the matter. “It is an accounting issue that normally has to be collated at the end of the fiscal year,” said one of those cited above. “The 25 per cent data can be given over a period of time and not immediately.” The government last month legalised the marketplace models operated by Amazon India and homegrown rivals Flipkart and Snapdeal, allowing 100 per cent foreign investment in such businesses. Apart from the 25 per cent restriction, they have to function strictly as technology platforms for buyers and sellers. The government had said the rule would take effect on March 29, the day Press Note 3 was issued, leaving many ecommerce companies worried about compliance, said those cited above. For example, both Amazon and Flipkart have vendors that exceed the 25 per cent threshold on their platforms. One of the largest vendors on Amazon India is Cloudtail, owned by Prione Business Services, which is in turn held by Amazon Asia and Catamaran. Cataraman is the personal investment vehicle of Infosys founder NR Narayana Murthy. “We would not like to speculate on the share of Cloudtail or any other seller till we close our books for the year and given how recent the Press Note 3 is,” an Amazon India spokesperson said in an emailed reply. “We will put a process in place to inform sellers in case they are close to or likely to breach the 25 per cent guidance.” ET had reported last week that Flipkart will drastically scale down in the next 12-18 months the contribution of WS Retail, still the largest seller on its platform, to conform to the new guidelines. “At Flipkart, we have always been compliant of all rules and regulations and will continue to adhere to the new guidelines as well,” a Flipkart spokesperson said in an email without replying to specific questions on the contribution of WS Retail. Snapdeal is fully compliant with the stipulation, a spokesperson said. “Snapdeal has nearly 300,000 sellers from across India. Given the span and depth of our seller base, even the bigger ones account for much less than the 25 per cent threshold mandated for any single seller,” the person said. “Because of the level of technology embedded in our operations, it is possible to assess the on-going volumes contributed by various sellers and also make a range bound projection for the current year,” the person added. There was an attempt at getting the Internet and Mobile Association of India (IAMAI), a group that has members ranging from tech companies to online retailers, to lobby the government over the new rules. Although a draft note addressed to the Department of Industrial Promotion and Policy (DIPP) had been prepared (see ET, April 4, 2016), a lack of consensus among the ecommerce companies led to the idea being junked. The draft had sought time until September to comply with new marketplace rules. Jayson Werth Womens Jersey
Changi, AAI looking for mutually acceptable terms: Mahesh Sharma
Union Minister Mahesh Sharma today said efforts are being made to work out “mutually acceptable” terms for AAI and Singapore’s Changi Airport with respect to operating Ahmedabad and Jaipur airports. The latest development comes after Airports Authority of India’s (AAI) terminated discussions following its assessment that the Changi Airport’s proposal would not be commercially viable. The proposal to have Changi Airport to operate and maintain Ahmedabad and Jaipur aerodromes was mooted during Modi’s visit to Singapore in November 2015. “We have conveyed (to Changi Airport) that their terms and conditions are not favourable. We have asked them to make the conditions mutually acceptable,” Sharma, the Minister of State for Civil Aviation, said today. He said AAI would go ahead only if the proposal is “suitable” and in case that does not materialise, then an alternative would be looked at. According to sources, Changi Airport was allegedly demanding a very high share in revenues from the two airports which was not acceptable to AAI. With regard to Ahmedabad and Jaipur airports, AAI had inked a memorandum of understanding (MoU) with Singapore Cooperation Enterprise (SCE) during Modi’s visit to the island nation. In January, the Union Cabinet had also given its ex-post facto approval to the MoU. Earlier this month, an AAI official said it could not reach “mutually agreeable terms” with the Changi Airport on the proposal. SCE had nominated Changi Airport for the proposed project. Changi Airport Group (Singapore) Pte Ltd runs the Changi airport in Singapore. Under the MoU, both parties were to cooperate in planning and development of Ahmedabad and Jaipur airports besides other aspects including traffic and commercial development, service quality and operations and management. Globally, limited O&M (Operation & Maintenance) contract models are prevalent for the entire airport operations, the statement said, adding the AAI has no previous experience in awarding O&M contract model of terminal buildings to other entities. De’Vondre Campbell Jersey
Air India to focus on higher revenues, not trimming staff costs: Senior official
Seeking a turnaround in its fortunes, Air India is looking to augment revenues rather than trim staff expenses even as it battles tough market conditions and financial woes. The national carrier, which is surviving on a staggered Rs 30,000 crore bailout package, has around 19,000 employees, including over 1,500 pilots and about 6,000 people on contract. A senior official said the airline is looking at various options to increase revenues and that there are no plans to cut down costs related to staff. “Air India’s staff is around 12 per cent of the total expenses…It might be an easy way to slash expenditure by withdrawing or doing away with certain perks given to employees but that will not help in the long-term,” he noted. The Government-owned airline’s annual wage bill stood at Rs 3,100 crore in the 2014-15 fiscal as against Rs 3,600 crore in FY 2011-12 by abolishing productivity-linked incentives as per the Department of Public Enterprises (DPE) guidelines. Significantly, the carrier had early last year announced a slew of cost-cutting measures including reduction in reimbursables by 10 per cent and abolition of posts from non-operational areas besides other measures to rein in the spending and return to break-even. The use of expensive hotels or five-star hotels for stay during travel or holding events has been restricted unless it is unavoidable and the budget for such activities has been reduced by 10 per cent as part of the measures…These cost-cutting measures are part of a two-pronged drive to speed up our return to the break-even status,” Air India had said. The sale and lease back of aircraft would be a good option that would help in better revenue management. Besides, the focus is on flying more number of people, introducing new routes, improving efficiency and services, the official said. Sale-leaseback is an arrangement in which an owner sells an asset to a leasing firm and, at the same time, leases it (as a lessee) on a long-term basis to retain exclusive possession and use. This frees capital tied up in a fixed asset, while the lender obtains a guaranteed lease. Currently all its 21 dreamliner Boeing 787-800 planes in its fleet are operating under the sale and lease back arrangement. Buoyed by substantial improving in operational performance, Air India expects to have an operational profit of Rs 8 crore in the financial year ended March 31, 2016. It would also be the first time since the merger of Air India and Indian Airlines that the national carrier would be reporting an operating profit. The airline was expected to trim its losses by around 40 per cent to Rs 3,529.80 crore in the last financial year. “Air India is expected to earn operating profit of Rs 8 crore as compared to the operating loss of Rs 2,636.18 crore in the previous year. This is the first time that the company is going to achieve operating profit since its merger in 2007-08,” Minister of State for Civil Aviation Mahesh Sharma had informed Parliament last month. The flag carrier, however, had a total debt burden of Rs 51,367.07 crore, including Rs 22,574.09 crore outstanding on account of aircraft loans, as on March 31, 2015. The national airline was extended Rs 30,231 crore lifeline by the government in 2012 under a turnaround plan stretching over a period of nine years to keep it afloat. The Government has already infused Rs 22,280 crore in the carrier as part of this financial package till the last fiscal. Derrius Guice Womens Jersey
Government working on proposal to invest Rs 6,000 crore on regional airports
The aviation sector is set to get a leg up with the government working on a proposal to invest Rs 6,000 crore this fiscal year to revive and develop 75 regional airports, which currently see little activity. The civil aviation ministry will soon send a formal proposal to the finance ministry and both have already discussed the matter at a recent meeting, a senior aviation ministry official said. “The project will be implemented by the Airports Authority of India,” the official told ET, speaking on the condition of anonymity The proposal is in line with the government’s stated plan to take flying to the masses, by boosting air connectivity to small cities and towns, and subsidizing fares to such destinations. In his budget announcement in February, Finance Minister Arun Jaitley had said the central government would partner with states to develop some of these airports to improve regional connectivity. These facilities “can be revived at an indicative cost of Rs 50 crore toRs 100 crore each”, he had said. But the aviation ministry official said the government’s estimate is a little low. “Even AAI (Airports Authority of India) feels that each airport cannot be revived in just Rs 100 crore and the allocation should be more.” Analysts said the government should look at the viability of an airport before investing money in reviving it. “The government would want to provide infrastructure for air connectivity to as many points as possible, which is a laudable objective,” said Sanjay Sethi, who runs Nector Consulting and was head of the infrastructure group at Kotak Investment Banking. “But at the same time, it would not make sense to develop or revive airports in areas which do not have the potential for new flights. Only those airports should be developed where there is a viability.” The proposal is in sync with the plans outlined in a draft of the aviation policy made public late last year. The government wants to fix fares on regional flights, to a maximum of Rs 2,500 for flight lasting an hour, to attract more people to fly. The rest of the cost would be met through a viability gap fund. The National Civil Aviation Policy 2016 is likely to be taken up for clearance by the Union Cabinet this week. K.J. Wright Jersey
US to focus on infra investment in smart cities: Ambassador
United States Ambassador to India Richard R. Verma on Friday said the US will continue to focus on making investments in infrastructure in Indian smart cities, which have an investment potential of $1.5 trillion. “Infrastructure development in smart cities in India will continue to be the focus of the US government. There is a market potential of $1.5 trillion in smart cities,” Verma said at the 24th annual general meeting of the American Chamber of Commerce in India. “Investment in smart cities’ infrastructure is one of the pillars of the India-US commercial dialogue. The US will collaborate with governments at the Centre, states and India’s finance sector to take the smart cities projects off the ground,” he added. Currently, around 38 dialogues are in progress between India and the US at the government level, he said. “38 dialogues are on between India and the US, amongst which a number of US agencies are talking to the Indian government on smart cities,” the American ambassador said. “There is massive urbanisation happening in India at levels we have never seen earlier. Opportunities in rural India are drying up. India needs to construct a Chicago city every year to accommodate people moving to its cities,” Verma said. He said the US government had initiated a reverse trade mission under which 14 officials from the Vizag smart city project visited US cities to analyse the infrastructure requirements of a smart city. Talking about the growing partnership in India, he said: “We have seen broadening and deepening of our relationship. Year 2015 saw the India-US bilateral trade scale new heights. Soon the two countries will hit the $108 billion-mark.” Vladimir Tarasenko Authentic Jersey