Financial Inclusion from Obligation to Opportunity
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Volume 20 No. 3 March 2011 Contents 05 newsmaker Trade Agreements with Japan & Malaysia CII Missions visited Japan and Malaysia, coinciding with the signing of the Comprehensive Economic Partnership Agreement (CEPA) with Japan, and the Comprehensive Economic Cooperation Agreement (CECA) with Malaysia. 09 spotlight Financial Inclusion Innovative paradigms can help convert ‘Obligation’ into ‘Opportunity’, finds the CII-BCG Report on Financial Inclusion. 12 Cover story Understanding Budget 2011-12 The focus in Budget 2011-12 is on building infrastructure, tackling inflation, and putting more income in the hands of rural India. 23 s foCu International Engineering & Technology Fair The 19th edition of the flagship International Engineering and Technology Fair, showcased technological prowess in diverse sectors of the economy. 29 Corporate india CII Governance Series In the CII Governance Series, leaders of corporate India shared their perspective on corporate governance challenges. plus All our regular features we welcome your feedback and suggestions. do write to us at [email protected] Edited, printed and published by Chandrajit Banerjee, Director General, CII, on behalf of Confederation of Indian Industry from The Mantosh Sondhi Centre, 23, Institutional Area, Lodi Road, New Delhi-110003 Tel: 91-11-24629994-7 Fax: 91-11-24626149 Email: [email protected] Website: www.cii.in Printed at Lustra Print Process. B- 249 Naraina Industrial Area, Phase 1, New Delhi - 110 028 Registration No. 34541/79 Jou RNAL oF ThE CoNFEDERATIoN oF INDIAN INDuSTRy 2 | March 2011 Communiqué india & the world newsmaker India and Japan sign CEPA IndA I And JApAn opportunities formally signed the a n d i m p r o v i n g C omprehensive t h e i n v e s t m e n t Economic Partnership environment, besides Agreement (CEPA) on ensuring protection of 16 February, during Intellectual Property the visit of Mr Anand Rights. Sharma, Minister Coinciding with the for Commerce and visit of Mr Anand Seiji Maehara, Foreign Minister, Japan; and Anand Sharma, Commerce and Industry Industry, India, to Minister, India; with Hari S Bhartia, President, CII, and and Co-Chairman & MD, Jubilant Sharma to Japan, Japan. Bhartia Group; at the signing ceremony of the CEPA between India and Japan, in Tokyo CII organised a Expressing his optimism on the signing of CEPA 16-member business delegation to Japan from 15- between the two countries, Mr Hari S Bhartia, President, 16 February. The CII delegation, comprising of top CII, said “The CEPA signed between India and Japan business leaders, was led by Mr Hari S Bhartia, and is essentially the first step towards the process of included Mr Amitabh Kant, MD & CEO, DMICDC, building a strong, sustainable and a mutually beneficial Mr. Rajesh Shah, Past President, CII, Mr. Ramesh economic relationship between the two countries. We Adige, President, Ranbaxy Laboratories Ltd, Mr are confident that the CEPA will catapult the bilateral Rahul Desai, MD, Religare Enterprises Ltd. and economic relationship between India and Japan to a Mr. Chandrajit Banerjee, Director General, CII, amongst higher trajectory.” others. The India - Japan CEPA, after its implementation, The members of the delegation also participated in a is expected to eliminate tariffs on 94% of India- Business Conference in Tokyo organized by Nippon Japan bilateral trade flows over the next 10 years. The Keidanren, a leading industry chamber of Japan and a CEPA also aims at liberalizing the trade in Services. The MoU Partner of CII. Mr Anand Sharma delivered the pact would also help in increasing investment keynote address at this conference. CEOs delegation to Japan with Anand Sharma in Tokyo Communiqué March 2011 | 5 newsmaker india & the world India - Malaysia Bilateral CECA Mr AnAnd ShArMA, policy which mandates U n i o n M i n i s t e r o f 30% equity participation Commerce & Industry, by local companies. India, and his Malaysian The Agreement will come counterpart, Mr Mustapa into effect on 1July 2011 Mohamed, Minister for and the first review will International Trade & be held within a year of Industry, signed the India- coming into force. Malaysia Comprehensive Malaysia is the 3rd Economic Cooperation largest trading partner Agreement (CECA) in the of India amongst the presence of Malaysian ASEAN (Association Prime Minister, Mr Mohd of South East Asian Najib Tun Razak at Nations) countries. India- Putrajaya in Malaysia Y.B Datuk Seri Mustapa Mohamed, Minister of International Trade & Industry, Malaysia; and Anand Sharma, Minister of Commerce & Industry, Malaysia trade increased on 18 Ferbruary. The India; exchanging the CECA documents while Dato’ Sri Mohd Najib Tun from US$ 3.52 billion to signing of this Agreement Abdul Razak, Prime Minister of Malaysia, looks on US$ 9.03 billion between concludes the processes 2005 and 2010 after reaching a peak of US$ for implementing the CECA from 1 July 2011. 10.65 billion in 2008. The India-Malaysia CECA is a comprehensive Mr Sharma led a high-level business delegation and ambitious agreement that envisages to the event, including CEOs of top CII member liberal trade in goods and services and a companies in India, Mr B Muthuraman, President- stable and competitive investment regime Designate, CII, and Vice Chairman, Tata Steel, to promote foreign investment between the Mr Deep Kapuria, Chairman, Hi-tech Gears, two countries. The goods package under the Mr. Ranganathan Venkata Sheshan, CEO, CECA takes the tariff liberalization beyond the MAS GMR Aerospace Engineering Company India-ASEAN FTA commitments on items of B Muthuraman, President-Designate, Ltd, Mr. Manish Singhal, Executive Director – mutual interest for both countries. CII, and Vice Chairman, Tata Steel Ltd International Business Division, Bharat Earth Under the agreement, India will get market Movers, Dr Debashis Sarkar, General Manager, access in Malaysia for goods including fruits such as Coal India, Mr P. S. Nair, CEO- Corporate (Airports Sector), mangoes, banana and guava, basmati rice, two wheelers Delhi International Airport, and Mr Umang Sharma, CEO and cotton garments. At the same time, protection & Director, Bry-Air Asia Pvt Ltd. continues to be provided for the sensitive sectors. Earlier, Mr Anand Sharma called on the Malaysian Prime Under the services agreement, India and Malaysia Minister to apprise him of the steady growth in bilateral have provided commercially meaningful commitments economic engagement and the excellent relations in sectors and modes of interest to each other which between the two countries. Mr Sharma expressed the should result in enhanced services trade. Sectors hope that the bilateral trade target of US$ 15 billion by such as accounting and auditing, architecture, urban 2015 set during the visit of the Indian Prime Minister planning, engineering services, medical and dental, to Malaysia last October would be achievable with the IT and ITES, management consulting services, etc. signing of the bilateral CECA. would get Malaysian market access. Two - way flow of investments are also expected to get a boost. During his meeting with Mr Mustapa Mohamed, MITI Minister, Mr Sharma discussed a wide range of bilateral and regional Malaysia has offered a comparatively higher level of FDI matters including the Delhi-Mumbai Industrial Corridor in key sectors of interest to India such as construction project, the progress under the India-ASEAN Services & services (51%), computer and related services (100%), Investment Agreement negotiations, and the Comprehensive management and consultancy services(100%). This is Economic Partnership in East Asia (CEPEA). a breakthrough, given that Malaysia has a Bhoomiputra 6 | March 2011 Communiqué financial inclusion spotlight Financial Inclusion From Obligation to Opportunity The task is herculean, and challenges infinite, in taking basic financial services to the Indian masses. But innovative paradigms can help convert ‘Obligation’ into ‘Opportunity’, finds the CII-BCG report on Financial Inclusion B Muthuraman, President-Designate, CII, and Vice Chairman, Tata Steel Ltd; Pranab Mukherjee, Finance Minister of India; Hari S Bhartia, President, CII, and Co-Chairman & MD, Jubilant Bhartia Group; and Chandrajit Banerjee, Director General, CII Mr. prAnAB MUkhErJEE, Finance Minister of India, in India is 47% of Indian households, the criteria being released the Confederation of Indian Industry (CII) and the household owning a bank account. The situation is the Boston Consulting Group (BCG) Report on ‘Financial grimmer in rural India because, despite having 80,500 Inclusion– From Obligation to Opportunity’ on 5 March bank branches spread across the length and breadth in New Delhi. of the country, only 5% of India’s over 600,000 villages The report is based on a nation–wide survey covering have a bank branch. Thus, the task of inclusion is around 12,000 customers, to understand their needs in Herculean, and challenges infinite in taking the basic terms of credit and financial products and the difficulties financial services to the masses. they face in meeting these. It aptly brings home the But obligation is just one side of the coin. The other extent and nature of financial exclusion in India through side constitutes nothing less than a profitable business select customer profiles, that range from a rickshaw opportunity hidden in the process of including the vast puller in New Delhi earning Rs. 36,000 per annum to multitudes in the financial ambit. The late management a shop owner in Ultadanga, West Bengal, earning Rs. guru,