` ` 4/2018 INDIA Contact: Rajesh Nath, Managing Director Please Note: Jamly John, General Manager Telephone: +91 33 40602364 1 crore = 10 000 000 Fax: +91 33 2321 7073 1 lakh = 100 000 E-mail: [email protected] 1 Euro = Rs.78 The Economic Scenario Economic Growth The World Bank has forecasted a growth rate of 7.3% for India this year and 7.5% for the next two years, making it the fastest growing country among major emerging economies. India's economy is beleived to be robust, resilient and has the potential to deliver sustained growth. Growth in India is projected to advance 7.3% in Fiscal Year (FY) 2018/19 (April 1, 2018-March 31, 2019) and 7.5% in FY 2019/20, reflecting robust private consumption and strengthening investment. The growth in South Asia is projected to strengthen to 6.9% in 2018 and to 7.1% in 2019, mainly as factors holding back growth in India fade. India retains the tag of the fastest growing country among the world's major emerging economies. India's growth projections remain unchanged since its January 2018 forecast. China is expected to slow down slightly from 6.9% in 2017 to 6.5% in 2018, 6.3% in 2019 and 6.2% in 2020. India's growth potential is about 7%, and it is currently growing at a pace above its potential attributing it to the major economic reforms and fiscal measures undertaken by the government. Noting that India's growth prospects are strong, the potential growth rate of India is around 7%. There are risks that all emerging market economies are facing because of global economic developments like the disorderly tightening of global financial conditions that could have implications for emerging market economies. Like other oil importers, India is also facing a higher oil prices. In India, investment growth has firmed recently, as the effects of temporary factors wane. The growth in South Asia is projected to accelerate to 6.9% in 2018, mainly reflecting strengthening domestic demand in India as temporary policy-driven disruptions fade. VDMA-Newsletter “India”, Edition 4/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444 2 Indian Economic and Industrial Scenario, 4/2018 VDMA INDIA Office Elsewhere in the region, ongoing recoveries in Bangladesh, Pakistan and Sri Lanka are expected to be accompanied by moderating activity in Afghanistan, Bhutan and Maldives. India is committed to a broad-based trade and investment agreement with the EU to be achieved in a generous spirit of mutual accommodation and of pragmatism as per the Indian Government. Indian companies are significant investors in the EU, in industries as far apart as pharmaceuticals and automobile components. India remains committed to an India-EU Broad-based Trade and Investment Agreement (BTIA). The negotiations for the BTIA have been held up since May 2013 and both the sides are yet to bridge substantial gaps on crucial issues. Since June 2007, both the sides have completed 16 rounds of talks and five stock-taking meetings on the proposed pact. The negotiations have witnessed many hurdles with both sides having major differences on key issues like intellectual property rights, duty cut in automobile and spirits and liberal visa regime. Besides demanding significant duty cuts in automobiles, the EU wants tax reduction on wines, spirits and dairy products, and a strong intellectual property regime. On the other hand, India is asking the EU to grant it data secure nation status. The country is among the nations not considered as data secure by the EU. The matter is crucial as it will have a bearing on Indian IT companies wanting market access to the countries in the bloc. India will endeavour to have a balanced RCEP trade agreement as it would cover 40% of the global GDP and over 42% of the world's population. The Regional Comprehensive Economic Partnership (RCEP), negotiations for which started in November 2012, aims to cover goods, services, investments, economic and technical cooperation, competition and intellectual property rights. The RCEP bloc comprises 10 Asean members (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam) and their six FTA partners - India, China, Japan, South Korea, Australia and New Zealand. There are risks in this because India has huge adverse balance of trade with China, Japan, South Korea and Asean. So far, 22 rounds of negotiations have concluded besides five minister-level meets. The services sector is an important component of the pact. India's trade deficit with China stood at € 51 ($ 63.12) billion in 2017-18. India wants certain deviations for such countries. Under deviations, India may propose a longer duration for either reduction or elimination of import duties for such countries. India already has a free trade pact with Association of South East Asian Nations (ASEAN), Japan and South Korea. It is also negotiating a similar agreement with Australia and New Zealand but has no such plans for China. The US has surpassed India to become the top destination for greenfield FDI investment in 2017. The number of greenfield FDI projects in India during the year fell sharply by 21% to 637. India had maintained the numero uno slot in greenfield FDI investment in 2015 and 2016. However, in 2017, the US reclaimed the spot from India, recording € 72 ($ 87.4) billion of announced Foreign Direct Investment (FDI). In the Asia and Pacific region, China was on top in terms of FDI in total number of new projects and capital investment, followed by India. China received foreign capital investment of € 42 ($ 50.8) billion in 2017 in greenfield projects, compared to India's € 21 ($ 25.1) billion. China received investments in 681 projects as against 637 in case of India. Globally in 2017, greenfield FDI weakened with the number of FDI projects declining by 1.1% to 13,200. Capital investment decreased 15.2% to € 543 ($ 662.6) billion alongside a 9.4% decline in job creation to 1.83 million. India was replaced by the US as the highest ranked country for FDI by capital investment boosted by major announcements from Foxconn and Saudi Basic Industries to invest billions in single plants. The US was also the highest ranked country for FDI by number of projects, recording 1,627 announcements. VDMA-Newsletter “India”, Edition 4/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444 3 Indian Economic and Industrial Scenario, 4/2018 VDMA INDIA Office Industry Scenario Infrastructure GVK achieves financial closure for Navi Mumbai airport A GVK-led venture that has won the bid for a € 2051 million (Rs 16,000 crore) second airport project in Mumbai, announced the financial closure for its first phase of construction. The concession agreement for the airport was signed in January this year between the GVK arm Navi Mumbai International Airport (P) Ltd and the City and Industrial Development Corporation of Maharashtra Ltd. (CIDCO), the nodal body for the project. NMIAL is a public private partnership venture in which the GVK led Mumbai International Airport (P) Ltd., (MIAL) that operates the existing airport in the city has a 74% stake. CIDCO holds the remaining 26%. AAI may partner Gujarat government for Dholera Airport Project The Airport Authority of India (AAI) is likely to partner with the government of Gujarat to build the € 256 million (Rs 2,000 crore) Dholera airport project. Equity participation between AAI and government of Gujarat will be 51% and 49%, respectively. The airport at the biggest upcoming greenfield city in India under the Delhi-Mumbai Industrial Corridor (DMIC) project at Dholera will be built over four years. The Dholera Industrial City Development (DICDL) is the special purpose vehicle (SPV) formed by the DMIC Trust and the government of Gujarat to administer the special investment region (SIR). It is seeking investments from defence and aerospace, heavy engineering, auto and auto ancillaries, manufacturing, pharma and biotechnology and MSMEs, among other sectors, thereby, proposing employment for 8.27 lakh people during the course. With a total footprint of over 920 sq km, Dholera is the biggest of the eight industrial smart cities being developed in the first phase of the € 82 ($100) billion DMIC project. Adani Logistics, NYK arm form rail logistics JV for auto sector Adani Logistics, an arm of Adani Ports and SEZ, has signed an agreement with NYK Auto Logistics India to form a joint venture that will specialise in transportation of finished vehicles using freight trains. Adani Logistics already has category 1 licence from the railway ministry which allows it to operate container trains on the broad-gauge network of the Railways throughout the country. The joint venture aims at strengthening the finished vehicles transportation service network in the country. The JV will participate in AFTO policy of the Railways and offer its automobile freight trains to ferry vehicles across the country in a more efficient manner. Accordingly, the JV is planning to commence operation with six automobile freight trains, which will be scaled up to 25 over the next three years. Indian Railways to use AI to manage track maintenance blocks Artificial intelligence (AI) that can diagnose the condition of rail tracks will be used by the railways to prepare a repair and replacement calendar and improve punctuality of trains. In India, unplanned track maintenance work is often cited as a reason why train operations descend into chaos. The use of AI will ensure that at least 90% of trains run on time as routine maintenance work would be planned in advance on the basis of the AI-aided calendar. the national transporter is already procuring automatic track detection machines which, through AI, can predict the life of tracks and track joints.