Foreign firms rush to India’s online marketplace

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India’s booming online marketplace business has attracted a new wave of merchants and sellers from countries such as China, South Korea, Japan, Singapore and the US. In fact, thousands of sellers are getting into tie-ups with Indian e-commerce players to kick-start operations in the country.

 

According to industry insiders, around 50,000 sellers from China, South Korea and Singapore are planning to enter India through online marketplace players.

 

“In business-to-business (B2B) segment, there is no online organised player in the country right now. The market is being created for the online businesses,” said Sanjay Sethi, co-founder and CEO of Shopclues. The company has brought in DHgate, the second largest player in China after Alibaba, on to its platform. It’s also getting 25,000 South Korean merchants on board. Tie-ups are also in process with Singapore Traders Association to enable them to sell on Shopclues.

 

American retail major Walmart is also exploring ways to tie up with leading e-commerce companies in India, including Flipkart, Snapdeal, ShopClues, Grofers and Bigbasket. It is learnt that German wholesale giant Metro Cash and Carry is also in talks with e-commerce marketplace players to sell its products online.

 

Meanwhile, e-commerce giant Alibaba is looking to make a big bang entry into India’s marketplace via One97 Communications-owned Paytm.

 

Alibaba is expected to be the support behind Paytm’s China product portfolio. With that in place, Paytm will aim to become the biggest Indian player insofar as the number of sellers on the platform is concerned. With eight million sellers, Alibaba has the widest seller range as well as product portfolio.

 

This is not for the first time that Paytm is planning to sell Alibaba’s product range. During Diwali last year, Paytm had the whole product catalogue sourced from Alibaba and merchants from China were directly shipping products to customers in India, saving Paytm the hassle of finding warehouses.

 

As for the second top player in China, DHgate, online B2B would be a gateway into India and an opportunity to get connected to 350,000 sellers through the Shopclues portal.

 

DHgate plans to list its products across categories, including electronics, accessories, beauty products and sports. “From China we are getting around 10,000 SKUs (stock keeping units) listed. It is not a retail business and the target audience for this business are other businesses in India,” said Sethi.

 

The foreign investment rules vary across retail platforms and companies often resort to complex structuring to bypass policy. While foreign direct investment (FDI) is capped at 51 per cent in multi-brand retail with states having the last say on whether international players would be permitted to operate or not, there’s no limit of foreign investment in single-brand and business-to-business or cash and carry.

 

In e-commerce, however, FDI is not permitted. But, e-commerce players are mostly run with foreign money by operating marketplace platforms, where rules have not been framed yet.

Source: http://www.business-standard.com/article/companies/foreign-firms-rush-to-india-s-online-marketplace-116020100015_1.html

Startups enjoy 3 years tax holiday over a five year window

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If a startup claims benefit in first year & does not make profit in next two years, it can still enjoy tax exemption on profit in fourth and fifth year

The three-year tax holiday proposed for startups in India will be available over a five-year window, ensuring that innovators won’t lose the benefit even if they make a profit later, the government said.

Those seeking the income tax exemption, announced in the Startup Action Plan on Saturday, will need to get approval by March 2019, in line with the government’s policy to weed out exemptions and bring down the corporate tax rate to 25%. Startups approved until March 31, 2019, will enjoy the benefit for up to five years. The government has proposed that a high-level, inter-ministerial committee should vet startup proposals to validate the innovative nature of the business for granting tax-related benefits. The details of the tax benefits will be announced in the budget.

“The benefit will be available for three years over a five-year period, “a senior government official told ET. If a startup claims the benefit in the first year and does not have a profit in the next two years, it will not lose out on the exemption. If profits are made in the fourth and fifth year, they will still be eligible for the tax break.

“All startups incorporated in India not prior to five years as per the definition of startup and starting the operations before 2019 can get this benefit for three years,“ said Amitabh Kant, secretary in the Department of Industrial Policy and Promotion, which piloted the startup initiative.

With the deadline for seeking exemption set for March 2019, the scheme will effectively run till March 2024, a period of eight years from now.

“This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations, “according to the action plan document.

The policy imposes only one condition on startups claiming the benefit, apart from seeking approval from the appropriate body and meeting eligibility criteria: it should not distribute dividend while getting the tax exemption.

Tax-friendly Regime Need of the Hour for Startup Investors

The devil is in the details. The tax incentive package for startups will be clear in the Budget. But open-ended tax breaks won’t be possible as the government has already signalled a phasing out of exemptions to lower the corporate tax rate. Investments in unicorns would typically be long-term. So, it makes eminent sense to spare investors from paying capital gains tax when they sell their unlisted shares in startups after holding them for over a year. A tax-friendly regime will encourage many of them to relocate to India from, say, Singapore. The government, as promised, should end its Inspector Raj to boost the startup ecosystem.

Source: http://epaperbeta.timesofindia.com/Article.aspx?eid=31816&articlexml=Startups-May-Get-5-Year-Window-to-Avail-18012016015013

 

Singapore pips Mauritius as India’s top FDI source

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Singapore has replaced Mauritius as the top source of foreign direct investment (FDI) into India during the first half of the current financial year.

During April-September 2015, India has attracted $6.69 billion (Rs 43,096 crore) FDI from Singapore while from Mauritius, it received $3.66 billion (Rs 23,490 crore), according to data from the Department of Industrial Policy and Promotion (DIPP).

Foreign investment from Singapore was $2.41 billion in the year-ago period.

According to experts, the Double Taxation Avoidance Agreement (DTAA) with Singapore incorporates Limit-of-Benefit (LoB) clause, which has provided comfort to foreign investors based there to invest in India.

“Investors are preferring Singapore to Mauritius as the LoB clause in India-Singapore treaty provides substance and certainty,” said Krishan Malhotra, head of tax and an expert on FDI with corporate law firm Shardul Amarchand and Mangaldas.

FDI from Singapore during the first six months of the current financial year is also more than what it had invested in India for the whole of 2013-14 ($5.98 billion). India had attracted $6.74 billion foreign investment during 2014-15.

Overall, Singapore accounts for 15 per cent of the total FDI India received between April 2000 and September 2015. However, Mauritius makes up 34 per cent of FDI during the same period.

Sectors that attracted the highest foreign investment during April-September 2015 include computer software and hardware ($3.05 billion), trading ($2.30 billion), services and automobile ($1.46 billion each) and telecommunications ($659 million).

Foreign investment is crucial for India, which needs about $1 trillion by March 2017 to overhaul infrastructure such as ports, airports and highways, and to boost growth.

Source: http://www.business-standard.com/article/economy-policy/singapore-pips-mauritius-as-india-s-top-fdi-source-115120700040_1.html

Foreign banks buy up bulk of Indian state government debt

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Offshore units of Nomura, Standard Chartered and Bank of America Merrill Lynch bought about Rs 3,000 crore of the Rs 3,500 crore on offer. (Photo: Reuters)

Three banks snapped up almost 90 percent of bonds sold by Indian states to foreigners, and turned them into derivatives, raising the prospect of more volatility in one of Asia’s best performing debt markets.

Several market participants involved in the sale said offshore units of Nomura, Standard Chartered (STAN.L) and Bank of America Merrill Lynch (BAC.N) bought about 30 billion rupees ($451 million) of the 35 billion rupees on offer in October, the first window for foreigners to buy in.

Much of that debt was then sold for a hefty fee as derivatives known as total return swaps to offshore clients keen for the bonds’ higher yields, compared with India’s already popular sovereign debt, and with similar guarantees.

In contrast, traditional buyers of the illiquid bonds are state banks, who hold the debt to maturity.

When contacted by Reuters, the three banks declined to comment.

India has been one of the most resilient emerging markets, with foreign buyers taking up about $9.7 billion of debt this calendar year, nearly exhausting available limits on sovereign debt purchases.

Those purchases have helped domestic debt return 7.8 percent so far this year, the highest in Asia, according to HSBC.

Given that appetite and a need to expand its investor base, India let foreigners buy state bonds and also relaxed the investment ceiling in government bonds by around 56 billion rupees in September: the first step in a gradual opening.

“The main objective of (Reserve Bank of India) in opening these limits is to attract diverse and new sets of investors to the Indian bond market,” said a senior foreign bank treasury official based in Mumbai.

“But if eventually the FII (offshore) units of the foreign banks in India get to corner the limits, elbowing out the long term investors, then that leaves open a big risk of these trades unwinding and disrupting the Indian debt market.”

India’s central bank has sought to discourage “bond tourists”, favouring what it calls “real” investors, who would not flit in and out of the market.

Although currency and market risks have been passed on to other buyers, a sharp sell-off could see these investors re-selling the derivatives back to the banks and forcing them to swap the debt or sell at a discount.

But with foreigners owning only 4 percent of Indian government debt versus 47 percent in Indonesia, for example – the impact of even a significant sell-off would likely be muted.

“We are less concerned as the liquidity in IGBs is one of the highest in the region, and foreign positioning remains a very low component of the outstanding market,” said Rohit Arora, interest rate strategist at Barclays in Singapore, referring to Indian government bonds.

The next window for foreigners to buy state government debt is on Jan. 1.

($1 = 66.450 Indian rupees)

(Writing by Clara Ferreira Marques; Editing by Rafael Nam and Jacqueline Wong)

 

After 50 years of diplomatic ties, India and Singapore to be strategic partners

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After almost five decades of having diplomatic ties, India and Singapore will become strategic partners for the first time on Monday.

The partnership will encompass all aspects of bilateral ties from expansion of defence cooperation, enhancement of trade and investment and strengthening of regional relationship with the Association of Southeast Asian Nations (ASEAN).

The decision to sign the Strategic Partnership Agreement with Singapore was taken in August 2014 based on a ‘5S Plank’. Since then both Prime Minister Narendra Modi and Singapore Prime Minister Lee Hsien Loong have been continuously discussing the contours of such a pact as they planned to take their relationship beyond just business and trade.

“It is crucial to have such a pact with Singapore considering its strategic location. Not only will it enhance India’s ‘Look East’ policy, but it will also give India a greater voice in the ASEAN region at large,” an official told BusinessLine.

This is also done keeping in mind the increasing presence of China in that region and the escalation of dispute in the South China Sea region, the official added.

As a result, Modi’s visit to Singapore assumes importance. The pact will be signed with both leaders having a summit-level dialogue where all issues are expected to be discussed, with a special focus on India’s overall strategy in the Indian Ocean region.

“Singapore is an integral part of our Look East Policy and it was announced from there by our former Prime Minister Narasimha Rao. Singapore remains one of our important defence exporters. Besides, they have been trying to act as a bridge between India and China and all these is linked to the entire Indian Ocean strategy that India is now working on,” highlighted Sanjaya Baru, Director for Geo-economics and Strategy, at the London-based International Institute of Strategic Studies (IISS).

Recently, at a meeting of the Fourth Joint Commission, which was co-chaired by External Affairs Minister Sushma Swaraj and her Singaporean counterpart Vivian Balakrishnan, issues such as maritime cooperation, trade ties and cyber security were discussed. While in Singapore, Modi is also expected to deliver the prestigious ‘Singapore Lecture’ at the Institute of South East Asian Studies.

Singapore has emerged as the second largest source of FDI amounting to $35.9 billion as of June 2015, which is 14 per cent of India’s total FDI inflow. India also has a Comprehensive Economic Cooperation Agreement with Singapore with bilateral trade reaching $17.1 billion in 2014-15.

Source: http://www.thehindubusinessline.com/todays-paper/tp-news/after-50-years-of-diplomatic-ties-india-and-singapore-to-be-strategic-partners/article7906529.ece

Resurgent Rajasthan sees proposals worth Rs 3.3 lakh cr

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The first day of the much-hyped Rajasthan Resurgent Summit concluded with 295 proposals worth Rs 3.3 lakh crore. These proposals, however, were received over the past year and barely left much scope for industry heavyweights and the Union government to announce any new big-ticket projects.

“These proposals are just the tip of the iceberg. A lot of work has to be done,” Chief Minister Vasundhara Raje said in her inaugural speech. “This investment will create 2.5 lakh jobs,” she added.

In the past year, Rajasthan has undertaken a raft of economic and industry reforms to create an investment-friendly image. Her government was left with a huge debt, including Rs 70,000 crore of debt from the power sector, by the previous Congress government.

THE PROPOSALS
• Rs 11,000 cr investments announced by Kumar Mangalam Birla
• Rs 10,000 cr pledged by Gautam Adani
• Rs 6,500 cr worth investments by Anil Ambani
• Rs 10,000 cr worth projects to be undertaken by chemical & fertiliser ministry
• 24 model railway stations to be developed in the state

Lauding Raje’s role, Union Finance Minister Arun Jaitley said, after leading the state in reforms, the chief minister should now lead the state in ease of doing business. The government should provide land for business. “The India of 2015 is not the India of 1971. For that matter, it is also not the India of 1991. The aspirational constituency, which supports growth wants India to reform at a much faster speed,” he said. “Everything should be corruption free. Taxation should be reasonable and the policy should not be so aggressive that it deters investors, ” he added.

Among the investments made public on Thursday, the biggest perhaps came from Kumar Mangalam Birla, chairman of the Aditya Birla Group. Birla promised investment of nearly Rs 11,000 crore, including Rs 7,000 crore for setting up two new cement plants and Rs 3,000 crore for establishing a 500 MW solar power plant in the state. Gautam Adani, head of the Adani Group, also promised to invest an additional sum of Rs 10,000 crore over four years for the expansion of thermal power plants and generation of solar power in the state.

However, then there was a word of caution by Hero Motocorp chairman Pawan Munjal. Though he lauded the government’s role in making the state investor friendly, he requested the chief minister to ensure speedy clearance of projects.

“We need speedy clearances for setting up our industries,” Munjal said, disclosing that his company is setting up a state-of-the-art Research and Development Centre on the outskirts of Jaipur.

Uday Kotak, chief executive officer of Kotak Mahindra Bank, found special mention from Raje for the bank’s financial services. Kotak said his bank’s lending ratio is more than the deposit in the state.

For instance, against a deposit of Rs 100, his bank lends Rs 250. “We plan to double our lending from Rs 5,000 crore to Rs 10,000 crore in the next three years… this will help small, medium-scale industries and farmers in the state,” Kotak said.

From the central government, the biggest announcements came from chemicals and fertiliser minister Ananth Kumar, who promised Rs 10,000-crore of projects. This includes setting up a National Institute of Pharmaceutical Education and Research in Jhalawar district in two years, upgrade of the Central Institute of Plastic Engineering and Technology in Jaipur, and setting up a plastics park and a medical devices park, a first in the country. Railways minister Suresh Prabhu said they were going to set up 24 modern railway stations in the state.

Tourism was another key sector, which received special attention from the Central government, as well as the summit’s international partners including Singapore, Japan, Italy and Australia. Singapore Home Affairs Minister K Shanmugam said Singapore Airlines has decided to operate a direct flight from Singapore. “The airlines knew that it might not be earning profit in one or two years, but it is a long-term partnership,” he said.

Singapore to focus more on economic activities in India: Experts

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“The emphasis would be on working with India in the areas we are good at, including skill development and town planning,” he told PTI in comments on India-Singapore ties ahead of Modi’s visit from November 23.

Singapore will further strengthen its bilateral trade ties with India through the “strategic partnership” the two countries will establish during Prime Minister Narendra Modi’s visit here next week, according to experts.

 

“The strategic partnership means bringing the relationship between the two countries to a higher level. This is likely to be focused on economic activities,” said Gopinath Pillai, Chairman of the Institute of South Asia Studies, a think-tank of the National University of Singapore.

 

“The emphasis would be on working with India in the areas we are good at, including skill development and town planning,” he told PTI in comments on India-Singapore ties ahead of Modi’s visit from November 23.

 

Singapore and India have enjoyed steadfast bilateral relations for the past five decades which were further enhanced under the 2005-Comprehensive Economic Cooperation Agreement (CECA), a free-trade pact promoting economic and trade activities.

 

Singapore is India’s second largest investor, especially in the power and port sectors.

 

CECA is further being reviewed and would encourage more international investments through Singapore into massive developments taking place in India.

The Indian government has this month further liberalised Foreign Direct Investment (FDI) in infrastructure, sending a clear signal of its economic reform programmes, Pillai added.

 

Depending on how the reviewed CECA is positioned, Singapore-based investors remain “gung-ho” on economic prospects in India and will use the treaty to venture into the Indian market, just as Indian companies and businesses are using Singapore as a springboard to spread across Asian markets, including China, he said.

 

The Indian leader’s visit to Singapore is also seen as timely and comes soon after one made by Chinese President Xi Jinping in early November.

 

Singapore, as a signatory to the Trans-Pacific Partnership and as negotiator of the China-led pan-Asian Regional Comprehensive Economic Partnership, can help India expand into Asia, according to Girija Pande, Executive Chairman of Apex Avalon.

 

Pande also pointed out that, Singapore with its links to the Asian supply chain, can also play an important role in ‘Make in India’ initiative, calling on the Indian Prime Minister to push for more commercial engagement with Singapore and the wider ASEAN region.

 

Singapore and India have many collaborative programmes between schools and colleges.

 

“Students from Singapore often visit Indian schools to get better understanding of the Indian communities and study approaches and vice versa,” he said.

 

Source:  http://economictimes.indiatimes.com/articleshow/49857019.cms