German Chancellor’s visit to India

German Chancellor, Angela Merkel lands in India this week for a three day trip. Needless to say, Chancellor Merkel’s visit is of great significance. She is not only accompanied by her elite cabinet ministers, but also by a large delegation of business leaders.

With 21 billion $ worth of trade, Germany is the top trading partner from EU. And there is still scope for expansion. Today there are around 1,700 German companies in India, creating 4 lakh jobs. Germany needs IT skills and India needs technology, to create more jobs. The major agenda that India is seeking is in manufacturing, infrastructure, vocational training and renewable energy. We, India is a fast growing economy with 7+ growth rate and we need a large amount of foreign investment. With the new policies, thanks to our new government, our Indian economy is opening up as never before. The recent visits by our PM to various nations highlights this. There is a significant relaxation in caps on FDI in key sectors.

India-Germany(Picture courtesy : indiatoday.intoday.in)

Infrastructure:
With Metro rail projects, Smart cities, Speed railways taking into shape it is vital that we have the support of German technology. German companies like Siemens are there from Decades. Companies like Deutsche Bahn can help us in developing high sped corridors. It is only about how well we reform and utilize their expertise.

Manufacturing sector:
The ‘Make in India’ providing huge potential, India is keen to parter in manufacturing sector. Indian government is driving hard to on the ease of doing business. German companies that are already make in India have brought their global business networks and advanced technologies.

Vocational Training:
Vocational training is used to prepare for a certain trade. It is all the training needed for a certain job especially Auto repair, plumbing etc. Germany is eager to provide its expertise in modernisation of the apprenticeship system and supporting in Small and medium enterprises. (http://thekalyan.com/2014/12/26/small-and-medium-enterprises-smes-are-key/)

Renewable energy:
Germany sees an opportunity to partner with India in development of solar power on rooftops in cities in India. Forecasts show that India plans to add 175GW of renewable energy in the next seven years. (our non renewable energy is 195GW for only 2014-15). German cooperation on in this aspect will be a great asset.

Clean Ganga Project:
It is also an opportunity for India if we can get the expertise of German’s having cleaned up Rhine River that was in the same state as Ganga now.

In conclusion this visit is an opportunity for India in many economic aspects.

(Analyzed from dw.com, financial express, yahoo news Indiatoday)

Small and Medium Enterprises (SMEs) are key

 

Certainly, India is on a growing path. However, our economy still struggles to generate enough employment to match the eligible population. One reason is because the economic and financial institutions are not able to provide support the small and micro enterprises (SME). It seems banks are able to support only 4% of this small and micro enterprises sector. I have mentioned the significance of the small and micro enterprises in one of my previous articles: http://thekalyan.com/2014/05/29/india-should-focus-on-micro-small-and-medium-enterprises-now/

SME

(image taken from “The Hindu”)

As per the statistics, these small and medium enterprises provide 90% of employment to decentralized manufacturing, services industries. Majorly known as “unorganized”, this sector is owned by self-employed people. Also the numbers shows that 45 per cent of GDP is contributed by this sector. Once properly recognized, trained, this sector can be of great value to our nation.

Some of the recent positive events can help SME develop

  • Sebi has proposed that bank funding to listed SMEs. This move will give a huge boost to the SME trading platform and eases the financing needs of smaller companies. Another
  • As a part of its strategy to strengthen itself in India, foreign lender DBS is now focusing on SMEs as well, typically one that has a loan requirement of Rs. 5 crore or below.
  • The recent comments by Joe Hockey, Australian treasurer that SMEs can play a major role in strengthening trade ties between Australia and India has made us remind the significance of SMEs.

Well, “Make in India” initiative by our PM is majorly to improve the manufacturing areas of SME sector, we hope there will be new initiatives also taken for other areas of SMEs.

Overcome immediate hurdles in IT industry

With the new economic activities in US, there has been a growth in jobs in US, at the same time more work offshored to India. Also the positive sentiment is shown in Britain and Europe that in turn helps India in getting more work. A global economic recovery is good news for those who are relying on the IT budgets. Even the Software product development companies are also benefited with this trend. These all looks like a positive trend in the IT industry.

IT-industry-bcbay

(image taken from trackworks website)

But, there are two main reasons that are having a negative impact on the growth of IT industry in a short term. It is majorly on the decreased margins or the increased costs with relatively less increase in topline.

  • The annual pay raise to its employees
  • Higher visa costs for the employees in the customer locations

Solution: The way the margins can be increased is by:

  • Automation of routine tasks, so that increases in staff productivity will stay ahead of costs
  • Indian IT companies should gain confidence of the clients’ core activities such as research and development areas so that those core activities can also be offshored, increasing the work that can be offshored.

There is a very possibility that Indian IT companies can cope up with the margins, but as mentioned, it may be difficult to have it done in the first quarter.