Transport infrastructure: Taking India to the global centrestage

Manish Agarwal, Leader, Capital Projects and Infrastructure, PwC India

The macro-medium term outlook for transport infrastructure is positive, with massive investments required globally as well as in India.
According to PwC estimates, the global infrastructure market will double from 4 trillion USD in 2013 to 9 trillion USD and Asia Pacific’s share will increase to 60% by 2025.
PwC’s report, Future of India: The Winning Leap estimates that India needs to grow at the rate of 9% per annum to achieve its development goals. Enabling this will require logistics costs to reduce from 13 to 8% of the GDP. Investments in rail and inland waterways will need to be disproportionately higher than road in order to facilitate this reduction.

However, it is the micro-short term that drives business plans; especially in terms of infrastructure, where the micro picture is considerably different from the macro potential.

After a euphoric rise in investments during 2008-2011, the slowdown in the sector has been equally dramatic. However, in line with several sections of the economy now beginning to look positively towards the future, infrastructure investors are also becoming increasingly optimistic.

We believe the optimism is largely driven by the government’s initiatives to kickstart the construction cycle by increasing public sector spending. For this to sustain, private investments have to make a grand comeback. Initiatives such as rebalancing risks in PPP structures, reforming the regulatory environment and easing dispute resolutions, can make the investment cycle self-sustaining.

Among the world’s 250 largest infrastructure companies, only four are Indian and only two feature in the 100 largest. Given the emerging opportunities within India as well as across the globe, what is it that Indian companies need to do in order to scale up and build capabilities, in order to play on the global stage?

Read the full version here.

Make in India: Delivering the industrial corridors

Manish Agarwal, Leader, Capital Projects and Infrastructure

The fact that India has a large infrastructure gap, which impacts competitiveness of manufacturing in India, is well understood. The financing and institutional capacity constraints imply that expecting a rapid build-up across all areas is unrealistic. Given this, the industrial corridors are essentially a prioritisation programme to leverage agglomeration benefits. Industrial corridors comprise of sets of projects– an industrial park, with access to sufficient utilities (power, water, etc), well connected to markets, ports and airports through road and rail. The limited funding and institutional capacity, if prioritised in this manner, can yield quicker returns (in terms of economic activity), than if the priorities of each ministry are different.

The Delhi-Mumbai Industrial Corridor (DMIC) has envisaged seven such industrial nodes, along the backbone of a Dedicated Freight rail-line (DFC), encompassing seven states. The large market in the north and Nhava-Sheva Port, along with the DFC, are the defining features of DMIC. The Chennai-Bangalore Industrial Corridor (CBIC) has identified three industrial nodes that will leverage the coastline from Chennai to Krishnapatnam in order to ride on the industrial growth in Chennai and Bangalore. The Vizag-Chennai Industrial Corridor (VCIC) will add industrial nodes along the Andhra Pradesh coastline, with land connectivity to India’s interiors and sea connectivity to global production networks in ASEAN. The Mumbai-Bangalore Economic Corridor (through the ecologically sensitive Western Ghats) and the Amritsar-Kolkata Industrial Corridor (through the most populous parts of India) are also in planning stages, along with a few state level initiatives.

Delivering the prioritised sets of projects so as to reap the agglomeration benefits is challenging in the Indian context. Each component has different implementing agencies and competes with several other projects. The National Industrial Corridor Development Authority (NICDA) will have to do the challenging task of coordinating across central and state government agencies in order to give priority to the corridor projects. There are lessons in the Early Bird Projects planned in DMIC, which faced challenges while getting relevant stakeholders on board. Perhaps a corridor projects’ unit in each ministry and state governments is needed. The unit will need adequate institutional capability and empowerment as well as a separate budget. Such dedicated units, in coordination with the NICDA, can provide the priority and impetus needed to be delivered in tandem. Only then can India provide the plug-and-play readiness needed to compete with China, Taiwan or Indonesia and become a preferred manufacturing location.

Click here for a detailed assesment.

The Transfer Pricing side of things

Kunj Vaidya, Transfer Pricing Dispute Resolution Lead

Expectations from the Union Budget 2015 also included citizen aspirations that the nation, in its current state, is not ready to afford. The Finance Minister has effectively laid down all that was attainable and has left the rest to be covered in the years to come. While this gap has not appeased tax pundits, it has managed to resonate with the economists and corporates.

While there may not be any big bang reforms; there are no downsides either. The Budget has focussed on making the mortar run deep in order to facilitate future growth and development. The government has emphasised improvements to tax administration and easing the cost of doing business over short-term fiscal incentives. As for the most litigated tax matter in India, transfer pricing, the following wishes of corporates as highlighted in the recently launched India Transfer Pricing Survey report, remain unanswered:

  • Risk-based selection of cases for TP audit
  • Clarification on the application of economic adjustments
  • Retrospective application of the use of multiple-year data for benchmarking
  • Rationalising requirements under the Companies Act as well as the SEBI Listing Guidelines

That said, the government has deftly kept the promise of Acche Din alive by providing a glimpse of its repertoire. And with stable governance over the next four years, we hope to see tangible results. 

Read our Transfer Pricing Survey report here.

Reinventing modern retail

Rachna Nath, Retail and Consumer Leader, PwC India

For the second year in a row, PwC India, in collaboration with the Retailers’ Association of India (RAI) launched the Total Retail 2015 report titled Retailers and the Age of Disruption. It was launched at the Retail Leadership Summit on 11 February 2015 at the Renaissance Convention Centre, Mumbai.

Part of the PwC Global Total Retail series, our report is based on a worldwide survey that tries to understand and compare shopping behaviours and the use of different retail channels. I am pleased to announce that this year, in an expanded comprehensive survey, we covered more than 19,000 respondents in 19 countries across six continents. In India, our team obtained more than a 1,000 completed responses that have provided data to analyse and evaluate at great depth the changing retail landscape in the country.

The debate around online and offline retailing has taken a new turn. We are now witnessing disruptions driven by companies that are redefining the retail business model. Our report recognises five major waves of disruptions. Although these new strategies have had the retailers and e-tailers scrambling for the top spot, the consumer still emerges as the winner. Be it the discounting war or greater convenience offered by way of faster deliveries, the Indian consumer has never had it better.

From the retailers’ point of view, we have also outlined the future of modern retail. Will we see an amalgamation of the channels or at least collaboration to begin with between the online and offline retailers? Is discounting to win maximum customer share a viable long-term growth strategy? Join the discussion on my blogpost on LinkedIn.

For detailed insights on multichannel retailing 2015, please read our report: Total Retail 2015: Retailers and the Age of Disruption.

Indian manufacturing sector: Optimistic about the future

Bimal Tanna, Leader, Industrial Products, PwC India

The second edition of the FICCI-PwC India Manufacturing Barometer was released by Ajay Shankar, former Member Secretary, National Manufacturing Competitiveness Council, at the FICCI office in New Delhi.

The India Manufacturing Barometer 2014: Turning the Corner delves into the current sentiments of business leaders from the manufacturing sector and explores the factors they perceive will impact their businesses over the next few months and the strategies they expect to employ in order to address barriers to growth in order to make the most of the sector turning the corner.

The Indian manufacturing sector faces a defining moment in its evolutionary path. As the global economy revives, growth rates across several major economies are expected to improve. The new Indian government has also stated its intention to attract manufacturing sector investment through its Make in India campaign.

Overall, there is an increase in the level of optimism and activity as compared to the sentiments captured in the previous edition of the report.

Business leaders in the manufacturing sector are optimistic about performance of their businesses and the sector as a whole over the next 12 months. More than half the companies in the sector expect to plan major investments with research and development, new products or services introduction and facilities expansion being the three priority areas.

Concerns related to raw material and energy costs persist, though domestic demand is less of a worry than last year. Business leaders are looking to the government to rationalise taxes and duties and to invest in infrastructure improvement.

In our view, a series of short- and long-term measures will help take the manufacturing sector to the next level of growth. In the short run, the government needs to streamline regulatory processes and take meaningful confidence-building measures for investors. It has already begun this process through a number of measures aimed at labour reforms. In the long run, a modern set of laws in the areas of taxation, labour, FDI, land acquisition and environment needs to be implemented.

Riding the digital wave

Smita Jha, Entertainment and Media Leader, PwC India

The Indian entertainment and media industry grew at a healthy 19% in 2013 over 2012. The growth was driven mostly by the strong growth in the subscription revenue of the television segment, which continues to be boosted by ongoing digitisation.

The relatively newer segments of internet access and internet advertising witnessed rapid growth, and the former surpassed the entire print segment (i.e. the sum of advertising and subscription revenues from magazines and newspapers) as the second-largest segment of the industry. As digitisation drives growth in the industry, the biggest challenge remains monetising the digital consumer.

We at PwC believe that digital success is not just about technology, but about applying a digital mindset to build the right behaviours. We’re in a world where digital technology is constantly redefining the nature of the business. It has provided businesses with the ability to provide a richer customer experience.

But to capitalise on this digital revolution, companies need to develop a stronger digital IQ, with digital as an enterprise capability woven into the business. Instead of just a digital strategy, they need a business strategy in a digital age.

Alongside, customers have now realised that they can be at the centre of their own world of entertainment and media. Through personalisation, online services have shown consumers that they can find content experiences of their choice. The challenge is monetisation of this experience, which companies need to focus on.

Delivering such an experience requires getting to know consumers as individuals—and them knowing you back. This requires not just the right technology, but also the right mindset and talent for relationship innovation. Thus, investment in customer analytics will no longer be a luxury but a necessity for survival in the digital age.

Read the India Entertainment and Media Outlook 2014 for more insights.

Budget proposals augur well for the education sector

Dhiraj Mathur, Leader, Education, PwC India

Clearly stating that elementary education is a priority for the government is a public good and therefore a primary responsibility. The launch of the New Teacher Training Programme with an initial sum of 500 crore INR allocation is important for addressing the issue of teacher training and quality. The FM has announced a new Beti padhaao, beti badhaao yojana and has also made provision for drinking water and toilets in all girl schools.

The launch of the new Skill India programme is welcome, subject to its ability to achieve convergence of the plethora of programmes being run by multiple departments and ministries.

IT can provide vital support in delivering education and hence the new programme that leverages IT in setting up virtual classrooms, as Communication Linked Interface for Cultivating Knowledge (CLICK) and online courses is also an important decision that could potentially improve the quality of education in schools.

Setting up five IITs and IIMs is a welcome step. However, there is no mention of involving private sector participation in providing higher education. This is a departure from the recommendation made in the Economic Survey that government spending must focus on providing public goods. Higher education does not fall under that category.

Investment in new cities is a must

Neel Ratan, Leader, Management Consulting, PwC India

With the urban migration trend, the only way for us to sustain as a society is to invest in new cities, cities that need to focus on leveraging technology to improve service delivery, quality of life and at the same time optimise the usage of resources. Although the actual creation of 100 new cities will require large financial outlays, the current Budget allocation is a step in the right direction.

This announcement will definitely excite stakeholders including urban planners, city administrators and industry to come together and create sustainable models for new cities. It is essential to focus on the right governance and regulatory frameworks to ensure speedy execution and benefits realisation. Since the smart city concept is a nascent development, it will be prudent for stakeholders to gain insights from the planners of similar initiatives such as GIFT, DMIC and Naya Raipur. Conceptualising and developing new cities is a time-consuming process. This announcement therefore will give the required thrust to fast-track the planning of new cities.

It has been seen in the recent past that technology companies have become wary of government contracts, leading to their reduced participation. To reinforce the level of confidence in the investor community, it is pertinent for the government to work out measures that help in the 'ease of doing business' with the government.

The retailer steps into a new age

Rachna Nath, Leader, Retail and Consumer

As boundaries merge and customers interact with retailers and brands anytime, anywhere, the world is truly flattening. Technology is no longer an inhibitor and has truly evolved into a partner. In fact, technology has developed faster than its adoption. The dilemma facing today's retailer is to understand how to deploy these technologies to drive revenue, customer engagement or operations excellence.

Today’s consumer expects much more. The retailer needs to not only provide her home shopping, but also via her devices of choice. The consumer expects to pay using digital wallets, mCommerce, online, via cash on delivery. She expects to buy online, return in store or vice versa, check online, buy in store or check in store and order online. And that's not all. Right through the experience, the consumer expects the retailer to stay engaged with her via text messaging, social media and other communication, updating her with the latest trends and offers.

The consumer will settle for nothing less than a seamless experience across channels.

PwC’s multi-channel report from earlier this year, Total Retail discussed how these consumer expectations are driving the retailer’s business model. It is no longer just important to be present across channels and expect the consumer to ‘walk in’. Today, a customer-focussed organisation, supported by an optimised supply chain, a seamlessly integrated technology across functions and an analytical engine to provide personalised services, are critical.

This is a radical change from a decade ago in India, when the most important aspect in retail was ‘location, location, location’. The emphasis was on opening stores and technology was all about supporting the point of sale, managing inventory and providing MIS to the ‘central’ management team. Customer experience was largely ignored.

A volte face to a new era brings with it challenges as well as opportunities. How have India's retailers performed?

Fit for the future: Retail

K Venkataraman, CEO, Mahindra Retail

 

K Venkataraman talks about the key takeaways from the PwC CEO Summit 2014 and how the discourse on skill and leadership development will help him make important investment decisions.

To view the Global CEO Survey report, click here: http://www.pwc.com/gx/en/ceo-survey/index.jhtml

For the India cut, click here: https://www.pwc.in/global-ceo-survey-2014/index.jhtml

The opinions expressed in the blogs are personal.


 

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