Focus on Infrastructure in India’s Union Budget 2015

Focus on Infrastructure in India’s Union Budget 2015

In his budget speech, Finance Minister Arun Jaitley said "Major slippage in the last decade has been in the infrastructure sector. Infrastructure sector will increase by Rs 70,000 crore.” By the looks of it the Indian government plans to have a large scale push in the infrastructure sector, which has seen policy paralysis.

Infrastructure is one of the main challenges faced by Narendra Modi’s government. The Public-Private Partnership (PPP) model has to be reinforced by this government. The Union Budget has proposed a 'plug-and-play' model for big-ticket infrastructure projects such as power plants, airports and roads, and I fully agree with this model.

"This should unlock investments to the extent of Rs 1 lakh crore," Jaitley said, adding that the government will consider plug-and-play model for other projects such as roads, ports, rail lines and airports as well. I think the government’s ideas on plug-and-play model is aligned with long-term industry demand and will help the government attract foreign and domestic investments into much-needed infrastructure projects as it will significantly cut down project implementation time.

The inadequacy of quality infrastructure at globally competitive prices has long been recognized as a handicap to the development of the economy. Given the focus of the government on Make-In-India to create mass manufacturing for job creation, it was imperative for the Budget to address issues that constrain the infrastructure sector and pursue reforms with rigour. Broadly, the key measures announced in the Budget provide a renewed impetus to the INVESTMENT cycle and infrastructure sector in the country.

A few measures include creation of a National Investment and Infrastructure Fund (NIIF) with annual inflows of Rs 20,000 crore which would make funds available to firms for new projects, corporatisation of ports, revisiting the PPP framework and the announcement of five new UMPPs.

Marketplace Model

Marketplace Model

“The future lies in the hybrid marketplace-led model where the seller is also selling his own labels as well as provides a platform for merchants and sellers to sell their products. If a seller has to make available large merchandise to his buyers, it has to adopt a marketplace-led model. The real use of internet would be if the small merchandisers get a chance to sell their products to a wider range of audience,” said Vivek Gaur, CEO, Yepme.com

Flipkart had based its business model on Amazon when it was launched in 2007. But, now it has completely changed its business model last year. Inspired by Alibaba, it now claims that reason was due to the Indian market, where customers and income levels are quite similar to that of China. What does this really mean?

It means that the product or service is provided by multiple third parties, whereas transactions are processed by the marketplace operator. Transparency is ensured by applying the same set of rules to all participants, and because buyers and sellers know who they are dealing with. Trust is provided by features such as buyer and seller ratings, reviews, and integrity / guarantee of payment.

What are the advantages and disadvantages of marketplace model?

Advantages:

1. ·        It can sell a large number of stock keeping units (SKU) without maintaining any inventory
2. ·        Operational efficiency improve as some overheads are transferred to the seller
3. ·        Being a marketplace provider allows you to focus on developing eCommerce technologies

Disadvantages:

1. ·        It is much tougher to implement product quality control in a marketplace model, as the seller is primarily responsible for the products
2. ·        With a multitude of sellers, brand salience is one of the first things to get hit in the marketplace model

Online Commerce in India-Part 2

Online Commerce in India- Part 2

In the first part, I had discussed problems facing Indian commerce industry. Now, let me look at its solutions.

The solutions:

Segmentation: It's critically important. Not all consumers should be treated the same — they're all different in value. Even the most basic forms of segmentation, can produce good results. The simplest, most-effective form of segmentation involves dividing customers up into first-time users, high-value active customers (who drive 80 percent of profits), and inactive-users. If you take first-time users through the "tunnel of love" in the first 30 days, they're likely to become active customers.

Listen and Serve: Think and act like a concierge at a hotel. Listening to your customers and providing proper service may help resolve any privacy breach. Give customers the ability to tell you what they want. Remind them about deals and promotions — if they've asked that information.

One Chance: Everyone has forgotten the power of opportunity: You only have one chance to get it right, so be right from the beginning. I recommend a microscopic examination of details such as when customers are most likely to buy. For example, don't try to market apparel in July, when consumers are more inclined to spend toward travel, not clothing. With sophisticated tools, marketers can identify the specific day that a deal or promotion might have the most impact.

Personalization: Personalization, while a challenge, if addressed well can be a huge differentiator in how the customer experience is shaped in the online world. Utilize intelligent tools like web analytics, study customer behavior online, reward and reach out to customers. The more personalization you can out into your web-store, the more the customers will love you.

Make Your Site Navigable: Customers sometimes tend to get lost in your site. Provide proper navigation in your site to make things easier for your customers. Try to make your e-commerce site properly structured.

Choosing e-commerce solution: It is better to do some research based on your specific needs. Read the feature lists, try demos, and get reviews from who know better about this. It is always better to choose something that has large community as it will offer help, tutorials, sample codes, third party plug-ins, themes, and security auditing, which will help you in enhancing the productivity for your e-commerce web-store.

Delivered Duties Paid: E-marketers pay duties and taxes for what they sell. It is better to sell products internationally on an all-inclusive price basis and hassle free services though all international courier facilities. Product registration and reduction is shipping cost is another good solution.

Shipping: It is better to deliver in bulk in one go to a single hub and distribute based on domestic shipping charges. This is called regionalization.

Product Return and Refund: Make sure that all product descriptions are up-to-date and relevant. Also ensure that the products you deliver are procured from certified vendors.

Multiple Payment Options: Be open for all payment gateways, start entertaining e-Wallets, prepaid cards etc. which will offer better cash flow and relieve customers from credit card problems.

Focus on Customer Service: Online users want fast response to their query. So start interacting with them through 24X7 emails, calls, and chat assistance. Make your customers interact with you through all possible means like social media marketing etc. Keep reminding them about deals and promotions that you are offering and try to know what they think about them.

Revival of the Silk Route

Revival of the Silk Route

The ancient silk route is one of the world’ best travel route, whether it is by road or by maritime. In the past it had facilitated goods, cultures, religions, intellectual ideas, important inventions etc. Though right now it is not important to spread these ideas by travelling across vast areas of land, due to the advent of Internet, I still think it is important to revive the silk route.

In the contemporary world, which is full of belligerent nations ready to go to war, the Silk Route would foster new ties of friendships across the countries which it spans. It will also connect the newly emerging superpower China with Eastern Europe. It will bring in much needed investment from western countries to create new special economic zones along the Silk Route.  

Online Commerce in India-Part 1

Online Commerce in India

Amazon, Flipkart, Snapdeal etc. are common household names in India at present. Online commerce is now one of India ‘biggest growing sectors’.  Despite objections over its irregularity, more and more people are getting accustomed to this new way of shopping. But, does this industry does have its share of problems.

India’s internet penetration level is around 11.4%. On the other hand, USA and China today have 77.86% and 40.01% penetration rate. The worldwide average is around 35%. The internet browsing levels are very low in India compared to other parts. It is still expensive to browse the net in India; also people from tier-2 and tier-3 cities find it difficult to have internet access. We have a population base, which has budding for a thriving e-commerce industry but is limited by the broadband penetration.

The infrastructure requires secured payment solutions, and blindly trusting your money with some unknown company is very difficult to achieve in India. But, high failure rate at payment gateway could obstruct the growth of e-commerce industry. There are many loopholes in the law, causing many cyber crimes to occur.

Biggest challenge in India for online retailing companies in India is logistics. Given the large size of the country, there are thousands of towns that are not easily accessible. Metropolitan cities and other major urban centers have a decent active logistics infrastructure. But since the real “customers” of the Indian market lies in its large population, absence of infinite access to a significant of probable customers is a hindrance.

 Another great hurdle of all is the huge competition between various e-businesses. For a small product, there can be as many as five different well-funded companies battling for it. The firms have been fighting in a price war that has pushed profit margins to almost nothing. Bidding wars can spiral out of control even on the company’s own name.  The war these companies are fighting is unsustainable.  The problem of competition is also compounded by very little brand recognition.  (Continued in part 2)

Gujarat Solar Park

Gujarat Solar Park

In May 2014, Narendra Modi was elected the Prime Minister. He left his job as the Chief Minister of Gujarat, a state he had developed into one of India’s most economically productive one when he took reins in 2001. Right now, Gujarat is one of the few states in India which can boast of 24-7 electricity. And to supplement that is the Gujarat Solar Park.

Asia’s largest solar power park, the Gujarat Solar Park is a great initiative from Modi as a part of India’s efforts to curb carbon emissions. The most surprising thing is that what once was complete barren land, is now expected to generate 2/3^rd of India’s solar power production. Considering the massive 2012 blackout, awareness & use of renewable energy in India must increase & this is a great step towards it. By 2013, India aims for solar power to account for 3 percent of total national capacity and the nation wants renewable sources of energy to rise from the current 6 percent capacity to a whopping 15 percent of capacity by 2020.

As more & more solar plants are constructed in & around these areas, economic rural development is expected to occur. And there are other benefits too such as employment generation as well as irrigation water provision.

The huge power deficit and the recent challenges to coal & petroleum supply, is one of the main reason why Modi was voted into power. The success of the scheme, should propel other states to create & develop more solar parks. Projects such as the construction of new plants Dhirubhai Ambani Solar Park in Rajasthan, Welspun Solar Park (Madhya Pradesh), Sakri Solar Park(Maharashtra) and the development of solar park in Andhra Pradesh and Bhadla Solar Park (Rajasthan) are examples of these. More such sites for these plants are being identified by Jammu & Kashmir, Meghalaya, and Karnataka etc. Foreign Investment, hence, is much required for these. And for that to occur, we must support & enhance our knowledge/use of solar energy.

As Thomas A. Edison once said “I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.” Certainly, we don’t have to wait since we don’t have time to complete replace non-renewable energy with renewable forms. Other countries such as USA and China have already realized this and have formulated polices with regard to this.

Export of Chinese HSR

Export of Chinese HSR

Seven years ago, high speed rail were words unknown in China; but now the country is pioneering in constructing some of the world’s largest as well as longest rail projects. The Shanghai-Beijing Rail Network is the best example of this. But, now, the Chinese are focusing on improving transport & infrastructure of other countries . This is important as China is making inroads into every Third World country. It will also promote diplomacy and goodwill between China and other counties.

A key advantage of Chinese high-speed train technology is that it is inexpensive, and exporting it could help growth in developing countries. A report said that unit costs in building the high-speed rail network were lower than for similar projects in other countries.

China initially bought trains and related equipment from foreign manufacturers, but its engineers later re-designed the machinery and succeeded in building their own trains capable of reaching top speeds between 350 and 400 kilometers per hour. Furthermore, the scale of domestic high-speed rail network construction has led to a decline in production costs for Chinese manufacturers, which has made them more competitive than their counterparts in places like Germany and France.

In an bid to increase its impact on European markets, China has been investing in countries which has been hit the most by the Financial Crisis of 2008 and/or 2012-13. The contract that CSR signed with Macedonia last month was its first in Europe. It marks the first attempt by China to sell high-speed locomotives abroad and establish itself as a credible rival to sector leaders such as Germany's Siemens, Canada's Bombardier and Japan's Kawasaki.

In terms of technology, China is currently using a strategy that has served the country well in various industries - technology transfer and reverse-engineering. Early competitors in the Chinese railway market like of Alstom, Bombardier etc. were required to form joint ventures or partnerships with Chinese manufacturers. Most were happy to oblige in return for access to a huge emerging HSR market. Still these foreign contractors would have been unable to predict just how quickly China would be able to adapt towards it, improvise upon it, re-innovate it and enter the international market for big contracts.

A recently inaugurated high-speed rail line in Turkey, which connect the country's largest city Istanbul and its capital Ankara, represents China's first major completed HSR project in a foreign market. This line might be the first international Chinese-assisted high-speed rail project to be completed, but it certainly won't be the last. The Chinese Government is having negotiations all over the world to bring Chinese technology and construction to planned HSR projects. And they are effectively using their main trump card- low cost.

The Chinese state can negotiate attractive export terms for its fully-owned HSR tech, a luxury not afforded to its European and Japanese rivals. "In other countries it is difficult to export all the technologies since they are controlled by different companies," said Ji Jialun, a professor at Beijing Jiaotong University's School of Traffic and Transportation, as quoted by China Economic Review. Right now, countries in which China has signed or is negotiating HSR contracts include Saudi Arabia, Hungary and Serbia.

India, led by her new PM Narendra Modi (who was elected on the promises of better governance and especially improving infrastructure) , is proving to be a tight contest between China and arch-rival Japan. India has to look deeply with the options she has at her hand: while Japan is emphasising on flawless technology and safety record while China positions itself as the cost-effective option.

The British were the first to build railways in China, but now UK is seeking help from China for developing further its own network of high-speed rail. It has been 150 years since the British started building - without permission - the first railways in China, the earliest of which were dismantled by a suspicious Qing dynasty government. Today, history has come full circle and it is the UK that is seeking Chinese help for its next wave of high-speed rail.

There are plenty of developing economies which want to take “fruit of China's HSR” labour at a lower cost than its rivals can achieve. HSR is another industry where the Chinese have taken the world by storm.