Public Affairs Perspectives APAC Issue 1

7/28/2019 Public Affairs Perspectives APAC Issue 1

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Public Affairs Perspectives Asia Pacific

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ISSUE 1 2013 January/February

Behind the Curtain: Understanding

Indias Changing Political Landscape

The goal of Indias Foreign Direct Investment (FDI) policy is to attract and promote foreign direct investment in order to

supplement domestic capital, technology and skills, for accelerated economic growth. FDI has long been an important

component in Indias fiscal management,with a significant part of the capital deficit

also financed through FDI.

In recent times, the government has

struggled to maintain interest from foreign

investors in the economy. Recent

economic reforms have tried to shake a

bad reputation created by opposition

parties claiming most policies are one-

sided and beneficial to the rich.

Recent DevelopmentsIn this context, Indias government

recently introduced a number of changes to its FDI policy. One of the most significant and controversial policies has

been the decision to allow up to 51 per cent of FDI in multi -brand retail.

The retail sector employs around 10 per cent of Indias workforce the second largest after agriculture. Estimated

employment in the sector is around 40 million, mostly in small mom-n-pop stores. Opponents of the move to allow FDI in

retail fear this might lead to large-scale job losses as small businesses collapse under the onslaught of big retail.

However, supporters say allowing FDI would create more than 10 million new jobsand lead to a modernisation of Indias

creaking supply chain infrastructure. While there could be some impact on small retail, the large space requirements of

larger, foreign retailers and their inability to match the personalised services offered by corner shops might ensure the

Davids of Indias retail sector continue to thrive even as the Goliaths set -up shop.

Indias government has a lot on the line with this new policy: if it works, the country benefits from an employment boom,

while the retail industry proves its ready to grow up and welcome big brands. If it doesn't work, and small business suffers

the government risks shouldering the after-effects of an economic bump.

Latest FDI Policies Target Indias Retail Sector

FDI inflows in India; Data source: World Bank and DIPP, Govt of India
http://dipp.nic.in/English/Policies/FDI_Circular_012011_31March2011.pdfhttp://dipp.nic.in/English/Policies/FDI_Circular_012011_31March2011.pdfhttps://www.cia.gov/library/publications/the-world-factbook/fields/2095.html#inhttps://www.cia.gov/library/publications/the-world-factbook/fields/2095.html#inhttp://www.thehindubusinessline.com/industry-and-economy/article2659490.ece?ref=wl_opinionhttp://www.thehindubusinessline.com/industry-and-economy/article2659490.ece?ref=wl_opinionhttp://www.thehindubusinessline.com/industry-and-economy/article2659490.ece?ref=wl_opinionhttps://www.cia.gov/library/publications/the-world-factbook/fields/2095.html#inhttp://dipp.nic.in/English/Policies/FDI_Circular_012011_31March2011.pdfhttp://dipp.nic.in/English/Policies/FDI_Circular_012011_31March2011.pdf


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FDI: Key Milestones

Sep 2012: The

government revives an

earlier decision to allowFDI in multi-brand retail.

The decision had

originally been put on ice

after political

disagreements. The gov

also announces its inten

to hike FDI in insurance,

permit FDI in pension

funds, and allows FDI in

Indian carriers by foreign

airlines.

Dec 2012: Parliament

votes against motions

calling for a roll-back of

the decision to allow FDI

in multi-brand retail.

Jan 2013: Indias Financ

Minister embarks on a

tour to meet investors in

foreign countries,promising policies aimed

at reviving growth and

better fiscal managemen

Jan 2013: Controversial

anti-tax avoidance

proposals in Budget 201

-13 are shelved after

widespread investor

unease.

Jan 2013: Indias Foreig

Investment Promotion

Board (FIPB) clears a

US$ 2b IKEA proposal

after much back-and-

forth.

Latest FDI Policies Target Indias Retail Sector, contdAt this point, its not clear if other FDI reforms related to insurance or pension funds will be

pushed through Indias upcoming budget session. After all, success in retail doesnt mean

the Government wont play it safe and shy away from other reforms in the face of pending

elections. At the same time, India faces severe pressure to take steps in addressing the

ballooning fiscal and Current Account deficits, and to stave off the threat of a possible ratings

downgrade. A reportby a government panel recently warned that the Indian economy is

poised on the edge of a fiscal precipice and the Finance Minister has promised that the

2013/14 Budget will be responsible. Given the approaching elections in 2014, and the tight

fiscal space, expect the Finance Minister to try and strike a golden mean between populism

and fiscal rectitude.

The Confederation of Indian Industry (CII):

A Champion of All TradesThree types of industry associations exist in India

national all-industry associations, regional associations

and industry-specific associations. The Confederation of

Indian Industry(CII) is a national association that works

on issues affecting sectors in manufacturing, services

and agriculture.

CII is an important stakeholder for the government and

is often involved in consultations on policy or regulatory

issues that impact industry. As a result, many global

companies also use them as a sounding board to understand the current climate around

policy issues in India.

CII also helps major companies in India connect with each other and identify industry or

sector issues, providing important information the government can use in responding to

industry concerns.

It has partner associations in most countries, many of which are important sources of

investment for India, and has also set up institutes of excellence in areas such as corporate

social responsibility (CSR), sustainability & environment, and quality management.

The association has been a strong advocate of industry reforms and is part of important

global platforms such as the B20 coalition of G20 countries, thereby lending its weight in

India to talk about issues impacting countries across the globe.

So why should a company work with CII? Think of the association as your ultimate

champion. In many cases, it can open doors for sustained government engagement, provide

insights into industry concerns and collaborate on valuable research.
http://www.finmin.nic.in/reports/Kelkar_Committee_Report.pdfhttp://www.finmin.nic.in/reports/Kelkar_Committee_Report.pdfhttp://businesstoday.intoday.in/story/will-present-a-responsible-budget-next-month-chidambaram/1/191964.htmlhttp://businesstoday.intoday.in/story/will-present-a-responsible-budget-next-month-chidambaram/1/191964.htmlhttp://businesstoday.intoday.in/story/will-present-a-responsible-budget-next-month-chidambaram/1/191964.htmlhttp://cii.in/http://cii.in/http://cii.in/http://cii.in/http://cii.in/http://businesstoday.intoday.in/story/will-present-a-responsible-budget-next-month-chidambaram/1/191964.htmlhttp://businesstoday.intoday.in/story/will-present-a-responsible-budget-next-month-chidambaram/1/191964.htmlhttp://www.finmin.nic.in/reports/Kelkar_Committee_Report.pdf


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Budget 2013/14: What

on the Table

FDI: The government is

expected to introduce

bills increasing FDI for

both insurance and

pension funds from 26%

to 49%.

GST: The government is

likely to announce a

revised roll-out schedule

for the Goods and

Services Tax (GST),

replacing many currentindirect taxes.

Taxation: The budget

might include more clari

on current tax rules,

starting with the official

roll-out schedule for the

new Direct Tax Code.

Economic Growth:A

key focus for thegovernment, parliament

will introduce steps to

increase growth from the

present 5.3% to 6.5-7%.

Food Security: The

2013/14 budget is

expected to announce

mechanisms to fund

Indias ambitious Food

Security program, slatedto launch the next Fiscal

Subsidies: With a focus

on reducing subsidy

burdens, the budget is

likely to table polices

making it easier to

transfer cash subsidies

to beneficiaries.

Indias General Elections: Still Too Fractured to Call

State elections held in Gujarat (December 2012) and Himachal Pradesh (November 2012)

provide an interesting preview of Indias upcoming general elections of 2014. The Bharatiya

Janata Party(BJP) won the state of Gujarat for a fourth consecutive term,while it was ousted

in Himachal Pradesh by the Indian National Congress party, the single largest party in the

United Progressive Alliance(UPA). UPA is the coalition of parties running the nationalgovernment in India, presently in its second term.

Although the win in Himachal Pradesh was a relief for the UPA, the Alliance still faces many

challenges ahead of the 2014 elections. Its second term was marred by a series of scams

and corruption charges, slow economic growth, and policy paralysis impacting investment

and industry. In an attempt to fix this, and with the general elections less than 16 months

away, the UPA recently announced several economic reforms including the approval of

Direct Cash Transfersfor subsidies, FDI in multi-brand retailand aviation,raising the FDI cap

in insurance, and opening the pension sector up to foreign investment.

However, as inflation numbers rise and India's fiscal deficit increases, the UPA has also

taken tough economic measures which have chipped away at its popularity, such as limiting

subsidized Liquefied Petroleum Gas (LPG) cylinders to six per household annually and

increasing diesel prices. RecentABP Nielsen Pollnumbers show the Congress-led UPA

coalition Party sitting 17 points behind the National Democratic Alliance (NDA) in 28 cities.

The NDA is Indias major opposition party, led by the BJP.

In an effort to revamp its image and woo youth

voters, the Congress party recently elevated Rahul

Gandhi son of Congress president Sonia Gandhi

to the position of Vice-President. Rahul is widely

believed to be the partys prime ministerial

candidate for the 2014 elections, but has yet to

implement policies or changes setting him apart.

Should these trends continue across the country,

measures by the Congress party to benefit the rural

poor (such as Direct Cash Transfers) could deliver

votes for the party. On the other hand, lingering

negative sentiment for the Congress may provide

BJP the opportunity to once again take the lead in

government.

What remains to be seen is whether the NDA canhold its current lead or if recent economic reforms

last long enough to change the tide for the UPA. A

key takeaway for businesses operating in the

current scenario: it is just as important to engage

with government stakeholders as it is to continue

speaking with key influencers in the opposition.

With a political landscape this fractured, it is just

too early to predict which party will emerge

triumphant in 2014.

Supporters of (BJP) hold posters ofGujarat Chief Minister Narendra Modiwhile celebrating the party's victory inthe State Assembly elections, in Ah-medabad. Image courtesy ofthe-hindu.com
http://www.bjp.org/http://www.bjp.org/http://www.bjp.org/http://www.hindustantimes.com/India-news/Gujarat/Modi-powers-BJP-to-a-record-fourth-term-in-Gujarat/Article1-264883.aspxhttp://www.hindustantimes.com/India-news/Gujarat/Modi-powers-BJP-to-a-record-fourth-term-in-Gujarat/Article1-264883.aspxhttp://www.aicc.org.in/http://www.aicc.org.in/http://www.unitedprogressivealliance.com/http://www.unitedprogressivealliance.com/http://timesofindia.indiatimes.com/home/specials/himachal-pradesh-assembly-elections/Himachal-win-gives-Congress-a-face-saver/articleshow/17701742.cmshttp://timesofindia.indiatimes.com/home/specials/himachal-pradesh-assembly-elections/Himachal-win-gives-Congress-a-face-saver/articleshow/17701742.cmshttp://ibnlive.in.com/news/aadhaarbased-direct-cash-transfer-from-january-1-chidambaram/307272-3.htmlhttp://ibnlive.in.com/news/aadhaarbased-direct-cash-transfer-from-january-1-chidambaram/307272-3.htmlhttp://www.hindustantimes.com/business-news/WorldEconomy/Govt-allows-up-to-51-FDI-in-multi-brand-retail/Article1-929952.aspxhttp://www.hindustantimes.com/business-news/WorldEconomy/Govt-allows-up-to-51-FDI-in-multi-brand-retail/Article1-929952.aspxhttp://www.hindustantimes.com/business-news/WorldEconomy/Govt-allows-up-to-51-FDI-in-multi-brand-retail/Article1-929952.aspxhttp://www.hindustantimes.com/business-news/WorldEconomy/Govt-allows-up-to-51-FDI-in-multi-brand-retail/Article1-929952.aspxhttp://in.reuters.com/article/2012/09/14/india-aviation-fdi-idINDEE88D08P20120914http://in.reuters.com/article/2012/09/14/india-aviation-fdi-idINDEE88D08P20120914http://articles.timesofindia.indiatimes.com/2012-05-21/india/31800534_1_upa-government-upa-2-price-rise-and-corruptionhttp://articles.timesofindia.indiatimes.com/2012-05-21/india/31800534_1_upa-government-upa-2-price-rise-and-corruptionhttp://www.thehindu.com/news/states/other-states/hattrick-for-modi-in-gujarat-congress-ousts-bjp-in-hp/article4221353.ecehttp://www.thehindu.com/news/states/other-states/hattrick-for-modi-in-gujarat-congress-ousts-bjp-in-hp/article4221353.ecehttp://www.thehindu.com/news/states/other-states/hattrick-for-modi-in-gujarat-congress-ousts-bjp-in-hp/article4221353.ecehttp://www.thehindu.com/news/states/other-states/hattrick-for-modi-in-gujarat-congress-ousts-bjp-in-hp/article4221353.ecehttp://www.thehindu.com/news/states/other-states/hattrick-for-modi-in-gujarat-congress-ousts-bjp-in-hp/article4221353.ecehttp://articles.timesofindia.indiatimes.com/2012-05-21/india/31800534_1_upa-government-upa-2-price-rise-and-corruptionhttp://in.reuters.com/article/2012/09/14/india-aviation-fdi-idINDEE88D08P20120914http://www.hindustantimes.com/business-news/WorldEconomy/Govt-allows-up-to-51-FDI-in-multi-brand-retail/Article1-929952.aspxhttp://ibnlive.in.com/news/aadhaarbased-direct-cash-transfer-from-january-1-chidambaram/307272-3.htmlhttp://timesofindia.indiatimes.com/home/specials/himachal-pradesh-assembly-elections/Himachal-win-gives-Congress-a-face-saver/articleshow/17701742.cmshttp://www.unitedprogressivealliance.com/http://www.aicc.org.in/http://www.hindustantimes.com/India-news/Gujarat/Modi-powers-BJP-to-a-record-fourth-term-in-Gujarat/Article1-264883.aspxhttp://www.bjp.org/http://www.bjp.org/


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Narendra Modi: Indias Polarizing Politician

Chief Minister of the state of Gujarat, Narendra Modiis one of Indias most

polarizing figures.

While supporters see him as a strong leader with a proven track record in

development-oriented governance, his opponents associate him with right -

wing Hindu extremism. In 2002, Modi was months into his current position

when religious riots broke out in Gujarat, resulting in the deaths of

thousands of people, mostly Muslim.

Many held his administration responsible for the riots and some members

of his cabinet were even jailed for their role in it. Critics have long accused

Modi of not doing enough to stem the violence, with some alleging he

quietly encouraged it accusations he has denied and which have

remained unproven. For years, he was a political pariah both overseas and

at home, with Washington denying him a travel visa in 2005 for religious

intolerance.

However, Modis star has recently been on the rise. Under him, Gujarat has

seen sustained growth and he has projected himself as someone who speaks a different lingo from the often casteist and

populist language so common in Indias polity. Through aspirational rhetoric and well-executed marketing, Modi has built

Gujarat and himself into an investor-darling. Though the state of Gujarat accounts for just five per cent of India's

population, it generates 16 per cent of Indias industrial outputand 22 per cent of its exports; its GDP rates consistently

exceed national averages, though it is not the fastest growing statein India.

By linking himself to the economic viability of Gujarat, Modi was successfully re-elected as Chief Minister for the fourth time

in December 2012, almost sweeping the urban regions, and is widely seen as a potential candidate for Prime Minister in

2014. In an indication of growing international recognition, Modi recently appearedin public with both the British Ambassado

and the U.S. Consul-General.

Gujarats success, coupled with Modis appeal to many of Indias youth, makes him a good political candidate in the eyes of

many Indian businessmen and foreign diplomats who praise him for corruption-free administration, inclusive development

and good-sense business policies. He has also received a thumbs-up from India Inc. for luring investors to the state and

ensuring they stay.

However, pundits and critics alike remain divided on whether Modi can capture enough votes outside of his home state and

appeal to Indias ever-changing diverse society. In Indias divided polity, his party the Bhartatiya Janata Party(BJP) - mig

find it difficult to attract allies willing to support a Modi-led administration.

With pollshaving swung in favour of the BJP and calls from within the party for his appointment as Prime Minister, it seems

likely Modi may find himself running against the Congresss choice in 2014 with a very good chance at the top job.

Edelman India

Mr. Rakesh ThukralPhone: (91) 124 4131400 x 429E-mail: [email protected]

Edelman Korea

Mr. SB JangPhone: (82) 2 2022 8294E-mail: [email protected]

Edelman Singapore

Ms. Delicia TanPhone: (65) 6347 2325E-mail: [email protected]

Edelman Australia

Mr. Nic JarvisPhone: (61) 2 9291 3382E-mail: [email protected]

Edelman China

Ms. Cindy TianPhone: (86) 10 5828 6505E-mail: [email protected]

Edelman Southeast Asia

Mr. Stephen LockPhone: (62) 21 721 59000E-mail: [email protected]

Narendra Modi speaks during a recentinterview. Image courtesy ofrediff.com
http://en.wikipedia.org/wiki/Narendra_Modihttp://en.wikipedia.org/wiki/Narendra_Modihttp://en.wikipedia.org/wiki/2002_Gujarat_violencehttp://en.wikipedia.org/wiki/2002_Gujarat_violencehttp://articles.timesofindia.indiatimes.com/2012-09-01/india/33534626_1_kodnani-and-bajrangi-godhra-carnage-babu-bajrangihttp://articles.timesofindia.indiatimes.com/2012-09-01/india/33534626_1_kodnani-and-bajrangi-godhra-carnage-babu-bajrangihttp://www.gujaratindia.com/business/major-indus.htmhttp://www.gujaratindia.com/business/major-indus.htmhttp://articles.timesofindia.indiatimes.com/2012-12-26/india/36007058_1_12th-plan-cent-in-10th-plan-cent-growthhttp://articles.timesofindia.indiatimes.com/2012-12-26/india/36007058_1_12th-plan-cent-in-10th-plan-cent-growthhttp://articles.timesofindia.indiatimes.com/2012-12-26/ahmedabad/36007551_1_legislature-party-leader-arjun-munda-raman-singhhttp://articles.timesofindia.indiatimes.com/2012-12-26/ahmedabad/36007551_1_legislature-party-leader-arjun-munda-raman-singhhttp://in.reuters.com/article/2012/10/29/india-narendra-modi-gujarat-idINDEE89S00520121029http://in.reuters.com/article/2012/10/29/india-narendra-modi-gujarat-idINDEE89S00520121029http://www.bjp.org/http://www.bjp.org/http://www.firstpost.com/politics/abp-news-ac-nielsen-opinion-poll-predicts-modi-win-534683.htmlhttp://www.firstpost.com/politics/abp-news-ac-nielsen-opinion-poll-predicts-modi-win-534683.htmlhttp://realtime.rediff.com/images#!narendra%20modihttp://realtime.rediff.com/images#!narendra%20modihttp://realtime.rediff.com/images#!narendra%20modihttp://www.firstpost.com/politics/abp-news-ac-nielsen-opinion-poll-predicts-modi-win-534683.htmlhttp://www.bjp.org/http://in.reuters.com/article/2012/10/29/india-narendra-modi-gujarat-idINDEE89S00520121029http://articles.timesofindia.indiatimes.com/2012-12-26/ahmedabad/36007551_1_legislature-party-leader-arjun-munda-raman-singhhttp://articles.timesofindia.indiatimes.com/2012-12-26/india/36007058_1_12th-plan-cent-in-10th-plan-cent-growthhttp://www.gujaratindia.com/business/major-indus.htmhttp://articles.timesofindia.indiatimes.com/2012-09-01/india/33534626_1_kodnani-and-bajrangi-godhra-carnage-babu-bajrangihttp://en.wikipedia.org/wiki/2002_Gujarat_violencehttp://en.wikipedia.org/wiki/Narendra_Modi

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