REGIONAL FOCUS: INDIA
India’s digitalisation journey so far Many governments are investing heavily to build ‘digital public highways’, which corporates can then leverage. Such initiatives include unique identification provided to each citizen, and bank accounts opened for them. India’s government is helped by the fact that the country’s mobile telephone penetration actually exceeds 100%, and smartphone penetration constitutes 50–60% of this total. These factors have combined to transform India’s payment systems, now operating 24 hours a day, seven days a week, while rapid advancements are being made in the development of ‘contextual banking’ (or ‘in- app purchases’). These are payment options for consumers already using ‘freemium’ online services with basic free and pay-for ad-free options, such as Spotify. A key focus is the consumer experience,
India Gate in New Delhi
examples of such specialised offerings, which build upon India’s long heritage in commodities markets, include silver exchange traded funds (ETFs), with ETFs for base metals and agricultural commodities also being planned. Such has been their rise in attracting retail investor capital that Jha believes that commodities “could give more traditional asset classes like equities or bonds a run for their money”.
4. Increased appetite for commodities. There has been a recent upswing in oil prices, in addition to those for raw materials such as aluminium, copper and steel, notes Jha. This in turn increases the working capital requirements for Indian businesses, and the demands they place upon their banks. Regulatory caps – limiting the disbursements that an Indian bank can make to any single borrower – are being reached, especially for many of the larger Indian corporates. This is therefore a busy time for many treasury departments in large Indian-based corporates, as options are explored, such as raising funds overseas both through capital markets and in the form of equity specifically. The country’s strong post-Covid rebound has seen many
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production plants running near capacity, causing many Indian corporates to devise ambitious capital expenditure plans which, Jha believes, will have the benefit of trickling down to those micro, small and medium enterprises (MSMEs) able to help meet production demands. Squeezes from commodity price rises and production capacity constraints are consequently behind the fourth trend driving India’s growth – namely, the expansion of working capital and production capacity.
5. Digitalisation. Initiatives such as the new Port Community System, and the Export and Internal Data Processing and Monitoring Systems (EDPMS), launched by the Reserve Bank of India in March 2014, are important steps forward. Jha points out that the advice from the central bank to other banks is to “just connect your engine to these two platforms and take whatever information is available there”. He reflects, “we are really gravitating towards a document-less export and import system, which is quite a change from what we used to see a few years ago”, despite the current backlog the banks are ploughing through.
given that digitalisation and smartphone penetration enable corporates to engage directly with their customers. But the digitalisation process is neither a panacea nor a quick fix for corporates. A huge amount of work, coupled with significant expertise, is needed to ensure that existing systems architecture can be developed to the point where it can cope with an increased frequency and volume of transactions and the decreased transaction size. “Transactions happen 24/7 and systems have not been designed for this,” says Rajesh Thakur, Co-Head of Transaction Bank & Head of New Economy Coverage for India and Asean at Deutsche Bank. Another example of India’s digital momentum is The Gujarat International Financial Tec-City (GIFT City) – an ambitious response to the call for an offshore centre for India-focused business. A four-phase construction development, which at first will be similar to the Dubai International Financial Centre, GIFT City already houses global businesses and 12,000 professionals. True to India’s entrepreneurial culture,
many start-ups are being created to develop offerings in areas such as banking and financial services, but also edtech, online fashion and beauty, and green ventures focused on electric batteries and vehicles, and battery swapping. Many of these start- ups are platforms, creating marketplaces in the growing e-commerce space. That these have been fruitful endeavours, created and grown by India’s highly educated and entrepreneurial workforce, is evidenced by the fact that, after the US and China, India has more unicorns (private companies with valuations of more than US$1bn) than any other country globally.
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