Tempers boil over water in India

MUMBAI // Scenes of burning lorries and buses torched by protesters, riots and violent clashes with police gripped Bangalore this month, as tensions surged over a water dispute.

The city is often referred to as the Silicon Valley of India because it is the country’s IT hub, attracting some of biggest the world’s corporate giants such as Google and Microsoft.

But the city and its economy ground to a halt amid the deadly violence and as curfews were imposed. Offices were evacuated and shut and shops and other businesses also closed. The dispute arose following an order from the supreme court to release water from the Cauvery river to the state of Tamil Nadu, which neighbours Karnataka, the state in which Bangalore is based.

This brought into stark focus the troubles that India faces over water and the challenge this presents to the country’s economic growth prospects. Indeed, at the same time, India’s rapid economic growth is a major part of the problem because it is fuelling a surging demand for water in the country. It is not only Bangalore that faces problems with water. There are smaller-scale water wars being fought across the country. And India suffered its worst drought in decades this year following two years of poor monsoon rainfall. Households and industry were in competition for water supplies, while, given the country’s large agricultural sector, farmers and factories competed with each other and among themselves for access to water.

There were post-apocalyptic scenes in central Maharashtra of weary villagers queuing for hours on end in the searing heat at pumps to fill up a couple of pots with water. As India aims to scale up its economy and boost industry, including manufacturing, the problem urgently needs to be solved to avoid more water wars breaking out and to create economic growth and a good business and investment climate, experts say.

“We feel that sometimes some of the problems that are coming up, whether it’s in terms of access to water, the conflicts, is a fallout of the types of policies that the government has been following,” says KJ Joy of the Society for Promoting Participative Ecosystem Management, based in the city of Pune in western India, and the co-editor of the book Water Conflicts in India: A Million Revolts in the Making.

“In India, there is this whole emphasis on a higher growth rate of 8 to 10 per cent. As a result of this, more and more water is getting reallocated from the rural as well as the agricultural sector to urban areas and the industrial sector. There’s hardly any thinking that is taking place around this. More and more industries are grabbing water.”

India is set to be the world’s fastest growing economy this year, and Narendra Modi, the country’s prime minister, is striving to boost growth levels even further, given the need to create enough jobs and support its burgeoning young population of more than 1.2 billion.

“Water can be correctly described as a catalyst in the economic growth of the country,” says Mahesh Tejwani, the president of the Vivekanand Education Society, based in Mumbai.

“The economic sustainability of the country to a large extent depends on the unhindered access to water. As the global population continues to expand, economies diversify and there is increase in urbanisation, the challenge for any modern-day government is to manage its water resources, which are limited and finite, in an efficient manner.”

He says that industry’s pollution of water has also reduced the availability of safe drinking water in the country.

“Reckless exploitation of groundwater by companies without consideration of sustained replenishment is also vastly depleting precious water resources,” he adds. “Mismanagement of water resources coupled with civic apathy and low consciousness about water as a key economic resource has resulted in mass wastage and inefficiencies.”

He says that the challenges surrounding water in India “can have a debilitating effect on the investment climate of the country as global investors may put off their investment initiatives in the country in the face of an irrational and unstable water supply framework”.

Experts agree that there is a need for coordinated efforts at the central government and state government levels to develop a unified water policy.

There needs to be “a democratic space” for stakeholders to come together and there should be reliable data on water available in the public domain, according to Mr Joy.

Business leaders believe that Bangalore’s image as a corporate destination was damaged by the riots.

“The constant bandhs [strikes] and threats have dented the economy badly,” says Pratik Mehta, the managing director of Unishire, a Bangalore property developer, “With so many non-working days, businesses have been affected and hence the impact on the overall economy is evident. While all the businesses suffered with the bandhs and curfews, most badly hurt were e-commerce and on-demand companies, mostly start-ups.”

D S Rawat, the secretary general of the Associated Chambers of Commerce and Industry of India (Assocham), says that Bangalore was “home to almost all the Fortune 500 companies”.

“The way the violent incidents had spread is demoralising the business and industrial community, particularly in the capital city of Karnataka,” he says. “The image that India built around Bengaluru as its Silicon Valley is being sullied.”

Assocham estimates that Karnataka lost some 220 billion (Dh12.12bn) to 250bn rupees as a result of the disruption.

Industrial production, movement of cargo and retail trade at malls and restaurants were some of the areas that were impacted, as well as losses to the IT industry, and the travel and tourism sector.

“While water is a basic requirement and an emotional issue, the situation is being exploited by miscreants, scaring away the peace-loving workforce which has settled in both Bengaluru and Chennai from all over the country and even abroad,” says Mr Rawat.

“While we are selling ourselves to be the fastest growing economy of the world, we cannot afford the incidents which are taking place in the metropolitan cities. After all, the two states had built with a lot of hard work image of progressive areas.”

There are concerns that the chaos will recur in Bangalore and the situation could get even worse next year if the right action is not taken to manage India’s water problems.

“A growing economy like ours cannot afford to get dented by such issues,” says Mr Mehta. “Hence it is important that the government aims at resolving it and seeking a solution – otherwise the situation will be no different next year. Various technologies such a desalination of water at the coastal areas can resolve this water crisis, and that’s the best way forward. But there should be adequate intent to come to a certain logical resolution and avoid further conflicts in the future.”


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Adani Group gives India the “world's largest” solar plant

India’s Adani Group has opened a 648 megawatts (MW) solar plant in Tamil Nadu, south India.

The project in Kamuthi, Ramanathapuram, is the world’s largest solar plant “in a single location”, says the Gujarat-based company, adding that it cost more than 45 billion rupees (Dh2.48bn).

Adani, which has interests in energy and logistics, wants to add 10,000MW of solar capacity in India by 2022. It is planning a solar park in Rajasthan, in the north. It is also developing a solar panel factory in Gujarat.

Gautam Adani, the company’s chairman, said that the Tamil Nadu plant “reinstates the country’s ambitions of becoming one of the leading green energy producers in the world”.

The government is aiming to generate 175 gigawatts (GW) of renewable power by 2022 including 100GW of solar power. It says the country needs US$250 billion of investment in energy infrastructure in the next few years.

More than 300 million Indians live without electricity, according to the World Bank, and many parts of India experience regular blackouts.

India’s solar sector has gained increased focus because of “the government’s ambitious installation target followed by favourable reforms”, said India Ratings and Research, part of the Fitch Group. “The sharp fall in the capital cost has made the India solar sector an attractive proposition for investors across the globe.”

US solar company SunEdison entered India in 2011 and other names, including Canada’s SkyPower Global and China’s Trina Solar, have ­followed.

Indian conglomerates, including Tata, Reliance, Aditya Birla, are also involved in the sector.

ReNew Power, an Indian renewable energy company with solar projects across the country, announced a year ago that the sovereign wealth fund Abu Dhabi Investment Authority had invested US$200 million in a minority stake in the company.

Japan’s SoftBank and Taiwan’s Foxconn, known for manufacturing smartphones including the iPhone, announced in June last year that they would invest $20bn in solar projects, along with India’s Bharti Enterprises.

Tata Power has a target of generating 20 to 25 per cent of its power from clean sources.


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India education: Gap in quality between government and public schools is troubling

At the Malleswaram school in Bengaluru, which consists of a few basic classrooms, a group of 8-year-old children sit on the floor, practising their writing in Kannada, the local language. Their teacher does not speak English. They do not have desks. At lunch time, they again sit on the ground to eat their lunch. The government-run school is free of charge.

Away from the city, in Belgaluru’s countryside, the scene could not be more different at the Stonehill International School, a non-profit private school, set up by one of Bengaluru’s major property developers, Embassy Group. There, privileged Indian and expat children enjoy modern classrooms where they are taught in English and have the benefits of a large cafeteria, a swimming pool and expansive playing fields spread across 34 acres. The fees range from US$9,400 to more than $26,000 a year.

These are the two extremes of India’s education system.

There are huge opportunities in the education sector, given a growing need for more good schools, a young population, an expanding middle class and parents’ willingness to invest heavily in their children’s education. And despite the fact that India’s school system is largely based on non-profit models because of regulations, education providers are finding ways to legitimately generate profit from schools, creating significant business opportunities. To take a profit, there has to be a dual structure between a trust that runs the school and a management company that provides the educational support.

India Ratings and Research, part of Fitch Group, highlighted in a recent report that “the education sector has tremendous potential to grow due to the huge demand-supply gap”.

It says the country needs a further 200,000 schools, along with 35,000 colleges and 700 universities. The size of the market will reach 7,800 billion rupees (Dh427bn) this year, up from 6,423bn rupees last year, according to India Ratings.

Ramya Venkataraman, the founder and chief executive of the Centre for Teacher Accreditation (Centa) and the former leader of McKinsey’s education practice in India, says that demand for quality schools has grown significantly in recent years.

“This is driven by several things, such as spending more on education and greater understanding of what quality means because of the efforts of organisations and because of national level tests that have started,” she says. “At the bottom of the pyramid, there is also some amount of shift from government schools to private schools, mainly because of the need for English medium, which government schools offer only to a limited extent.”

Ms Venkataraman says there is another gap in the government school system, where many schools stop at seventh or eighth grades. Enrolment in secondary schools is rising and children may not necessarily be able to access a government secondary school nearby, forcing parents to send their child to a private school if they want to continue their education.

Demand for private schooling “is not just about elite private and international schools” but “it’s across the board, across income segments and geographical segments”, she says.

There is “a perceived quality difference” between government and affordable private schools, although she adds there is some debate over this.

Even India’s poorer citizens, from road sweepers to taxi drivers, say that they send their children to affordable private schools because they are not happy with the standard of education at government schools.

“The amount of money that parents are willing to spend is definitely going up,” says Pranav Kothari, the vice president of the large-scale education programme at Educational Initiatives, a technology solutions company in India involved in assessments and benchmarking of schools. “I don’t think there’s any doubt about the amount of money that is being thrown at education.”

Learning levels are low in a lot of government schools and cheap private schools, he says. There is a dearth of high calibre teachers in the country and a need to raise the standards of teaching.

Gems Education, a Dubai-based education company, is one entity that is capitalising on the need for quality school education in India. It has about 175 schools in India, with more than 65,000 students across nine states. It wants to open almost 3,000 budget schools in India by 2022.

Amreesh Chandra, the group president of Gems India, says that with the emergence of “brand India” there has been a “very large focus on the internationalisation of school education” in the past few years.

Corporates had already started setting up schools or tying up with providers to set up good schools for its employees’ children, he says. For example, Mercedes-Benz has a school in Pune. This helped to bring about a change in the education landscape in India.

The government allowed foreign direct investment (FDI) of 100 per cent and this “brought up the whole aspect of looking at India in the business sector and that’s where companies like Gems come in”.

Gems charges $350 a year at its affordable schools in India, with each of its schools having a multimedia centre. These cater to lower middle-class families.

Global Indian International School is another brand that is expanding and targeting wealthy parents.

“Affluent parents prefer schools that offer a globally branded curriculum, hence the demand for international schools in India,” says Atul Temurnikar, the chairman and co-founder of Global Indian International School. He says that “in the last few years, competition among international schools has considerably risen”.

Despite the fact that there is clearly strong demand for quality school education in India, Ms Venkataraman says there are challenges and “it has not been very easy for any player to tap this opportunity in as big a way as people expected”.

A major hurdle is the fact that schooling is meant to be not-for-profit in India. The trusts running schools can only reinvest surplus funds back into the school. Separate management companies can, however, be paid for their services.

“Trust founders are increasingly establishing private limited companies to manage the services of the schools by charging fees with markups,” according to India Ratings. “This structure facilitates companies to take away profits from the trusts.” It says that “these evolving structures are positive for the sector”.

But Ms Venkataraman says that this profit-taking is still perceived by some opponents as “a grey area”, which deters some investors.

India Ratings says that there need to be more business tie-ups in the sector to allow it to expand even further to meet the surging demand. “More international collaborations with education institutions along with joint ventures and merger and acquisitions with both foreign and domestic corporate players would further help the sector to grow.”


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Amreesh Chandra, the group president of Gems India, part of the Dubai-based group that has 175 schools in India and plans to have 3,000 budget schools there by 2022, talks about the potential for India’s education sector.

What do you think of the standard of government schools in India, which are widely criticised for low standards?

It gives my affordable Gems schools an inherent market because there is a graduation of those parents who are aware of the education they want their kids to have. Also, as the largest private education provider in the world coming to India, we are now in conversations with government and government agencies, where we are trying to work hand in hand with them in trying to build up and better provide education in the Indian government schools. On September 5, we signed up with the government of Rajasthan where we have adopted a few of the schools and we are working with them in partnership for a better academic delivery in their schools. States are aware of the problem and they are open to a public-private partnership.

Could you talk about some of the synergy you have with India as a UAE-based company, given the large Indian expat population in the Gulf?

The idea here is why India is a focus for Gems. The growth of Gems has been from within the UAE and the Middle East. But we now know that with the kind of market in India and our knowledge of education, we are best equipped to address the market. We shall now use the platform of India to be the largest education company in the world. In the UAE, we run schools that are also affiliated to the Indian boards and we also run international boards. We are well-equipped to address what the parent community is looking for in India.

Could India attract more students from abroad?

The prime minister [Narendra Modi] has the initiatives Make in India and Skill India. But it should be Educate in India first. The kind of positioning India has globally, we are in the perfect position to become the intellectual capital of the world and the new education destination.

What are the biggest challenges you face in India?

I think it’s the availability of infrastructure. When you want to grow at the speed that we want to grow, you can’t do a [new] project every time. You need the kind of infrastructure to be readily available that you can acquire and start a school.

What other plans does Gems have in India?

We are still to come up with an international school. We want to do an international world academy. We are looking at Mumbai, Pune, Jaipur. We’re exploring those projects.


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India property: investment tips for NRI landlords

Deepthy Saleem, from Kerala in India, has lived in Dubai for 17 years and owns three homes in her native country – two of which are rented out.

But at times over the past few years she has questioned whether it is really worth leasing her properties, given the hassles she has faced from not being based in her home country.

“Honestly, living in Dubai and renting out a house in India is a tedious task,” says Ms Saleem, 42, an admin and accounts manager. “We initially requested the builders to help us out with tenants, then resorted to advertising in the classifieds and online portals and finally settled on local brokers.”

She adds that “the tenants had their own tantrums and never-ending list of requirements and demands”.

These included one occupant insisting she should pay their water bill and another demanding a state-of-the-art kitchen be installed. In one incident, just three months after renting the home, a tenant managed to break the sink and some tiles, and damaged other parts of the property, resulting in Ms Saleem paying 400,000 rupees (Dh21,964) in repair costs.

While her villa in Trivandrum, Kerala, is rented out for 15,000 rupees a month, her three-bedroom apartment in Kochi brings in 25,000 rupees a month. She says other three-bedroom apartments in the same building in Kochi go for between 35,000 and 40,000 rupees a month.

Her third apartment in Bangalore is not rented because of problems in the past, she says. The homes were bought between 2007 and 2011.

“Our homes are priced extremely low since we are unable to manage renting them out from Dubai,” says Ms Saleem. “Relying on the word of agencies and brokers has caused our homes to be valued at such low rates.”

But despite the challenges, experts say that NRIs in the UAE with property back home should rent out their properties and that there are ways of reducing potential hassles.

“NRIs are increasingly looking at property purchases in India, both as an investment opportunity and a place to stay when they return to India for good,” says Fali Poncha, the director, residential and land, Mumbai, at Knight Frank India. “In the interim, renting out the property is a good option. The rental income plus the possible appreciation could result in good returns on investment.”

Other factors that make renting the most cost-effective option, says Mr Poncha, include covering costs and home loan repayments and keeping the home in good condition through regular upkeep and maintenance.

Mortgage rates for NRIs in India are about 0.25 per cent to 0.5 per cent higher for Indian expats compared to resident Indians. Ms Saleem had a home loan on her apartment in Kochi, which she paid off a year ago, with the rental income going a long way in helping to pay off the borrowed funds.

Mr Poncha says that those worried about renting should note that landlords are well protected under the rental agreement, known as a leave and licence agreement.

“The rental market has evolved into a more mature and safe market, with new legislation and registration procedures that secure landlords against potential risks of tenants violating terms and conditions of the licence agreement,” he says, adding that renting to professionals and corporate tenants is the wisest option.

But Mr Poncha stresses that NRIs should make sure they are either in India at the time of setting up the agreement or that they use someone they can trust to do this on their behalf.

“They must have a designated person in the city where the property is located, to enable viewings by prospective licensees, repairs and interior works necessary to make the apartment habitable, and to facilitate executing the leave and licence agreement and registration thereof,” he says.

Dharmesh Jain, the chairman and managing director of Nirmal Lifestyle, a property developer in Mumbai says NRIs investing in property in India should study the rental market carefully before making a decision.

As most NRIs generally purchase an apartment as an investment option, it is vital to consider renting, he says. “The NRI should look at factors like the location of the flat, the amenities it offers, good furnishings and facilities like schools, hospitals, multiplexes to get a good rent.”

NRIs should also remember that taxes have to be paid in India on income generated from property rental; this can be 30 per cent on any rental income above 250,000 rupees.

VK Venkatesan, 55, a consultant who has lived in Dubai for 12 years and is from Trichy, south India, bought a flat in Bangalore in 2008 as an investment, which he rents out. He has “no issues” with his existing tenant, who works for a larger corporate firm and has lived there for the past six years, as he “maintains the flat with the utmost care”.

Despite being based overseas, he found his tenant through contacts in Bangalore and says because the city is the information technology hub of India, with a number of large companies based there, he had no trouble finding someone suitable.

Experts say NRI investors tend to buy property in their home states and Sushil Raheja, the chief executive of Raheja Homes, a developer in Mumbai, says his NRI customers from the UAE generally choose to rent out their homes.

“We find residential clients for them who are working with good corporates, and we get the documentation done,” he says, adding that this service costs one month’s rent.

To ensure they secure a property that can command a good rent, Mr Raheja advises buying a property from a good developer with sound amenities.

In 2005, Anuroopa Mukherjee, a Dubai resident since 2003 and founder of the Dubai public relations agency Pulse 360, bought a two-bedroom apartment in Indirapuram, in the Delhi area, along with her husband, Kaushik. The main purpose of the purchase was to have a home to live in if they returned to India. They bought an off-plan three-bedroom apartment in 2012 because they needed a larger home to accommodate their growing family.

That apartment is yet to be completed, something analysts advise against as a completed property can start generating income from rental immediately.

The couple rented out the Indirapuram flat six years ago to generate income from it rather than leaving it sitting idle, something Ms Mukherjee managed to organise while on a visit to India.

“It was quite easy – we rented it through an agent who is dedicated to our building,” she says, though she admits that having people close at hand also helps. “We have friends and family in Delhi so whenever required they can visit the apartment to see if things are in order.”

She says tenants should be selected carefully and she advises other NRIs not to opt for the first person who comes along.

“Verify where he or she works, do background checks and also your gut feel should tell you a lot about the person who will make your house their home,” she says.

“Renting out has its benefits, the maintenance charges are taken care of, you also earn some extra bucks, plus your house is functional.”

But while UAE NRIs are investing into India, well-heeled Indians back in India are increasingly looking to invest in homes abroad, including in the UAE, UK, and US, according to the International Real Estate Expo, to be held in New Delhi next month. Relatively low interest rates overseas compared to India amid a sluggish market in the country, as well as Brexit’s effect on the British pound and the expected negative impact on property prices in the UK, are factors driving this trend.

Almost half of India’s high net worth individual and ultra-wealthy population own property abroad, the highest rate globally, according to Knight Frank.


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For India, Islamic banking is inevitable

Zaheer Chauhan, a public relations consultant in Mumbai, laments the fact that Islamic banking is not available in India.

He uses conventional banking, but he tends to keep his financial activities with the bank to a minimum because as a Muslim, he simply would not be comfortable with certain transactions.

“I’d prefer to use an Islamic bank,” Mr Chauhan says. “One of the major reasons is interest on finance is prohibited [under Islamic law] and Islamic banking would give all the benefits without interest.”

The current situation has a significant effect on his life and how he spends and invests money.

“The entire game of interest is holding me back from investing, be it in mutual funds, taking loans for a car, property, consumer durables,” he says.

But it may not be too long before Islamic banking is available in the country, with strides being made towards introducing the alternative system.

The Reserve Bank of India (RBI), as part of its plan to boost financial inclusion in the country, has proposed to the government that interest-free banking be introduced in India, according to the central bank’s recently released annual report.

This could pave the way for Islamic banking in the country, although strong opposition is coming from some corners.

In Islamic banking, which follows the Sharia, interest is not allowed and should not be paid or collected on deposits and loans. Also, investments should not be made in areas prohibited under Islam, such as alcohol and pork. To earn money, instead of interest, Islamic banks rely on profit-sharing and fees.

“It is observed that some sections of the Indian society have remained financially excluded for religious reasons that preclude them from using banking products with an element of interest,” the RBI report stated. “Towards mainstreaming these excluded sections, it is proposed to explore the modalities of introducing interest-free banking products in India in consultation with the government.”

Previously, the RBI had taken the position that Islamic finance could be offered through non-banking institutions – but should not be offered through banks. This latest move, therefore, marks a significant shift.

India has more than 180 million Muslims, so many believe there is a huge opportunity for Islamic banking to take off in the country.

“The RBI has given its opinion and it’s now up to the government of India to make up its mind,” says H Abdur Raqeeb, the general secretary of the Indian Centre for Islamic Finance.

Middle class and wealthy Muslims in India “reluctantly” use the conventional banking system, because they have no choice, while some Muslims, avoid using banks altogether because the system goes against their religious beliefs, he says.

He says that he expects to see Islamic banking launched in India within the next year following the latest signs that there is a push towards its introduction.

“There is definitely scope and space for Islamic banking in India,” he says. “I don’t think it can be stopped from coming for much longer.”

There have been other recent steps towards Islamic banking in India. Saudi Arabia’s Islamic Development Bank this year announced plans to launch its operations in Ahmedabad in Gujarat, a state in west India. But there are politicians in the ruling Hindu nationalist Bharatiya Janata Party (BJP) that are vehemently opposed to the introduction of Islamic banking in India.

The most vocal of them is Subramanian Swamy. The BJP politician has long argued fiercely against Islamic banking and does not believe that it has a place in the secular society of India. On Twitter, he once said that “Islamic banking is a failure in Dubai” and in India it would “be conduit for religious conversion – no loan to Hindus on technicalities”.

The State Bank of India was planning to launch a Sharia-compliant mutual fund about two years ago but the plan was scrapped at the last minute. The Sunday Guardian reported that this was because Mr Swamy had intervened to halt the launch. In a letter to the Indian newspaper, he was reported as having written that Islamic banking would be “politically and economically disastrous for our country”, and he expressed concerns that it could lead to “dubious funds” being brought into the country via Islamic banks.

But Narendra Modi’s government is eager to advance financial inclusion in the country so that more of the population can come under the formal banking system.

Abhimanyu Sofat at India Infoline, a financial services company with its headquarters in Mumbai, says that Islamic banking does have “big potential” given the number of Muslims in the country, but he thinks that any introduction of Islamic banks could be a lengthy process.

“There could be new legislation that would be required to get this implemented,” he says.

There are a couple of mutual fund schemes in India that are Sharia-compliant, although they are marketed as “ethical” funds.

There would be significant opportunities for UAE banks, including Islamic banks, if Islamic banking does emerge in India.

“There could be opportunities for those with experience of Islamic banking in the Middle East,” says Mr Sofat. “But it’s speculative until we reach the stage where [Islamic banking in India] is going to happen.”

The GCC countries, Malaysia and Iran account for more than 80 per cent of the Islamic finance industry, according to Standard & Poor’s (S&P).

It says that the growth of the industry is slowing amid subdued oil prices and a lack of standardisation within the sector. Nevertheless, Islamic finance is expected to reach US$2.1 trillion this year and will be worth $3tn “some time in the next decade”, according to S&P.

There are a number of Indian expats in the Gulf region that do not put money into banks in India because Islamic banking is not available, Mr Raqeeb says.

He explains that India needs billions of dollars for infrastructure development in the country and Islamic bonds, or sukuk, could be one way of attracting funds.

“Sukuk is one of the important things in the world today for infrastructure development,” he says.

Kerala’s finance minister, T M Thomas Isaac, last month said the state’s government would launch Islamic banks within the next two years, Indian newspaper The Hindu reported. He said that Islamic banking offered an alternative system to the capitalist structure that triggered the global economic crisis of 2008, according to the newspaper.

Mr Raqeeb insists that Islamic banking is not necessarily only for Muslims and it could help to bring more Indians from poorer backgrounds into the banking system. Farmers could be among those to benefit, he says, with farmer suicides in India often linked to crippling high-interest loans that they have taken out.

“The marginalised people and the minorities are excluded from banking, so we think if this alternative system comes, it will be inclusive.”


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Mohamed Damak, the global head of Islamic finance at S&P Global Ratings, talks about the opportunities and challenges for Islamic finance in India.

Is India a potential market for Islamic finance?

Yes, we think India could well be a potential market for Islamic finance. There’s 180 million Muslims in India that might or might not be interested in Islamic financial services. There’s also a number of investments that could be financed through Islamic financial solutions. In any country where Islamic finance develops, you have to go through a certain number of prerequisites to create an enabling environment, including political support and adjustment of the regulatory and legal frameworks to make it friendly for Sharia-compliant operations, and an assessment of whether or not there is a demand and whether or not Islamic finance could add economic value to the country.

Could there be opportunities for UAE Islamic banks and UAE banks offering these services if India adopts Islamic finance?

Probably, yes, because there’s a large Indian population in the UAE. If we were to see development of Islamic finance activities by UAE banks in India, it could create some opportunities for the growth of the industry in India, through for example money transfer or offering financing solutions to the Indian expatriates in the UAE who want to invest in their home country.

How long would the process of launching Islamic finance actually take if the support emerges in India?

It depends on the speed at which the regulators want to take this forward. Things can go pretty quickly. Some African countries, such as Senegal, that have tapped the sukuk market managed to adjust the regulatory environment pretty quickly. But it can take a lot of time. An example is France, where regulatory adjustments were made in 2008, but since then there hasn’t been a real take-off of Islamic finance in France. It depends also on the local appetite of the local customers and the local corporates and whether they are interested in Islamic financial services.

Could the slowing growth of the Islamic finance industry globally make it less attractive to India?

We wouldn’t say that. Although we are seeing a slowdown in growth, there are untapped opportunities for the industry.


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Diwakar Nigam, the managing director of Newgen Software, an IT company based in New Delhi, talks to The National about how the main trends in the industry are affecting his business.

Could you talk about what you are seeing when it comes to the IT sector in India, and how it is performing?

In India the software product industry is still at a very nascent stage when compared to the software services industry, which has already seen a matured growth. The government’s focus on Digital India, by increasing mobile and internet use in India, the growing phenomena of new age technologies such as social, mobile, cloud and analytics are the primary factors affecting the business dynamics positively.

What are the challenges?

Major challenges that the Indian IT sector faces are the threat of loss of business to foreign software companies. The government should take measures to counter this. It should lower taxes and ease regulations to provide the Indian software companies with a level playing field vis-a-vis their global competitors. Made in India software needs to be promoted to create confidence and awareness about the availability of high-quality products from Indian vendors.

Brexit has a mixed effect on India’s IT sector. In the short term, India will see a negative effect but then in the long term it is too early to predict the outcome. We have recently opened an office in UK to cater to the European market.

What are the new trends you are noticing?

Robotic-process automation, social media analytics and cloud and digital sensing are the emerging smart process-solution trends.

How important is the Arabian Gulf to the industry and what presence and plans do you have for the market?

The Arabian Gulf is an important market for India’s IT sector. We are currently present in Dubai, which acts as a central location to cater to customers and organisations in the Arabian Gulf and Africa. These areas are a major part of our growth and expansion plans. We have a strong partner network in this region and are working towards expanding this network in the region, with strong associations in the banking, healthcare and government sectors


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Indian IT targets Arabian Gulf

MUMBAI // Bangalore is buzzing with activity; billboards for new luxury apartments are visible across the city, the roads are constantly lined with traffic, and well-educated workers flock to the city’s modern offices.

All this has been driven by the booming IT sector, which has made it the industry hub.

But the picture is not as rosy as it appears. India’s IT sector is facing a challenging environment, amid slow growth in the West, the United Kingdom’s exit from the European Union, restrictions on and higher costs of visas in the United States, competition from other Asian countries, and venture capital drying up for start-ups.

As the US and the UK face slow growth – markets that have been driven by outsourcing of IT service to Indian companies that provide skilled workers and competitive costs – IT firms are looking to the Arabian Gulf as an increasingly important area of focus to generate business.

“The IT sector is currently having a cautious outlook,” says Srividya Kannan, the founder and director of Avaali Solutions, headquartered in Bangalore. “Margins continue to stay under pressure due to headwinds from rupee depreciation, wages and visa fee rises and further pricing pressures.”

Amid all of this, the Arabian Gulf has is becoming increasingly important to firms such as Avaali.

“This market is very important for the Indian IT sector and we cannot afford to ignore it,” says Ms Kannan. “The countries here are still the geographical centre to some of the hottest developing markets. As far as Avaali’s plans go, we’re certainly planning to strengthen our operations in this market as we believe that our solutions are now more relevant than ever for enterprises in this market to enable margin improvements and improve governance.”

Others say they have similar plans.

“The Arabian Gulf is going to be an important market for the Indian IT sector as the Middle East is one of the world’s fastest growing markets in the banking, financial services, and insurance space,” says Gautam Ramanujan, the chief commercial officer of Infiniti Software Solutions, based in Chennai. “The region’s financial services sector is in the process of significant change and this would bring tremendous opportunity for the Indian IT sector. We have been aggressively targeting the Middle East market for the last few quarters and we have been able to build a very healthy pipeline of prospective customers in the region.”

India has a distinct advantage because of it geographical proximity to the market and Infiniti has plans to double its customer base in the region over the next two quarters, he says.

The web solutions company Websters – which is part of SoftAge, a technology company based in Gurgaon, north India – already has a presence in the UAE and now wants to expand across the region, says its co-founder Sheraz Saeed.

“We plan to put more efforts into Oman, Saudi Arabia and Qatar markets,” he says.

Bertrand Yella, the managing director of IBEE Hosting, a web hosting solutions company headquartered in Hyderabad, says his company also has expansion plans for the Gulf for new servers that it has recently launched.

Its customers globally are demanding better and better technology, while expecting costs to be competitive, which is challenging for Indian IT firms, he says.

Brexit has turned this into “a phase of uncertainty”, Mr Yella adds.

Infosys, the Indian IT major, this month lost a US$300 million contract with Royal Bank of Scotland, which has been linked to the Brexit issue.

“The immediate impact is of course the decline in the value of the British pound and its consequent impact to the existing contracts which would need to be negotiated again,” says Ms Kannan. “Also the decisions relating to large projects may get delayed resulting in unpredictability on the revenue front.

“There are also people issues that IT companies will need to take care of – given that London can no longer be the central hub for easy people movement across the EU.”

Mr Ramanujan says there is a shift in India’s IT industry and companies are taking a long, hard look at their business strategies.

“There are some near-term concerns as the traditional business model is undergoing a significant change,” says Mr Ramanujan. “Some of the largest Indian IT companies are digging deep into their pockets to go out on an acquisition spree, to buy companies that help with automation. To build their own portfolio of products, companies like Infosys, TCS and Wipro are aggressively scouting for companies to acquire.”

Hiring has slowed, as headwinds eat into companies’ revenues.

“Recruitment in the IT industry has seen a significant slowdown in 2016,” says Ajay Kolla, the founder and chief executive of Wisdomjobs.com, a jobs portal in India. “Job creation in the industry has fallen significantly, by around 10 per cent, as compared to the past year.

“While there haven’t been any large scale lay-offs yet in the Indian IT sector, the decision of several top IT companies to delink revenue and headcount has resulted in stagnant hiring. With companies emphasising implementing new technologies to automate several processes – and consequently cutting down on bench strength – hiring at the entry level has taken a big hit.”

Mr Kolla says he has noticed a change in the types of skills companies in the sector are demanding.

“The focus this year has shifted to hiring those with experience in new technologies such as artificial intelligence and cloud computing from the traditional practice of volume-hiring freshers.”

Nikhilesh Tiwari, the cofounder of Helical Insight, a business intelligence framework developed by Helical IT Solutions, says his company is striving to keep up with changing technologies to remain competitive and ahead of the curve.

“With the coming of new technologies like artificial intelligence and machine learning, we are seeing more and more automation in repetitive tasks like that of data entry, BPO [business process outsourcing],” he says, adding that the firm has plans to target the Middle East for business.

“We are seeing more and more chatbots taking the work of chat agents. With Helical Insight we are trying to bring the same kind of automation in business intelligence by integrating artificial intelligence and machine learning inside business intelligence and data analysis. Indian IT companies are slowly trying to diversify their geographical portfolio and thus hedge the risks and the Saudi market is one of them.”

But experts say, despite hurdles that the IT sector in India is facing, there is still scope for the industry to grow for those companies that manage to keep up with shifting demands from customers and continue to grow their markets.

“There’s infinite room for us to grow,” says Ambarish Gupta, the chief executive and founder of Knowlarity Communications, a cloud telephony company which has a presence in Dubai. “Cloud telephony is massively underserved.”

Mr Ramanujan says that “overall in the long run the potential of the Indian IT sector is huge. The world will always look at India for its offshore development efforts as long as the Indian IT sector focuses on continuous improvement in service quality as well as keeping the costs low”.


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Indian surrogacy ban could be 'doomsday' for booming medical industry

The Indian government’s draft law to ban commercial surrogacy in the country could result in the end of a booming medical industry.

Commercial surrogacy involves a woman being paid to carry and give birth to a child for someone else.

In India, it is largely impoverished women who act as surrogates. The industry has grown rapidly since it was legalised in 2002, with Indians and foreign couples employing the services offered at Indian clinics.

A number of couples from the Arabian Gulf region have opted for surrogacy treatment in India, with the practice being illegal in Gulf countries, along with other nations such as the United Kingdom and Australia. Costs are also far lower compared to other countries that offer commercial surrogacy, such as the United States.

But last week, the cabinet cleared a draft bill that seeks to ban commercial surrogacy for both Indians and foreigners. It proposes that only couples who use a relative to carry a child for them and have been married for at least five years can opt for surrogacy treatment.

Jatin Shah, who runs the Mumbai Infertility Clinic and IVF Center, which oversaw the surrogate birth of the Bollywood actor Shah Rukh Khan’s son in 2013, says that the move could be “doomsday” for India’s commercial surrogacy industry.

“I think a ban is too harsh,” Dr Shah said. “There should be regulation and licensing of all the clinics, regulations of how much the surrogate should be paid so there is no exploitation.”

The controversial sector, which is unregulated, has been described as “rent-a-womb” and has been criticised for offering “baby farms”, as well as being likened to India’s outsourcing industry. It has an annual value of about US$2.3 billion, according to the Confederation of Indian Industry.

Until the end of last year, foreign couples had been flocking to India to take advantage of the practice. But the industry was plunged into uncertainty when the Indian government in October revealed plans to ban commercial surrogacy for foreign couples. This was followed by notices being sent out to clinics in November by the Indian Council of Medical Research, a government body, ordering them to stop receiving new cases of foreigners for commercial surrogacy with immediate effect.

India’s foreign minister, Sushma Swaraj, when announcing the ban said that having a child through surrogacy had become a “fashion” among celebrities rather than a necessity.

The bill will have to be approved by the upper and lower houses of parliament before it can become a law and come into effect.

Rita Bakshi, a surrogacy specialist in New Delhi, said that she was “numbed and shocked” when she heard about the draft law.

“We were expecting our government to put good regulations in place but we were not expecting them to find an easy way out – because banning is the easiest way out,” Dr Bakshi said. “[Surrogacy] is a need.”

She said she would certainly see a huge drop in business if the ban was passed and that she would have to focus on other areas of fertility treatment instead. Until the end of last year, up to about 60 per cent of the couples she was receiving for surrogacy were foreigners, but that flow of business completely stopped following the government notices.

There are also concerns that banning commercial surrogacy could prompt it to become a backstreet industry.

Dr Shah said that commercial surrogacy helped infertile couples and provided a livelihood to poor families in India, as well as having wider benefits for the economy. The thousands of dollars that a surrogate receives are life-changing, allowing them to start a business or build a house and educate their children, he said.

“It was bringing a lot of revenue for India – medical tourism.”

He said that he was planning to get together with other members of the industry to challenge the move.


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