CII ASCON Survey: Economic Recovery on Track

Edited, printed and published by Chandrajit Banerjee, Director General, CII, on behalf of Confederation of Indian Industry fromThe Mantosh Sondhi Centre,
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Journal of the Confederation of Indian Industry
We welcome your feedback and suggestions. Do write to us at communique@cii.in
Contents Volume 38 No. 6 June 2016
cover story
17 The Water Imperative
The availability, quality, use and utilization of Water impacts
each and every aspect of the Indian economy. Recognizing
Industry’s responsibility as a key consumer of this resource,
our cover story describes CII’s work in Water Management,
prioritized through the CII-Triveni Water Institute, its
specialized Center of Excellence, and complemented by
intensive developmental and community efforts through
the CII Foundation and other initiatives.
Game-Changers
09 CII Manufacturing Competitiveness Toolkit
11 Ciitrade: CII’s e-marketplace
FOCUS
12 Smart Cities: Mission Transform-nation
policy periscope
32 Towards a Globally-competitive Capital Goods Sector
34 National IPR Policy: Goals Ahead
Mindspace
37 Revitalizing the Financial Sector
manufacturing
43 Championing Manufacturing in India
plus...
sECTORSCAPE
Portfolio
engaging with
the world
REGIONAL REVIEW
... AND MORE

Communiqué June 2016 | 3
From the Director General’s Desk
Dear Reader,
T
he CII Communique comes to you this month with a new look and presentation. From this
issue onwards, you will continue to see changes in the style, design and content of our
monthly magazine. Our endeavor is to offer you more features that are relevant and tailored
to industry readers, and share innovative ideas for industry growth and success. Each edition
would present novel business models, new CII initiatives, and contemporary issues to meet your
information needs in a dynamic world.
The June edition brings to you two remarkable new CII measures designed to enhance
performance in a demanding marketplace. The website www.ciimfgmission.com provides a simple
tool that will help a factory unit find out how competitive it is, while another online tool,
www.ciitrade.in, connects businesses to buyers across the world.
Our cover story this month focuses on the urgent need for water management in the country,
which has gained poignancy after two devastating years of drought. We need to come together to
leverage our water resources wisely and strategically, and industry must play an important role as
a key community participant. CII’s Center of Excellence for Water, the CII-Triveni Water Institute,
forges strategies for companies to save costs and water use. The CII Foundation works with
industry and NGOs on water solutions through different models.
The banking sector has been facing several challenges and the Government has devised various
measures to address these. Our second lead story examines the overall stressed assets position,
the landmark Insolvency and Bankruptcy Code, and debt recovery measures.
With the Smart Cities Initiative capturing public interest, a special feature looks at the milestones
and challenges of this unique mission for a better quality of life for urban India.
We also analyze two critical policies recently brought out by the Government of India, the
Intellectual Property Rights Policy, and the National Capital Goods Policy.
In May, Mr Pranab Mukherjee, President of India, visited China, and the accompanying CII
delegation had the opportunity to join the business interaction.
Like every month, the magazine will continue to showcase our impressive array of major events,
key interactions with government and business representatives, both in India and overseas,
regional happenings, and the portfolio of services provided by the CII Centers of Excellence.
We would greatly appreciate your views and feedback on this edition of the CII Communique.
Do write in to me with your ideas and suggestions, so that we can make the magazine a really
outstanding and articulate voice for Indian industry.
Chandrajit Banerjee
Director General, CII

I
ndia believes there is great potential for economic and
commercial cooperation with China. Both countries
face similar opportunities and challenges, said
Mr Pranab Mukherjee, President of India, addressing
the India-China Business Forum, supported by CII, in
Guangzhou, on 25 May. The stability of the bilateral
relationship between the two countries in recent years
provides an enabling basis for utilizing these opportunities
and coming together, he added.
CII organized a high-level industry delegation, led by Dr
Naushad Forbes, President, CII, and Co-Chairman, Forbes
Marshall, to accompany the President of India to China.
To realize the full potential of our economic partnership,
it is important to bridge the information gap between our
business communities. India is committed to providing
a conducive environment for Chinese investments, and
is ready to facilitate collaborations between industry and
business of the two countries across different sectors,
said Mr Mukherjee, inviting investors and entrepreneurs
from China to be partners in India's growth story.
“Our primary goal is to build a modern economy
that puts a premium on sustainable development.
We are steadily moving towards this, and a profound
socio-economic transformation is taking place in our
country. China's economic achievements are a source
of inspiration for us. Stepping up two-way trade and
investment flows will be of mutual benefit to both
nations. India will facilitate the efforts of Chinese
investors to make their investments in India profitable,”
Newsmaker
india and the world
India-China Business Forum
said the President of India.
Indian industry warmly welcomes Chinese investments
and participation in the Indian economy, and hopes
for likewise cooperation in the Chinese economy, said
Dr Naushad Forbes. Envisaging huge opportunities for
Chinese participation in India’s ambitious infrastructure
programs, he said Chinese companies have demonstrated
high technical and engineering capabilities in project
management, and can deliver excellent outcomes.
In recent years, with the joint efforts of government and
industry on both sides, Sino-Indian trade cooperation has
entered the fast lane, stated Mr Jiang Zengwei, Chairman,
CCPIT, China's largest trade and investment promotion
agency. In 2015, bilateral trade reached $71.62 billion, up
1.5% from a year earlier, and is expected to touch $200
billion in 2019, he said. Investment cooperation too is
rising, he observed, citing the plans of companies like
Dalian Wanda and Sany to invest in India.
The Chinese economy, said Mr Jiang Zengwei, is
entering the new normal, and will maintain rapid
growth, with the 13th
Five Year Plan promoting a new
round of opening to the outside world, and international
cooperation. He said the CCPIT would work to:
• Strengthen cooperation with the Indian Government
and business associations
• Encourage Chinese enterprises to expand imports
from India
• Facilitate Chinese enterprises to invest in India.
Dr Naushad Forbes, President, CII, and Co-Chairman, Forbes Marshall, addressing the India-China Business Forum in the presence of
Pranab Mukherjee, President of India, and senior leaders of China, in Guangzhou

T
he outlook in Industry is optimistic, with an
improvement in growth trends in terms of
production in Q4 FY16 over the corresponding
quarter a year ago, finds the CII ASCON (Associations’
Council) survey for the period, January - March FY16.
The current trends also point towards a bottoming out
of growth trends in the majority of sectors.
While the pace of economic activity remains uneven across
sectors, a participation of more and more sectors in the
uptick is pointing to a strong revival in the economy, with
sentiments far more inspiring than before.
The survey, which
tracks the growth
of economic sectors
on a quarterly basis,
based on feedback
r e c e i ve d f r o m
sectoral industry
associations, shows
that while a majority
of the sectors are
still continuing to
witness 'moderate’
growth rates (0
t o 10 % ) w i t h
‘excellent’ (>20%)
and ‘high’ (10-20%)
growth limited only
to a few sectors,
there has been a
sharp decline in the
share of sectors
registering ‘low’
growth of <0%.
Out of the 102
sectors surveyed,
t h e s h a r e o f
sectors registering
‘excellent’ growth of
>20% has remained
constant at 9.8%
CII ASCON Survey
Economic Recovery on Track
survey
industry
(10 out of 102), vis-a-vis the same quarter a year ago.
However, the share of sectors witnessing ‘high’ growth
of 10-20% has surged substantially to 20.6% (21 out
of 102) as against 11 out of 102 recorded in the same
quarter in the previous year.
The share of sectors witnessing ‘moderate’ growth of
10-20% has declined marginally to 45.1% (46 out of 102)
from 49.0% during the corresponding period a year ago.
Hearteningly, the number of sectors recording ‘low’ growth
has declined significantly to 24.5% (25 out of 102) in Q4
FY16 from 30.4% (31 out of 102) in Q4 FY15.
A further analysis
of the sectors at
the aggregate level
(with industry being
classified into broad
segments in terms
o f p e r f o r m a n c e
of production, i.e.
‘excellent’ and ‘high’
(above 10%) on one
hand and ‘moderate’
or ‘negative’ (below
10%) on the other)
reaffirms that there
are improvements on
the ground. In the Q4
FY16, 75.3% of the
sectors are recording
positive growth, as
compared to 69.8%
in Q4 FY15.
An analysis of growth
trends on a sequential
quarter-on-quarter
basis also presents
improvements in the
growth trends in Q4
FY16 as compared to
Q3 FY16. According
to the survey, while
‘We are hopeful that, going forward, given the Government’s
continued focus on reviving demand, the current uptick in
growth momentum is likely to be supportive of a robust
recovery in the coming quarters.’
Shobana Kamineni,
President Designate, CII, Chairperson, CII ASCON, and
Executive Vice Chairperson, Apollo Hospitals Enterprise Ltd
Industry performance Q4 FY16 over Q4 FY15 (in %)

8 | June 2016 Communiqué
there has been a marginal increase in the percentage
of sectors reporting ‘excellent’ growth, there has been a
substantial surge in the share of sectors reporting ‘high‘
growth. The share of sectors reporting high growth has
increased to 20.6% (21 out of 102) in Q4 FY16 from
just 6% in the previous quarter.
On the other hand, even as the share of sectors
recording ‘moderate’ growth has dropped to 45.1% from
53.0% in Q3 FY16, the number of sectors recording ‘low’
growth has declined significantly to 24.5% from 33%
in Q3 FY16, clearly pointing towards an improvement
in the growth trends.
On capacity utilization too, an indicator of demand
acceleration in the economy, the survey reveals a
slight improvement in the January–March quarter. While
30.8% of the respondents (compared to 21.4% recorded
in the last quarter) have reported capacity utilization to
be in the range of 75-100% for the January – March
FY16 quarter, 53.3% reported it to be in the range of
50-75%. The trend is expected to continue in the
coming quarters as well.
With respect to issues and concerns impacting growth,
lack of domestic demand (58.8%), high tax burden
(50.0%), cost and availability of finance (41.7%), and
competition from imports (40.0%) were cited as the
most important constraints by more than 40% of the
respondents.
The survey respondents have emphasized the need for
intensive action on reforms related to trade and the
business environment and have stressed on improving
the ‘Ease of Doing Business’ indicators, with a focus
on removing the massive transaction costs by enabling
efficient processes and a conducive taxation system
to help integrate India into global supply chains. These
measures, coupled with sustaining the reforms agenda,
particularly ensuring quicker progress on reforms such
as the Goods and Services Tax (GST) Bill and the
Land Acquisition and Rehabilitation & Resettlement
(Amendment) Bill, 2015, will impart greater certainty
to investors on the policy front.
A
Publication
ThereforeIwanttoappeal[to]allthepeopleworld
over, from the ramparts of the Red Fort, ‘Come, make
in India’, ‘Come, manufacture in India.’
PRIME MINISTER SHRI NARENDRA MODI
Speech on Independence Day of India, 15 August 2014
For price and orders, please contact corporate.communications@cii.in
With Insights From:
Adi Godrej Cyrus P Mistry Sumit Mazumder
Adil Zainulbhai Deep Kapuria Sunil Kant Munjal
Anant J Talaulicar Hari S Bhartia Sunil Mathur
Banmali Agrawala Jamshyd N Godrej TV Narendran
B Prasada Rao Naushad Forbes Venu Srinivasan
Chandrajit Banerjee Rahul Bajaj Vinayak Chatterjee
C Narasimhan Sanjay Lalbhai YC Deveshwar
survey

I
n line with the ‘Make in India’ initiative, the CII
Manufacturing Council has been working on initiatives
both at the macro and micro levels. At the macro
level, the Council has been working to identify a sectoral
roadmap to drive double digit growth in manufacturing.
At the micro / firm level, the endeavour has been to
identify the ‘recipe for success’ for manufacturing
companies, and to distil the secret sauce that gives
companies an edge over their peers.
As a first step, the long term performance of companies
was analyzed for 32,000 companies for
the last 10 years. To gain deeper insights,
members of the CII Manufacturing Council
had in-depth conversations with CEOs of
companies that had outperformed their
peers. The insights gained from these
conversations was blended with the expertise
of CII’s Centers of Excellence (CoEs) to
synthesize and develop
a tool to help companies
benchmark their functional
and cross-functional aspects
and ways of working.
The Online Diagnostic
Toolkit (ODT) is a unique
self-assessment tool
that scores a company’s
competitiveness and helps benchmark its performance
against peers. It helps companies identify their weakest
link and points to areas of improvement.
This online, self-evaluative method is simple, yet
comprehensive. It is built on six key pillars that are
core to a company’s competitiveness:
• Human Resource and Leadership
• Operations
• Marketing
• Supply Chain Management
• Environment, Sustainability and Governance
• Research and Development.
The online diagnostic toolkit can be accessed from
anywhere in the world by simply logging on to
www.ciimissionmfg.com. Post registration, it takes
about 30 minutes to complete the full process, and is
guided by easy to understand instructions.
The ODT is targeted at CEOs and CXOs of
companies who appreciate having a holistic
view of their company’s competitiveness.
Once the diagnosis has been completed,
the toolkit identifies the gaps for the six
functional parameters listed above.
Detailed Analysis
The ODT can also be leveraged
to conduct an analysis at the
overall or at the functional
level. For example, for the
Marketing function, the toolkit
can conduct an analysis on
the sub-parameters of this
function, such as Leadership
and Marketing Strategy,
Marketing Processes, Product Development, etc, and
identify the performance for each, against the industry
average. It thus gives companies a wealth of benchmarks,
and identifies areas that need immediate attention.
Companies can leverage this toolkit to do a quick and
comprehensive benchmark analysis of their competitiveness,
and then easily access the services of the CII Centers of
Excellence on one platform, to help transform themselves
from being good to great companies.
Log on to www.ciimissionmfg.com to kick-start your competitiveness journey today!
CII Manufacturing Competitiveness Toolkit
Taking Companies from
GOOD TO
GREAT
game-changers
manufacturing competitiveness
Overall Analysis
Functional Analysis

To know more, write to business@ciitrade.in, or call 180030002686 (toll free)
C
II has launched ‘ciitrade.in’ an online e-commerce
gateway powered by cloudBuy, a global provider
of Cloud-based e-commerce marketplaces. The
ciitrade.in gateway will connect CII members with new
trading opportunities within the country and around the
world. The official agreement was signed by CII and
cloudBuy during the recent visit of Mr Narendra Modi,
Prime Minister of India, to the United Kingdom, as a
part of the India-UK initiative.
ciitrade.in was formally launched during the 2nd
edition
of the Global Exhibition on Services 2016, organized in
association with the Ministry of Commerce and Industry
and the Services Export Promotion Council (SEPC). It
will enable secure e-commerce for organizations of all
sizes, and will aid in the growth of online business-
to-business transactions. The portal will also provide a
gateway to global supply chains.
Almost 95% of the B2B market in India is
unorganized. Limited access to larger markets
and export opportunities puts Indian suppliers at
a disadvantage. Understanding the untapped potential
of the B2B e-commerce industry, the Government
has allowed 100% FDI in B2B e-commerce, giving
global successful B2B e-commerce companies such
as cloudBuy an opportunity to explore opportunities in
the Indian space.
CII, as a service to its members and Indian industry,
has entered into agreement with cloudBuy to give
Indian suppliers access to global markets without
much investment and effort. With a base of 35,000
buyers across the globe, ciitrade.in will provide Indian
companies access to a huge exports markets in the
US, the UK, and countries of the Asia Pacific region,
the Middle East and Africa.
The CII e-marketplace provides sophisticated e-commerce
capabilities giving businesses the ability to:
• Sell products and services online
• Process enquiries, orders, invoices and payments
• Offer a secure shopping basket and checkout process
• Provide various secure payment options to customers
• Upload product catalogues
• Display multiple images for products and services
• Update catalogues, prices and stock online, which
are instantly reflected to buyers
• Offer online promotions
• Create online forms to gather additional information
• Provide item details on orders and invoices
• Process online enquiries for business
• View reports of online sales
• Boost search engine rankings for their business.
Both CII members as well as non-member companies
can register their companies on the portal and list their
product or services.
Ciitrade: CII’s e-marketplace
game-changers
e-commerce

Intelligent and sustainable urbanization in the
country requires a robust management
framework to effectively establish Indian
cities as true engines of economic growth
Smart Cities
Mission Transform-Nation...
... and the Challenges Ahead
W
hat started as an urban enigma in June
2015 has gradually blossomed into a
full-fledged urban revolution. The Smart
City Mission, the ambitious Government
scheme that aims to develop 100 Smart Cities in the
country, successfully crossed the first milestone with
the declaration of 20 ‘Lighthouse’ cities in Round I,
as part of an elaborate City Challenge Framework.
Further, 13 other cities have been shortlisted on a
‘fast track’ basis. Hence, 33 cities are already on their
way to realize their vision to become more inclusive
and sustainable.
While Government attempts towards urban renewal
are not new in India, this program has some unique
characteristic features that offer unprecedented
opportunities.
Stakeholder Aspiration and Social Media: In a bottom-
up approach, a unique feature of the Mission Guidelines
ensured that citizens vote their opinion (primarily through
social media) on the specific amenities sought by them.
In fact, Smart City Proposals posted online on MyGov
FOCUS
infrastructure
for public comments received more than 2.5 million
responses. The entire exercise demonstrated the latent
potential of social media as a tool for citizen empowerment
in the increasingly digitized Indian society.
City Vision and Priorities: Since a city is inhabited by
multiple strata of population with varying needs and
ambitions, the program requires each city to create
its unique vision that not only highlights its inherent
strength but also reflects the collective conscience of
its citizens. The exercise for identifying priority areas
for intervention in each city not only results in the
superimposition of different layers of city needs but also
increases the sense of ‘ownership’ amongst citizens.
Collaborative Competition: This Mission is a departure
from various other national missions as it establishes
a competitive process for the cities to engage in. It
sets a broader framework for cities to develop their
strategic smart city plans and allows them to innovate,
depending on their institutional, administrative and
financial capacities. At the same time, this competitive
method does not penalize the weaker cities and, in

fact, allows cities with varying capacities to engage in
a larger pool of collaborative learning, with hand-holding
by the Ministry of Urban Development.
Special Purpose Vehicle (SPV): The Indian urban
landscape has been plagued by multiple overlapping
authorities, making effective decision-making virtually
impossible. In this context, the proposed SPV for each
city, which is to be registered under the Companies
Act 2013, is nothing short of a transformation. With a
dedicated CEO and Board of Directors, this entity will
not only be responsible for coming out with desired
frameworks, but also for monitoring the implementation
of identified projects.
Challenges and the Way Ahead
While there is no doubt about the profusion of
opportunities for all stakeholders, major concerns
pertaining to the prevailing civic governance structure
need to be resolved to achieve the optimum potential of
Indian urbanization. Some of the key challenges are:
Existing Legacy of City Infrastructure: Integrating
formerly isolated legacy systems is a major challenge
for making a city sustainable and efficient.
Availability of Master Plans: The absence of a long
term development plans for most cities in the country
also makes it difficult to improve the potential and
implement sustainable city development.
Financial Stability: Since the tariff imposed by many
cities does not adequately reflect the cost of providing
the amenities, financial self-sustainability is a major
problem.
Techno-managerial Constraints: Due to limited
competiveness in the Indian urban landscape, most
Urban Local Bodies (ULBs) lack the requisite technical
capabilities and talent, making it difficult to timely
implement an effective Smart City Development plan.
Intra-city Coordination: While one of the mandates
of the proposed SPV is to ensure inter-department
coordination within the city, the fact that most
civic departments lack a unified perspective of the
technological implications of smart cities would add to
operational inefficiencies.
To pave the way for intelligent and sustainable
urbanization in the country, it is necessary for the
proposed SPV to not only help resolve these challenges
but also manage the various sub-entities within the
city, and put in place a robust equity management
framework, to effectively establish Indian cities as true
engines of economic growth.
CII Smart City
Investors’ Meet
The Indian urban
juggernaut has
begun to move,
showcasing projects
worth $7 billion as
the first offering in the
20 lighthouse cities
that have made it to
Round 1 of the Smart
Cities Challenge. The
Government has
announced another
13 cities, making a
total of 33 cities that
will be financed in
the first round under
the Smart City Mission, a flagship initiative of the
Government of India.
These listed cities will receive the first tranche of
funding, said Mr Venkaiah Naidu, Minister of Urban
Development, Housing & Urban Poverty Alleviation
and Parliamentary Affairs, at the CII Smart City
Investors Meet, held on 19 May in New Delhi.
Emphasizing the role of the private sector in the
development of smart cities and urbanizing India, he
said there is an urgent need to involve the private
sector and bring in their expertise and technology
to meet the aspirations of the citizens.
These cities are looking at new and innovative means
of financing, said the Minister, such as monetizing land
assets, introduction of user charges, and tax incentive
financing. “Citizens have paid and are willing to pay
M Venkaiah Naidu, Minister of
Urban Development, Housing and
Urban Poverty Alleviation, and
Parliamentary Affairs
Vinayak Chatterjee, Chairman, CII National Committee on
Infrastructure & PPP, and Chairman, Feedback Infra Pvt Ltd;
Dr Sameer Sharma, Additional Secretary, Ministry of Urban
Development, and Mission Director, Indian Smart Cities Mission,
and Prof Jagan Shah, Director, National Institute of Urban Affairs,
at the Smart City Investors’ Meet in New Delhi
FOCUS

Investment Opportunities
in Smart Cities
The Smart City Mission is opening up numerous investment opportunities
across the urban landscape. CII, in partnership with the Ministry of
Urban Development and the National Institute of Urban Affairs, has
published a Handbook highlighting the specific investment opportunities
emerging from and in the 20 cities selected in Round I of the
Mission.
The priorities of the cities have been sub-divided into 24 broad themes.
While some of these themes are general indicators of the quality of
life, such as water supply, housing and mobility, many others are more
specific, pertain to the specific requirements of a city, and range from
underground electric wiring, to air quality and source of energy.
Indore tops the list with a projected investment outlay of $731 million,
while Ludhiana has proposed an outlay of $159 million.
Coimbatore has earmarked an area of 16.8 sq.km to be developed
under the Area Based Development (ABD) category, with predominant
focus on mobility and walkability. This is the maximum area under this
category amongst all the cities.
For pan-city solutions, Visakhapatnam has chosen the maximum area
of 513.61 sq.km, while New Delhi has the smallest area of 42.74
sq.km.
The most sought-after solutions pertain to waste management, intelligent
transport, and e-gov (including ICT).
The Smart Cities Handbook
CII has brought out a ready reckoner on
the identified 98 cities to serve as a
‘Go-To’ document for potential investors
from India and overseas. Such a
document is significant because work
in some of these cities has already
been initiated.
The Handbook compares the relevant
urban statistics of all the cities and
identifies specific opportunities and
challenges. It includes a compilation
of 40 metrics from authentic public
data, comparing various parameters
of quality of life such as water and
sanitation, mobility, et al, of the
98 cities. It also features snapshots
of the proposals of the 20 Lighthouse
Cities selected in Round I.
user charges as long as they
get assured and quality services.
This would be the biggest ask
from the service and solution
providers,” he said.
Mr. Rajiv Gauba, Secretary,
Ministry of Urban Development,
said that citizen participation is
a unique aspect of the entire
Smart City Mission. Almost
14 million citizens across the
country have participated in
shaping the Smart City plans,
and this needs to be built upon,
even as plans are rolled out.
“We need to institutionalize it
and see that citizens play a
proactive role through feedback
loops,” he said.
CII is committed to work with the
Government and all stakeholders
to realize this ambitious scheme,
by adapting the global best
practices to Indian conditions,
said Mr Ravi Parthasarathy,
Chairman, CII Smart City
Mission, and Chairman, IL&FS
Ltd. Cities have emerged as
new nodes of growth, a fact
that resonates with both local
and global constituencies in
contemporary times, he added.
Global interest in India’s Smart
City Mission was demonstrated
at the Investors’ Meet, which was
attended by the ambassadors of
the US, Japan, South Korea,
and Spain, and the High
Commissioner of UK, among
others. The Commissioners of
Ahmedabad and Pune, as well
as a vast array of stakeholders
including representatives of
Industry, Government, cities,
foreign investors, overseas
missions, consultancy firms,
think-tanks, solution-providers,
academia, et al, attended the
day-long convention.
FOCUS
Publications

The Water Imperative
Every Drop Counts
COVER STORY
water management
The imperative for water
conservation and usage strategies
cannot be overstated. The impact
of this life-sustaining resource
feeds into the consumption and
employment outcomes of all
aspects of the Indian economy.
As a significant user,
Indian industry bears
responsibility for water
management.
In a series of articles,
this cover story
presents the spectrum
of CII’s work in Water
Management, prioritized through
the CII-Triveni Water Institute,
its Center of Excellence,
which undertakes policy
advocacy, along with
projects, water audits,
and industry awareness
and sensitization,
and complemented
by developmental
and community
efforts through
the CII Foundation
and other
initiatives.

I
ndia today experiences, by most
estimates, water variability and
scarcity. The country’s annual
precipitation, characterized by the
monsoon rains over 3 to 4 months,
is estimated to be in the range of
3600 - 4000 billion cubic meters (bcm).
High rates of evaporation and transpiration
consume about 50–55% of the total rainfall,
leaving annual available water resources
in the range of 1870 – 1950 bcm, (both
surface and groundwater). Of this available
water resource, the utilizable water, i.e.
after factoring in economic, environmental
and physical conditions, is assessed to be
1030-1120 bcm, of which 60-65% is from
surface water, and the remaining from
groundwater sources.
If we were to assume a bucket of water
as the total annual rainfall received by the
country, then the total utilizable resource is
actually just 1/4th
of the bucket, and even
this is shrinking!
The situation becomes more complex on
account of spatial and temporal differentials,
translating into iniquitous water distribution
and access. (See Box).
High spatial variability in rainfall and high
• Almost 68% of India is vulnerable to drought, and 12% to floods. On an average, about 50 million people
are affected annually by drought, and about 30 million people by floods.
• Consecutive droughts in the last two years have impacted more than 330 million people.
• Groundwater serves as a vital buffer against the volatility of monsoon rains and climate variability, but is increasingly
shrinking in India, with falling water tables.
• As the demand for water outstrips supply, river basins will get water-stressed and scarce, and groundwater
aquifers will reach ‘critical condition,’ creating larger socio-economic imbalances and food insecurity, impacting
lives and livelihoods.
• The World Bank believe the Middle East, North Africa, and Central Asia and South Asia are likely to suffer the
biggest economic hit from water scarcity as climate change takes hold. This could take double digits off their
GDP.
• According to the WHO, close to a quarter of the country’s communicable diseases are due to the use of unclean
water. Public health is seriously at risk.
The Water Scenario
Water Resources and Sectoral Demands
High spatial variability in rainfall and high inter-annual variability
exacerbate aridity water stress. Eight large basins have a per
capita water availability less than 1000 m3/capita, a level indicating
regional water scarcity.
More than 80% of India’s river basins are water stressed.
These include the Indus, Ganga, eastern and western flowing
rivers, Mahi and Sabarmati.
The total annual water demand is currently estimated in the
range 635 – 815 bcm. This will increase to 895 - 1100 bcm by
year 2050 under a Business As Usual (BAU) scenario.
The Agriculture sector accounts for 85-90% of the total demand,
followed by the industrial and municipal sectors. Gross water
used is around 1.5 m per hectare of gross irrigated area. The
estimated withdrawals for agriculture will range between 630-
810 bcm by year 2050 under a BAU scenario.
Annual water demand for industrial and power use currently
ranges between 50 - 60 bcm, which is likely to increase to
150-160 bcm by year 2050 under a BAU scenario.
Water demand for municipal and domestic sectors is estimated
to range between 40-45 bcm, and is likely to increase to 100
- 120 bcm by year 2050.
Groundwater withdrawal is expected to increase from around
250 bcm in 2010 to > 400 bcm by year 2050, and groundwater
development to increase from close to 60% in 2010 to > 80%
by year 2050.
COVER STORY

With the situation becoming increasingly critical, it is
important to adopt an integrated approach facilitated by an
enabling framework and multi-stakeholder partnerships.
Both demand and supply side management solutions
need to be considered. Some of CII’s recommendations
in this regard include:
• Apply integrated decision support tools for water
resource management, taking the watershed as the
unit of planning level: The CII-Triveni Water Institute,
CII’s Center of Excellence on Water, has developed
WATSCAN, a comprehensive tool for water resource
evaluation and planning to guide decisions.
• Minimize wastewater generation and maximize its
recovery: Water audits for water-using entities play
an important role in deciding options for water
conservation and efficient management.
• Promote and incentivize water use efficiency across
sectors.
• Enable the setting up of a water tariff policy.
• Develop skills and capacity-building in water and
wastewater management.
• Encourage innovative concepts such as industry-municipal
interface among Urban Local Bodies (ULBs).
inter-annual variability exacerbate
water stress in many parts of
India.
Sectoral Water Demand
The total annual water demand
for India is estimated in the range
of 645 – 810 bcm, of which
agriculture accounts for 85-90%,
followed by the industrial and
municipal sectors.
In effect, current sectoral
demands have already reached
70-75% of the present utilizable
resource, leaving only 25% for
future use. This is further reduced
in low monsoon years, when
many parts of the country face
drought, acute water scarcity and
distress, leading to competing
usage of water amongst various
stakeholders. This situation leads
to over-exploitation of limited
water resources, creating a
vicious cycle where water stress
leads to scarcity and resource
wastage.
Besides increasing demand pressures, another stressor
to the available resource is deteriorating water quality.
Around 40% of the total riverine length in India has
high levels of pollution, measured in terms of a single
indicator – Biochemical Oxygen Demand (BOD). As
many as 650 cities and towns lie along polluted rivers,
contaminating groundwater; 276 districts have high
levels of fluoride; 387 districts report nitrate above
safe levels; and 86 districts have high arsenic levels.
During summers and low rainfall years, the condition
worsens.
The National Water Mission under the Government
of India’s National Action Plan on Climate Change
has set for itself the goal of optimizing water use
by increasing water use efficiency across sectors
by at least 20%.
It envisions the development of guidelines for
incentivizing recycling of water including waste
water; water neutral and water positive technologies;
and improving the efficiency of urban water supply
systems.
While India’s annual water resources
potential is 1870 – 1950 bcm, utilizable
water resources i.e what is actually
available, is only 1030-1120 bcm.
Annual average per capita water
availability is progressively declining,
classifying India at the threshold of a
water-stressed country.
Increased urbanization, industrial
development, land use changes,
population pressures, etc are resulting
in competing demands for water
resources, leading to scarcity.
COVER STORY

• Facilitate a conducive policy
framework for use of treated
wastewater
• Upgrade water infrastructure
with innovative and smart
technologies.
These are comprehensive steps and
will require high commitment from
all water-users. However, if they are
not taken up urgently, the country’s
growth and development, as well
as the quality of life of its citizens,
will suffer. Industry, as a significant
stakeholder in water resources,
and a responsible member of the
community, needs to be increasingly
proactive in fighting the water risk
that threatens us all today.
Increasing competition for a scarce
resource is already inviting bigger
challenges related to water and food
security, water and energy security,
and most importantly, water and
livelihood security, through their
entire supply chains.
National and international experts
have expressed concern about
the growing competition for water
between food production and other
uses. This competition is bound
to intensify pressure on essential
resources. The solution calls for
an integrated approach to identify
competing demands and assess
trade-offs between different uses,
in keeping with the real world of
complex socio-politics, changing
lifestyles in the developing world,
issues related to water pricing,
gender, and increasing climate
variability. This further calls for
focus on the ‘triple bottom
line’ of economic development,
social equity and environmental
sustainability.
Let us join together to serve as
responsible water stewards for a
water-secure future. Incentivizing
water conservation across sectors
seems to be the way ahead.
QHow, according to you, are we managing our water resources?
India’s supply of water is rapidly dwindling, primarily due to
mismanagement of the resource. Our approach to water and wastewater
management is largely a synonym for the exploitative use of ecosystems
that sustain life and well-being. Large parts of India are already water
stressed, with demand-supply gaps continuously increasing. Growing
pollution of water sources through untreated or partially treated sewage and
effluents is affecting the availability of safe water and, more importantly,
causing environmental and health hazards. Groundwater is increasingly
being pumped from lower and lower levels, and depleting much faster than
rainfall is able to replenish it. There is rising uncertainty on the occurrence
of extreme events. The monsoons that fortify agriculture are becoming more
unpredictable. Climate change is likely to further intensify the stress.
QHow has drought/water scarcity impacted industry till now?
With more than a quarter of country’s population and more than 250 of 678
districts spread across 13 States of India vulnerable to drought, accompanied
by drinking water shortage and agriculture distress, the overall impact is being
felt by Industry. Water stocks in India’s major reservoirs are hugely diminished.
Many of these reservoirs also offer hydropower benefits. Thus, drought entails
productive capital damage as a direct consequence of water scarcity or power
cuts. In order to adapt to such conditions, Industry has to operate below
optimal production capacities. Industry categories that get affected include,
among others, thermal power plants, iron and steel, agro-based industries,
food products and beverages, textiles, and pulp and paper.
Even as the World Bank warns that India is among the regions likely to suffer a
big economic hit from water scarcity as climate change takes hold, economists
in the country fear that, with civic bodies imposing cuts on water supply to
industry in several States, the resultant shortage could pull down the Index
of Industrial Production (IIP) growth by around 40-50 basis points, while the
manufacturing sector alone could take a hit of about 50-75 basis points.
QPlease elaborate on some of the initiatives being taken to tackle
the problem.
Businesses and entrepreneurs are increasingly working towards finding
sustainable water management solutions.
The CII-Triveni Water Institute (CII-TWI) has undertaken about 120 water audits
across industries, resulting in potential annual water savings of about 85 billion
liters of water, equivalent to supplying one day of fresh water to the entire rural
population of India! Results show that 15-20% water savings are possible by
low-cost strategies with a payback of 4-5 months, and 30-40% water savings can
be achieved by medium-high cost strategies, with payback of 12-18 months.
It is imperative to identify and implement a
basket of strategies for an improved water
scenario, water security and sustainability,
says Dhruv M Sawhney
Interview
COVER STORY

The CII-TWI has also recently undertaken a comprehensive
watershed evaluation study for a water-stressed area in
Maharashtra, using its Water Resource Evaluation and
Planning Tool (WATSCAN), to devise community-centric
water management interventions. Demand-supply
gaps were mapped. The study revealed that, through
the implementation of both supply and demand side
interventions, such as moving to a combination of dams
and dykes (i.e a combined surface and sub-surface
system), enhancing existing storage for optimal utilization
of monsoon flows, considering municipal-agriculture
interface and municipal- industry interface, and irrigation
optimization through soil-moisture conservation, it was
possible to alter the landscape of the area with impacts
visible from the second year itself. The direct outcomes
include increased per capita water, per hectare water,
and increased incomes and livelihoods, leading to a
transformation of the area.
QWhat is the way forward?
Promoting water use efficiency holds immense
promise for curtailing water stress, thereby ensuring
sustainable water resource management. There is a need
to increasingly move towards opportunities to conserve,
reduce, reuse and recycle treated water and wastewater
through good governance. Studies undertaken by the CII-
Triveni Water Institute have clearly shown that the demand-
supply gap can be reduced through effective interventions,
both on the demand side and the supply side.
Interventions such as rainwater harvesting (both rooftop
and catchment area based systems) can further reduce
the gap.
Some specific recommendations include:
• Make water audits compulsory with a targeted
year-on-year improvement of 15-20%
• Build municipal-industry connects, where treated
municipal sewage could be used by Industry
• Incentivize wastewater recycling, rainwater harvesting
etc, and introduce reforms and progressive measures
for innovation, conservation and efficient utilization
of resources
• Undertake watershed-based water resources
planning, using state-of-the-art hydrological tools
and techniques such as WATSCAN to scientifically
identify areas of high and low water generation,
accumulation and losses.
It is imperative to identify and implement a basket
of strategies for an improved water scenario, water
security and sustainability.
SALE
Total Land Area : 44000 Sq.Ft.,
Industrial Shed : 6000 Sq.Ft.,
Power : 95 HP
Location : Bommasandra Industrial Area, Anekal Taluk,
BANGALORE
(Brokers please excuse)
Respond to email : “skandiac@gmail.com”
PRIME INDUSTRIAL LAND
(BANGALORE)
COVER STORY
Dhruv M Sawhney is Chairman, CII-Triveni Water Institute, Past
President, CII, and Chairman & Managing Director, Triveni Engineering
Industries Limited

Opinion
W
ater, and its allocation for various uses,
requires top priority for sustaining life. The
life-threatening needs include water for
drinking and domestic purposes, for cattle, and for food
security.The National Water Policy 2012 recognizes these
as pre-emptive needs. The policy also recognizes the
maintenance of ecology as a prerequisite for the health
of watersheds. Since these needs relate to each and
every individual in a democratic India, the community
plays a key role in the allocation of this resource.
Not surprisingly, during the recent drought, water for
industry and other uses was reduced to meet the
pre-emptive needs in many parts of India. This caused
disruption to industrial production, hitting economic
activity. The challenge for Government and Industry
is to ensure that pre-emptive needs are satisfied and
industrial production does not get hit, especially in times
of low or extremely high rainfall.
Over the years, in some low rainfall areas, innovations,
including the integrated management of watersheds,
harvesting of water during rainy days, storing it in
ground water aquifers and surface water ponds/behind
sub-surface dams, and regulating its use to produce
maximum output per drop, have helped tide over
natural shortages.
Industries in these low-rainfall areas can ensure that
water use in their plants is minimized, by employing
new knowledge such as water pinch analysis, and/or
redesigning their plants as zero discharge plants. If it
is not possible to reuse the treated effluent within the
plant, it can be supplied to other nearby industries, which
can utilize comparatively lower quality water, or treated
to a level that can be discharged in natural drains.
Industry can also help by subsidizing micro-irrigation
equipment for farmers, and provide expertise on new
cropping patterns and horticulture, to improve the
profitability of agriculture. Industry, as a part of its CSR
activity, can also develop systems for marketing farm
produce using IT tools. The basic premise is to move
from the competitive to the cooperative mode in the
use of water, by all stakeholders.
Several State Governments are also responding to
the water needs of urban and rural communities, with
programs to meet their minimum water needs even
during dry months.Telengana, for instance, has proposed
regional pipe networks which will be connected to the
nearest perennial water sources. Existing tanks are to
be revived to their original design capacities to improve
water supply. Once the requisite number of States also
develop such water grids, a national water grid can be
designed for dependable water supply.
The frequency of extreme rainfall events has increased
due to climate change, leading to floods as well as longer
dry periods. During high rainfall periods, all activity is
disrupted, as in Chennai during the recent floods. Lack
of proper drainage and the filling of existing drainage
networks to construct houses and commercial buildings
aggravates flooding, in such cases.
Reservoirs in the upper watersheds must be operated
in an integrated manner to pass the flood water with
minimum damage to existing infrastructure, and therefore
to the economy. The rapid rise of water during floods
requires real-time information systems linked to decision-
models to ensure the timely opening of the gates to pass
floodwater safely through the drainage network. Satellite
information needs to be integrated with information from
ground networks, so that these events, which cover wide
areas, can be managed efficiently.
Knowledge of watershed hydrology and ecology can
help decrease the damage. Industries situated within a
watershed need to develop long term spatial hydrology
of their watersheds, including spatial demand and
availability maps. Local industry associations could set
up ‘Know your Watershed’ programs for developing
such maps using remote sensing, GIS technology,
hydrological models and other tools to educate and
involve surrounding communities to develop a suite of
plans for various exigencies.
The key requirement is to engage the community in
conserving, developing and managing water resources,
to ensure water to each and every stakeholder in all
situations. The Digital India program would help provide
information on floods on mobile phones, as they develop
in real-time, giving enough time for suitable measures
to minimize damage to both industries and people.
Prof Subhash Chander is former Deputy Director, IIT, Delhi,
Professor Emeritus, Dept of Civil Engineering, IIT Delhi, and
Fellow of the Indian National Academy of Engineering
COVER STORY
All stakeholders need to move from the competitive to the cooperative mode
in the use of water, says Prof Subhash Chander

C
II, through its dedicated
Center of Excellence on
Water, the CII-Triveni Water
Institute, provides advisory services
to industry, advocacy for water
use efficiency, training and capacity
development programs, and works
to raise awareness on water issues.
The Center has developed an innovative Water Planning
& AssessmentTool (WATSCAN), which is an integrated IT-
driven, GIS and remote sensing-based information system,
that enables comprehensive
watershed evaluation, to devise
community-centric water
management interventions.
The other applications of the
Tool include:
1. Proper siting of water
schemes/ infrastructure for
efficient water delivery
2. Evaluating area-wide
CII Initiatives in
Water Management
CII has been working across the country with diverse
stakeholders for water conservation and management
CII Recommendations
CII, through the CII National Committee on Water, has made the following recommendations to the Ministry of
Water Resources, River Development and Ganga Rejuvenation, and the Ministry of Urban Development:
• Evolve a system of benchmarks for water use for different purposes, through water auditing, to promote
and incentivize efficient use of water
• Design developmental projects using an integrated watershed approach (IWRM)
• Improve ‘project’ and ‘basin’ water use efficiencies through continuous water balance and water
accounting studies
• Promote innovative concepts such as industry-municipal interface among Urban Local Bodies (ULBs) to
generate money using treated wastewater
• Encourage incentives for recovery of pollutants and recycling / reuse
• Take up capacity-building in ULBs for providing task-oriented coaching for one full year to municipal functionaries,
to improve the efficiency of operation, leading to timely completion of projects.
availability of water, access and
demand-supply analysis
3. Developing an improved water
scenario and water framework
4. Recommending technological,
policy and institutional interventions
5. Developing strategies to help improve the lives and
livelihoods of communities over the short, medium
and long term.
Taking the watershed approach, WATSCAN is applicable
at various scales – farm/ block / district / State, and
COVER STORY
Water Availability
(Where it gets generated)
Water Accessibility
(How much)
Water Losses
(Where & How to store)
Applications of WATSCAN in a water-stressed district in Maharashtra

drought-hit States of India.
CII has also undertaken various localized projects
through the CII Foundation, such as restoration of
water bodies, aquifers, artificial recharging water bodies,
check dams, de-silting, and rain water harvesting. The
CII Foundation, along with the CII Water Institute, will
expand this initiative, helping companies integrate water
management with their CSR goals.
A benchmark initiative for aquifer management is
being implemented in two districts, Alwar, Rajasthan,
and Sonepat, Haryana, where the Special Projects
Department, CII, in partnership with SABMiller India,
has evolved a strategy for groundwater sustainability.
Both locations are groundwater dependent, and face
the challenges of near exhaustion of aquifer (Alwar)
and water quality deterioration (Sonepat).
Water harvesting and recharge technologies appropriate
for the local hydrogeology were designed and
demonstrated, and the overall potential for water
harvesting and ground water recharge was assessed.
The potential for recharge was assessed as being
limited.
Demand-side management in agriculture was made the
primary strategy for water sustainability while, at the
same time, assisting various governmental and industrial
stakeholders to undertake harvesting and recharge. An
agricultural extension program comprising of about 325
participatory crop demonstration plots (with volunteer
farmers without providing any subsidies) and a village/
cluster training program, that has attendance of about
6,500 farmers, is being implemented.
The productivity enhancement achieved on
demonstration plots is over 50% for irrigated crops (such
as mustard and wheat), with over 10% reduction in cost
of cultivation in Alwar, and productivity enhancement of
scientifically identifies areas of high and low water
generation, accumulation and losses. This leads to
identifying suitable strategies for an improved water
scenario, and balanced water demand and supply
management in the watershed.
WATSCAN can help:
• Improve water productivity by 20-30% in the short
term
• Improve water use efficiency by 40-50% with cost
effective strategies
• Enhance opportunities to dovetail water-related CSR
initiatives with Government programs
• Reduce water risks thereby ensuring long term
water sustainability.
WATSCAN has recently been applied to a water-stressed
district in Maharashtra. The results from the hydrological
evaluation based on millions of pixels analyzed using
satellite data sets, assessed the water availability for
the district, to determine areas of high and low water
availability, water accessibility and losses.
The analysis identified strategies including both demand
and supply side management interventions. These
include improving storage through a combination of
dams and dykes (surface and sub surface storage
systems), enhanced monsoon storage, soil-moisture
conservation, municipal-industry interface, municipal-
agriculture interface, and water audits that can improve
the region’s water scenario.
With the adoption of strategies in a time-bound
manner, the direct results include improved per
capita water access, per hectare water supply, and
better incomes and livelihoods, leading to significant
changes in the area for an improved water scenario.
CII will now deploy WATSCAN in 50 districts in 10
COVER STORY
Participatory crop trials for Wheat (left and center) and Cluster Beans (right)

about 15% with reduction in cost of cultivation of over
50% in Sonepat. The water saving on demonstration
plots has been about 15% for paddy and 55% for
other crops. The results have evoked tremendous
response to the training program, building significant
interest in crop management and irrigation practices
among neighboring and trainee farmers.
CII, in partnership with ITC Ltd, is also working to
develop a basin scale planning model for the Ghod
basin, Pune, comprising of 365,000 hectares, using
scientific investigations and participatory appraisals.
The study addresses various issues like canal and lift
irrigation management, ground water management,
water availability for low rainfall areas, drought
mitigation, and sustainable cropping patterns and
crop management practices, etc, through supply side
as well as demand side management solutions. The
overall objective is sustainable management of water
resources, agricultural livelihoods and water security
to industrial and urban areas.
Another notable example by ITC Ltd is an integrated
watershed management project in Bundi district,
Rajasthan, in partnership with the State Government, as
part of a Private-Public Partnership initiative facilitated
by CII. Through the mobilization of local communities
into water user groups, assisting them to revive and
maintain micro water harvesting and carrying out soil
and water conservation measures, the area under
irrigation has been increased, along with enhanced
productivity benefits. This translates into better incomes
and livelihoods of the community, while saving the
precious resource.
Water Audits
A key to water conservation and efficient management
is monitoring and mapping water consumption under
various processes. This can be obtained through water
audits, a ‘systematic approach of identifying, measuring,
monitoring and reducing the water consumption by
various activities in an industry.’
A regular water audit identifies and quantifies water
uses and losses from a water system and helps
promote water-use efficiency and wastewater recycling,
reuse and recovery. The audit provides the following
benefits:
• Attractive payback time to an extent of less than a
few months
• Enhances opportunities for both freshwater saving
and wastewater recycling
• Provides competitive advantage by looking beyond
compliance
The CII-Triveni Water Institute has so far undertaken
around 120 water audits of factory units and buildings
in several industry sectors. This has helped to conserve
annual water use to the extent of about 85 billion
liters.
The analysis based on water audits by CII for different
sectors shows that it makes immense economic sense
to bring down specific water use:
• 15-20% water savings possible through low-cost
strategies with payback of 4-5 months
• 30-40% savings possible by low-medium cost
strategies with payback of 12-18 months (these
include efficient faucets and fixtures, recycling treated
wastewater and water, precise measurements and
controls)
• Wastewater recycling yields considerable benefits
(40-50% potential saving) and a road map to Zero
Liquid Discharge.
For the individual unit, therefore, it makes good sense
to invest in water audits. At the same time, conserving
water through water-saving measures instituted through
water audits, if scaled up across industry, can greatly
help meet the water challenges of the nation.
COVER STORY
Water conservation audits and measures, in different locations

For the last two decades, CII has been closely working with the
National Disaster Management Authority, and the Union and State
Governments, to extend relief and rehabilitation support to disaster-
affected communities across the country. CII engages the corporate
sector to undertake interventions in the affected areas to provide
immediate and long term support. These collate industry initiatives
under the Corporate Social Responsibility (CSR) endeavor.
CII, with support from its industry members, has responded to
a number of water-related disasters including floods, drought,
and cyclones across India, as part of its overall natural disaster
management efforts.
Cyclones in Odisha in 2008 and 2013, the Bihar floods (2008), the West
Bengal cyclone (2009), the Leh floods (2010), the Uttarkashi floods
(2012), the Uttarakhand floods (2013), the J&K floods (2014), and the
Tamil Nadu floods (2015) are some of the calamities that CII has engaged
in to provide humanitarian relief. CII worked in close association with
the National Disaster Relief Force, defence and paramilitary services,
humanitarian agencies and local administrations to provide immediate
relief material including food packages, tarpaulin sheets, drinking water,
hygiene kits medicines, etc to the disaster-affected people.
In response to the recent drought conditions in India, CII, as part
of immediate relief, has identified seven badly-affected districts of
Bundelkhand to send water tankers for a month’s duration, or till the
monsoon arrives. CII is handing over the tankers to the respective
District Magistrates for distribution of water to the citizens. Solar-
powered water pumps will be setup in the areas where electricity
is a challenge.
CII has presented comprehensive recommendations for drought
mitigation and sustainable management of water resources to honor
water entitlements to agriculture, industry and domestic use, and
examine the potential for making water available to the drought-prone
Solapur region in Marathwada, Maharashtra.
Further, CII has been implementing various need-based rehabilitation
interventions through the CII Foundation, set up in 2011.The Foundation
extended short term and long term support to the drought-affected
Marathwada region of Maharashtra in 2013. With support from
industry, the CII Foundation provided machinery to enable de-siltation
and cleaning of ponds and lakes, provided gen-sets to distribute
water, created awareness on rain-water harvesting, and facilitated
its implementation.
The Foundation has also initiated various rehabilitation projects
in Chennai and Cuddalore in Tamil Nadu, to support livelihoods,
rebuild infrastructure, and restore water bodies, after the severe
floods last year.
COVER STORY
CSR for Drought
and Flood Relief

Indian Economy: The Monsoon Effect
Reducing the dependence of our
economy to the vagaries of the
monsoon, by addressing the pertinent
issues which plague the agricultural
sector, deserves utmost priority
T
here is no gainsaying the importance of the
monsoon for an agrarian economy like India.
Good monsoons correlate with a booming
economy, while weak or failed monsoons (droughts)
result in widespread agricultural losses and hinder
economic growth. Although the extent of the impact
of the monsoon on the overall economy may have
moderated over the years, a poor monsoon could still
shave off a few basis points from GDP growth.
Deficient Rainfall & Agricultural Production
The impact of a poor monsoon on agricultural production
is significant, as despite a substantial increase in the
area under irrigation over the years, almost 55% of the
total cultivable land in the country is still un-irrigated.
In 2009-10, a particularly bad year in terms of annual
rainfall received, agricultural growth was anemic at
0.8%. The last two years of poor monsoons saw
average agriculture growth decelerating sharply to
0.5% from a robust 4.2% in 2013-14. This is evident
from the graph (see next page), which captures the
rain gap, defined as the percentage deviation from the
long-period average (LPA) vis-à-vis agriculture growth
in the last decade.
COVER STORY

Impact of Poor Monsoon on Food Prices
Deficient rainfall has an adverse impact on the overall
food production, arising from those crops which are
largely rain-fed in India, and also due to a reduction in
the area under cultivation. This, in turn, puts pressure on
food prices, resulting in high food inflation. As observed
in 2002-03, deficient monsoon caused foodgrain
production to decline by 18%, while the drought of
2009-10 resulted in food grain production declining by
7% and WPI food inflation (primary + manufacturing)
concomitantly increasing by a whopping 14.5%!
In the last two years, though, despite sub-normal
monsoons, WPI food inflation did not increase by a large
magnitude, mainly due to the existence of large stocks
of grains, and falling global oil prices, which further
reduced input and transportation costs substantially.
This fiscal, though food inflation (both in CPI and WPI)
so far has remained relatively subdued, the continuance
of this trend will largely depend on whether or not we
see a normal monsoon this year.
Poor Monsoon and Economic Growth
Available evidence shows that while a sub-optimal
monsoon impacts agriculture production and rural
demand, the overall impact on economic growth could
vary. For instance, while a deficient monsoon resulted
in the moderation of GDP growth to 4.0% in 2002-03,
the drought year of 2009-10 witnessed a rise in GDP
growth to 8.6% from the previous year, mainly due to
double digit growth in the manufacturing sector.
The sub-normal monsoon of the last two years has caused
a decline in rural wages, dampened rural purchasing power,
and has had a detrimental effect on industry. However,
there wasn’t a significant dent on economic growth in
the last fiscal, largely because of the surfeit of food-grain
stocks and subdued global commodity prices.
Yet, after two bad monsoons, the economy will be
impacted if the third year sees poor rains, too. Industry
is looking forward to the prognosis of above-normal
monsoon becoming a reality.
The Way Forward
Over the years, India’s dependency on the
monsoons has somewhat reduced, but has not
been completely eliminated. Hence, the need
for providing an impetus to water management
assumes importance. For this, priority should be
given to expand irrigation cover. Though the last
two Union Budgets have increased the allocation
for irrigation, more such spending should be
encouraged to drought-proof the economy. The
right incentives to adopt advanced technologies
like drip and sprinkler irrigation, develop drought-
resistant seeds, promote rainwater harvesting, and
recharge ground water, et al, will be important.
About 75% of the public investment in agriculture
goes into medium and large irrigation projects,
many of which are incomplete or under progress. These
projects need to be completed to augment irrigation
available for agriculture.
Furthermore, encouraging agri-research to develop
drought-resistant and low water-requiring crops, evolving
creative, cheap and practicable methods of water
conservation, and getting ‘more crop per drop,’ is long
overdue.The river water linking project, which envisages
transfer of water from surplus river basins to ease water
shortages, should be explored.
To conclude, Government interventions in reducing
the dependence of our economy on monsoons by
addressing the pertinent issues which plague the
agricultural sector and make it vulnerable to the vagaries
of the monsoon, deserve utmost priority.
COVER STORY
Source: CSO (for CPI) and Office of Economic Advisor (for WPI)
Source: IMD & RBI
Monsoon and Agriculture Growth

A
healthy and robust manufacturing sector with
significant contribution to the Gross Domestic
Product (GDP) is at the core of the consistent
and sustainable economic growth of a nation. For
India, which enjoys end-to-end capabilities across the
manufacturing spectrum, the capital goods (CG) sector
is of high strategic importance as it is considered to
be the ‘mother’ of manufacturing.
While the sector is a vital chord for industrial
development, India's CG production has been historically
plagued by a variety of issues – limited inclination of
end-user industries to use domestic sources due to
lack of latest technology, the sub-scale and fragmented
nature of industry with a large number of micro small
and medium enterprises (MSMEs), and sub-par visibility
and promotion of India as a CG manufacturing hub,
alongside a set of continuing taxation and trade policy-
related issues. As a result, India’s imports of machinery
and equipment have been rising across sub-sectors.
The fast-track approval by the Cabinet of the National
Capital Goods Policy is noteworthy as the much-awaited
policy is critical for realizing the ‘Make in India’ vision
of the Prime Minister. The policy incorporates extensive
inputs from industry, including through the joint task
force of the Department of Heavy Industry (DHI) and CII.
It comes at an opportune time when the Government
has announced several infrastructure projects such as
Smart Cities, Industrial Corridors, Housing for All, etc.
The CG policy aims to increase the contribution of this
sector to 20% of total manufacturing activity from the
current 12%, by 2025.The share of domestic production
in India’s total demand would be raised from 60%
to 80%, and exports are targeted to go up from the
current 27% to 40% of production, to make India a
net exporter of capital goods. The policy also aims
to facilitate improvement in technology depth across
sub-sectors, increase skill availability, ensure mandatory
standards, and promote growth and capacity-building
of MSMEs.
Under the ‘Make in India initiative,’ the CG policy would
identify major sub-sectors such as machine tools, textile
machinery and others, as priority sectors. The existing
CG scheme to enhance competitiveness through centers
of excellence, integrated industrial infrastructure parks
and the Technology Acquisition Fund would receive
additional funds. Cluster development would be a key
target to provide critical components of competitiveness
such as management of quality, energy, costs, plant
maintenance, etc.
Transfer of technology, purchase of intellectual property
rights, designs and drawings, and commercialization of
research will be encouraged through a specific budgetary
allocation. The policy proposes a start-up center for the
CG sector with private sector participation to provide
technical, business and financial support.
A key element of the policy is mandatory standardization,
according to which minimum standards would be
defined. With the help of the Bureau of Indian Standards,
the International Organization for Standardization and
other institutions, along with industry associations,
this would help produce quality to the products. More
research institutions are also proposed to be set up.
For skill development, a sector skills council for the CG
sector would be established, along with five regional
centers. A capital subsidy scheme to enable SMEs
to replace their equipment with modern, efficient,
computerized systems is also included. To map the
progress, a continuous system of monitoring for timely
Towards a Globally-competitive
Capital Goods Sector
While the recommendations and intent of the
National Capital Goods Policy are well-stated, it
now demands intense implementation focus and
program management rigor, says Vipin Sondhi
policy periscope
capital goods

policy periscope
Scripting a New Growth Narrative
The National Capital Goods Policy is a critical key for realizing the ‘Make in India’ vision, towards the next
industrial revolution. The leadership demonstrated by the Department of Heavy Industry (DHI) is laudatory, not
only for its responsiveness to the needs of the sector, but also for the unique, unprecedented, and innovative
approach adopted for its formulation under the aegis of the DHI-CII Joint Task Force. Perhaps never before has
a policy document meant for industry been driven by such extensive consultations with industry, with a view
to scripting a new growth narrative in the history of India’s industrial development. The highlights:
• Integration of major capital goods sub-sectors as priority sectors under the ‘Make in India’ initiative
• Creation of an enabling scheme as a pilot for a ‘Heavy Industry Export & Market Development Assistance Scheme
(HIEMDA)’ to enhance the export of Indian-made capital goods. This will also require developing a comprehensive
branding plan for the CG sector.
• Increase in budgetary allocation and scope of the present ‘Scheme on Enhancement of Competitiveness
of Capital Goods,’ to set up centers of excellence, common facility centers and the Technology Acquisition
Fund Program.
• Launch of a Technology Development Fund as a PPP model to fund technology acquisition and commercialization.
• Creation of a ‘Start-up Center for the Capital Goods Sector’ shared by the DHI and CG industry/industry associations
in 80:20 ratio, to provide an array of technical, business and financial support resources and services to promising
manufacturing and services start-ups with focus on the pre-incubation, incubation and post-incubation phases.
• Mandatory standardization which includes, inter alia, defining minimum acceptable standards for the industry,
and the adoption of international standards
• Upgradation of development, testing and certification infrastructure, and setting up of 10 more institutes, like
the Central Manufacturing Technology Institute (CMTI) for all sub-sectors.
• Development of a comprehensive skill development plan/scheme with the Capital Goods Skill Council, upgradation
of existing training centers, and setting up 5 regional state-of-the-art greenfield skill centers.
• Deployment of the cluster approach for competitiveness, especially for CG manufacturing SMEs, with the
thrust on quality, plant maintenance, energy management, cost optimization, human resource management,
and prevention of corrosion, with Government support to the extent of 80% of the cost.
• Modernization of existing CG manufacturing units, especially SMEs, through computer-controlled and
energy-efficient machinery.
• Putting in place a robust mechanism for reporting data of production, export and import for all capital goods
sub-sectors, with minimal time lag, to facilitate continuous monitoring of policy effectiveness and timely actions.
corrective action will enable the policy to be optimally
effective.
While the recommendations and intent of the National
Capital Goods policy are well stated, it now demands
intense implementation focus and program management
rigor. An important element will be to strengthen and
build the supply chain and form stronger linkages with
the rest of the world. If we are to enhance scale and
quality, significant efforts will need to be made to
provide an ecosystem to promote innovation, R&D
and quality.
The sector needs a TED (Technology depth, Export
promotion and Demand creation) boost. The need of
the hour is to replicate and adopt global best practices
in these three core areas, as also highlighted in
the policy.
Vipin Sondhi is Chairman, CII National Committee on Capital
Goods and Engineering, and MD & CEO, JCB India Ltd.
This article was first published in the Financial Express
on 1 June.
As we strive to excel and create a brand of our own in
‘Manufacturing,’ there has to be constant collaborative
effort from manufacturers and the Government to attain
and sustain higher growth through technology transfers,
domestic R&D, and effective export strategy.
We, in industry, need to be consistent in our efforts
towards the implementation of the key policy actions
to make Indian capital goods globally competitive.
Importantly, the role of the States is very critical for
the overall balanced growth of the sector. The game-
changer has been unveiled, but there is still a long
way to go.

T
he declaration of the National Intellectual Property
Rights (IPR) Policy is a step in the right direction
to consolidate the efforts of multiple agencies
associated with the national Intellectual Property (IP) eco
system. It proposes measures to ensure that the Indian
IP system is responsive to the changing needs in this
space, as India engages with new technologies, evolving
trade environments, and international negotiations.
By bringing forefront the issues related to technology transfer
and licensing, the Policy would provide a strong framework
for the ‘Make in India’ program of the Government.
It is expected to generate a positive environment
for multiplying innovations and
entrepreneurship, and, thus, pave the
way for more employment creation
in newer areas of technology. The
Government had recently announced
measures for promoting start-ups in
the country and the reorganization of
IPR-related departments, even before
the announcement of the Policy,
indicating its serious intention of implementing the
Policy recommendations.
The Policy promises to provide a positive environment
and framework for technology transfer and IPR licensing
both from domestic sources and international sources,
especially in the area of clean and green technologies
which need to be imported from advanced countries.
Similarly, there is a special mention of licensing of
standard essential patents. Terms and conditions of
license are better left to the trade and parties involved,
rather than regulating them, unless one is faced
with a situation of compulsory license.
National IPR Policy: The Goals Ahead
policy periscope
intellectual property
Emphasis has been laid on enhancing the IP stock of
MSME and start-ups - a laudable step. The Government
needs to set up a functional mechanism for funding
for protecting IP start-ups, which is not in place yet.
MSMEs need to engage in Research and Development
(R&D) and new knowledge to become and remain
competitive. Such enterprises would need large funds
to take forward ideas and research results to the
field, so that they feel encouraged to risk time and
money in R&D.
The need for anti-counterfeiting and anti-piracy
measures, including measures against
online piracy, has been duly spelt out.
This would go a long way in attracting
investment into the country by all
types of industries. In order to reduce
counterfeiting and piracy, coordination
among different agencies, including
international agencies, would be
essential. We would certainly like
India to have zero counterfeiting.
The Policy’s push for awareness and capacity-building in
the IPR area is on expected lines, and would strengthen
the on-going efforts in this regard. While Industry is
also in line with this thought, it would be essential to
have the right faculty for teaching IPR, as IPR impacts
trade, business and technology directly. At the same
time, due attention should be paid to the pedagogy for
teaching IPR subject matter.
The Policy puts responsibility on academic and other
publicly-funded institutions to generate IP and have
the necessary systems to license them to Industry.
A careful approach needs to be followed so that
The National IPR Policy is expected to generate
a positive environment for multiplying innovations
and entrepreneurship, and, thus, pave the way
for more employment creation in newer areas of
technology, says Chandrajit Banerjee

mere numbers of filings do
not overtake the quality of
inventions. This, if seriously
followed and implemented,
will change the face of Indian
R&D, by directing these
activities towards meeting
users’ and market needs.
Conducting research on
IPR-related subjects is a
fresh theme articulated by
the Government. It is now
the responsibility of all
stakeholders, especially the
academic sector, to take the
lead in conducting research
through PhD programs and
sponsorship from different
funding agencies. It would be
desirable if the Government
earmarks separate funds for
conducting research in IPR.
It is good that the Policy has
left some areas open and is
not prescriptive. One area
mentioned is the protection
of trade secrets, important
for the success of trade
and business. CII has been
addressing this through wide
consultation with its members
and experts, and has also
carried out survey-based
research on the topic, which
is adequately addressed by
the Indian laws. The need for
revisiting them is in view of
fast-changing technologies.
The next step is to have
an action plan with various
measurable milestones and a
definite time frame. Without
an action plan, some of the
laudable goals may not be
fulfilled.
policy periscope
Highlights of National IP Policy 2016
1. IPR Awareness: Outreach and promotion campaign to create public
awareness about the economic, social and cultural benefits of IPR among
all sections of society. A nation-wide program to improve awareness on
the benefits of IPR and its value among the right holders and the public,
reaching out to less-visible IP generators and IP holders, especially in rural
and remote places.
2. Generation of IPRs: India needs to tap its fertile knowledge resource and
stimulate IP asset creation. IP audits will be conducted across sectors
to formulate and implement the targeted program. The corporate sector
will be encouraged to generate and utilize IPR. The mechanism is to be
devised to reach IPR benefits to innovators, especially start-ups and grass
root innovators. Special incentives to be provided for the creation of IPRs in
green technologies, and in the manufacture of energy efficient equipment.
3. Legal and Legislative Framework: Strong and effective IPR laws would
balance the interests of rights owners with the larger public interest. The
existing IP laws in India (revised after the TRIPs agreement), along with
various judicial decisions, provide a stable and effective legal framework
for the protection and promotion of IPRs. India should commit to the Doha
Declaration on TRIPS and Public Health. Protecting traditional knowledge
from misappropriation is important.
4. Administration and Management: The Policy aims to modernize and
strengthen service-oriented IPR administration, so that IP offices work in
a more efficient, and cost effective way, developing and providing value-
added services to the users. The administration of the Copyright Act, 1957
and the Semiconductor Integrated Circuits Layout-Design Act, 2000 is
being brought under the aegis of the Directorate of Industrial Policy and
Promotion (DIPP).
5. Commercialization of IPRs: Economic reward for IP owners comes only
after the commercialization of the IP, thus it is necessary to create a public
platform to connect IP creators with investors and buyers. The policy talks
about technology transfer and licensing, which is an important element for
the ‘Make in India’ program.
6. Enforcement and Adjudication:The Policy calls for strengthening enforcement
and adjudicatory mechanisms for combating IPR infringements, in order to
build respect for IP among the general public, and protect and enforce IP
rights. Measures such as strengthening the IP cells in State police forces,
checking counterfeiting and piracy, conducting regular IPR workshops for
judges, etc are required to build effective enforcement in India.
7. Human Capital Development: India needs to strengthen and expand human
resources, institutions and capacities for teaching, training, research and
skill-building in IPR, to generate an increasing pool of professionals and
experts to facilitate the generation of IP assets in the country, and their
utilization.
8. Implementation: While the DIPP shall be the nodal point to coordinate,
guide and oversee the implementation and future development of IPRs in
India, the responsibility for the actual implementation of the plans of action
will remain with the Ministries/ Departments concerned. Public and private
sector institutions and other stakeholders, including State Governments,
will also be involved in the implementation process.
Chandrajit Banerjee is
Director General, CII.
An edited transcript of this
article was published in
Hindu Businessline on
22 May.

R
ising Non-Performing Assets (NPAs) continue to
take a toll on the Indian banking sector, with
public sector banks reporting the worst-ever
quarterly losses in their operational history. However,
with strong action being taken by the Reserve Bank of
India (RBI) to get banks to identify NPAs and stressed
assets, and clean up their balance sheets, a new picture
is emerging with respect to their health.
The gross NPAs of banks are rising, adversely impacting
their profitability in the last quarter of fiscal year 2015-16.
Thirty-five of 40 banks have announced their Q4 FY16
financial results as of May-end, and their combined
gross NPAs grew 51% from `2,64,368 crore in Q3
FY16 to `3,99,290 crore in Q4 FY16.
Among public sector banks, the combined gross NPAs
of 21 banks touched `3,45,108 crore for Q4 FY16, as
against `2,19,805 crore in Q3 FY16, reflecting a sharp
rise of 57% quarter on quarter. Till May-end, the gross
NPAs of 14 private sector banks had surged 22% to
`54,182 crore for the quarter ending March 31, 2016,
as against `44,563 crore reported in September-
December 2015.
Restoring the health of the banks is crucial to revive
lending, promote new investment and boost growth.
More lending is necessary to lift India’s low investment-
to-GDP rate and create jobs for the millions of young
people who step into the country’s labor market
every year.
The Government has undertaken wide-ranging measures
to tackle difficult financial sector reforms. In its first
two years, it has rolled out the
largest financial inclusion
program to improve
access to financial
services through
the Jan Dhan
Yojana; taken
steps to improve
g o v e r n a n c e
among state-
owned banks
t h r o u g h t h e
c r e a t i o n o f a
Banks Board Bureau
(BBB); brought in
private bankers to head
public sector banks; passed the
Insolvency and Bankruptcy Code;
initiated consolidation among
The banking sector has been facing multiple
challenges relating to stressed assets and
capitalization. The revival of investments
depends crucially on the robust health
of the banks, and a number of policy
measures have been taken in the recent
past to improve key indicators of the
banking sector. Our second lead feature
presents a brief overview of recent changes
in the Banking Sector, and examines the
Insolvency and Bankruptcy Code, and
Debt Restructuring Mechanisms
Revitalizing the
Financial Sector
‘The banking
sector in India is witnessing
a major evolution with technology
and innovation rapidly altering the
existing landscape. As markets become
more competitive and volatile, commercial
success will depend on the ability to operate
and scale up in an uncertain environment.
Managing risk will become increasingly
important.’
Shikha Sharma, Chairperson,
CII National Committee on
Banking, and
MD & CEO,
Axis Bank
Mindspace
financial sector
A Helping Hand for Banks

public sector banks; and set up
a professional board to hire top
management. The Government’s
commitment towards long-term
capital infusion is evident in the
Indradhanush program, a seven-
point agenda introduced in August
2015 to reform banks.
Following the RBI’s directive to
banks to clean up their books,
the banks have reported heavy
losses and are in need of capital
to strengthen their balance sheets.
This will enable them to start with a
clean slate as soon as the economy
revives.
Estimates by India Ratings and
Research Pvt Ltd suggest that banks
need a total of `3.7 trillion between
fiscal year 2017 and 2019 to meet
the Basel-III norms for capital
adequacy. While the Government
has committed to `70,000 crore
capital infusion into banks over three
years (starting with the last fiscal
year), this amount would prove to
be inadequate, without additional
accompanying measures to raise
resources.
One reform that will go a long way in
improving the working environment
for investors and lenders in the long
run is the Insolvency and Bankruptcy
Code. Under the Code, resolution is
time-bound (within a maximum of
270 days) unlike the current scenario
where it takes five to eight years
for a case to arrive at a logical conclusion.
Further, the Bankruptcy Code will not only make the recovery of bad loans time-bound, but will also give a fillip
to the bond market, since it would reduce dependency on the banks for funding long-term infrastructure projects.
This is because lower-rated corporate bonds would be in a better position to attract investors who are hesitant to
invest in such companies due to fear of default.
Consolidation among public sector banks - which account for 70% of the market share - too has been considered
for over a decade, but has now become a reality. In May, the country's largest bank, the State Bank of India,
signed an agreement to acquire six banks, including five of its associate banks, and the Bharatiya Mahila Bank.
During the past two years, the Government has set various policies to bring about positive sentiments regarding
the banking sector in India, long-established as the backbone of the economy. The sector is undergoing a major
evolution with the entry of new universal banks and differentiated banks. The future of banking in India looks not
only exciting but also transformative.
Mindspace

Insolvency and Bankruptcy Code
A Big Step Forward in the Reform Journey
P
arliament recently passed the
Insolvency and Bankruptcy
Code, paving the way for a
new bankruptcy framework that will
make it easier for companies to do
business in India by ensuring time-
bound settlement of insolvency and
faster turnaround of businesses.
The new law will provide an
overarching framework for dealing
with bankruptcies, replacing multiple
laws dealing with the issue, including
the Companies Act. It will cover individuals,
companies, limited liability partnerships and
partnership firms.
The Code seeks to bring a host of regulatory changes
to build a robust and faster insolvency resolution
mechanism, besides setting up an Insolvency and
Bankruptcy Board of India. Under the new Code,
employees and workmen will have the first right during
liquidation of assets under the law followed by secured
creditors.
CII welcomes the new code which will go a long way
towards managing the insolvency of failing companies.
It would also help to enable early resolution of bank
stressed assets. Further, as this was a key component
of the Ease of Doing Business index, it is expected to
facilitate higher investments, including from overseas.
However, it has to be ensured that the administrative
process to be set in place, including the Insolvency and
Bankruptcy Board, insolvency agencies and adjudicators,
functions in a smooth and time-bound manner.
How will the Bankruptcy Code help?
Given proper implementation, the legislation will cut
the resolution time when a borrowing entity fails
to pay up on time. Lenders/investors, according to
the provisions, can recover dues within a period of
180 days, with an extension of another 90 days,
provided three-fourth of the creditors agree. With little
chance of recovery, any company will be liquidated
automatically.
Currently, it takes an average of 4.3 years to resolve
insolvency in India, and the country ranks 136 in the
World Bank’s ‘resolving insolvency’ ranking.
The new timeframe will help India improve
its ranking.
Benefits for Investors
The Code will also work well in
deepening the shallow corporate bond
market in India, perceived to be a
bigger source of company borrowings
compared to bank loans. With higher
chances of recovery, institutional investors
will start betting on lower-rated corporate
bonds, where the chances of non-repayment
of dues are relatively higher.
Many foreign institutional investors avoid the Indian
markets as insolvency suits are time-consuming. The
same investors, however, find it easy to invest in the
so-called ‘junk bond’ market in the US, as recoveries
are fast-paced there.
Key Provisions of the Code
• Applicability: The Code will apply to companies,
partnerships, limited liability partnerships, individuals
and any other body specified by the Central
Government.
• Insolvency Resolution: The insolvency resolution
process for individuals varies from that for companies.
These processes may be initiated by either the
debtor or the creditors. The resolution process for
companies and limited liability partnerships will have
to be completed within a maximum period of 180
days from the date of registration of the case. This
period may be extended by 90 days if 75% of the
financial creditors agree.
• Fast-track Resolution: There will be provision for a
fast-track insolvency resolution process for companies
with smaller operations. The process will have to be
completed within 90 days, which may be extended
if 75% of the financial creditors agree.
• Termination: The process will end under two
circumstances: (i) when a resolution plan is agreed
upon by a majority of the creditors and submitted
to the adjudicating authority, or (ii) the time period
for negotiation has come to an end. In case a plan
Mindspace

cannot be negotiated upon, the company will go
into liquidation.
• Insolvency Professionals and Agencies: The
insolvency resolution process will be managed by
a licensed professional. The professional will also
control the assets of the debtor during the process.
The Code also proposes to set up insolvency
professional agencies. These agencies will admit
insolvency professionals as members and develop
a code of conduct and evolve performance
standards for them.
• Information Utilities: The Code
proposes to establish information
utilities which will maintain a
range of financial information
about firms. These utilities
will collect, collate
and disseminate this
information to facilitate
insolvency resolution
proceedings.
• Insolvency Regulator: The
Code seeks to establish the
Board of India, to oversee
insolvency resolution in the
country. The Board will have 10
members, including representatives
from the central Government and the
Reserve Bank of India (RBI). It will
register information utilities, insolvency
professionals and insolvency
professional agencies under it,
and regulate their functioning.
• Bankruptcy and Insolvency Adjudicators: The
Code proposes two separate tribunals to adjudicate
grievances related to insolvency, bankruptcy and
liquidation of different entities under the law:
(i) the National Company LawTribunal, with jurisdiction
over companies and limited liability partnerships, and
(ii) the Debt Recovery Tribunal, with jurisdiction over
individuals and partnership firms. Appeals against the
orders of these tribunals may be challenged before
their respective Appellate Tribunals, and further,
before the Supreme Court.
• Offences and Penalties: The Code specifies that
for most offences committed by a debtor under
corporate insolvency (like concealing property,
defrauding creditors, etc), the penalty will be
imprisonment of up to five years, with a fine of
up to ` one crore. For offences committed by an
individual (like providing false information), the
imprisonment will vary, based on the offence. For
most of these offences, the fine will not exceed
` five lakhs.
Observations and Recommendations
• Section 7 of the Code provides that any financial
creditor on occurrence of a default may apply
to the 'adjudicating authority' for initiation
of the corporate insolvency resolution
process without giving any notice
of such application to the debtor.
Further, there is no provision for
the debtor to be heard before
such an application is
considered. This may lead
to challenges on the ground
of breach of principles of
natural justice.
• Stress on the existing
tribunals may hamper the
strict timelines set under the
Code. The National Company
Law Tribunal (NCLT) would also
need to be in place before the
implementation of the Code.
• The trigger of default of an amount
more than ` one lakh set under the Code
is very low. Further, setting a fixed monetary
threshold may raise various issues. Even the
RBI, while protecting creditor interest, provides for
time-based thresholds.
• Exemptions in relation to debtor companies
undergoing restructuring under various RBI
schemes may be inserted, to avoid any conflicting
compliances.
• The resolution process gives rise to various
reputational risks rather than actual recovery from
the debtor company. Risks related to cross-default
triggers, downgrading of credit ratings, exit of or
loss to minority/retail shareholders, key employee
movement, etc may need to be evaluated in relation
to such a resolution process.
• There should be certain provisions in relation to
protection against malicious applications and failure
of creditors to implement and provide for a viable
resolution process.
‘An efficient
Code is a critical cog in any
economic system. This was missing
till date in India, and this was one of the
main reasons for India’s low ranking in the
‘Ease of Doing Business’. The Code is also
significant as it seeks to provide a framework
which will play an extremely crucial role in
ensuring insolvency resolution of corporates
and individuals in a time-bound manner
and will pave the way for capital to flow
into our country.’
Chandrajit Banerjee,
Director General, CII
Mindspace

CII ASCON Survey: Economic Recovery on Track

CII ASCON Survey: Economic Recovery on Track

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