27/02/2016 Talking Business


27/02/2016

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On Monday, it is Budget Day here in India, and business leaders will be

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watching carefully for any announcements which could help them.

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This is a country which is notoriously difficult to operate in.

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Has the Narendra Modi government delivered on its promise to make

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things easier? That is what we are discussing on this week's Talking

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Business. Welcome to Talking Business in

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Delhi. I am Yogita Limaye. India is renowned for its red tape. It takes

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an average of 29 days to open a company and firms have to comply

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with 33 different tax procedures. Then they have to deal with 29

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different states all with different rules on land purchase, employment

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and the environment. But things do seem to be improving slightly. In

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2014 India was ranked 142 in the ease of doing business index. By

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2015 it had moved up 12 places. There is still a long way to go but

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have things become easier? We have a panel of experts. One of the leading

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media platforms, the managing director of a pharmacy firm and the

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managing director of Dixon technologies which has some of the

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contracts with some of the best known technology firms across the

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world. Right at the outset, I'm going to ask you have it become

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easier to do business in India? Entrepreneurship has become a matter

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of pride. If you months ago people

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would wonder that probably these boys could not get a job, that is

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why they are making a company. Now people from the top colleges are

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starting companies. That is the big change which has happened. India was

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of a complex place to do business in. We have and added a huge number

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of rules. A lot of that dismantling has started happening and India has

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definitely become a far easier place but this is definitely still a work

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in progress. I have seen the winds change and I'm sure things will

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change a lot more. 2014 was not the best period to run a business but

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the winds of change are coming now. This, once

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they come to the ground level, will make a lot of difference to this

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country. If you talk about our sector which we recently got into,

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India is one of the fastest-growing markets for smartphones in the

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world. We consume almost 17 million phones a month. In the coming years

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we will be manufacturing 70% of what they can do in India. This tells you

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about the change that is happening in the country. You are the man

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behind the make in India and start-up campaigns, what is the one

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biggest difference this government has made since it came to power? The

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government is clear that Indian entrepreneurs must be allowed to

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fly. We must make India one of the easiest places and simplest places

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to do business. This would mean that you just as Mantel a lot of

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procedure, rules and regulations down the line and from the 1st of

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April, we will be putting out a mobile app which will allow all

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smart ups to do their registration in just one single day, across five

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different departments through this mobile app. I think the government

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is broke clear that Indian start-ups must grow and flourish. As we go

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along, this would mean that departments across sectors must

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become simpler, they must convert, they must integrate, they must work

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together, to ensure the entrepreneurship of India will grow.

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You said you have seen the winds of change but you have not really seen

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change on the ground as yet, what are the difficulties you face? Today

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for example, if I upload a tax form, sometimes uploading does not take

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place, sometimes there are problems. There is still the contact between

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the person who has uploaded the form and the tax office. I'm not just

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talking about the tax, if a notice is served online, the responses go

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online to the department concerned, so it becomes a response which is

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not answered by one ticket a person. It is not a visibility factor, it

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becomes a clear-cut answer you giving. There is not one person who

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will take care of your case, and then there is corruption. That

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corruption at grassroots level has two disappear for a country to

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become a smooth place to work. One of the findings of the World Bank is

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in India you have to comply with 33 different tax procedures, how big a

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difficulty is that? No doubt it is difficult for someone

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to understand India's tax structure, it is very complex. But I think that

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will change now. We have the goods and services tax coming in so that

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will take weight factors which are in the system right now. You have

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talked about how there are several start-ups which started up here and

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moved away. Your company has chosen to remain. Why have start-ups moved

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out of India? I think traditionally raising capital as an Indian company

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was quite cumbersome. I don't think it has eased yet, but what has

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changed is because the whole perception of India has changed, I

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just came back from a trip abroad where I met a lot of investors,

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large global pension funds etc, and there is so much euphoria, positive

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euphoria around India that now investors don't bother whether you

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are a Singaporean corporate Indian company or an Indian incorporated

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company because they want to be part of the story. India is a very large

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country. It is bigger than 24 countries of Europe. You have to

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work in partnership with the states. Much of the action in reality is

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shifted to the States. How do you meet the states' change. Every

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single state of India, whether it is good to rats or tunnel now do, they

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are all becoming simpler places to do business. -- which are wrapped.

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When you start a large company, the mindsets have changed that higher

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levels and the tripping down effect has started. It will take another

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two to three years to spread this whole revolutionary change. We are

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in this climate of global economic gloom and India is seen as a bright

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spot, you think if it takes long to get all of these things actually

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moving, that it will lose the great opportunity it has at the moment? I

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think over the next five years, India will emerge as a global hub

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for manufacturing, not only for India but for exporting to the

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world. What we are lacking today is an ecosystem because we import a lot

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of components from China. If you are importing your components, the

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question is, why is there are not a strong robust component ecosystem in

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place? I think one of the reasons is it is very difficult for a new

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entrepreneur to come in and start a business, because of the

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huge acquisition of land building. If someone was to set up a factory

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of 300 square feet, it would cost around two to set it up. We don't

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expect a new entrepreneur to come in and put in that kind of capital. You

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have seen a lot of tech start-ups. How many are in the manufacturing

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space where people have put together a man of factoring facility? We have

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seen a huge number of incubation centres and creating research parks

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all over the country so students become the innovators of tomorrow

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and that in my mind is the industrial Academy linkage and

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bringing that into sharp play in the days to come. Is that what you are

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seeing when you see young entrepreneurs of today, are they

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veering towards a tech start-up which might be simpler in our

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country than in manufacturing? No start-up is simple. I don't agree it

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is only tech where we are seeing entrepreneurial spirit. I'm seeing

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many companies in the area of robotics, consumer packaged goods

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etc where manufacturing is starting in India. The entrepreneurs feel

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there is a great competitive advantage because we are technology

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first into manufacturing, so they're not thinking only about importing

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machines, they are thinking about innovating and manufacturing. You

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mentioned the goods and services tax. The government set a deadline

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of 1st of April this year for it to roll out. The bill has not cleared

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Parliament so it does not look like that deadline is something they will

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meet. If that is appointing for you? The number of taxes we have to pay

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and the funds, you have consultants for practically every taxed or you

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have in place. You need to cut out all that. You need to make it into a

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simple form and we are waiting for that to happen. Right now, some

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states have very arbitrary taxation for goods coming into the state. A

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seller in a particular area, say Gujerat wants to sell something to

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Kerala, that needs to go away so there is free and fair commerce

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between all the states. We have talked about bureaucracy and red

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tape, we are also going to talk about the other things which this is

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Miss needs to flourish. -- businesses need to flourish. First,

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this is a look at what businesses need from government.

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Promising a business friendly environment, for once I would like

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to see a politician get tough on business and the causes of business,

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but that will never happen. Has one set of promises been kept? India

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became the fastest growing big economy in the world. India has vast

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untapped potential. If it goes according to plan, it will be

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growing at upwards of 5% out to 2050. Is this Prime Minister

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Narendra Modi's doing? He has been travelling the world asking large

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companies to come and make in India. The government has launched

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initiatives such as making India to stimulate investment and

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manufacturing. But how can we hold politicians to their promises or

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measured them. If it was a business promise you might ask businesses to

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do a pipeline calculation. You might say we have this calculation and the

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value is this. In theory, you could do the same with business promises.

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But that presupposes that politicians have any influence on

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what happens in business. Streamlining is the name of the

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game. Lets come at it from another angle. If you could stretch of

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imagination and imagine that I am a successful businessman, what is it

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you would want to make a business friendly environment? Business

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leaders want the same thing. They want stability and policy, they want

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stability in what to expect from the politicians. They want to know that

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if they have not told that tax rates will be stable or will be

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increasing, that that will happen. They want stability in the

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macroeconomy environment. To make it easy on the politicians, let's do it

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in a language they understand, slogans and acronyms since. Thrive

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is an acronym to make me feel welcome in a business environment.

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The T stands for taxes. H for hidden or stop hide your low taxes. We had

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a lot of complicated but OK arrangements. R is for relax it. I

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is for investment, invest in the infrastructure that will bring the

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great jobs to your country a little bit easier. At the airport, why

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can't my plane land very near to where my taxi takes off? V is for

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visa. Don't make it so hard for me to get one.

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Finally, e-fit for exit strategy. If things do not work out, don't

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make it hard This will radically change this. It

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will bring down the costs to one tenth of what it was. We import

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components from China will stop the cost has come down from 1500 to we

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will bring the container from purport to my factory. It costs me

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almost $2000. I have to bring the container in and export the product.

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Another $2000 to the cost. How can I compete if I have to pay that kind

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of cost? You cannot open a newspaper in India without reading about

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millions of dollars of investment coming into Indian start-ups. Is it

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easy to get funding? 3 billion, $4 billion came into start-ups. The

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trend will only move in the right direction. The big reason for that,

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we will have a billion internet users in the near future. Every

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investor in the world wants access to companies that are solving

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problems profitably for these billion internet users. We are the

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largest large front here in the world. In India, financial charges

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are really high. We need to work on that. If I am competing with a

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company that is working on LIBOR wrote all over the world, and I am

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paying an additional 6%, 7%, something is going on. One simple

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example, one year we went through massive loss. Even our company went

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into a loss. That year, the turnover of my company was around 20 million

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US. The financial charges I paid 20 million US. I am justified in what I

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am saying. I paid to the bank much more. It was loss-making, that year

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was loss-making. I paid a lot more. I would say to the people who are

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exporting, there is a level playing field for the two companies who are

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manufacturing in India for India, there is a bit of a problem. We

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supply boxes. When we are giving them credit, we are borrowing at a

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much higher cost. In China and any other country, they are paying in

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dollars. One solution is the banks must offer the buyers credit in US

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dollars to all the companies. Very few companies have access to the

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facility right now. Is that something the Government can help

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with? The Government is constantly looks at policy measures. In the

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electronics sector, we have taken a number of currency measures. We must

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understand that India is part of a globalised world, an integral part

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of a globalised supply chain. I's manufacturing must become extremely

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cost competitive. -- India. Total productivity must rise you cannot

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keep subsidising this. On that note, thank you for joining us. That

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brings us to the end of this edition from daily and indeed the series. We

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will be back soon. Bye-bye. -- from Delhi.

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Time to talk about the weather. A cloudy day across the UK. A

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beautiful day in the

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