2022 Has Been The Year Of The Crouching Tiger And Hidden Dragon!

Posted on July 11th, 2023

The year 2022 has been transformational for India in many ways. A turbulent period for global economies, with the world’s collective GDP falling by 3.4% in 2020 alone. It was also a time when our country’s traditional sectors and businesses didn’t just sit or sleep but closely observed and strategically took the right moves to sustain their progress despite the ongoing headwinds.

There has been a myriad of commentary on the meltdown of tech in the west, the meltdown of the western economies due to inflation correction actions, tech meltdown in the West, and its impact on the startup world in India and so on. Most view 2022 as the annus horribilis for the global economy, mainly tech companies and startups. All of these are irrelevant

What’s relevant is what is happening in India and China. India and China represent 40% of the world. They were shaping how the world worked for millennia and they will continue to shape how it works for the next few millennia. So it is important to put this in perspective and not get carried away by a narrative that is shaped by the Western press. I would describe 2022 as the year of the crouching tiger and the hidden dragon.

China is going through a great internal economic correction. You may call it regressive, you may call it dictatorial, etc. However, they are doing things their own way to fix some of the frivolity that invaded the west and to some extent India, because of superfluous application of technology, which has affected China as well. For example, bringing into control the culture of easy-lend, easy-spend.

Xi Jin Ping, maybe as a part of his effort to consolidate power, is also cleaning up some of this frivolity and the intent is to make the country stronger. However, this means the country has withdrawn into its shell, thus disrupting the global supply chain. The resurgence of Covid ,while it is a setback for China, worsens their isolation. The dragon thus remained hidden through 2022.

This presents an opportunity for a country like India.

What has India been doing? From an external lens, it looks like India has been staying still in the same position. But there’s more to it than meets the eye. India has been watching and you can almost see its muscles tensing as it waits to pounce! That is why I call it the crouching tiger.

Let’s delve deeper into the facts that back this shift of power. The world we see today has dramatically changed from what it was three years ago since the outbreak of COVID-19. The pandemic dismantled China’s 20-year global manufacturing dominance – primarily driven by optimized shipping lanes and extremely cheap labour rates – pinning it down to make internal corrections. This decline pushed companies to look for alternatives and build reliance on other Asian countries. The Fed’s inflation-control measures fell short, resulting in a whopping 8.5% rise in consumer prices, the highest annual uptick since 1981.

However, in contrast, India has weathered this turmoil by being a silent observer, making the right moves that may have initially looked erroneous but are now set to bear fruit. For instance, India was roundly criticized for handling the pandemic differently when it used surplus money to provide relief to citizens and doubled down its infrastructure investment instead of printing money, which most western countries did. The Indian government has been undertaking numerous infrastructure projects, with its direct capital expenditure increasing from two and a half lakh crore in 2013-14 to around seven and a half lakh crore in 2022-23.

As per research, India stands second in the world for its vast road network, spanning 63.72 lakh kilometres as of 2021. Similarly, NHAI plans to construct around 25,000 kms of national highways in 2022-23 at a speed of 50 km per day. In terms of shipping, the government, under The Maritime India Vision 2030, has identified 150+ initiatives to boost this sector and is likely to invest Rs 1,00,000-1,25,000 Crore for world-class development. Further, India’s installed Renewable Energy capacity has been boosted by over 2.5 times, standing at more than 141 GW today. The country now aims to reach net zero emissions by 2070, and meet 50% of its power requirements from green sources by 2030.

Apart from strengthening its physical infrastructure, India has also enhanced its digital ecosystem (Jan Dhan Aadhaar Yojna) through its Digital India program to shape its overall muscle and become capable of responding actively to global upheavals. Because what’s the point of building a first-world technology platform riding on third-world infrastructure?

Moreover, there is also a lot of conversation about the threat of inflation hitting India and other developing countries. But if you take a step back, you will realise that there are only three major issues or the 3 Cs – COVID-19, Conflict and Climate.

In terms of COVID-19, India was one of the first countries to isolate the virus, with a recovery rate of 97% and the lowest fatality rate of 1.44% in the world. Likewise, we have handled conflicts better than others by being ruthlessly pragmatic about our relationships. And this is why India is not suffering the inflationary effects of the conflicts on its construction of pipelines for essential goods like fuel, which are forex dependent for us.

However, there are a couple of inflationary pressures, too. For instance, the mess created by the west because of its federal reserve-related moves will have implications as we rely upon certain imports for sustenance. But the good news is, we also have a couple of hedges, such as the pragmatism we demonstrated in fuel and our rupee trading mechanism, that will help us counter this inflationary push over time.

The next thing we must worry about is the third C, Climate. Although we are handling it better than anticipated, there is still some inflationary effect of climate change that is visible in the food supply chain. For instance, crops fail due to unpredictable climatic conditions, which, in turn, puts pressure on prices, reflected as inflation. In fact, it was found that climate change is directly impacting 55% of the country’s inflation basket.

Fortunately, significant work is being done in the agriculture sector, such as encouraging access through expressways that connect various remote farm belts to the markets. As per research by Bain & Company, agritech will see significant investment, and as a result of regulatory changes and COVID-19’s impact, the sector will grow into a $30B–$35B market by 2025. This growth will be majorly championed by online sales of produce and inputs, along with digitally enabled logistics.

We may not have noticed, but India is either upgrading or launching new airports every two weeks. 1,215 railway stations across the country have been upgraded so far, and 38 more are to be developed under Adarsh Station Scheme by 2023. New railway lines are being inaugurated, and 400 Vande Bharat trains are set to go live in the next three years. All these initiatives will have deflationary effects on our logistics cost, which will benefit every sector and help them scale.

Further, India is transforming from a developing to a middle-income nation, which is another gigantic shift. People’s aspirations are changing rapidly; the move from needs to wants will be tremendous and create a massive demand push, which will fuel the Capex cycle. It’s a truism that people’s wants for better stuff to enhance their lifestyle will increase with their per capita income.

For instance, people need food, but they want good quality, hygienically packaged and branded food. People need mobility, but they want relatively nicer bikes and cars. People need clothing, but they want fashionable clothes. This shift is being observed even in rural areas, with people using better cars, wearing better clothes, and having better aspirations. This continuous cycle of deflation will be attributed to enhanced infrastructure. Clearly, certain deflationary effects are set to kick in, and we just can’t ignore them.

With that being said, there’s a lot that 2022 taught us about India’s resilience and ability to choose progress against all odds. With the crouching tiger and hidden dragon assuming their positions, it’s exciting to anticipate how 2023 will unfold.

Key Expectations From Budget 2023

Posted on July 6th, 2023

Tilting the scales on private capital inflows

The startup ecosystem has grown tremendously in the past few years. However, if one peels the layers, one notices an anomaly. Private capital naturally flows into sectors where big payouts are possible, even if highly risky, or where returns can be captured fast. This has resulted in considerable capital inflows into frothy sectors such as gaming, crypto, stock trading and the like. Even in relatively deeper sectors such as food, the capital that has flowed into high speed last mile delivery is an order of magnitude greater than what has gone into food logistics/supply chain. It has now become critical to ensure that private capital (both domestic and international) flows into sectors of national importance. Private capital needs to be made to work harder and create meaningful assets for the country. Given this, the time has come for the Government to put its thumb on the scale, by incentivising private capital to flow into sectors of national importance such as food and agri, healthcare and education, and if required, disincentivising its flow into sin sectors/frothy sectors. There have been requests to rationalise long term capital gains tax by private equity investors. This provides one opportunity for the government to send the right signals – eg differentiated LTCG Tax for sectors of national importance vs the others. Direction of India’s infrastructure investment funds to expand their horizons beyond hard infrastructure investments alone, and into technology investments related to the infrastructure sectors e.g. logistics and supply chains, healthtech and edtech, as well as creation of new government vehicles (e.g. sovereign wealth funds, AIFs) directed towards these spaces will be another welcome measure. These, coupled with capital gains tax breaks for such vehicles, will help accelerate equity investments into sectors such as these.

Encouraging domestic capital inflows into sectors of national importance

In addition to the above, it is important to encourage the flow of domestic capital into sectors of national importance. Domestic capital has been relatively risk averse. Given this, incentivising them to place calculated bets on sectors such as these will accelerate development of these sectors, while also providing better returns to investors, and ensuring that the ownership of these assets are more domestic than global. Creative means may be explored for this. For e.g. if the mandatory CSR program for corporates can be modified to treat investments into AIFs focussed on sectors such as food, education and healthcare, as deemed CSR, this will make CSR funds work harder and more efficiently, and also provide the possibility of an upside to company treasuries, rather than being dissolved as a grant.

Food as a priority sector

Food security will become one of the pressing concerns due to the impact of climate. Given this, more investments are needed in the food supply chain, starting from the development of climate resilient seeds, to improving storage and supply chain practices, to reducing food miles to reducing food waste. Today, the Government has declared agriculture as a priority sector, and facilitated the enablement of low-cost debt finance to this sector. However, given the extent of fragmentation of farms, administering this has proven to be challenging to most lenders. It is time we looked at food, and not just agriculture, as a priority sector. This means that any one involved in the production, trading, processing, storage, transport and retail of food shall be eligible for priority sector lending for the creation of assets as well as for working capital. By enabling the entire value chain, particularly the forward supply chain, access capital at cheaper rates, the government can massively incentivise formalization and introduction of better technology into the sector. This will also be administratively easier for lenders as organised players are easier to work with and secure lending. While considerable subsidies are offered in this space including PLI scheme for food processing, the above decision can enable investments in this sector much more effectively, seamlessly and speedily

Making MNREGA work harder

Today, in many parts of the country, the MNREGA program has created peculiar challenges such as the non-availability of farm labour. Tokenising MNREGA payments and making these tokens available to farmers free or subsidised, and other employers of rural labour (eg. PMGSY) to pay out digitally into the jan dhan accounts of labourers based on standard effort units may help acceleration of projects such as rural infrastructure (e.g. water tank cleaning projects by Panchayats), as well as provide agriculture labour at reasonable cost, thus creating deflationary effects.

Single window for access to schemes and subsidies

Today, central and state governments offer a range of schemes and subsidies. However, navigating to these subsidies is non-trivial for companies. A single window portal that enables access to these will help companies take advantage of schemes better and achieve the objective of these schemes.

WayCool’s Jigani Is Now FSSC 22000 Certified

Posted on July 3rd, 2023

Food safety in the food industry is extremely essential. The main objective of food safety is to ensure that the consumers are protected from all possible food borne diseases and injuries that could occur to them.

At WayCool, along with quality, food safety is also taken very seriously. Our vision is to build an efficient, impactful and sustainable platform which is capable of handling 1% of the world’s food. That journey involves ensuring objective standards are implemented in terms of quality and food safety. Providing cleaner and better food products to customers has been an integral part of our vision. We practice it in all aspects of our work and our practice has been rewarded, with global recognition.

Recently, our integrated packing unit in Jigani, Bengaluru has been certified for FSSC (Food Safety System Certification) 22000 which is recognised by GFSI (Global Food Safety Initiative) and is proof that the certification scheme meets the highest global standards of food safety.

FSSC 22000 provides a certification scheme that incorporates an in-depth hazard analysis in a robust food safety management system to control the food hazards, minimize risks and assure protection of safe packaging and packaging materials. The scheme uses international standards such as ISO 22000 for food safety management and ISO/TS 22002-4. This is a sector-specific prerequisite program for food packaging and packaging material alongside additional FSSC 22000 certification requirements. This certification ensures consistent, high quality audits monitored by an integrity program to measure and maintain performance to deliver safe packages and safe packaging.

Tilting the scales on private capital inflows

The Food Safety System Certification 22000 comes with a lot of benefits. The certification provides a systematic methodology to effectively identify and manage food safety risks across the entire food supply chain. Also, since FSSC 22000 is recognised by Global Food Safety Initiative (GFSI) and European Cooperation for Accreditation (EA), it helps in facilitating internal benchmarking and management through consistent application across multiple sites. It also promotes the review of continual improvement of our food safety management system, which also helps generate confidence among our customers.

WayCool and its various business units always ensure that the customer requirements are met in the best way possible. Contract manufacturing is no different, upholding the best of the grading and packaging standards and striving to incorporate better systems as the journey continues towards excellence.

Customers, whether they are consumer brands, modern retail chains, e-tailers or food processors can rest assured that the products they provide to their consumers are undergoing a rigorous quality assurance process at WayCool’s contract manufacturing unit.