Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Rajiv Batra 29th June 2016 Public Content India – macroeconomic trends and government initiatives Cummins initiatives for vendor partners Way forward… 2 Content India – macroeconomic trends and government initiatives Cummins initiatives for vendor partners Way forward… 3 India’s growth is expected to remain strong GDP growth rate % 7.6 7.5 7.5 7.3 7.2 6.6 5.6 2.6 2012 2.5 2013 2.7 2014 3.1 2.6 2015 World 2017 India GDP growth to continue at highest rate in world, even higher than China… • World growth is slowly recovering 3.2 2.5 2016 • 2018 India Source: IMF April 2016, IHS May 2016 4 Globally economy is expected to recover slowly GDP growth % 2.4 USA 2.2 Brexit 2.5 UK GDP to contract by 0.8% in 2017, exact impact to be seen 2015 2016 2017 • 2016 GDP growth expectation revised from 2.4% to 2.2% • Energy sector has dropped following crude oil rate cash • Strong $: Dollar is 10%-20% higher than natural value and Brexit can further increase it • UK no longer have access free market of EU and 56 negotiated countries and will have to restart negotiations • Services (majorly Financial) which forms 80% of UK GDP and has EU as its single largest market will be impacted negatively GDP growth % China • Re-balancing its economy 6.9 6.5 6.2 6.0 2015 2016 2017 2018 • Overcapacity and weaker exports • High debts: From 2007-2015, China's debt grew from USD 7T to USD 25T. Debt to GDP is 237% Grexit - If Greece exits EU • Default by Greece, lower valued currency, lower standard of living for • Shake investor confidence on other PIGS countries • European companies shares could fall sharply Source: GDP: IMF, April 2016 5 Inflation and repo rate have eased over last 2 years % 15.0 % Inflation, % Repo Rate, % 8.5 CPI WPI 8.0 8% 7.5 10.0 7.0 6.5 5.0 6.5% 6.0 0.0 5.5 -5.0 RBI target of CPI is 5% for March 2017 and 4% with +/- 2% beyond 2016-17 Market expects repo rate cut by 25 basis points around August subjected to normal monsoon and under control inflation Source: RBI 6 Rupee predicted to be in range of 66.5 to 68.5 over this fiscal year Forex Reserve, $B INR/$ INR 70 $B 380 68.5 67 65 360 340 60 320 55 300 280 50 02-Feb-17 02-Dec-16 02-Oct-16 02-Jun-16 02-Aug-16 02-Apr-16 02-Feb-16 02-Dec-15 02-Oct-15 02-Aug-15 02-Jun-15 02-Apr-15 02-Feb-15 02-Dec-14 02-Oct-14 02-Aug-14 02-Jun-14 02-Apr-14 45 260 240 • Rupee predicted to be in range of 67.5 to 68.5 in next 2-3 months, moving to 66.5 to 67 by March 2017 • Forex reserve has grown consistently and is at 10 months import equivalent, giving RBI leverage to keep Rupee in a band if needed Source: RBI 7 International crude oil and commodity prices seem to have stabilized Crude Oil - WTI, $/barrel $ 120 ($/dmtu) Commodity prices ($/mt) 9000 106 180 Copper, $/mt 8000 100 80 60 49 40 7000 140 6000 120 5000 100 4000 80 3000 60 Iron ore, cfr spot, $/dmtu 2000 26 20 160 40 1000 20 Crude oil rate increased to 30% since February 2016, but seen as stabilizing at $45 - $50 in next few months Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 0 Jan-14 2016 Oct-13 2015 Jul-13 2014 Apr-13 2013 Jan-13 0 - In 2016 and beyond weak demand from China is expected to keep prices down as these metals are used extensively in infrastructure and manufacturing projects Source: Nasdaq, World Bank, Economist Intelligence Unit, Mar 2016 & IMF Analysis 8 The current Government has taken various steps in the positive direction Improved Governance NITI Aayog Quicker Decision making Ease for doing Business Inclusion of states in policy making Base Corporate Tax Clearing stalled projects & predictable policy regime Single Window Clearances 25% Actively pushing GST Strengthening business and strategic ties Increased Transparency E-Auctions: Coal & Spectrum 30% Creating revenue streams for investment Direct Fund Transfers Disinvestments Easing FDI limits Relaxed limit up to 100% in most sectors including defense 9 Planned increase in infrastructure investment is moving the economy on the intended path 2014-151 ($M) 2015-162 ($M) Roads 4,116 6,260 52% Build roads from India's west-to-east land border, upgrade state to national highways Railways 4,934 6,260 27% Electrification, improvement of speed of trains and safety Shipping 74 146 97% Port connectivity and inland water ways National waterways development Defense 36,766 38,607 5% Build indigenous combat vehicles, warships, etc. Industry & minerals 6,459 6,745 4% Permission to private companies to mine and sell coal in the open market Energy 25,393 26,182 3% 5 ultra mega power projects (coal-based) planned (4000 MW each) Smart cities 398 923 132% Build 100 smart cities in India Ports 41 61 49% Corporatization of public sector ports Urban development 1,266 1,570 24% Affordable housing, sanitation and development % Growth Key focus areas Source: 1- Union budget 2014-15 revised estimates 2 – Union budget 2015-16 budgeted estimates 10 Few focus areas of the government are expected to drive positive trends for the manufacturing industry On-highway Off-highway Migration to higher tonnage nodes expected due to growth in infrastructure With nationwide implementation of BSIV, ability to deliver an FFM product is critical Government’s intention to skip BSV and jump to BSVI by 2020 Upgrade and expand highways – build road from India's west-to-east land border (target of 30 km/day for 2016-17 from current 20 km/day) Govt.’s push for affordable housing, sanitation, urban and rural development Plans to create 100 smart cities by 2022 Mining Power Generation Thrust on industry and infrastructure development expected to increase power demand Power deficit expected to continue at current levels of 2-3% Modest growth in gross fixed capital formation expected (may accelerate if economy improves) Railway Focus on electrification, increased speed, improved safety, connectivity and enhanced capacity Investment of $136 B planned over the next five years Mines and minerals amendment bill 2015 allows private companies to mine and sell coal in the open market ending state monopoly Oil & Gas Increase in gas distribution stations (IGL,MNGL etc.) – Gas compressor market; consistent demand for offshore emergency DG market Marine Fleet expansion and modernization by Indian Navy, Coast Guard Government push for inland waterways, port connectivity projects to help generate demand 11 Some challenges, if addressed, could boost the economic growth even further Rajya Sabha support for GST NPAs of Banks Support for GST has grown in Upper House but still shy of 2/3 mark NPA of banks are at very high levels Undecided Supporting Opposing Others Others Congress NDA Two-Third Majority at 164 Total seats - 247 Party / group NDA + 7 nominated members No. of Seats* 81 Supporting Others 60 Undecided (AIDMK – 13, YSR congress, TRS, JD (Secular)) 19 Opposing Others (Left, RJD) 20 Congress 60 141 *Excluding Vacant seats • Banks have become reluctant to lend • Asking for additional collateral • Higher rate Other Factors • Weak infrastructure – Insufficient Rail and Power access for inland factories • Regulatory burden, particularly in labour markets • Bills pending in Rajya Sabha e.g. Land acquisition bill • Time to start business still high Source: NDTV India news, Scroll, thehindu 12 Content India – macroeconomic trends and government initiatives Cummins initiatives for vendor partners Way forward… 13 For GST implementation, Cummins is collaborating with vendor partners to realize benefits for end customers • Cost Benefit: • Interstate transactions under GST will benefit • Input credit for one type of tax against another • Coverage of CENVAT will increase e.g. outward transportation • Tax Filing & Litigation: Less Complicated • More Working Capital will be required • Credit lock if a firms vendor has not paid and registered under its GST no. GST workshop conducted with vendor partners • Cummins is happy to help and extent the support to Tier 2 vendors • To remain competitive after GST implementation, we need to be transparent and collaborate 14 Cummins is launching ‘Vendor bill discounting scheme’ to provide easy financing Vendor Partners who chose to join, can avail financing at market competitive rates without providing any collateral This will enable in supplying at cost effective rates 1 • Cummins’s Banker to pay immediately after receipt of material Submits invoice • Disbursement at discounted rate as agreed between Cummins and its vendor partner • Current discount rate is 10.75% PROGRAM • Partners do not need to provide any collateral 3 2 • Agreement required to be executed with Cummins but No agreement or KYC between vendor partner and Bank • No charges over and above discounting interest 15 Content India – macroeconomic trends and government initiatives Cummins initiatives for vendor partners Way forward… 16 The way forward… RFT Customer expectations are increasing on cost and quality 2015 2016 2017 2018 TCO Product Reliability Dependa bility 17 Lets reduce our Cost of Quality ► Loss of Customer / Goodwill External ► Retro fit costs Failures: ► Incurring penalties / claims $100X $10X $1X Cost of Quality increases $1000X Internal Failure: Appraisal Costs: Prevention Costs: ► Scrap / Rework ► Re-test / Re-inspection ► Unplanned downtime ► Trouble shooting ► Incoming inspection ► Maintenance and calibration of equipment ► Setup inspection and tests ► Field testing ► Process audits ► Education and training ► Quality planning ► Product design qualification tests ► Vendor qualification ► Customer interface ► Controlling processes Warranty cost based on ABO consolidated and TCL sales 18 In the long term, we continue to remain optimistic Growth Prospects Impact Global growth is picking up slowly Macroeconomic factors for India are trending in right direction Government initiatives and spending is expected to drive growth Cummins is well-positioned to capitalize on growth with enhanced support from its vendor partners 19