Chamber Voice – December – 2020

We have been passing through challenging times.

The Indian economy which had plunged 23.9% in the first quarter, recovered to a contraction of 7.5% in Quarter 2, and is now recovering at a better than expected pace. The three broad aspects of the economy – Production, consumption and Investment, are on a comeback path, but not yet there.

It is heartening to note that though Barclays, Credit Suisse, Goldman Sachs etc. are lauding the faster than expected recovery, pre-Covid level growth is expected only by 2021-22 as per Niti Ayog.

The rupee is expected to end 2020 as Asia’s worst performing currency even underperforming minor South Asian currencies.

We at the Chamber are not immune to these challenges. As a community, we can take up the issues faced by the fraternity so that these get addressed as initiatives by the policy makers including Government.

For a start, I request you, the Members of the Cochin Chamber of Commerce & Industry, to send in your concerns, issues, and the bottle necks you face in your respective sectors in conducting business. Once we receive them, we will collate them and arrange for consultation and dialogue for an early resolution of issues to promote the ease of doing business.

The inputs we receive from you all will be tabled and discussed at the next Meeting of the Executive Committee of the Chamber. I am confident that collectively, we will be able to work towards finding solutions to the various issues faced by trade and industry. Such interventions will also position the Cochin Chamber as the ideal platform for the resolution of the issues.

It is the Chamber’s responsibility to protect and promote the welfare of its members and I assure you that we will continue to carry on the good work done by my predecessors besides finding new ways to take things forward.

I thank you all once again for having elected me as the President of the Chamber and wish you all the best of the season and a Very Happy & Prosperous New Year.

K. Harikumar
President

There have been investments across various sectors of the economy. The mergers and acquisition (M&A) activity in India stood at US$ 35.1 billion in the first half of 2020, while private equity (PE) deals stood at US$ 13 billion. Some of the important recent developments in Indian economy are as follows:

• India’s overall exports from April 2020 to August 2020 are estimated to be US$ 182.13 billion, (a 19.32% decrease compared with the same period last year). Overall imports from April 2020 to August 2020 are estimated to be US$ 167.94 billion, (a 38% decrease compared with the same period last year).
• According to IHS Markit, Purchasing Managers’ Index (PMI) for manufacturing stood at 46 in July 2020 against 47.2 in June 2020, showing contraction in the sector because of coronavirus-related restrictions.
• Gross tax revenue stood at Rs 3.80 trillion (US$ 51.35 billion) in the first quarter (from April 2020 to July 2020) of 2020-21.
• The first quarter of FY 2021 witnessed four initial public offerings (IPO) worth US$ 2.08 million.
• India’s Foreign Direct Investment (FDI) equity inflow reached US$ 469.99 billion between April 2000 to March 2020, with maximum contribution from services, computer software and hardware, telecommunications, construction, trading, and automobiles.
• India’s Index of Industrial Production (IIP) for 2019-20 stood at 129.2.
• The combined index of eight core industries stood at 137 in March 2020. Its cumulative growth was 0.6% in 2019-20.
• Consumer Price Index (CPI) – Combined inflation was 5.9% in March 2020 as compared to 6.6% in February 2020. The annual consumer price inflation increased to 4.8% in 2019-20 from 3.4% in 2018-19.
• India improved its ranking in World Bank’s Doing Business Report by 14 spots over last year and was ranked 63 among 190 countries in the 2020 edition of the report.
• India is expected to have 100,000 start-ups by 2025, which will create employment for 3.25 million people and generate US$ 500 billion in value as per Mr T V Mohan Das Pai, Chairman, Manipal Global Education.

• The Prime Minister announced various economic packages, having a cumulative worth of around Rs 20 trillion (US$ 283.73 billion) and being almost 10% of India’s GDP.
• On July 6, 2020, World Bank and Government of India signed a US$ 750 million agreement for ‘Emergency Response Programme’ for micro, small and midsized enterprises.
• As of August 17, 2020, 12.2 million Kisan credit cards were sanctioned with credit limit of Rs 1,020.7 billion (US$ 13.98 billion) under the special saturation drive to revive rural economy and accelerate agricultural growth.
• In September 2020, ADB & India signed US$ 500 million loan for the ‘Delhi-Meerut Regional Rapid Transit System (RRTS) Corridor’ to improve regional connectivity and mobility in India’s national capital region (NCR).
• In September 2020, Government of India, Government of Himachal Pradesh and World Bank signed a US$ 82 million loan to implement the Himachal Pradesh State Roads Transformation Project, to improve the condition, safety, resilience, and engineering standards of state road network.
• Pradhan Mantri Garib Kalyan Package (PMGK) was introduced in April 2020 to provide relief to underprivileged and help them fight the battle against COVID-19. The budget allocated to the scheme was Rs 1.70 trillion (US$ 24.12 billion).
• India is expected to attract investment of around US$ 100 billion in developing the oil and gas infrastructure during 2019-23.
• The Government of India proposes to increase public health spending to 2.5% of the GDP by 2025.
• For implementation of Agriculture Export Policy, Government approved an outlay Rs 2.068 billion (US$ 29.59 million) for 2019, aimed at doubling farmers income by 2022.
• In the mid-term review of Foreign Trade Policy (FTP) 2015-20, the Ministry of Commerce and Industry enhanced the scope of Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS), increased MEIS incentive for ready-made garments and made-ups by 2%, SEIS incentive by 2% and increased the validity of Duty Credit Scrips from 18 months to 24 months. In April 2020, Government extended FTP for one more year (up to March 31, 2021).

• India’s GDP is expected to reach US$ 5 trillion by FY25 and achieve upper-middle income status on the back of digitization, globalization, favourable demographics, and reforms.
• India is also focusing on renewable sources to generate energy. It is planning to achieve 40% of its energy from non-fossil sources by 2030, which is currently 30%, and have plans to increase its renewable energy capacity from to 175 gigawatt (GW) by 2022.
• India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behavior and expenditure pattern, according to a Boston Consulting Group (BCG) report. It is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by 2040 as per a report by PricewaterhouseCoopers.

• Cabinet approves Merger of Five Film Media Units through Rationalization of Infrastructure,Manpower and Other Resources 
• Cabinet approves Revision in guidelines for providing Direct to Home (DTH) Services in India 
• Cabinet approves signing of revised air services agreement between India and Philippines 
• Cabinet approves signing of revised air services agreement between India and Afghanistan 
• Cabinet approves MoU between India and USA for exchange of information in areas of mutual interest in the electricity sector 
• Cabinet approves Auction of spectrum 
• Cabinet approves the proposal of Securities & Exchange Board of India (SEBI) tosign Bilateral Memorandum of Understanding between India and Luxembourg 
• Cabinet approves Memorandum of Understanding between India and Suriname on Cooperation in the field of Health and Medicine 
• Cabinet approves setting up of Public Wi-Fi Networks by Public Data Office Aggregators to provide public Wi-Fi service through Public Data Offices without levy of any License Fee 
• Cabinet approves Provision of Submarine Optical Fibre Cable Connectivity between Mainland (Kochi) and Lakshadweep Islands (KLI Project) 
• Cabinet approves Universal Service Obligation Fund Scheme for providing Mobile Coverage in Arunachal Pradesh and two Districts of Assam under the Comprehensive Telecom Development Plan for North Eastern Region 
• Cabinet approves Atmanirbhar Bharat RojgarYojana (ABRY) 

The Cochin Chamber is pleased to inform you that we are recommencing the CEO FORUM Breakfast Meetings from January 2021 after a hiatus on account of the pandemic.

Accordingly, the next Breakfast Meeting will be held on Friday, the 8th of January, 2021 at the Taj Gateway Hotel, Marine Drive, Ernakulam from 8.00 a.m. to 10.00 a.m. The meeting will be followed by a Networking Breakfast.

Mr. Paul Antony I.A.S. (Retd.) former Chief Secretary to the Government of Kerala, has agreed to be the Guest Speaker for the upcoming meeting. He will speak on “Resurgence of Economic Activities – Is it real and sustainable?”

While there is No Registration Fee payable for those who have subscribed to the Breakfast Meeting series, we are constrained to charge a nominal fee of ₹600 (inclusive of GST) for the other participants.

Click here to register

The Kerala Government has constituted a Committee of Secretaries vide Order dated 7th October 2020 as Phase 1 of exercising minimum regulatory compliance on businesses. The Cochin Chamber of Commerce & Industry wishes to contribute quality policy inputs to the Government to improve Ease of Doing Business in the State.

Questionnaire on Business Information Survey (click on the link given to view the same)

We request you to send your valuable inputs by filling the above Questionnaire and kindly co-operate with us.

should be a mandatory cooling off period before a retiring Judge takes on new responsibilities. He also said that the lack of consistency vis-à-vis verdicts, off late, is a matter of concern as it affects the credibility of the judiciary and the confidence reposed in them by litigants.

Speaking about the delays in the Courts and the need for reforms for the faster conclusion of litigation in the judicial system, Mr. Viswanathan said that there are different dimensions to be considered. One of the critical points he raised was that many Courts in the country have a large number of cases pending due to the complexity of the issues to be adjudicated upon. While the expeditious disposal of cases is a must it is also essential to ensure the services of an impartial Economic Wing that will help analyse complex matters and advise the Courts as to the actual position. He cited the example of the recent Coal and Telecom cases that involved weighing huge business and economic implications. Unfortunately, our law enforcement agencies lack the required expertise in analyzing and providing detailed advice to the Courts in such matters. Mr. Viswanathan opined that unless the Government and the lawmakers at various levels consider this dimension in business related cases, it could lead to more pendency of cases that will further clog up the judicial system and also result in erroneous interpretations that could have wide ranging negative impact on the country.

Mr. Viswanathan suggested that the Chamber should consider setting pressure groups that will press the Government to consider appointing economists or other experts to panels that can advise the Courts in such cases. This, he said, will help in expediting the clearance of pending cases in the judicial system.

Mr. Viswanathan also stressed the need for renewed efforts to promote Arbitration/Mediation as alternate legal remedies that will help reduce the burden on the Courts. He called on the Chamber to aggressively promote and encourage businesses to consider the formation of an Ombudsman, which will help settle disputes out of the Court. This will also help businesses save time and money otherwise spent on pursuing cases through the existing judicial system.

Speaking about the IBC, he said that the National Company Law Tribunal (NCLT), the adjudicating authority for the Companies Act, Insolvency and Bankruptcy matters and also the Competition Act is struggling to handle the huge number of matters pending due to the lack of adequate Benches across the country to hear these cases. This issue needs to be addressed urgently. He also addressed the current Operational Credit Mechanism under GST, where some suppliers are asking for Security, which basically acts as a hindrance to the Ease of Doing Business. He emphasized on the importance of the judiciary in relation to The Ease of Doing Business Index, which values the time and cost for resolving commercial disputes in the country.

Some of the other areas touched upon by Mr. Viswanathan in his address was the Pre-Deposit Clause on Taxation, Fast tracking of Industrial Relations Code related cases, MSME Sector etc.

In his closing remarks, Mr. Viswanathan said that in an international scenario, a country that does not have an independent, robust and efficient judiciary, reflects badly on the Government and its efforts. He said that it is upon the Government and Businesses to work together to ensure that the necessary reforms in the judiciary are implemented at the earliest for the benefit of all.

Following his talk Mr. Viswanathan interacted with the participating CEO’s and answered the various queries raised by them.

Mr. K. Harikumar, Vice President of the Chamber proposed the Vote of Thanks.

The meeting concluded at 10.00 a.m.

6. Petroleum price regulation based on international crude oil prices and GST on Petrol
7. Finalisation of New Industrial Policy, National Retail Trade Policy, National Logistics Policy, etc.
8. Placing India’s Vaccination Strategy in the public domain
9. Reducing GST rates for Health Insurance policies
10. Infrastructure status to Real Estate
11. Standardisation of Faceless income tax assessment
12. Adequate publicity for Unemployment Allowance
13. Amnesty scheme for Legacy Disputes under Customs Law
14. Institutionalising Development Impact Bonds
15. Setting up Parliamentary Budget Office
16. A law mandating effective Pre Legislative Consultations

The Cochin Chamber hopes that the Union Budget 2021-22 will usher in a new dawn for the revival of the Indian Economy with policies that focus on the ‘Build Back Better’ approach.

Click here to view the submission in full

“data about or relating to a natural person who is directly or indirectly identifiable, having regard to any characteristic, trait, attribute or any other feature of the identity of such natural person, whether online or offline, or any combination of such features with any other information, and shall include any inference drawn from such data for the purpose of profiling”

Chapter VII of the PDP Bill deals with restriction on transfer of personal data (including sensitive and critical personal data), wherein sensitive personal data may be may be transferred outside India, subject to conditions mentioned in sub-section (1) of Section 34, whereas critical personal data must be processed only in India.

Essentially there is a duty of care cast on data fiduciaries to process the data principal’s personal data in a fair and reasonable way. In addition, the PDP Bill confers certain privacy rights on the principal, such as obtaining personal data, correction of inaccurate data, erasing, updating, porting the data to other fiduciaries and the right to restrict or prevent the disclosure of personal data, if it is no longer necessary or if the consent is withdrawn. Any processing of data can be done only on the basis of consent given by the principal.

The PDP Bill also provides for certain obligations on the data fiduciaries with respect to processing of personal data. The processing must be for lawful purposes, and is subject to collection and storage limitations. Additionally, the data fiduciaries must undertake certain transparency and accountability measures such as implementing security safeguards and instituting grievance redressal mechanisms. In addition, the notified significant data fiduciaries must undertake additional accountability.

Given all of the above, it is necessary to understand the concept of ‘Data Localisation’. This article strives to capture the concept and its implications. This article also refers to and relies on a number of sources that have dealt extensively with this topic.

(fiduciaries) to store and process data on servers physically located within national borders. These policies can take various forms which include a specific requirement to locally store copies of data, local content production requirements, or imposing conditions on cross border data transfers that in effect act as a localization mandate.

• Impact on the Economy: Data localization mandates have led to decline in GDP rates in various countries. Data localization measures are meant to promote local economic development, but in reality, any mandate to store and process data locally, imposes a substantial economic burden on domestic companies that sell goods and services with the help of foreign infrastructure, for instance, cloud computing.
• Large foreign enterprises may be willing to invest in servers within the territory they operate in. However, for any small and medium sized enterprises, the costs of setting up or renting the infrastructure may be high. Such entry barriers may exacerbate the existing issues, like the monopolization of the digital economy and the data by foreign companies, which include multiple benefits such as first-mover and network industry advantages. Furthermore, it also reduces foreign investments and therefore leads to a circular chain of issues including unemployment, etc.
• Impact on cross-border trade of goods and services: Cross-border data transfer entails international co-operation in data processing, retrieval, storage, transmission. This is the key building block of the global economic order. If a legislation is however introduced restricting transmission of data, it could adversely impact companies.
• Impact on new age services: New age services such as ‘Industry 4.0’ and the ‘Internet of Things’ includes interoperability of machines, sensors, information transparency and technical assistance to humans in making decisions and solving problems, which has introduced “smart factory”. These evolutions have led to the creation of new services such as factory management. There is a likelihood that the Indian service industry would gain from these developments and it would scale up the transfer of data across borders, which would be hindered if data localization is implemented.
• Impact on Indian start-up eco system: Start-ups, instead of making huge capital investments to purchase computer hardware, use cost effective cloud service providers. Data localization laws threaten this model. There have been several studies in this regard, where companies were required to pay 30-60% more for their computing needs. Specific sectors such as ‘fintech’, could largely be affected by this decision, holding their plans for international expansion. Free flow of data is required for the innovation of start-ups and data localization may wear down the cash liquidity by incurring more operational costs and reducing revenue.

• Impact on the telecommunication sector: Globalization and technology have made cross-border data transmission essential for economic activity globally. Any disruption or hindrances to cross border data transmission, would adversely affect innovation, economic competition and availability of technology and services to consumers. Another major aspect is the inconvenience caused to the global telecom companies that are considering providing enterprise level telecom consolidation with respect to the international clearing houses activities.
• Impact on the Information Technology sector: IT is one of the major sectors responsible for India’s growth, which contributed around 7.7% to India’s GDP in the year 2019-2020. This makes it important for policy framework to consider the strategic impact of the localization mandate on this industry. Considering India’s dominant position in the BPO and outsourcing industries in India, implementing measures such as the data localization could hamper its growth and will be detrimental to the India’s economic interests.

The concept of Data localization and its possible introduction in the PDP Bill (and other allied laws) have led to doubts with regard to whether the policy will actually increase or decrease economic growth, international investment, trade relations, and stimulate job growth locally. For example, a 2016 study found that full implementation of this mandate and associated regulations in the European Union would lead to a 0.48 percent decline in real gross domestic product (‘GDP’). That is essentially the expected result in India as well which will be subject to loss of GDP by nearly 1% in the short and the medium term, along with a hit on the projected growth of the county by 20%. Apart from the economic impact, it could potentially impact the rights and liberties of the citizens’ and reflect an authoritarian regime. Though data sovereignty of the state must be respected, there are a few challenges that need to be addressed.

India should approach Data localization with care and caution. Ideally, domestic data from India must be permitted for cross-border transmission, storage and processing of data or use, if the other country meets specific standards of data privacy and protection. Though MeitY officials have previously alluded to this possibility, to formally embed and develop this mechanism in the PDP Bill, would create opportunities to strengthen co-operation digitally and defuse trade tensions.

Some recommendations to help nurture the above proposition are as under:

1. Softening Data localization measures through mirroring of select datasets;
2. Promote ‘International Regulatory Cooperation’;
3. Institutionalize consultative and transparent policy making measures;
4. Enabling overall IT ecosystem instead of forced Data localization;
5. Preparation of regulatory impact assessments, security audits and vulnerability assessments before policy development and implementation;
6. Strengthening the overall cyber security framework.

Although data sovereignty should be respected, the Government should strive to ensure that the least intrusive method is used to address various issues following the introduction of the Data localization policy keeping in mind, the interests of various stakeholders. A broader perspective must be taken into account, since this affects the economy. Therefore, a middle ground can be reached by consulting various stakeholders and identifying different problems and finding alternative solutions.

*The authors are Founder and Associate respectively with Shivadass & Shivadass (Law Chambers), Bangalore. The contents and comments of this document do not necessarily reflect the views/position of Shivadass and Shivadass (Law Chambers) but remain solely of the author(s). For any further queries or follow up, please contact [email protected].

To view all the videos in the Chamber Vlog series and the Chamber Web Series, please go to the Cochin Chamber’s YouTube Channel.

The most recent ones are added to the video players below. We will keep uploading new and relevant content for our members and the industry in general.

1. The Ministry of Ports, Shipping and Waterways has invited comments on the draft of Indian Ports Bill 2020. Deadline: 24th December. Contact id : [email protected]
2. The Ministry of Labour has invited comments on Draft Code on Social Security (Central) Rules, 2020. Deadline : 28th December. Contact : [email protected]
3. The Ministry of Labour has invited comments on  Draft Occupational Safety, Health and Working Conditions Code(Central) Rules, 2020. Deadline : 3rd January Contact : [email protected] and [email protected]
4. The Ministry of Ports, Shipping and Waterways has invited comments on Draft Merchant Shipping Bill, 2020. Deadline: 24th December. Contact id : [email protected]

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