Multilateral Newsletter March 2015

1Multilateral Newsletter

this IssueInside
Focus Story
BRICS: Hosting A Spectrum of Opportunities..........................2
International Trade Centre
Supporting India’s Trade and Investment Preferences for
India (SITA) Project Launched................................................4
WORLD BANK
World BankApproves $500 Million Project to ImproveAccess to
Finance for Micro, Small and Medium Enterprises.......................5
Banks Can Help to Incentivize Commercial Performance of
Power Sector, says World Bank Study.....................................6
March 2015, Volume 3, Issue 3
Message from Mr Chandrajit Banerjee, Director General, CII
With combined GDP around 21% of global volume, 20% of global trade and 11% of
accumulated investments, the five countries constituting the BRICS grouping represent
one of the largest markets in the world. With enormous strengths in various sectors,
several opportunities for fruitful cooperation exist among the countries.
BRICS today represents much more than merely an investment narrative, this group now
has significant political and economic dimension.
The cooperation has come a long way in diverse areas. The initiatives taken by the cooperation aim to strengthen
South-South engagement, provide unique avenue to advance the regional and global strategic interests and
offer new investment vehicles to the member countries. There is a storehouse of knowledge, know-how,
capacities and best practices available in countries to be shared and on which meaningful cooperation can be
built for the benefit of people. There is a need to explore new areas towards a comprehensive cooperation
and a closer economic partnership to facilitate market inter-linkages, financial integration, infrastructure
connectivity as well as people-to-people connectivity.
The economies today present a spectrum of opportunities for collaboration which can serve the objective
to extend economic growth and development at the next level.
The Focus story of this edition of the newsletter gives an insight to the opportunities for cooperation in
trade, investment and infrastructure among others.
Chandrajit Banerjee
Multilateral
ADB
ADB Sees Strong Growth for Developing Asia in
2015 and 2016.....................................................................7
UNDP
Urgent Need to Manage Water More Sustainably:
UN Report.............................................................................8
IMF
IMF Managing Director Meets Prime Minister Modi,
Announces High Level Regional Conference...........................9
NEWSLETTER

2 Multilateral Newsletter
More than a decade after the acronym BRIC was coined by Goldman Sachs, Brazil, Russia, India, China, and
now South Africa-constituents of this powerhouse called BRICS-are driving a paradigm shift in the way trade
and business are conducted between each other.
BRICS-today signifies the collective economic power of the world’s leading emerging market economies and is
charting a new global landscape. Today, the group accounts for more than a quarter of the world’s land mass,
41 per cent of the world’s population, and a combined GDP of US$ 37.4 trillion (in PPP terms).
In today’s multi-polar world, BRICS nations must assume a leadership role amongst developing countries. There
is a need for reforms in global institutions such as the United Nations Security Council (UNSC), and the Bretton
Woods institutions. It is here that the BRICS nations could play a major role. In fact, the financial crisis of 2008
and its aftermath have highlighted the structural deficiencies of the post-cold-war international order. This has
led to emerging economies seeking to build alternative forms of multilateral economic governance.
The creation of BRICS’ development Bank- a major outcome of the BRICS Summit in Fortaleza, Brazil in 2014 -is
the group’s first significant institutional innovation. It is expected that this bank will offer an alternative approach
to development assistance vis-à-vis western-led frameworks.
The Bank is expected to fund infrastructure and sustainable development projects not only in the BRICS countries
but in other developing economies also. This is an excellent move by the BRICS leaders and is very important
step towards reconfiguring international economic governance.
The MoU on cooperation between Export Credit Guarantee Agencies, and the inter-Bank Cooperation Agreement
on Innovation which were signed at the BRICS Summit. This will support the financing of innovation projects
which are of mutual interest to the BRICS. These are in fact tangible steps that will spur further cooperation
among BRICS countries.
The countries could also seek to improve coordination in the existing multilateral for a so as to offer effective
leadership to developing countries.
Areas of Cooperation
In addition to fundamentally altering the global economic governance order, the BRICS countries could seek
to collaborate in myriad ways. Subsequent annual summits in Brazil, China, India and South Africa have laid
foundation for the BRICS countries to seek out opportunities for cooperation in trade, investment, infrastructure
and various other arenas. These economies today present a spectrum of opportunities for collaboration which
can serve the objective to extend economic growth and development to the next level.
• Agriculture and agro-processing
There is a scope to increase cooperation among the BRICS nations to promote food security by increasing
agricultural productivity and output, promoting investment in the supply chain among others.
• Infrastructure
There is a scope for cooperation among BRICS in increasing the availability of infrastructure financing. Private
equity players could also be encouraged to invest in infrastructure projects.
Focus Story
BRICS: Hosting A Spectrum of Opportunities

• Healthcare
There is a need to formalize cooperation among themselves to fight diseases and focus on primary health
and improved healthcare.
• Energy and Green Economy
The BRICS economies can work together on promotion of new technology in the energy sector. Clean coal,
coal liquefaction, new energy technologies, and application of deep-sea technology popularization.
• Mining
The complementarities in resources can help to address mineral deficits through mutually beneficial trade
and economic relations.
• Industrial Development and Cooperation
Sharing technology, expertise and research in the industrial sector is another area of cooperation among the
BRICS. The BRICS economies boast of some of the largest private sector conglomerates in emerging market
economies. There is a scope to learn from the experience of these countries to take the private sector forward
in other BRICS and emerging economies.
• Cooperation in Financial Market Development
As the financial markets in BRICS are at different stages of development, there is considerable scope for the
BRICS to learn from each other by exchanging experts and country experiences.
• Investment
Intra-BRICS investment should be increased and streamlined. This can be done by coordinating investment
procedures and frameworks, establishing BRICS agreements on investments.
• Commodity Trade
There is a need to facilitate commodity trade between net commodity exporting and importing countries, while
simultaneously tapping into inherent competitive advantage and diversifying global import risks especially in the
realm of basic resources-such as oil, gas, coal, food and metals.
Way forward
The cooperation has come a long way in diverse areas. There is a storehouse of knowledge, know-how capacities
and best practices available in countries to be shared and on which meaningful cooperation can be built for
benefit of people. There is a need to explore new areas towards a comprehensive cooperation and a closer
economic partnership to facilitate market inter-linkages, financial integration, infrastructure connectivity as well
as people-to-people contacts.
The BRICS economies need to work more closely together in order to grow vertically, and this is where the
private sector can play a more relevant role by collaborating and working together to harness strengthens in
knowledge, skills and resources.
In conclusion, BRICS today represent much more than merely an investment narrative. This group now has a
significant political and economic dimension, as it is evident by the increasing number of converging positions
on political issues.
Focus Story

International Trade centre
The United Kingdom of Great Britain and Northern Ireland’s Department for International Development (DFID)
mandated the International Trade Centre (ITC) to design and implement a project, called ‘Supporting India’s Trade
and Investment Preferences for Africa’ (SITA). The Confederation of Indian Industry (CII) is the implementation
partner for the project in India.
Despite an enormous untapped potential for trade expansion between India and Africa, data reveal that a limited
number of products are currently being traded. India’s trade with Africa is concentrated in certain sectors and
countries, and it is dominated by exports of primary commodities. While the potential for export diversification
exists, it may not be realized without targeted intervention.
India is well-positioned as a partner to improve the productive and export capacities of African partner countries.
With the growing importance of South-South cooperation, India’s expertise can be leveraged to build trade
capacities in African partner countries through the sharing of knowledge, technology and lessons learnt.
The project responds to the challenges that selected East African countries – Ethiopia, Kenya, Rwanda, Uganda
and the United Republic of Tanzania – face in increasing and diversifying exports. It also addresses trade priorities
of the beneficiary countries so they can achieve sustainable development.
Speaking at an event to mark the launch of the project, Mr. Sumanta Chaudhuri, Joint Secretary, Department
of Commerce, Government of India stated that the India Africa relationship was based on collaboration and
participation and the SITA project fits well within that framework. He felt that the SITA project would help take
the India Africa economic relationship to a different level.
According to Ms. Arancha Gonzalez, Executive Director, International Trade Centre, the initial focus of SITA
was to explore how East African countries could enhance their exports to India. It has now grown into a much
larger project which is aimed at boosting trade as well as foster foreign direct investment between India and
East Africa as well as the rest of the world.
Speaking at the session, Mr. Yaduvendra Mathur, Chairman and Managing Director, Export-Import Bank of
India stated that the SITA Project was a perfect example of South-South cooperation and would promote the
development of value chains between India and East Africa.
Addressing the participants, Mr. Sameer Munjal, Chairman, CII Haryana State Council and Managing Director,
Satyam Auto Components highlighted the need to promote Investment-led Trade to could help East African
countries move up the value chain in terms of its exports and correct the trade imbalance between India and
East Africa. He stated that the SITA project is uniquely positioned to help facilitate such a partnership between
India and East Africa.
Ms Tamar Bello, Officiating Head, DFID India stated that the UK was ready to provide hands on support to a
number of export sectors in Africa. She felt that the SITA project would be a tool to help eradicate poverty in
the region.
Click here for more information
Supporting India’s Trade and Investment
Preferences for India (SITA) Project Launched

world bank
The World Bank approved a $500 million loan for the MSME Growth Innovation and Inclusive Finance Project
to improve access to finance for Micro, Small and Medium Enterprises (MSMEs) working in the manufacturing
and services sector from early to growth stage, including through innovative financial products.
In India, MSMEs account for more than 80 percent of total industrial enterprises, produce over 8000 value-added
products and employ an estimated 60 million people. It contributes around 45 per cent to manufacturing output
and about 40 percent to exports, both directly and indirectly. In addition, over 50 percent of MSMEs are rural
enterprises and widely distributed across low-income states making them an important sector for promoting
economic growth and poverty reduction.
However, lack of adequate finance is one of the biggest
challenges facing the MSME sector. Financial institutions
have limited their exposure to the sector due to a higher
risk perception, information asymmetry, high transaction
costs and the lack of collateral. The MSME census of 2006-
07 estimated that about 87 percent of MSMEs did not have
any access to finance and were self-financed. Credit towards
micro and small enterprises represent only around 13-15
percent of formal financial institutions portfolio.
The project will support MSMEs through direct financing by
the Small Industries Development Bank of India or SIDBI,
an apex financial institution for promotion, financing and
development of MSMEs in India, as also through Participating
Financial Institutions (PFIs) across three components. These
include support to startup debt financing and risk capital as
well as support to service and manufacturing sector financing
models.
The first component will support SIDBI in developing,
innovating and scaling up its startup debt financing program
as well as support entry of potential participating financing
institutions (PFIs). The India’s startup ecosystem is currently
one of the fastest growing in the world and the third largest startup base with 3,100 startups (after the United
States with 41,500 start-ups and the United Kingdom with 4,000). While there has been incredible growth in
equity financing in the Indian ecosystem, debt financing is non-existent for the majority of the vast growing
startup enterprises which severely constrains the necessary rapid growth startups need to survive. The project
will seek to address this gap and demonstrate financial products that can unlock the potential of India’s startups
and early stage ventures.
World Bank Approves $500 Million Project
to Improve Access to Finance for Micro,
Small and Medium Enterprises
“With eight million people
entering the labor force
every year, MSMEs have the
potential to create many new,
innovative jobs. However, for
these ideas to take shape,
MSMEs will need easier access
to finance. This project will
develop innovative products
that address such constraints
and help them achieve their
true potential,”
Onno Ruhl
World Bank Country Director in India

WORLD BANK
Its second component will support the financing of MSME enterprises in the services sector. Although the structure
of the Indian economy is markedly shifting towards services (65 percent o f Indian GDP), enterprises in this sector
continue to face challenges in accessing formal finance mainly due to lack of physical assets to provide as collateral.
Financial depth (credit to GDP) for this sector is a mere 25 percent (RBI). In an attempt to address this issue, SIDBI
has introduced new products and considering their potential to grow, this project will support scale up of innovative
products which are better tailored for MSMEs in the service sector, including franchise financing.
The project will also support MSMEs in the manufacturing sector through innovative financial products including
Loan Extension Services (LES) and cluster financing – including women-led clusters. Particular focus will be to
expand manufacturing activity in financially underserved areas, including low-income states especially through
refinancing, as banks and other PFIs have a deeper network in these states.
Despite significant increase in private investment in the power sector in Maharashtra over the past two decades,
electricity distribution to the end consumer continues to be the weakest link in the value chain, says a World
Bank report.
While overall bank lending to the power sector stood at Rs 4,883 billion in FY14, higher than overall bank credit
to other infrastructure, lenders to the sector have chosen to lend even in the face of continued inefficiencies
in the distribution segment.
More Power to India also highlights some of the key deterrents holding back private entrants to the power sector.
On the generation side, there are uncertainties related to domestic and imported coal; the poor financial health
of the distribution companies; and difficulties with physical pooling of imported & domestic coal among others.
On the distribution side, some of the key deterrents include a high cost of power relative to tariffs; a regulatory
process that faces political pressures in discharging its responsibilities to the sector; a lag in implementation of
open access; lack of clarity on models (licenses vs. franchises); no pressure to improve commercial orientation;
poor governance; and utilities not being service oriented.
While making an urgent call for change, the study recognizes the many impressive strides that the sector has
made over the years. Generation capacity has tripled between 1991 and 2012, boosted by the substantial role
played by the private sector. A state-of-the-art integrated transmission grid now serves the entire country. Private
distribution utilities in Kolkata, Mumbai, Surat, and Ahmedabad, which have been owned and operated by the
private sector since before Independence, point to potential gains from private participation. Grid-connected
renewable capacity has risen from 18MW in 1990 to 25,856 MW in March 2013. And more than 28 million
Indians have annually gained access to electricity between 2000 and 2010.
However, according to the study, the financial health of the sector is fragile, limiting its ability to invest in
delivering better services. Total accumulated losses in the sector stood at Rs 2.88 trillion or 3% of GDP in 2013.
Over the last two decades the sector has needed periodic rescues from the central government -- a bailout of
Rs 350 billion in 2001 and a of Rs 1.9 trillion that was announced in 2012.
Banks Can Help to Incentivize Commercial
Performance of Power Sector, says World Bank Study

ADB
Developing Asia will maintain its strong economic growth in 2015 and 2016 supported by soft commodity prices
and recovery in the major industrial economies, says a new Asian Development Bank (ADB) report.
ADB’s flagship annual economic publication, Asian Development Outlook 2015 (ADO), released today, forecasts
developing Asia will achieve gross domestic product (GDP) growth of 6.3% in both 2015 and 2016. The region
also grew 6.3% in 2014.
Growth in the United States (US), where recovery seems to have turned a corner, is leading major industrial
economies. While signs are mixed in the euro area and Japan, soft oil prices and accommodative monetary policy
will support growth. As a group, these economies are forecast to expand by 2.2% in 2015, up 0.6 percentage
points from 2014, and 2.4% in 2016.
With improving external demand for the region’s outputs, an expected pickup in India and in most members
of the Association of Southeast Asian Nations (ASEAN), could help balance gradual deceleration in the PRC, the
region’s largest economy.
Growth slowed in the PRC in 2014 on weak fixed asset investment, particularly in real estate. As the government
proceeds with its structural reform agenda, further slowing of investment is expected to diminish growth to
7.2% in 2015 and 7.0% in 2016. This is a much more moderate rate than the average growth of 8.5% in the
period since the global financial crisis.
India is forecast to overtake the PRC in terms of growth as the initial phase of government efforts to remove
structural bottlenecks is lifting investor confidence. With the support of stronger external demand, India is set to
expand by 7.8% in FY2015 (ending 31 March 2016), a sharp rise from 7.4% growth in FY2014. This momentum
is expected to build to 8.2% growth in FY2016, aided by expected easing of monetary policy and a pickup in
capital expenditure.
ADB Sees Strong Growth for Developing
Asia in 2015 and 2016

undp
The planet is facing a 40% shortfall in water supply by 2030, unless we dramatically improve the management
of this precious resource. This is the unavoidable conclusion reached in the 2015 United Nations World Water
Development Report, “Water for a Sustainable World”, launched on 20 March in New Delhi (India), in time for
World Water Day (22 March).
The Report is published by the World Water Assessment Programme, which is hosted by UNESCO, on behalf of
UN-Water. It stresses the urgent need to change the way we use and manage this vital resource, as the United
Nations prepares to adopt new Sustainable Development Goals.
Growing Demand
In 2000 India had nearly 19 million mechanised or tube wells, compared to less than a million in 1960. This
technological revolution has played an important role in the country’s efforts to combat poverty, but the ensuing
development of irrigation has, in turn, resulted in significant water stress in some regions of the country, such
as Maharashtra and Rajasthan.
This example alone illustrates the complex relationships between access to water and development. While water
is essential for economic growth and the fight against poverty, it is also itself directly affected by economic
development. To find a solution to this conundrum, we must seek a balance between water supply and demand.
But we are nowhere near this. Despite the considerable progress that has been made in recent years, 748
million people are still without access to an improved drinking water source. * And those first affected are the
poor, the disadvantaged and women.
At the same time, the planet has never been so thirsty. To answer the needs of an ever-growing population,
the agriculture and energy sectors have to keep producing more and more. From now until 2050, agriculture,
which consumes most water, has to produce 60% more food globally, 100% in developing countries. Demand
for manufactured goods is also increasing, which, in turn, puts further pressure on water resources. Between
2000 and 2050, the demand for water by industry is expected to increase by 400%.
Urgent Need to Manage Water More
Sustainably: UN Report

imf
IMF Managing Director Meets Prime Minister
Modi, Announces High Level Regional
Conference
IMF Managing Director Christine Lagarde concluded a two-day visit to India, the keyhights from here statement
after the meeting with Prime Minister Modi is highlighted below:
India is a bright spot in the world economy and is increasingly helping to drive global growth. Helped by•
positive policy actions that have improved confidence, and by lower global oil prices, India is set to revitalize
investment and accelerate the pace of structural reforms.
The challenges India faces in building infrastructure, continuing along the path of fiscal consolidation, durably•
lowering inflation, and capturing its demographic dividend. We are looking forward to helping build policy
capacity in India through additional training initiatives and enhanced technical assistance.
The Reserve Bank of India is to be commended for skillfully conducting its monetary policy, and managing•
to bring down inflation considerably. The recent move to introduce a flexible inflation targeting framework
is a clear positive and will help deliver low and stable inflation.
There is a need to strengthen the role of women in the economy and increase India’s low rates of female•
labor force participation.
The IMF and the Government of India will co-host a high-level Regional Conference, Advancing Asia, in March•
2016 in India. The aim of this conference will be to bring together leaders from across Asia to explore ways
to accelerate growth, build the region’s resilience to shocks, and share the benefits more widely among all
the populations. We are very much looking forward to listening to our partners in Asia, as well as drawing
lessons from the experiences of other countries.
Copyright © 2015 by Confederation of Indian Industry (CII), All rights reserved.
No part of this publication may be reproduced, stored in, or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical,
photocopying, recording or otherwise), without the prior written permission of the copyright owner. CII has made every effort to ensure the accuracy of information
presented in this document. However, neither CII nor any of its office bearers or analysts or employees can be held responsible for any financial consequences arising
out of the use of information provided herein. However, in case of any discrepancy, error, etc., same may please be brought to the notice of CII for appropriate
corrections.
Published by Confederation of Indian Industry (CII), The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi-110003 (INDIA)
Tel: +91-11-24629994-7, Fax: +91-11-24626149; Email: info@cii.in; Web: www.cii.in
For suggestions please write to us at: multilateralforums@cii.in

Multilateral Newsletter March 2015

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