Indian Economy - News & Updates - Archive

[Contrarian]

India, China to discuss FTA again

NEW DELHI: India and China are going to give a fresh try to a bilateral trade agreement later this week, with officials from the two sides meeting in New Delhi, armed with a second opinion.

A joint study group (JSG), which analyses the feasibility of a trade pact, had earlier recommended a free trade agreement (FTA), but India had to put the idea on the backburner due to concerns of the domestic industry.

With Beijing keen on going ahead with an FTA, which will result in India and China lowering customs duty on products, the neighbours have assigned the job to independent agencies to look at the possibility of a pact.

The JSG had also recommended a second opinion by a joint taskforce, which will meet this week.

A report by National Council of Applied Economic Research (NCAER), mandated by the Indian government to analyse the impact of a pact, has found areas of comparative advantage for products from both India and China.

While both have advantages when it comes to textiles, silk and iron and steel, China seems to have an upper hand in the manufacturing sector.

This is precisely the fear that the Indian industry has and had last time round managed to convince the government that a trade pact for trade in goods will result in a flood of cheap imports.

Besides, a section in the government also thinks that a trade agreement with China may not be beneficial to Indian companies.

The no-sayers point to the fact that Beijing is still not treated as a market economy since it provides subsidised inputs and capital — thanks largely to the absence on any prudential standards.

Besides, with an artificially pegged currency and subsidies, many of which are hidden, the industry is of the opinion that Chinese exports have an unfair advantage.

While NCAER has used bilateral trade data to work out the areas of comparative advantage, the report is seen by the industry as largely a mathematical exercise which does not factor in the concerns on subsidies and an artificially pegged currency.

While officials may be talking of a regional trade pact, a treaty may still be some time away with the Indian political establishment expected to weigh the concerns of the domestic lobby before taking a final decision.

Negotiations for an agreement will only start once the JSG and the taskforce's recommendations have been cleared at the highest level.

 

[Contrarian]

Birla makes his first retail takeover

MUMBAI: Retail is on a roll, and that's rocking news for the consumer. All the biggies of Indian business are flocking for a share of your shopping cart.

The Tatas have been there for a while with Westside, Mukesh Ambani's gearing up for a huge splash with Reliance Retail, Sunil Mittal's tied up with Wal-Mart to bring the $315-bn American gorilla to India.

And now, Kumar Mangalam Birla, who along with the Ambanis and Tatas sits at the high table of India Inc, has served notice of his intentions by acquiring the 172-store Trinethra from the private equity firm of Indian Value Fund for an undisclosed amount.


This marks Birla's first foray into the retail space (outside of clothes brands such as Allen Solly, Van Heusen and Louis Phillipe, which are in a sense a by-product of his group's interest in textiles via Grasim and Madura Garments).

Speaking to TOI on Tuesday, Birla said, "The acquisition signals our long-term commitment to be in the retail sector.
We hope to bring a new consumer experience."

Asked what made him zero in on Trinethra, which has a strong presence in the four southern states, the AV Birla Group chairman, who's been camping in Bangalore for the past few days said, "It has strong brand value, very good locations and has been growing rapidly. We've been talking to them for about a month and a half."

Birla has acquired 90% in Trinethra through Aditya Birla Retail, the unlisted retail arm of the group; the remaining, token 10% will stay with India Value. The Rs 40,000 crore group's interest in entering retail has been known for a while.

Under the corporate umbrella of Hyderabad-headquartered Trinethra Super Retail Ltd, there are two main brands, Trinethra and Fabmall, selling personal care, home products, food and grocery in the convenience format.

Birla said the management of Trinethra, headed by CEO Pranab Barua and MD George Thomas, would remain unchanged. The chain would maintain its southern focus, at least for the time being.

Bangalore-based grocery chain Fabmall India, which was acquired by Trinethra two years back, is a wholly-owned subsidiary.

The consolidated turnover of Trinethra Super Retail is said to be around Rs 250 crore, and, at current valuations, Birlas are estimated to have acquired the stake at around Rs 340 crore.

Fabmall, an online retailer start-up which commenced operations in 1999 during the dotcom boom, was acquired in 2004. Idea to set up Trinethra was first conceived by K Anjaneyulu and his wife, who took the supermarket firm from a fledgling stage in 1986 to what it is today. They have since have exited the firm.

India Value Fund is managed by private equity fund GW Capital which is sponsored by former GE Capital CEO Gary Wendt, HDFC, IDBI, and Ambit Corporate Finance.

It was set up with the intention to pick up stakes and manage mid-sized companies in the biotechnology, telecom, pharma and retail space.

GW Capital's interest in Trinethra was purely from an investment perspective. GW Capital had an exit option after five years.

In 2001, ICICI Ventures had picked up a minor stake in Trinethra through an investment of Rs 8 crore. The firm exited at Rs 18 crore by selling the stake o India Value Fund.

Trinethra became a public limited company in 1998. It had plans to expand into markets like Delhi, Mumbai, Pune, Bhubaneshwar and Bhopal.

As for Aditya Birla Retail, its strategy is to get into multi-format retailing, with both small and large stores. The group is chalking out an organic growth path even as it explores options to grow inorganically.

Asked if the group was eyeing any other acquisitions in the retail space, Birla said, "There's nothing on the radar at the moment."

To meet its goals, it is in the process of setting up a team under CEO Sumant Sinha, and is said to be attracting talent from across sectors like FMCG and retail.

 

[Contrarian]

Sensex breaches all-time high, closes @ 14,015

The Sensex closed at an all-time high of 14,014.92 after a choppy session on Wednesday, as buying interest resumed for index pivotals at lower level. The market witnessed a sharp rally in the first two trading session of calendar year 2007.

At closing, Sensex was up 72.68 points or 0.52% at 14,014.92. The BSE Sensex struck an all-time high of 14035.67 in mid afternoon trade surpassing its previous all-time high of 14,035.30, which it had struck on December 6, 2006. The Nifty, meanwhile, closed at 4,024.05, up 16.65 points.

The market staged a smart recovery in the second half of the day's trading session, after slipping to an intra-day low of 13,897.42 in mid-morning trade.

The market-breadth was strong, as buying continued for small-cap and mid-cap stocks. For 1,695 shares advancing on BSE, 933 declined. Just 64 shares were unchanged.

The BSE clocked a turnover of Rs 4,286 crore as compared to Rs 3381 crore on Tuesday (January 2).
Among the 30-Sensex pack, 21 advanced while the rest declined. In NSE, there were 619 advances and 379 declines.

Among the sectoral indices, consumer durable stocks climbed 1.61%, IT stocks advanced 1.52%, pharma stocks rose 1.42% while FMCG stocks declined 0.71% and oil and gas stocks fell 0.02%.

The major market movers on Sensex were Ranbaxy which gained 3.75% to Rs 413.35; Bajaj Auto rose 3.66% to Rs 2,839; Cipla rose 2.56% to Rs 258; TCS jumped up 2.28% to Rs 1,277.05 and Infosys rose 1.87% to 2,315. Dabur, Ranbaxy, Bajaj Auto, Cipla and TCS were the major gainers in the NSE.

The major BSE losers were HLL which declined 2.01% to Rs 212.10; ACC fell 1.73% to Rs 1,073.50; Tata Steel was down 1.61% to Rs 470.70; Hero Honda fell 1.29% to Rs 774 and ITC fell 1.02% to Rs 175.05.

Sebi has advised the stock exchanges to freeze the payout in Nissan Copper Ltd scrip and transfer it to the trade-to-trade segment, according to reports. The advice followed 'unusual price movements and turnover' in Nissan Copper shares following its stock market debut on Friday. Shares in copper pipe and tubes maker Nissan Copper, which listed at a 9.7% premium at Rs 42.80, touched a high of Rs 154.55 before closing at Rs 115.20 on Tuesday.

Foreign funds, a key player in powering the market to record highs, invested nearly $8 billion in Indian equities in 2006, compared to a net $10.7 billion in 2005.

Most of the Asian markets were trading with gains on Wednesday (January 3, 2007). Hong Kong was up 0.51% and Singapore was up 1.74% whereas Seoul Composite slipped 1.81%. US markets were closed on Tuesday (2 January).

Oil prices eased on Wednesday in Asian trade. New York's main contract, light sweet crude for delivery in February, slipped 18 cents to $60.87 a barrel.

 

[Contrarian]

Simple solution: Need more moolah

Except the rare ode to Aryabhatt and Ayurveda, there used to be little to write home about when it came to Indian science. After years of being condemned to the boondocks though, things don't look as bleak anymore.

After a few hiccups in the early part of this decade, research has finally started trickling out of Indian labs, particularly in biotechnology, life sciences and computing.

Take Reliance Life Sciences. A cursory look at the patents it has filed for indicates significant work on the stem cell lines it owns. The outcome of this work could eventually translate into breakthroughs for diseases like Alzheimer's.

With ethical issues in the First World constricting stem cells research there, India has emerged as a serious player in the field.

Then there are pha-rma companies like Dr Reddy's In spite of setbacks, the company is pushing ahead with trials on new drugs. One of them, the company says, can keep hypertension, cholesterol and diabetes under check.

Whether it makes the cut finally or not remains to be seen. But the point is, they are pushing the boundaries.

And it isn't the big boys alone that are pushing. There are smaller ones like the little-known IITIAM Systems in Bangalore. Many of the ubiquitous MP3 players are powered by software created at IITIAM Systems.

Add to all of this the kind of work being produced by the India labs of dozens of companies like Microsoft, Intel, Yahoo, Google, Amazon and IBM.

Many of the patents filed by these multinationals are based on work done in this country. A good part of Intel's latest chip Intel Core 2 Duo was designed out of Bangalore. The new versions of Yahoo's instant messenger were coded in India.

Not so surprisingly, the best of Indian science today is coming out of private enterprise. Arrogance. What else explains a lie that continues to do the rounds as an email, especially before the Independence Day.

It claims, 12% of all scientists in the US are Indian, 34% (or some such obscene number) of technical personnel at NASA are of Indian origin, 32% of Microsoft's engineers are from here, and so on.

The message was so pretty, it even found its way into parliamentary debate on India's capabilities. Business leaders quoted these figures while addressing seminars.

The truth is, about 5% of NASA's employees are of Asian descent (Indians being a subset of this group). A senior official at Microsoft grins rather

condescendingly when you ask him the truth. As for Indian doctors tending to all of America, well, all we can say is that the Indian inferiority complex that spreads these myths needs urgent cure.
For a dose of reality, consider this. According to Thomson Scientific which tracks scientific papers from across the world, between 1999 and 2003, 86,440 papers had at least one author address in India.

The highest percentage of these papers appeared in journals classified in the field of agricultural sciences. Also, the relative impact of published research from India registered below the world average.

Take this arrogance away and what you are left with is apathy. This year's budget for science and technology research is $4.5 billion. Optimists say it is a 16% increase over the last year. Realists call it peanuts.

 

[Contrarian]

When service = pure satisfaction

Gone are the days when you had to depend on government agencies for services, be it telephony, transportation, power or healthcare.

Delhi-based Bharti Tele-Services is already India's largest mobile telephony company replacing state-owned behemoth Bharat Sanchar Nigam.

In 2006, Jet Airways became India's biggest domestic air transport company, beating IA. And Mumbai-based Thyrocare administers more thyroid tests than all Indian hospitals put together.

In the 70s and 80s, large infrastructure projects were solely reserved for state-owned companies. Now, private entrepreneurs can build cities, airports and ports.

Reliance Industries' chairman Mukesh Ambani and partners have planned two industrial cities on the outskirts of Delhi and Mumbai. And Delhi-based Ansal Housing is building a 10,000-acre township in Uttar Pradesh.

There are twin positive effects from the increasing private participation in services. On account of better efficiencies brought in by private players, cost of services has come down dramatically.

Indian telephony costs are among the lowest in the world and flying in India is cheap despite very high fuel prices. Low prices have spurred a dramatic expansion of various markets and this is expanding the economy.

Taxes from the services sector have given the government a big new source of income to fund its large outlays for education and healthcare.

The growth of the Indian private sector services companies comes at a time when the government is slowly liberalising foreign ownership. Many of India's manufacturing companies came up at a time when foreign ownership was a big no-no which allowed local conglomerates to build and control their empires.


A decade after foreign companies were allowed to own telecom services, foreign capital has picked up large states in banking, insurance and telecom services. A combination of government policy and a growing need for funds brought in efficient foreign capital into the service sector.

Foreign shareholders already own 79% of HDFC, India's largest housing finance company and 45% of ICICI Bank, the country's largest private sector bank. International telecom companies have big stakes in local telecom firms.

As is usual in most economies, it is the service sector growth that will drive the Indian economy. Indian mobile telephony is expected to triple in size in the next few years while the insurance business is in the take-off stage as is the retail sector.

The government is set to liberalise each of these sectors under pressure from the WTO. If Indians don't invest more money in these sectors, they will eventually end up owning less of their economy.

As in manufactured goods, quality is vital in services. Despite offering just the same telephony or banking services, multinational companies attract a premium over Indian counterparts.

It is not just scale that Indian companies should vie for but for total customer satisfaction if they want to remain in business for long.

 

[Contrarian]

Time to net big bucks, again

The story of entrepreneurship, as any middle-class Indian understands it today, can be distilled down to one name. Rajesh Jain.
After latching on to the internet in 1994 and setting up India's first portal, he managed to sell IndiaWorld, the country's first general interest portal, for $415 million to Ramalinga Raju's Satyam in 1999.

The euphoria that Jain generated saw people chuck lucrative jobs to set up something, anything. Believe it or not, one of the ideas floated then even included a website dedicated to dogs.

Much water has passed under the bridge since then. The boom that Jain inspired went bust and took a few thousand entrepreneurs down. The buzz that used to permeate the business incubators at the premier IITs gave way to silence.

Venture capitalists (VC) used to doling out money hand over fist to anybody with a remotely smart idea clamped up. But one thing stayed middle class India's romance with entrepreneurship.

And that romance blossomed in 2006. The numbers are witness. In the first nine months of 2006, VCs made 53 early stage investments worth $355 million. This is twice what was invested in the last two years put together.

If you were to include funds looking to invest at every stage, then the first six months alone totted up a staggering $1.8 billion. Meanwhile, India's share of the Asian total moved up to 11.4% of the $15.75 billion available through the region in the first half of 2006. Suddenly, entrepreneurship is back That it is all right to fail is a lesson that hasn't been driven down hard enough. Take the case of this undergraduate student at IIT Mumbai a few years ago. He worked on his start-up by night at the campus incubator.

He once told this writer, "I wonder if anybody would give his daughter's hand in marriage to a start-up junkie." Back then, though, his hands got singed in the bust.

Unable to take the ignominy, he went West, got himself a job in a telecom company, married, now lives a quiet middle-class existence, and earned respect back home. The fear of failure still haunts the middle class.

Many entrepreneurs, who woo funds, work under the pressure that one mistake will be a stigma they may have to carry for years. As a consequence, technology entrepreneurs don't think outrageously enough.

Most business models are still offering services which assume cheap labour will be the lever around which the Indian future rests.

Even if VCs are back funding early stage companies big time, most look chiefly at IT entrepreneurs. Non-IT folks still don't stand much of a chance when it comes to fund-raising sweepstakes. Men like Captain C Y Gopinath of Air Deccan are all too rare

 

[Contrarian]

Sweet success in nuts & bolts

Statistics. They can't be all wrong. Look at it any which way, Indian manufacturing has managed to put up a stellar performance. Profit growth has beaten sales growth, putting more money in the hands of companies to spend.

Many of them have repaid expensive debts and owe less than ever before. In short, the manufacturing sector is in good health.

Much of the spurt in sales was propelled by exports to western markets, which also shows that the quality of Indian manufacture has increased dramatically.

Indian companies exported more drugs and agro products that passed muster with the tough US Food and Drug Authorities than ever before.

Pune-based Bharat Forge makes a quarter of all the front axles that go into heavy trucks globally while yet another company from Pune, Suzlon, is slowly emerging as the global powerhouse in windmill manufacture and implementation.

The heartening point is that Indian exports came from skill intensive manufacturing sectors as against the seemingly volume-driven unremarkable Chinese exports.

Last year, spurred by the new wealth, Indian companies shopped for expensive assets overseas. Till October this year, Indian companies shopped for a whopping $15.72 billion, three times more than what they bought in the previous year.

Bankers now appear more confident of backing Indian companies. Suzlon took just 10 days to arrange finances for its $565-million acquisition of Swedish company, Hansen Transmissions.

Big names in investment banking are helping Tata Steel in its $8-billion bid for Corus, an Anglo-Dutch steel-maker five times its size. There is enough to gloat about.Originality. Take a short trip on the road and Indian manufacturing will stand a bit exposed.

Tata and Ashok Leyland trucks are not just plain noisy and wobbly but after all these years the two companies have not managed to design workable tail lights that will tell you which way the monsters are about to turn.

Despite employing top class IIT engineers and smart-brained chemists, Indian companies have very few patents compared to their counterparts in the West.

They just took the argument for not re-inventing the wheel a bit too far as a legitimate excuse for copying or improvising existing products.

Tata Motors and Bajaj Auto have no doubt done well designing a cheaper local alternative to imported cars and motorcycles but their best resources are employed in finding new ways of doing old things rather than inventing.

Indian manufacturing's contribution to technology and processing is not growing. In 2006, profits from incremental sales did not come from smart technologies but from cheaper finance and lower administrative costs.

Exporting companies were only too happy to play with the labour arbitrage. In contrast, multinationals like Siemens, ABB and Novartis make far more margins on the products they sell, thanks to the proprietary technology.

A few companies, like Delhi-based compact disc maker Moser Baer, and the Tatas, whose bold one-lakh-rupee car is coming soon, are trying hard but there is still a long way to go.

 

[Contrarian]

Babus, bribes & red tape

The good

Here's something to reinforce faith in our babudom: Transpar-ency International has complimented India for improving its ranking from 88 to 70. Government has become more transparent: Thanks to increasing use of e-governance to announce tenders for public procurement and the introduction of the Right to Information Act.

These have made it more difficult — albeit not impossible — for officials to mask biased decision-making.

Also, there have been attempts at reform: Starting from Ricketts' report on civil establishments and salaries in 1866 to Veerappa Moily's 2005 report, Unlocking human capital: Entitlement and Governance, there has been no dearth of blueprints.

The bad

Despite the Centre and states spending Rs 3,000 crore a year on initiatives to make administration faster and transparent, 75% respondents in a Transparency India survey said corruption has increased in the last year; 62% said corruption is not hearsay but a fact of our lives.

India's 2 million babus — out of a workforce of 19 million government employees — often obstruct, rather than serve public good.

Common people pay an estimated Rs 21,000 crore a year in petty bribes for 11 most-used services like the police, judiciary, land, municipal and health.

In fact, a UNDP report says if corruption came down to Scandinavian levels, growth would jump 1.5% and FDI by 12%.

The police is seen as most corrupt, followed by the judiciary. In 2005, chargesheet rate for homicide was 85%, but 40% cases were pending investigation.

In the same year, conviction rate for murders was 35%. Overall, conviction rate in IPC cases has declined from 64.8% in 1961 to 42.4% in 2005. As many as 144 police custodial deaths (out of 359 in the past three years) were reported in 2005, but few cops have even been charged.

Our food subsidy schemes are a perfect illustration of bureaucratic bungling: Rs 150 million is spent on PDS, which targets have-nots, including a slum population of 42,578,150 in 640 cities. But not all of the subsidy goes where it is intended: 31% of foodgrain and 36% of sugar leak into the black market.

There are 4,000 municipalities. Most don't have computerised land records, services are poor and corruption is rampant.

Though labelled an IT powerhouse, India lags way behind countries like the US and UK which are now introducing metadata, or data about data, to help index online searches.

A cover-up culture, strengthened by constitutional protection, shields government servants. A CVC list of officials against whom action has been sought numbers barely 30, and most of them are low-ranking officials.

TOI view

Political patronage has reduced some sections of the bureaucracy to mere tools of politicians. India's poor have a vote, but are not fully empowered.

For 30% of India's population that lives on less than $1 a day, and roughly double which earns less than $2 daily, governance is a mirage.

For most, a tout is a better option than a long queue at government offices. Despite strong court interventions in landmark cases and media scrutiny, governance is at best patchy: better in urban areas, while rural India has to suffer its tyrannical local officials. Also, little is being done to cut red tape, inefficiency and corruption

 

[Contrarian]

India-born doc is BBC chief

LONDON: In a rare distinction, Dr Chitra Bharucha, an Indian-born haematologist, on Monday took charge as the acting chairperson of the British Broadcasting Corporation, becoming the first woman and first Asian to head the giant organisation.

Incidentally, the BBC Trust, of which Bharucha is the acting chairperson, took over the responsibility of running the organisation from BBC Board of Governors. The post of the chairman fell vacant following the resignation of Michael Grade after he decided to join rival ITV.

Born in Madurai, Bharucha has lived in Britain since 1972. A haematologist by profession, she has served as deputy director, Northern Ireland Blood Transfusion Service, and consultant clinical haematologist, Belfast City Hospital.

She shifted from a career in medicine to media in 1996 when she joined the BBC Broadcasting Council for Northern Ireland, a position she stayed in till 2003.

She had also served as the Northern Ireland member of the Independent Television Commission from 2001 to 2003. In 2004, Bharucha was appointed to the Advertising Standards Authority (Broadcast) Council, where she currently chairs the advisory committee on animal feeding stuffs for the Food Standards Agency.

 

[Contrarian]

It's a busy season for BPOs

BANGALORE: When the clock strikes 12 to ring in the New Year, Anoop Sridhar, a BPO executive in Bangalore, could well be selling a laptop to some customer in the US or the UK.

This holiday season, the Indian BPO workforce has got busy making calls rather than answering queries. Thanks to the huge appetite for gifts and discounted deals during year-end holidays like Thanksgiving, Halloween, Christmas and New Year, BPOs in India are seeing a huge uptake in telesales and telemarketing.

Nearly 70% of the workforce is engrossed in selling products and services to these customers.

It is this holiday season when most companies peak sales. Doing this job for them are the Indian BPOs.

A number of BPO agents have been engaged in selling laptops, financial instruments, insurance products, credit cards, air tickets, hotel rooms, holiday packages, or internet services to clients in the US, the UK and Europe.

November and December are packed months as far as outbound sales are concerned for Indian BPOs.

These are the months when people in US and Europe make purchases, says Ravi Kiran, a BPO executive. While agents at Barclays, Reuters, Ocwen Financials and Viteos are busy selling travel or medical insurance products, companies like Dell and HP are making the most when it comes to pushing their products.

"We do have a few teams that are looking into technical support. But close to 80% of the calls are outbound and this indicates the kind of sales witnessed during Christmas and New Year," said a Dell employee.

Although buying decisions are made much earlier, actual sales start around October and continue till the New Year.

According to sources at HSBC, sale of insurance products is most common as people travel a lot during the holiday season.

 

[Contrarian]

Delhi is world's BPO capital

NEW DELHI: Indian cities led by Delhi’s national capital region have the top seven slots in a global ranking of competitiveness of cities as outsourcing destinations. Close on the heels of Delhi are Bangalore, Hyderabad and Mumbai, according to a study released by US-based consulting firm neoIT.

The other three Indian cities at the top of the list are Pune, Chennai and Kolkata. Ho Chi Minh City (Vietnam), Manila (Phillipines) and Shanghai (China) are the three non-Indian cities which figure among the top 10 offshoring destinations.

Beyond that piece of good news, there is a word of caution. According to the study, in the next three to four years, several cities in eastern Europe and China could become major rivals to Indian ones as outsourcing destinations. In fact, the study projects that Warsaw (Poland) would be right at the top of the list by then, along with two Indian cities, Kolkata and Hyderabad.

Delhi, Mumbai and Bangalore could have fallen well behind by that time, with Mumbai and Bangalore likely to be not even in the top 15, while Delhi too could drop out of the top 10.
Related Stories

 

[Neo]

India sees record 9 per cent growth :thumbsup:

NEW DELHI: India’s economy will likely grow close to a record 9 per cent this fiscal year, but rising inflation was a cause for concern, the country’s finance minister said on Tuesday.

Finance Minister P Chidambaram said he was also worried that some industries were persistently underperforming despite the buoyancy of the broader economy.

India’s economy expanded 9.1 per cent in the first half of the current fiscal year that ends in March 2007, and Chidambaram said he expected full-year growth to be close to 9 per cent. That would be a record and bring India’s economic expansion -averaging at more than 8 per cent over the past three years ñ close to the Chinese.

“We look back with considerable satisfaction in what has been achieved in the past year ... (but) the only dark cloud as the year came to a close was rising inflation,” Chidambaram told business leaders at the annual meeting of the Federation of Indian chambers of Commerce and Industry.

India’s headline inflation rate climbed to 5.5 per cent in the week ended December 23, despite falling fuel and raw material prices in recent weeks.

Chidambaram said the latest upturn in inflation was mostly driven by a rise in prices of some manufactured products. “Even a 4 per cent inflation is unacceptable,” Chidambaram said, warning rising inflation could push up interest rates and slowe conomic growth in coming years. India’s central bank has already increased some key rates and commercial banks have increased their lending and deposit rates by 50 to 100 basis points in recent months.

Chidambaram said he was also concerned over the uneven spread of the growth process in the manufacturing sector. While overall manufacturing output registered about 10pc year-on-year growth in the first two quarters of the current fiscal years, several industries showed contraction, he said.

These industries included food processing, paper, leather, chemicals and basic metals. He asked business leaders to look into why production was slackening these sectors. Some of these industries are labor-intensive and a contraction could fuel unemployment.

http://www.thenews.com.pk/daily_detail.asp?id=38280

 

[Neo]

India’s current account gap may widen to $13bn

NEW DELHI: India’s current account deficit is expected to widen to $13.4 billion in fiscal year 2006/07 from $9.2 billion in 2005/06, the prime minister’s economic advisory panel said on Thursday.

The panel sees the current account deficit at 1.5 per cent of gross domestic product (GDP) in the year to March-end 2007, higher than 1.2 per cent in 2005/06, the prime minister’s office said in a statement.

Last month, government data showed the deficit deepening to $6.93 billion in the July-September quarter from a revised $4.76 billion in the previous quarter as higher oil prices hit the trade balance.

The deficit was $11.7 billion during April-Sept.

The panel expects India’s exports to reach $128.4 billion and imports to stand at $194.3 billion during 2006/07.

“With the increase in exports and imports, the ratio of total trade to GDP, signifying the extent of global integration of our economy, will be 35.9 per cent this year, up from 32.8 per cent last year,” it said.

“If we also include software exports, the ratio this year will go up to 39 per cent.”

The panel said that for the first time in several years, net foreign direct investment flows are projected to be larger than portfolio capital flows.

“Net FDI this year will be around $9 billion, up from $4.7 billion last year.”

The panel said the balance of payment surplus would be $22.6 billion in 2006/07, up from $15.1 billion last year. Of this, $8.6 billion has already been absorbed in the first half year.

“It is estimated that another $6-7 billion would have come in Oct-Dec, leaving a like amount to be absorbed in this last quarter,” the panel said. “The stance of monetary policy has to take this into account.” The central bank will next review monetary policy on Jan. 31.

http://www.thenews.com.pk/daily_detail.asp?id=38545

 

[Contrarian]

Essar to invest Rs 10,500 cr in Hazira SEZ

AHMEDABAD: Essar group said it will invest Rs 10,500 crore in a Special Economic Zone at Hazira and augment the steel manufacturing capacity to nine million tonnes, besides expanding the Vadinar refinery. "Our investments in the SEZ at Hazira will be over Rs 10,500 crore," Essar group chairman Shashi Ruia said.

He said the group has been approached by major automobile groups like Nissan and component manufacturers like Manineto to set up facilities in its Hazira SEZ.

Ruia also said international petrochemical giants had evinced interest for setting up base in its SEZ at Jamnagar.

He said the group would build a similar SEZ in Vadinar and also expand and diversify the petroleum refinery. "We will also create infrastructure for petrochemical and chemical complexes and downstream and ancillary industries," he said. The group last year commissioned a 10.5 million tonne refinery at Vadinar. Ruia said the refining capacity will go up to 14 million tonnes soon and further scaled up to 32 million tonnes in a few years.

Talking about the port in Hazira, the Essar chairman said, "We will expand the cargo handling capacity at our port to 35 million tonnes to cater to the increased requirements of industry, which will come up in our SEZ."

The Nikkei newspaper had recently reported the Japanese auto maker Nissan planned to build a 200,000-unit-a-year factory in India with an initial investment of $420 million to $500 million.

The plant would begin operations in 2009 and gradually step up capacity to 400,000 units annually, the paper had said. Around a third would be sold in India, and the rest exported to Europe and other regions, the paper had said.

Nissan had shortlisted two or three port cities in the west and south and would make a decision this month, the Nikkei had said.

Nissan, which has a very small presence in India, has an agreement with Suzuki Motors to supply Nissan with a new small car, mostly for export to Europe, starting in 2008.

 

[Contrarian]

IOC plans to invest Rs 2,000 cr in JV

PANIPAT: Indian Oil Corporation said it plans to invest about Rs 2,000 crore in a joint venture with Reliance Industries for retailing natural gas to households and automobiles.

"We are in talks for a 50:50 JV for city gas distribution project along the pipeline Reliance Industries is building from its KG basin field," IOC Chairman Sarthak Behuria said.

RIL is building pipleines from Kakinada in Andhra Pradesh to Chennai in South, Ahemdabad in West and Haldia in East.

The proposed JV will supply piped gas to households and industries and CNG to automobiles in cities falling along the route of these pipelines. Behuria said per city investment would be around Rs 200 crore and initially 10 cities have been identified.