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India’s industrial output slows

MUMBAI, July 12: India’s industrial production slowed sharply in May to its slowest pace in six years, hit by rising inflation, high input costs and monetary tightening, official figures showed.

Industrial growth in Asia’s second largest economy was at 3.8 per cent in May, against 10.6 per cent in the same month last year.

Output growth, as measured by the Index of Industrial Production, declined in the manufacturing and electricity sectors.

Manufacturing output, which has an 80 per cent weighting in the industrial output index, rose 3.9 per cent in May against 11.3 per cent for the corresponding period a year earlier.

Industrial output rose 8.1 per cent in the financial year ending March 2008.—AFP

India’s industrial output slows -DAWN - Business; July 13, 2008
 
India sea bridge an engineering marvel
By Prachi Pinglay
BBC News, Mumbai

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The sea link is an engineering feat

It is the first bridge to be built over the sea in India and it promises to change the skyline of its financial capital, the western city of Mumbai.

The cable-stayed eight-lane 5.6km(3.47 miles)-long $400m toll bridge linking the western suburbs of Bandra with Worli over the Arabian Sea in the southern part of Mumbai is expected to ease traffic congestion and, according to a state minister, become the city's leading engineering marvel.

Officials say more than 3000 people have worked to build the bridge, which will be fully thrown open to traffic by June next year.

Paying a $1 toll to travel one way, commuters can hopefully look forward to seeing their travelling time between the two suburbs cut by nearly an hour. At present, more than 120,000 vehicles pass through a narrow causeway on the same route every day.

Building the bridge has posed a number of challenges, say engineers who worked on the project. The main impediment can be rough weather.

Traffic woes

"Effectively, one can work only six to seven months in the open sea. Strong winds and tidal variations make it impossible to supply materials on both sides and it is risky too. We made a temporary pipe along the length for supplying material from one end to the other," says chief project engineer DK Sharma.

Authorities say the bridge is a way to ease Mumbai's traffic problems - the island city with a population of 18 million has more than 1.5 million vehicles.

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The sea link is expected to change the
Mumbai skyline


New railway links, flyovers, an underground railway, elevated walkways and sea transport have been planned.

But the bridge, first planned in the 1980s, is one project that is actually nearing completion.

Critics do not believe the bridge will help ease traffic congestion in a city which adds several hundred new vehicles to its roads every day.

And environmental activists also question the project's impact on the sea bed, marine ecology and livelihood of fishermen - the oldest residents of this island city.

"These deep pillars and unnecessary reclamation on both sides of the bridge will have terrible consequences," warns Girish Raut, an environmental activist who has worked with fishermen residing on two ends of the link.

"Several reports over the years say the coast, mangroves and creeks [in the area around the sea where the bridge is being built] have to be left untouched. The quantity of fish has gone down. At least three beaches have seen the impact with rising water levels but nothing is being done," he says.

Officials say some of these reservations have been addressed - the original plan to build it along the coastline was changed, and the bridge's design tweaked to make it run entirely over the sea.

But some citizens' groups are still not satisfied - they say public transport should be beefed up and the city's thriving railway network extended.

Still, Mumbai's harassed commuters can look forward to improved travelling when the overseas bridge is opened.
 
Indian think tank sees 2008/09 growth at 9.5 pct
Thu Jul 17, 2008 5:22pm IST

MUMBAI, July 17 (Reuters) - India's economy is expected to grow a robust 9.5 percent in the fiscal year 2008/09, boosted by the industry and services sectors, think tank Centre for Monitoring Indian Economy (CMIE) said in its monthly review.

The economy has reported a growth rate above 9 percent in the last three financial years and many analysts expect it to moderate this fiscal year, ending in March 2009, due to double- digit inflation and record high oil prices.

"The growth in the current year would be accompanied by high inflation and rising interest rates," CMIE said, adding it expects industry to grow 11.4 percent, services 10.6 percent and agriculture 3.2 percent.

CMIE expects the wholesale-price based inflation <INWPI=ECI> to average 9.6 percent in 2008/09, sharply above 4.7 percent in the previous year.

"The major sources of the increase in the wholesale price index are intermediate goods and thus, the increase in consumer price index is likely to remain about 7.5 percent," it said.
 
IMF revises India`s GDP forecast to 8% in 2008

New Delhi, July 17: Amid various disappointing indicators, India has received some solace with the International Monetary Fund marginally revising its projections for economic growth to 8 per cent in 2008 from its earlier estimates of 7.9 per cent.

IMF in its update of World economic Outlook released today, however, retained its earlier forecast of 8 per cent GDP growth for India during 2009.

Indian economy grew by 9.3 per cent in 2007.

Projections for Indian economy are not too dismal, if one takes IMF views on the world economy. The multi-lateral agency projected the global growth to moderate from five per cent in 2007 to 4.1 per cent in 2008 and 3.9 per cent in 2009.

"The slowdown in global growth is expected to continue through the second half of 2008, with only a gradual recovery during 2009," IMF said.

It said the global growth decelerated to 4.5 per cent in the first quarter of 2008, down from 5 per cent in the third quarter of 2007, with sluggish activities both in advanced and emerging economies.

In advanced economies, business and consumer sentiments have continued to retreat, while industrial production has weakened further. There has also been signs weakening in business activities in emerging economies.

The projections of the multilateral funding agency for India came a few days after Fitch downgraded the country's domestic credit outlook to negative from stable. Fitch also expected Indian economy to grow at 7.7 per cent in 2008-09 against nine per cent in the previous year.

Indian economy is widely expected to witness a moderation this year due to rise in borrowing costs as RBI continued to tighten monetary stance to tame inflation, which is inching towards 12 per cent mark.

The recent industrial production data have also shown that the industry continued to bear the brunt of rising costs as its growth plunged to 3.8 per cent in May compared to 10.6 per cent last year. Both manufacturing and electricity sectors showed a sharp decline in their growth. This may be pointer to the slow down in the Indian economy.

The Finance Ministry also expects moderation in India's growth this fiscal, though not much. It hopes that the economy would grow between 8-8.5 per cent in 2008-09.
 
Americans help fuel the increase in executive tourism to India
Canadian Press
18 July 2008

NEW DELHI — Keith Lotman went to New Delhi on a two-week business trip. But a quick day of sightseeing in India's capital city left him enthralled and ready to see more of the country.

"I have about a hundred different places that I'd like to visit," said Lotman, 31, a business executive from Philadelphia, as he checked out the world's largest Bahai temple in New Delhi. "A hundred different kinds of experiences."

He added: "It's very different from any place I've travelled to before. Culturally very different. I'd definitely like to go to Agra to see the Taj Mahal next."

Ever since the Beatles arrived on the banks of the Ganges river in the 1960s to study Transcendental Meditation, India has been on the life list of a certain type of traveller.

And while there are still are plenty of Westerners seeking low-budget Eastern spirituality, India has recently started attracting a different class of visitor - men and women like Lotman, who certainly wasn't spending his nights bunking in a dingy room with a bunch of backpackers.

New tourists like Lotman have helped feed a boom in travel to India, and the country is now nearly as popular a destination for Americans as Spain. Travel to India from the United States increased 10 per cent between 2006 and 2007, on top of an eight per cent rise the year before. More Americans visited India last year than went to Ireland or Thailand, according to the most recent data from U.S. Department of Commerce.

The upsurge in Americans visiting India is part of broader boom in India's tourism industry. In 2007, some five million travellers headed to India, nearly double from 2000, according to the Tourism Ministry. Visitors from the U.S. accounted for 15.7 per cent of the total.

These include a large number of business travellers, wealthy retirees out to explore India from the comfortable confines of an air-conditioned luxury bus or train and people of Indian origin eager to see their parents' - or grandparents' - homeland.

What has made India as attractive as Europe or South America for American travellers is a combination of a booming economy, an aggressive marketing campaign and what the Tourism Ministry describes as "the diversity of our product."

Most international airlines fly into New Delhi, making it a natural first destination for visitors.

The city is more than a sleepy administrative centre, and tourists can spend days gawking at the sprawling British colonial-era bungalows and exploring the crowded bylanes of Old Delhi, the capital of India's medieval Mogul rulers.

About 200 kilometres south - close enough for a day trip - is Agra, home to the Taj Mahal, the white-marble monument to love built by the Mogul Emperor Shah Jahan between 1632 and 1654 for his favourite wife, Mumtaz Mahal. The monument, a must-see for most tourists, hosts some three million visitors a year.

A bit farther afield is Rajasthan, a region in western India famous for its fabulous splash of colours, medieval forts, ancient temples and camel safaris. There, visitors can spend a night in one of the myriad palaces that have been converted to hotels, getting waited on hand and foot, much like the maharajas of bygone days.

But The New-Delhi-Agra-Rajasthan circuit known as the "Golden Triangle" is just one corner of the country.

What might make India daunting - a vast, complicated country of 1.1 billion people where dozens of languages are spoken across an area of almost 2.6 million square kilometres - is also its biggest draw.

"There's the history and the spirituality that everyone knows about and then there's more," says Leena Nandan, a joint secretary in the Tourism Ministry. "We now have business travellers, medical travellers, luxury travellers, adventure tourism."

There are the hippie haunts of Varanasi and Rishikesh on the banks of the Ganges, sacred to millions of devout Hindus; the all-night raves on the beaches of Goa, a slice of India once ruled by Portugal; the luxury resorts on the sparkling backwaters of the southern Kerala; the spartan yoga retreats and the bare-bones experience of Ayurvedic holistic healing in the Himalayas.

And then there are the myriad domestic airlines that have proliferated since India liberalized its economy. Even on the budget flights, meals are standard - and on the full-fare carriers, they are often accompanied by luxuriously embroidered cloth napkins, metal cutlery and friendly service.

Travellers may have to contend with the same kinds of flight delays seen in the United States, but, says Gary Goodlin, who travels frequently on business between Chicago and Mumbai, "you couldn't get that kind of service on a low cost airline in the U.S."


If You Go . . .

Getting there: Most international carriers fly in to the capital New Delhi. There are direct flights between New York and New Delhi and plenty of options between Los Angeles and New Delhi. Depending on when you fly (the peak season is November to early January) the price for an economy class roundtrip ticket should run between US$1,200-2,000.

Where to go and what to do:

-The Golden Triangle: For history buffs, New Delhi, Agra, and Rajasthan are a good start. There are several low-cost airlines connecting the Indian capital to Agra, as well Jaipur, Jodhpur, Jaisalmer and Udaipur in Rajasthan. The cities are also well-connected by train and bus services.

-Bodh Gaya: Buddhist pilgrims from all over the world flock to this town where the prince Siddhartha Gautama attained enlightenment after intense meditation and became the Buddha.

-Dharamsala: The Himalayan town is home to the Dalai Lama, the spiritual leader of millions of Tibetans Buddhists, and his government in exile. It's now also a major centre for the study of Buddhist and Tibetan culture.

-Goa: This former Portuguese colony is now a beach-lined tourist hotspot that attracts everyone from the hippie backpackers who come for the all-night beach parties to well-heeled travellers who come for the luxury hotels.

-Kerala: Sandwiched between the Arabian Sea and the tropical rain forests of the Western Ghats mountain range, Kerala is among India's most popular tourist spots. Millions of travellers head here each year for its Ayurvedic holistic resorts, beaches, tropical wildlife and a dance form called Kathakkali.
 
http://economictimes.indiatimes.com..._survey_of_HP_project/articleshow/3250047.cms

Rly asks pvt company to conduct feasibility survey of HP project
18 Jul, 2008, 1454 hrs IST, PTI


PALAMPUR: Railways have asked a private company to carry out a feasibility survey of broad gauging Pathankot-Jogindernagar line upto Leh, Himachal Pradesh Chief Minister Prem Kumar Dhumal said on Friday.

The development comes in the wake of Himachal Pradesh government's demand of broadgauging the route.

"A private company has been entrusted by the Railways to survey the project," Dhumal told PTI after laying foundation of a road bridge here in Kangra district.

Estimated at the cost of about Rs 65,000 crore, the project would be of great importance considering its implications on country's security and tourism, he said.

With the centre reluctant to continue on the project earlier on the grounds that it was economically inviable, Dhumal had argued that it was strategically significant for India in view of China expanding its Railway line up to the borders.

Dhumal said the state Finance Commissioner Arvind Mehta had met Railway authorities in Delhi on June 23 in which it was decided to assign the survey work to a private company.

He recently pitched for the project with President Pratibha Patil during her Shimla tour and also to Prime Minister Manmohan Singh.
 
Govt to accelerate economic reforms
24 Jul 2008, 1929 hrs IST,IANS


NEW DELHI: With the Communists off their backs, Prime Minister Manmohan Singh's government exuded confidence about fast-tracking key reforms in the coming months - a signal that is bound to go down well with the global business community.

"We are now more confident of carrying forward our task," Information and Broadcasting Minister Priya Ranjan Dasmunsi told reporters after a cabinet meeting presided over by the prime minister.

"We will try to accelerate the unfinished tasks," he said.

Asked about the mood in the cabinet - the first after winning the trust vote in Lok Sabha, the lower house of parliament - Dasmunsi initially said it was a "normal" meeting.

But on being prodded further, he added: "It was very good. We are very happy."

The government on Tuesday won by 19 votes the trust vote that was forced by Left parties following their withdrawal of support to protest the United Progressive Alliance (UPA) government's moves to go ahead with the India-US civilian nuclear deal.

Dasmunsi's comments echoed the sentiments expressed a day earlier by Finance Minister P. Chidambaram, who said the government was ready to push forward some major reforms, especially in the financial sector that were so far blocked by Left parties.
Legislations to allow a hike in foreign equity in insurance firms, higher voting rights for foreign banks operating in the country and entry of private pension funds are some of the key areas of focus, he indicated.

"We will make all out efforts to take economic reform process forward by passing a number of bills pending in parliament," Chidambaram said.

"We have absolute majority. We have to build on that and we will reach out to the parties which are not opposed to the reforms."

One of the main legislations pending before a group of ministers is to increase the foreign investment limit in insurance sector from the present 26 to 49 percent.

Similarly, while foreign investors can acquire up to 74 percent in Indian banks, their voting rights - that translates into effective management control - has been limited to 10 percent.

Industry wants parity in voting rights.

"We expect that in the next three months some major bills pending in parliament will also be pushed," said Rajeev Chandrasekhar, president of the Federation of Indian Chambers of Commerce and Industry (FICCI).

"Once this flurry of reforms are undertaken, the confidence level which had been dropping over the last three quarters in the business confidence survey of FICCI will bottom out and will put the economy back into a growth trajectory."

Even stock market indices - often seen as an immediate reflection of the mood of the investing public - gave a thumbs up to the victory in trust vote, primarily sensing a major push to unfinished agenda for the corporate sector.

The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) may have fallen Thursday. But a day after the trust vote, it had opened than 3 percent higher and ended the day with a gain of around six percent.

Govt to accelerate economic reforms-India Business-Business-The Times of India
 
'Indian IT sector set to be 2nd largest'
25 Jul 2008, 0004 hrs IST, Sujata Dutta Sachdeva,TNN


NEW DELHI: "Indian IT industry may be passing through a rough patch because of a slowdown in the US economy and high inflation rates, but this stage will pass. India will continue to drive the global IT market for the next few years. In fact, it will emerge as the second most important IT industry in the world after the US in terms of revenue and employment," says a study. "India will create the second largest IT services labour pool after the US within the next seven to eight years. That's not all, domestic IT industry's contribution to our GDP is likely to rise from 0.8% in 2006-07 to 2.65% by 2015-16."

This has been forecasted by a yet to be released white paper 'India's Role in the Globalization of the IT Industry' by Evalueserve, a KPO. It says, "by 2015-2016, the number of professionals working in the IT industry will grow ten-fold (from 2001-2002) and the total revenue will grow 22 times." This means, the IT industry is likely to employ 3,750,000 professionals and record $193.1 billion in revenue by 2015-16.

"Since India's GDP is growing at 8.5% per annum in real terms and 14% in nominal terms, by 2015-16 our GDP is likely to be $2,400 billion. Given this, the IT industry is likely to constitute 8.05% of India's GDP."

While in the last decade, IT services exports (including engineering services, R&D, and those related to creating and maintaining software products) have been growing at 32% annually. Evalueserve estimates this growth rate will taper off and become around 20% in the next seven to eight years. The reason: rising wages, lack of high quality talent, and IT jobs relocating to other low-cost destinations in Eastern Europe and Latin America.

The paper thus concludes: First, by 2016 India will have the second highest number of IT professionals in the world after the US. In fact, US will employ between 1.25 to 1.33 times more professionals than India.

Second, even in 2016, the US IT industry will generate approximately $810 billion in annual revenue, which would be almost five times the revenue of the Indian IT industry. And third, since the IT industries in both the US and India have become inextricably linked with one another, both countries will import and export more IT services and products for the next seven to eight years.
 
Software offers gateway to India for WealthPoint
Morris Kaplan
The Australian
July 26, 2008

SELLING ice to the Eskimos. Carrying coals to Newcastle. Such idioms are used to describe activities that are useless, fruitless, or redundant. How then would one describe an Australian programmer turned entrepreneur wanting to sell software to India -- a nation with more than 1.2 million ambitious software professionals?

"I don't see it a crazy," says Mike Giles, CEO of WealthPoint Australia, a company that develops software for the financial services industry. "It's not all that counter-intuitive. We have a very sophisticated financial services sector in Australia and India is a developing nation.

"Besides (in a former business) I've actually sold software to Microsoft. And they hate buying software."

Specialising in web platform development, Giles and his small team of 10 in Australia and 10 contractors in India have established a firm base in Australia with their suite of software products, boasting such customers as ING Asia, NAB and IAG.

"Our products focus on the web-based applications that allow financial institutions to create more profitable interactions with their clients and third-party distribution partners -- mortgage brokers, insurance agents -- that sell their products."

Giles, who has worked in both Britain and the US, says exporting to India is in some ways easier than growing in Australia.

"We'd like to move the ball further in Australia but it seems easier to go over there. In India they're very keen to talk to you. They are very excited about where India is going."

This is hardly surprising. Alongside China, India has emerged as one of the fastest growing economies in the world.

Moreover, its consumers are quick adopters of new technologies and products. For example, 10 years ago mobile phones were almost unknown. The mobile phone market doubles every year, now numbering more than 250 million users. The economy has been growing at an average 8.6 per cent a year over the last three years; and the growth rate in the first quarter of 2007-08 was 9.3 per cent. India is the largest democracy and the fourth largest economy in the world in terms of purchasing power parity. Salaries are rising. US-based analyst Global Insight estimates that by 2020 India will have 583 million people classified as middle class.

Hitech aside, the $3 trillion Indian economy is still very immature. In banking Australia is a mature player; India is emerging. In financial services the attractions of India are proving to be equally compelling. Mark Bouris, chairman of Wizard, another who has run the numbers over India, has been busy attempting to replicate the home loan revolution he and Aussie Home Loans' John Symond unleashed in Australia a decade ago. So far, Wizard International has branches in four Indian cities and estimates that the international addition would double Wizard's portfolio over the next three years. Giles says: "We see the opportunity in a mature market like Australia for web-based advice transactions to be around 2 million-plus transactions a year.

"In India, we see the short-term opportunity to be around three times that.

"However, over the next five years, while the Australian market will grow marginally, we see that the transaction market size will grow 10 times in the emerging Indian market."

Just because India is growing and well trodden by huge multinationals, it doesn't mean that doing business there is as simple as plucking tasty morsels from the local tandoori buffet. While an export strategy today is an essential component of a business plan, it can be a daunting prospect for an entrepreneur.

To do business successfully in India one must be aware of cultural differences. "Yes doesn't always mean yes," says Kumar Parakala, global chief operating officer of IT advisory and head of the India practice at KPMG.

"India is a huge continent that many Australians will find challenging in its size and complexity. But there are great opportunities for those who persevere," he says. "India has a very complex framework. There is a large number of states, each with their own rules and regulations. On top of that there is the federal system with its rules.

"But the Indian Government has moved to significantly reform the processes required to do business in India.

"We at KPMG are seeing all our global clients moving into India. I don't believe any company in the foreseeable future is going to remain relevant if it doesn't have an India strategy."

Giles says his decision to market to India was taken in full recognition of the needs to forge "appropriate" business relationships. "I had joined TiE (The Indus Entrepreneurs) some years ago." TiE is a non-profit, global organisation that provides entrepreneurs and world leaders with the networks, education and mentoring to turn ideas into big business. "They're in the business of helping entrepreneurs meet the right people.

"That way you are welcomed with open arms over there."

Both he and Parakal stress the importance of partnerships with Indian companies and entrepreneurs. "The challenge is to find the right partner to do business with. It can be difficult to set up on their own," Parakal says. "A credible partner lowers the risk."

An effective partnership can produce attractive results for a growing business. It can speed up entry into a new geographic area or market segment, open additional channels of distribution, accelerate new product development, and reduce costs, making it easier to operate. "We (Australians) don't partner well," says Giles. "Everybody worries about their market share. In the US, on the other hand, they know the market is so large that an individual company can't get the whole market on its own. You need to find partners."

Giles says that WealthPoint's entry into India arose from its relationship with the Netherlands-based ING Group. "They drew on their Australian experience and sought us out. They were effectively taking an established business model into India. They helped us localise a presence and were a big anchor for us."

Anyone who has travelled through India will have experienced lumbering bureaucracy -- for example, the Indian railway system. Despite these anachronisms Giles asserts that speed to adoption is very rapid in India. He believes they are so good at technology they can bridge any gaps very quickly.

"They're playing catch up," he says. "Australia has a very skilled, globally competitive workforce. We have great IP in the wealth management space.

"Our entrepreneurs should be confident of their abilities on a global scale because in some ways we do things better. We have one of the deepest pools of superannuation funds in the world and we only represent 1 per cent of the world economy."

This factor has no doubt helped the financial services sector spawn a lot of sophisticated software products.

"In India there are 2 million insurance agents. You're still talking about a country without a debt market -- very few mortgages. It's a market that is going to need some innovation.

"We're only in the early adopter part of the (product life-cycle) model."
 
India will beat China – all in its own good time
Democracy will ensure that the tortoise overcomes the hare in the race for competitive advantage, argues William Nobrega

William Nobrega
The Independent, UK
Sunday, 27 July 2008

Authoritarian regimes often yield strong short-term economic results, as seen in Germany in the 1930s, the Soviet Union in the 1950s, Brazil in the 1960s and China in the 1990s. Unencumbered by such things as property rights, legal recourse and public debate, the authoritarian regime can harness significant economic and political resources to achieve impressive industrial and economic feats.

Conversely, democratic regimes tend to be sloppy affairs with loud public discourse, a vocal press, stubborn land owners and a myriad of civil liberties. Far from being able to harness economic resources, the government often must act more as a regulator. The result is that there are very few grandiose government-sponsored projects. Instead, there are countless private-sector initiatives driven by the invisible hand of the market.

But while the authoritarian regime is envied by some, the fact is that, longer term, this type of socio-economic model has typically led to economic and social distortions.

That is the dilemma faced by China today. Since the 1980s, the government has focused on developing an export-driven economy supported by an artificially undervalued currency. Foreign direct investment was encouraged while domestic consumption was limited. Massive infrastructure projects were initiated, fuelled by a growing trade surplus, with cities sprouting up in the hinterlands like mythical phoenix. For years, the Chinese economy benefited from these policies with double-digit growth in gross domestic product, vast foreign currency reserves, and ever-increasing capital inflows.

But now the economic and social distortions have begun to appear with rising inflation rates, numerous asset bubbles, looming overcapacity and rampant institutionalised corruption. China's rulers find themselves in a quandary. If the government allows its currency to appreciate rapidly to reduce inflation, it will drive down exports and fuel unemployment. If it fails to quell inflation, social unrest will quickly unfold.

But while the hare runs into obstacles of its own design, the tortoise is looking well placed in the long endurance race for competitive advantage. In India there is an entrenched and vibrant democracy that will ultimately drive it to outperform China socially and economically. Messy, frustrating and more often than not agonisingly slow, India's democracy would seem chaotic at the surface. But if you look deeper, you will see why the tortoise will prevail. Let's take a look at two of the big advantages that India's democracy provides.

PROPERTY RIGHTS

As India becomes urbanised, many families will choose to sell or borrow against their land so that they can start businesses, buy apartments or provide education opportunities for their children. India is at the start of a gradual migration driven by the development of high-end manufacturing and other "sunrise" industries that will require a vast pool of skilled and semi-skilled labour. This migration will create an increasingly urban India that is expected to attract more than 200 million rural inhabitants to "secondary cities" by 2025.

This transition will facilitate the sale of land holdings by an estimated 30 million farmers and 170 million other individuals indirectly tied to the agricultural sector. These sales are expected to generate more than $1 trillion in capital by 2025. This capital will have a multiplier effect on the Indian economy that could exceed $3 trillion.

The development of mortgage-backed security and asset-backed security markets, driven by financial institutions like Citigroup, will create the liquidity required to free up this capital.

China, by contrast, has no rural property rights. The 750 million rural residents who lease land are at the mercy of local and regional government as to what compensation they will receive, if any, when they are forced from the land as a result of development, infrastructure improvements etc. Additionally, they have no right to borrow against their lease, and as such they have no assets. In fact, the Chinese government's official figures state that more than 200,000 hectares of rural land are taken from rural residents every year with little or no compensation. Between 1992 and 2005, according to some estimates, 20 million farmers were evicted from agriculture due to land acquisition, and between 1996 and 2005 more than 21 per cent of arable land in China was put to non-agriculture use.

The result has not been unexpected, with over 87,000 "mass incidents" (or riots) reported in 2005 – a 50 per cent increase from 2003. Many provincial governments in China have begun to use plain-clothes policemen to beat, intimidate or otherwise subdue any peasant that dares to oppose these land grabs. And, also as would be expected, the beneficiaries from these policies have been developers and corrupt government officials.

RULE OF LAW

This is a cornerstone of any modern society. India has a legal system that has been in place for well over 100 years. It is internationally respected and includes laws that protect intellectual as well as physical property.

The rule of law creates predictability and stability, allowing entrepreneurial behaviour to flourish. This is clearly evident in India, with more than 6,000 companies listed on the stock exchanges, compared to approximately 2,000 in China. More telling is that of these 6,000 listed groups in India, only 100 or so are state-owned. This stands in stark contrast to China, where more than 1,200 belong to the state.

Can there be any doubt where the next Microsoft or Intel will be created? Certainly not China.

More than 100 Indian companies that completed initial public offerings as mid-cap firms now have a market capitalisation of over $1bn (£500m). Companies such as Jet Airways, Bharti Tele-Ventures, Infosys, Reliance Communications, Tata Motors (which just acquired Jaguar), Wipro and Hindalco are becoming multinational competitors with globally recognised brands.

China also has numerous companies with a market capitalisation of more than $1bn, but most of these are state-owned behemoths recognised for their sheer size and not their nimbleness.

When the rule of law is seen by investors and foreign companies as something that is beyond question, it serves to facilitate additional investments in research and development. For instance, 150 of the top global companies now have research and development bases in India. Additionally, the US Food and Drug Administration has certified more companies in India than in any other country outside the US, a testament to the innovation fostered by free markets and the rule of law.

China, meanwhile, has a legal system that does little to protect intellectual and physical property rights; it has been ranked with Nigeria in this respect. Indeed, China's illegal copying of movies, music and software cost companies $2.2bn in sales in 2006, according to an estimate by lobby groups representing Microsoft, Walt Disney and Vivendi. This figure may in fact be understated as it does not include pirated products that have been shipped to overseas markets by government-controlled Chinese companies.

The rule of law, when applied evenly and justly in a democratic society, also helps to ensure that wealth accumulation does not favour individuals in political office or people connected to those in political office.

Democracy is a messy thing, especially when you have an electorate that exceeds 600 million motivated voters. However, it helps to ensure that individual liberties are respected and that the government is responsive and beholden to the will of the people – rich or poor. A democracy also ensures accountability through impartial courts that help enforce and protect such things as property rights, environmental rights, human rights and good governance.

India's democracy is far from perfect but it is also quite young, and as incomes rise and the populace becomes more informed, we can expect that India's state institutions will become more responsive and transparent.

And what about the hare? Consider this: a recent survey found that of the 20,000 richest men in China, more than 95 per cent were directly related to Communist Party officials. Where would you place your bet?

William Nobrega is founder of the Conrad Group, an emerging-markets strategic planning and M&A firm based in Miami. He is co-author of 'Riding the Indian Tiger'
 
http://timesofindia.indiatimes.com/...of_Turk_pipeline_plan/articleshow/3299314.cms

India keen to be part of Turk pipeline plan
29 Jul 2008, 0028 hrs IST, Indrani Bagchi,TNN

NEW DELHI: While the Iran-India gas pipeline remains mired in security and pricing issues, India has indicated its willingness to join the Mediterranean pipeline project Medstream, running from Turkey through Israel.

After national security advisor M K Narayanan made a quiet trip to Ankara recently, India is likely to send a team of officials to Turkey for a tripartite meeting to firm up details of the feasibility study that is expected to be completed in 10 months.

Energy ministers of the three countries will meet over the coming weeks to formalize the timelines and scope of the project.

As earlier reported by TOI , India was formally invited to be part of the project when Turkish foreign minister Ali Babacan visited New Delhi in February.

The project and its expected timelines were announced after last week's meeting between Turkish minister for energy Hilmi Guler and Israeli infrastructure minister Benjamin Ben-Eliezer. According to the Turking energy minister, the pipeline could be built in a little over three years and would carry 40 million tonnes of oil annually.

What is not yet clear are the suppliers and buyers on either side. While Azerbaijan and Russia have said they would be willing to use the pipeline to transport oil and gas to India and China, Indian oil and gas companies are currently in the midst of talks to gauge their levels of interest and how far they would be able to go. But officials said this project has now seen strong interest from the sellers so it won't be difficult finding buyers from an energy-hungry India.

The project will involve a cluster of five pipelines that will carry oil, natural gas, water, electricity and fibre optic cables. Naturally, India will only be interested in the energy pipelines.

The route will travel from the Black Sea oil terminal Samsun to Ceyhan on Turkey's Mediterranean coast, thence through an undersea pipeline to Israel's Ashkelong port. From there, over land to Eilat in the Gulf of Aqaba. From there, supertankers will be deployed to carry the natural gas/oil to India over the high seas.

This way, India avoids two important bottlenecks and prospective security hurdles — the overcrowded Suez Canal (that is for oil coming from further westward) and the tiny Strait of Hormuz which is a security hazard in the case of any future conflict in the Gulf.

Besides, it opens the Indian market to Central Asian oil, particularly from Azerbaijan, and Russian gas. As a matter of fact, Gazprom has also announced its participation in the Medstream project. Turkey said it was in advanced negotiations with Russia over sourcing its gas for the project through the Blue Stream pipeline below the Black Sea.
The bigger plan is for the oil and gas sourced to also travel to China, Taiwan and South Korea, basically opening up eastern Asia's big markets to central Asian oil and gas.

India's traditional friend Russia will be playing a big role in this project. Not only will it supply oil to the pipeline, Gazprom is also being tapped to build the terminals in Turkey.

On a geopolitical level, the new project is one of the first concrete steps India is taking to look further afield for energy sources. The Iran pipeline was the first, which continues to be dogged by issues of supplies and security. The Turkmenistan-Afghanistan pipeline, apart from the regular security issues, became a little difficult after Turkmenistan virtually promised most of its gas resources to Russia.
 
India’s economic indicators unlikely to improve soon

NEW DELHI: India’s central bank has released a report predicting an economic slowdown, rising inflation and dwindling corporate profit growth over the next nine months.

Twenty forecasters surveyed by the bank expected that annual gross domestic product growth, now running at 9%, would slide to 7.9% over the next nine months, according to the report released late Thursday by the Reserve Bank of India.

GDP growth driven by industry and services, the forecasters predicted, would total 7.5% and 9.5%, respectively, this year, down from last quarter’s predictions of 8.1% and 9.7%. Agricultural growth expectations remained flat, at 3 percent.

They expected corporate profit after tax to grow at 16% in fiscal year 2008-09, down from 25% tallied in the bank’s last quarterly survey. Corporate profit after tax would then bounce to growth of 20% for fiscal year 2009-2010.

The survey also revealed a consensus that the government would maintain its tight stance on money supply, predicting that the central bank would keep its key interest rate, or repurchase rate, at which the central bank makes short-term loans to commercial banks, near 9% through the current fiscal year ending March 31. The forecasters expected inflation to be 11.7% this quarter, before falling off to 11.4% and 9.2% in the subsequent two quarters.

Inflation, driven largely by the high price of oil on global markets, hit a new high of 11.98% in the week to July 19.

The bank said its quarterly forecasting survey, dated July 31, represents the views of the forecasters and not the bank itself.

In a bid to tame rampant inflation, the central bank this week raised its key interest rate 50 basis points, more than expected, to 9%, the third such hike in two months. It also further tightened money supply by increasing the cash reserve ratio, the amount of cash banks must keep on hand, to 9%, up from 8.75 percent.

Last week, the Federation of Indian Chambers of Commerce and Industry, or FICCI, which says it represents over 250,000 enterprises across the country, urged Prime Minister Manmohan Singh and other top government officials to create better conditions for growth and bolster waning business confidence.

In its “100 Day Agenda for the Government” the FICCI argued that the bank’s monetary policy has exacerbated the nation’s fiscal woes. Raising interest rates, it said, will do little to tamp down supply-side inflationary pressure, which must be attacked by rapid investment to boost capacity. reuters

Daily Times - Leading News Resource of Pakistan
 
'Country's manufacturing sector to grow by 9.5 percent'
3 Aug, 2008, 1130 hrs IST, IANS

NEW DELHI : Country's manufacturing sector is expected to grow by 9.5 per cent in 2008-09, up from 8.8 per cent last fiscal, according to a survey by an industry lobby.

The survey on manufacturing industry, carried out by the Federation of Indian Chambers of Commerce and Industry (Ficci), among 25 core sectors, 21 capital goods, 15 intermediate goods, 26 consumers durables, and 13 consumer non-durable sectors, holds out this prognosis.

"Of the 100 sectors surveyed, as many as 67 are poised to achieve 'excellent' to 'high' growth rates ranging from 10 to 20 per cent or more. While 12 sectors project excellent growth of more then 20 per cent, 55 foresee high growth of 10 to 20 per cent, 32 sectors expect moderate growth of up to 10 per cent and one sector has projected negative growth during 2008-09," the survey said.

The study cited various reasons for the optimistic projection that include increased investment, increasing mergers and acquisitions, focus on high-end and superior technology products, higher demand for sophisticated lifestyle products, entry of foreign companies in various industry segments and higher export prospects.

"While the present situation may continue for next two-three months, the manufacturing industry would be able to revive and achieve higher growth during the terminal period of the financial year 2008-09 provided the government takes some pro-active reform measures to redress the genuine grievances of the manufacturing industry", the survey said.

"While the farm loan waiver scheme and the proposed salary hikes of government employees will help generate more demand for manufactured items, there is need for stimulating consumption reducing interest rates and no further cuts in custom duty on manufactured goods," the chamber said.

"There is the need for ensuring relief package for exporters, increasing rate of depreciation, reducing corporate tax rate and correcting anomalies due to inverted duty structure existing in the tax structure," the study said.

It also underlined the need for adopting appropriate raw material policies, improving regulatory environment, helping capacity building of small and medium enterprises (SMEs), skill development and improving infrastructure for helping the industry achieve lower cost, improved quality and better performance.
 
Entrepreneurs shouldn't overlook India, Asia's other giant
Adam Lewis
The Australian
August 01, 2008

AMID uncertainties about the global economy, China and India keep forging ahead.

In Australia it is not surprising there is more awareness of China than India, as China is one of our largest trading partners.

India, however, presents opportunities that will be more important for some Australian companies.

Many local boards and senior executives are assessing the benefits of doing business in India and the smart ones are learning from past experiences in other markets and from other successful operations in India.

As the Indian economy is on a growth trajectory, optimism is understandable.

Since the mid-1990s the country's economy has changed gears from an average 3 per cent annual growth to a robust average of 6-8 per cent.

India's GDP has grown consistently and has become less volatile. Economic growth is set to continue on this trajectory due to a structural shift in favour of services.

For example, business services have doubled every year in recent times, internet usage has grown by a whopping 95 per cent annually for the past five years, and the credit card market is expected to grow by 25-30 per cent annually over the next four years.

These numbers become more attractive as companies dig deeper and discover a huge consumer pool. Over the next 20 years, India will become the world's fifth-largest consumer economy. Management consultancy McKinsey estimates that India's current growth rate will quadruple consumer spending from about 17 trillion Indian rupees ($400 billion) in 2005 to Rs70 trillion in 2025.

The dramatic growth in India's middle class, from 50 million to 583 million people, will drive this surge.

Australia has three advantages in the race to share in this growth.

Firstly, we have a strong trade relationship with India. We export goods and services worth more than $12 billion to India each year, which makes it our sixth-biggest customer.

We invest about $2.2 billion a year in India and $608 million of Indian investment finds its way to Australia.

Australia's investment in India is currently much larger, but it is growing at only 2 per cent annually, which is not keeping pace with India's economic growth, so our relevance is declining.

India's investment in Australia, on the other hand, has grown an average of 43 per cent each year since 2001.

A second advantage is that some of India's needs coincide with Australia's expertise. If India is to reach its potential, the need for better infrastructure is evident.

This includes hard infrastructure in the form of roads, railways, ports, electricity and urban planning.

It also extends to soft infrastructure such as schools and hospitals. Australia has expertise in these areas, which we can use to the mutual advantage of both countries.

The third advantage is a double-edged sword. We share some common heritage as a British colony and have a sizeable Indian diaspora in Australia.

This provides a healthy connection between India and Australia, but this connection can be overstated.

Compared with China's opaque structures and nuanced customs, India looks deceptively familiar. A lot of people there speak English, we share Westminster institutions and play cricket.

Yet, while we have a growing pool of Sinophiles in Australia, the same depth of expertise and intensity is not evident concerning India.

Take language as an example. A lot of Australian schools teach Mandarin, but only a handful teach Hindi.

We need to remind ourselves that India is an exotic market, perhaps even more so than China.

Companies that are successful there have learnt to be patient and to customise their product for the environment. Even for large multinational companies with global brands, it can take many years to make a profit.

For example, it took L'Oreal 13 years to break even in India, while in China it took seven years.

Successful vehicle makers build cars for the Indian market with low power, high fuel efficiency and high clearance for road bumps.

Successful takeaway food retailers customise their menus to local tastes, cut their prices and even respond to expectations such as home delivery.

India is not for the faint-hearted. In addition to infrastructure problems its regulatory environment can make business challenging.

A World Bank report in 2005 shows that Indian managers spend 14 per cent of their time dealing with regulation, compared with a figure of 8 per cent in China.

Many foreign companies have left India, particularly since the 2002-03 economic slowdown. These challenges should not put companies off. One of the indirect payoffs of doing business in India is access to innovation, which can assist Australian companies with competitiveness elsewhere.

Indian companies are innovative in technology and outsourcing, and it is producing companies that could change the way business is conducted.

ICICI Bank, for example, has initiated a rural banking strategy targeting India's rural poor in an economically viable way.

Reducing the cost of transactions, harnessing technology to set up low-cost channels and reducing layers of management have already made ICICI the subject of business school case studies.

It may soon be studied closely by our own financial services sector.

There is no doubt India's economy is in an earlier phase of development than that of China, but the lessons of China include: get in early, be very patient and don't be blinded by the size of the market.

Simple things such as market knowledge, relationships and competitive advantage are crucial to a sustainable business.

In India the opportunities are vast, but taking advantage of them requires staying power and investment.

Adam Lewis is managing partner of McKinsey and Company, Australia and New Zealand.
 
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