Indian Economy - News & Updates - Archive

[Neo]

February 17, 2007
Indian mobile firms plan to invest in Pakistan

By Nizamuddin Siddiqui

BARCELONA, Feb 16: At least two companies headed by Indians who took part in the 3GSM World Congress-2007, which ended here on Thursday, want to invest in Pakistan's growing cellphone sector.

Senior officials of the two companies told Dawn that their representatives would be visiting Pakistan soon to look for opportunities as well as for partners.

In their view, the sector, with more than 46 million cellphone users, will grow at a rapid pace because there's still a lot of untapped potential in the country.

Hungama Mobile — which specialises in mobile entertainment and which made waves at the mega event as much by launching unique products as by inviting Lara Datta and Sania Mirza — plans to send Ali Hussein, their assistant general manager, to Pakistan.

The other Indian-led company — PocketSurfer, which is based in Canada — will have its chief executive officer, Suneet Singh Tuli, come over to Pakistan.

Mr Tuli thinks that the hand-held device his company has developed will find popularity among Pakistanis who love to browse the internet but who cannot afford computers. His internet browser could be marketed at a low price provided the cellphone operators — in Pakistan's case the Pakistan Telecommunication Company and Pakistan Telecommunication Authority — pick up some of the bills involved.

"We think that hand-held browsers can strike it big in developing countries, like Pakistan," he remarked.

"You see, in Pakistan and India not many people can afford to buy computers. But they can own pocket browsers as they can cellphones."

Mr Tuli was of the opinion that his PocketSurfer, which was launched at the 3GSM Congress, could become particularly popular among students. The full potential of the market could not be gauged properly until the hand-held browser was introduced into it, he claimed.

“We need to provide the right tools to our people. And only afterwards can we judge whether something will catch on or not."

He informed this reporter that he had sent a proposal over the launch of his device to the state government of Bengal in India a few months ago. "We plan to do the same with the Pakistani government."

Ali Hussein of the Hungama Mobile said his company had a lot of experience in the Indian market. "We have worked hard there. The market was a poor one a few years ago vis-a-vis copyright laws etc.

"We have not only marketed products in that messy market but also have managed to help clean it up. We may do the same in your country, but we need to find the right partners there."

http://www.dawn.com/2007/02/17/ebr7.htm

 

[Neo]

Friday, 16 February 2007

The pitfalls of the 'economy game'

By Kaushik Basu
Professor of economics, Cornell University

'India is on a materialistic high'

This is the time of the year in India when interest in the economy peaks. With the annual union budget presentation coming up at the end of February, one can feel the tempo in the Delhi air.

This financial year, 2006-07, is expected to close with a GDP growth rate of 8.5%, which will make it three consecutive years of over 8% growth.

Also, Foreign Direct Investment (FDI) into India has risen sharply this year.

The prime minister's Economic Advisory Council has estimated a figure of $9bn, and, more recently, the commerce ministry suggested that it will be above $12bn.

Handsomely endowed

Whatever the final estimate, it is beyond doubt that it will be a sharp rise over last year's FDI of $4.7bn.

This will also be the year that FDI will exceed money that comes into India as portfolio investment.

Inevitably, there is mention in the press about how India has not only broken away from the relatively slow Hindu rate of growth but may actually be entering into a Confucian growth path.

The comparison is especially interesting to me since in December I came into India directly from China.

I had gone to Xiamen University, located where China abuts into Taiwan - in fact one can see some Taiwanese islands from the beach next to the University.

The Chinese boom is now so obvious that it needs no statistical reiteration.

Xiamen airport, which is small by Chinese standards, is a top-class international airport, much bigger than Delhi or Mumbai and more handsomely endowed with shops and traveller facilities than any Indian air terminal.

The city of Xiamen seemed on an entrepreneurial high.

[/quote]'The Chinese boom is so obvious' [/quote]

The periodic chimes from the Nanputuo Buddhist temple situated on a slope next to my hotel sounded serene and beautiful because they were so anomalous with the new materialism.

Coming into India a traveller cannot but notice the gap - the poverty is visibly greater and the infrastructure palpably worse.

Yet it is evident that India also is on a materialistic high.

It is an irony of our times that if you want to get away from extreme materialism you may have to think of going to Europe or America.

Banks are like bustling bazaars with people seeking advice on where to invest their money and entrepreneurs seeking loans.

Car show rooms are spilling over, with new models and customers vying for the attention of overworked agents.

Much of this visual impression is statistically confirmed.

Employment generation

India's industrial output growth rate reached 14% per annum by the end of last year - the highest since 1996.

Given that most of India's boom thus far has been in the area of services, this stirring of the industrial and manufacturing sector is reason for hope.

Since the country is starting out on a low base in manufacturing, the growth potential is large. And this sector also brings with it the potential for greater employment generation.

Also, India's fiscal situation is better than it has been in decades.

Millions have been bypassed by the economic boom

It looks as if for the first time India could get into a sustained annual growth rate of nine to 11%, which would indeed be comparable to China.

It is important at this point to realise that the "economy game" is not like cricket or war.

Your opponent's loss does not mean your victory.

Typically, when another nation does badly, it is bad news for you too - the global economy is not a zero sum game.

Hence, India doing well should be good news for China, and vice versa.

The government needs to be active in redistributing the spoils of high growth to those who are bypassed by the market

Amid the good news I must sound a note of caution. Indian inequality, especially regional inequality, is on the rise.

There are vast tracts and millions of people who are completely bypassed by the boom.

It would be foolish of our government to ignore this, since it can destabilise the nation politically and stall the economic resurgence.

The government needs to be active in redistributing the spoils of high growth to those who are bypassed by the market.

There is also a huge amount of work to be done in cutting down bureaucratic inefficiency and controlling corruption - India is among the worst in the world in these respects.

But even with all these caveats, there is no denying that the Budget of 2007-08 is coming at a propitious time, and the Indian economy could well be at the start of the best 20 or 25 years in its history.

http://news.bbc.co.uk/2/hi/south_asia/6365851.stm

 

[Neo]

India begins $1.9 billion Delhi airport revamp

NEW DELHI: India started work on Saturday on a project that will enable New Delhi airport to handle 37 million passengers a year by 2010, more than double its current capacity, aviation officials said.

The 85-billion rupee ($1.94 billion) revamp will see a third terminal building constructed in the next three years and a new runway by 2008 to ease congestion at the airport. The new runway — the airport’s third landing strip — would be one of Asia’s longest at 4,430 metres (14,530 feet) and would allow Airbus A-380 super jumbos to land, Delhi International Airport Pvt Ltd (DIAL) said. Work will be completed before the Commonwealth Games open in New Delhi in Oct 2010. The DIAL is a consortium in charge of developing, maintaining and operating New Delhi’s Indira Gandhi international airport.

“With the completion of this airport, Delhi will boast of a world class airport which would not only cater to growing aviation traffic, but also serve as a benchmark for other airports,” DIAL managing director Srinivas Bommidala said in a statement. India’s booming economy and reforms have led to around half a dozen private airlines starting operations in the past three years, putting tremendous pressure on airports in big cities like New Delhi and Mumbai.

Passengers often have to spend over an hour in the air as planes hover overhead airports, waiting to land, and complain of poor infrastructure and facilities. “We will see that infrastructure does not remain a bottleneck to India’s economic growth,” Sonia Gandhi, head of India’s ruling Congress Party, said after unveiling the plaque that marked the start of construction of the new terminal building.

Analysts say creaky infrastructure may impede a rise in India’s economic growth rates to double digits in coming years. The economy is set to grow at 9.2 per cent in the year ending March 2007. Passenger traffic is set to grow at 20 per cent annually for the next 10 years and domestic airlines would need at least 400 new planes by 2012 to the meet such growth. DIAL, a joint venture of India’s GMR Infrastructure Ltd, German airport operator Fraport and the state-run Airports Authority of India, won the rights in February 2006 to develop New Delhi airport.

http://www.thenews.com.pk/daily_detail.asp?id=43320

 

[Neo]

Tata to restart talks on $3bn investment

DHAKA: India’s Tata Group is moving to restart talks with Bangladesh’s caretaker government on a three-billion-dollar investment plan to build a slew of industrial projects, an official said on Saturday.

The group suspended its proposal to construct a power plant, steel mill and fertiliser factory as well as to develop coal mining last July after the previous government halted talks until after national elections.

The polls, originally set for January, have since been postponed amid charges of vote-rigging and widespread political unrest. No new date has been set. “I met the foreign ministry advisor early this week and discussed how we could take the proposals forward,” Tata’s Bangladesh representative Syed Manzer Hossain told AFP.

“Our proposals remain the same and we’re waiting for a response from the government to take it forward and restart negotiations,” added the official, who also met with the advisor in charge of the energy ministry earlier this month.

The Tata plan would be the biggest single foreign investment in the impoverished South Asian nation. Bangladesh has been under emergency rule since early January after the outgoing Bangladesh Nationalist Party government and the opposition Awami League failed to reach agreement on staging credible polls.

The new military-backed caretaker government has said it will take up all necessary projects to promote long-term economic growth.

http://www.thenews.com.pk/daily_detail.asp?id=43321

 

[Contrarian]

I hope the Delhi Airport GMR revamps is truely one of the best.

 

[Neo]

Aren't you building a complete new airport in Delhi aswell?

 

[Contrarian]

Nope. This one is being expanded and completely revamped. Its going to be a HUGE airport.
Mumbai is getting two airports. The existing one is being revamped, just like Delhi's though its run by a different company. And they are getting another airport in Navi Mumbai, that is gonna be one of the best too.

Hyderabad has just one airport that actually belongs to HAL. The amount of traffic on that airport is SO much that HAL cannot carry out its R&D for its aircrafts. Its cripling their development schedules. So another airport is being built in Hyderabad. This will be a greenfield airport. Again, its planned size is f*cking huge. They want to make it into an airport that caters to the entire demand in the South.

Bangalore, i think a new airport is being build, though i am not sure. The company running it might be revamping it completely and expanding it.

Actually most of the airports in India will be either getting revamped and expaded or getting new ones. And most second tier cities too will get new airports. Infact there are plans to allow privately owned airports in the country. Currently the govt owns the airports, but their management and all rights belong to private companies, this has too just happened recently.

 

[Janbaz]

Bharti to spend $2.5bn on retail network

NEW DELHI: India’s Bharti group aims to spend up to $2.5 billion by 2015 building hypermarkets and supermarkets as rivals vie for a slice of a fast-growing retail market.

Bharti will also meet executives of Wal-Mart Stores Inc, the world’s biggest retailer, this week to finalise a wholesaling joint venture in Asia’s fourth-biggest economy.

“We are in discussions ... they are coming this week, and the team will be led by Mike Duke (Wal-Mart vice chairman and head of international operations),” Rajan Mittal, joint managing director of Bharti Enterprises, told a news conference.

Bharti Retail Pvt Ltd, wholly-owned by billionaire Sunil Mittal’s Bharti Enterprises, will build hypermarkets, supermarkets and other stores to sell mainly locally sourced groceries, electronics, clothing and furniture, Mittal said. The first stores will open in Indian cities with a population of 1 million in the first quarter of 2008, and Bharti expects revenues of Rs200 billion ($4.54 billion) by 2015. Mittal said Bharti was looking at about 10 million sq ft of retail space and will hire 60,000 staff.

Bharti, a conglomerate that combines telecoms, commercial farming, insurance and software businesses, controls India’s top mobile phone operator, Bharti Airtel Ltd Local traders and politicians have opposed opening up India’s retail sector, which is estimated at $300 billion and could more than double by 2015, according to Technopak Advisors.

India allows single-brand foreign retailers to take up to 51 per cent in a joint venture with a local firm, but bans multiple-brand retailers from investing in front-end retail.

Earlier this month, one of India’s most powerful politicians wrote to the prime minister expressing his concerns about “the Wal-Mart effect” on domestic retailers, and the need to study the impact of transnational supermarkets on the “livelihood security” of small store owners. Organised retail makes up only about 3 per cent of India’s retail industry, but is forecast to rise to 15-18 per cent by 2011-12, attracting global interest from large retailers such as Britain’s Tesco Plc and France’s Carrefour Shoprite Holdings, Marks & Spencer Plc and Germany’s Metro AG have wholesale cash-and-carry and franchise operations in India.

Bharti and Wal-Mart will also have to contend with retail operations of local rivals including Reliance Industries Ltd, ITC Ltd, Pantaloon Retail Ltd, the Tata group and the Aditya Birla group. “We are totally in line ... in sync with the government thought,” Mittal said. “We want to co-exist with smaller convenience stores,” he said, referring to the thousands of non-organised retailers that control much of the retail sector. “We are even looking at franchising these stores.” Shares in Bharti Airtel, valued at $34 billion, rose as much as 2.4 per cent to a new high of Rs810.90 in a firmer Mumbai market on Monday.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=43578

 

[Janbaz]

Mobile phones to fuel Internet growth

BANGALORE, India: Google vice president and chief Internet evangelist Vinton G Cerf predicted on Tuesday that mobile phones, not personal computers, will fuel growth of the worldwide web as countries like India snap up millions of handsets monthly.

From 50 million in 1997, the number of people who have logged onto the Internet has exploded to nearly 1.1 billion, Cerf, who is considered one of the founding fathers of the Internet, said.

Yet, the Internet only reaches a sixth of the world’s population, Cerf toldreporters during a visit to this southern city, known as India’s Silicon Valley, where Google has a research and development facility.

“You will get those other 5.5 billion people only when affordability increases and the cost of communication goes down,” said Cerf, 63, who joined Google in 2005. “The mobile phone has become an important factor in the Internet revolution.”

The silver-bearded scientist, dressed in a three-piece suit for a presentation on the Internet, is hearing-impared and had to read the lips of reporters who asked him questions.

Worldwide there are 2.5 billion mobile-phone users, whose numbers are growing rapidly in developing countries led by China and India, the world’s most populous countries, Cerf said in his presentation.

India, a country of 1.1 billion people, alone is adding seven million mobile-phone users a month, a powerful enough lure for British telecom giant Vodafone to pay 11.1 billion dollars for a controlling stake in local mobile firm Hutch-Essar this month.

Handset manufacturers and mobile-phone companies are offering an array of Internet-enabled features and services including payment and navigation systems while dropping charges under the pressure of growing competition that will bring many of the new subscribers to the Internet, Cerf said.

“There are an enormous number of applications available on mobiles,” said Cerf, who’s responsible for identifying new technologies and applications on the Internet for Google.

Google has rapidly expanded its research and service offices in the country at the cities of Hyderabad, Delhi and Mumbai besides Bangalore, but Cerf said he has been visiting India since the early 1990s to understand its tech scene.

The company wants to tap the talent of Indian engineers to innovate technologies and widen its range of services, said Cerf.

India is estimated to have 40 million people online, a meagre 3.5 per cent of its vast population, he said, adding Google will focus on local languages, culture, content and delivery of new business models to widen the reach of the Internet.

Cerf was the co-designer with Robert Kahn of the basic architecture of the Internet.

In 2005, they both received the highest civilian honour bestowed in the United States, the Presidential Medal of Freedom, which recognised that their work on the software code used to transmit data across the Internet has put them “at the forefront of a digital revolution that has transformed global commerce, communication and entertainment.”

The Internet has brought access to the world’s information to users, introduced new business models, education services, ushered in a new advertising medium and enabled consumers to become producers, Cerf said.

It also has brought spam mail, computer viruses and worms, misinformation, fraud and social abuse, he conceded in his presentation. “This is a mirror to the population that uses it,” the scientist said.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=43737

 

[Janbaz]

Mittal seeks surety for $9b Indian plant

NEW DELHI: The Indian unit of Arcelor Mittal is ready to invest $9 billion to set up a steel plant in India’s Jharkhand state if supplies of iron ore can be guaranteed, a top company official said on Tuesday.

Sanjeev Sengupta, director at the India office of the world’s leading steelmaker, told Reuters the firm was looking for an assured ore supply of 600 million tonnes over the next 30 years.

“We are keen, they are keen and we have to reach a position where we get the iron ore,” Sengupta said after meeting the chief minister of Jharkhand in New Delhi.

Earlier in the day, he had said the company was ready to agree the investment if it got “reasonable assurances” concerning access to ore mines.

A state government official told Reuters that a follow up meeting was likely in about two weeks.

Mittal signed an initial agreement with Jharkhand’s state administration in 2005 and has since been working out the details, including the supply of raw materials.

The Mittal proposal would be developed in two phases, each with a capacity of six million tonnes. The first phase would be completed within four years, while the second would be up and running within a further four-and-a-half years.

The company may also build a 2,500 MW power plant to provide electricity to the steel unit.

In December, another Indian state, eastern Orissa, cleared a separate proposal by the firm to invest in a 400 billion rupee ($9.06 billion) project in the mineral-rich Keonjhar region.

Steelmakers and mining firms have been drawn to India by its relatively cheap labour and the world’s third-largest combined deposits of coal and iron ore.

Mittal was the second foreign steel maker to make a move on India’s ore reserves with steel demand likely to boom in step with India’s fast-growing economy, which is expected to expand by over 9 percent in the year to March-end. reuters

Daily Times.
http://www.dailytimes.com.pk/default.asp?page=2007\02\21\story_21-2-2007_pg5_23

 

[Neo]

February 21, 2007
Mittal to invest $720m in refinery

NEW DELHI, Feb 20: Steel magnate Lakshmi Mittal will invest $720 million for a 49 per cent stake in a refinery to be run by India's state-run Hindustan Petroleum (HPCL), the government said on Tuesday.

“Mittal Investment and HPCL will hold 49 per cent stake each in the refinery,” Oil Minister Murli Deora was quoted as saying by the Press Trust of India.

The remaining two per cent of the proposed 180,000-barrel-per-day refinery in north India will be offered to financial institutions, Deora said.

Last year, Britain's oil giant British Petroleum abandoned efforts to build a refinery with HPCL in Punjab state after signing a letter of intent in 2005.

Media reports said that BP later deemed the deal unattractive.

The HPCL board had on Monday cleared the joint venture for the refinery, which is likely to be commissioned by the end of 2010.

Mittal will use the family's investment arm, which is part of the same group as the world's largest steelmaker Mittal Arcelor, as the company represented in the deal, Deora said.

Mittal Investments already has a partnership with the state-run Oil and Natural Gas Corporation for oil exploration.

HPCL is the second-biggest oil refining and marketing company in India with a turnover of $14.7 billion.

It has coastal refineries near the financial hub of Mumbai and in the southeast port city of Vishakhapatnam.

http://www.dawn.com/2007/02/21/ebr14.htm

 

[Neo]

Thursday, 22 February 2007
India state airlines set to merge

The merger is the latest shake-up in the Indian aviation sector
India's two main state-owned airlines are set to merge in an effort to compete more effectively with private carriers, officials say.
The interests of the workers of Air India and Indian "would be taken care of" after the merger, said Federal Aviation Minister Praful Patel.

Officials said the deal would make the new entity more competitive, yielding annual savings of 5bn rupees ($113m).

Privately-owned rivals have taken market share from the duo.

Mr Patel said the merger of the two airlines would be completed "within two to three months".

"We wish to see a big, strong national carrier. This is our intention," he said.

The Indian government hopes that the combined firm will become one of the world's top 30 airlines.

Merger concerns

The two airlines have a combined fleet of 122 planes and over 34,000 employees, including 1,315 pilots, according to one report.

Both the airlines have a 20% share of their respective markets in India and abroad and jointly carry over 12 million passengers.

Analysts say the merger will create one of the top airlines in the world in terms of the number of planes, but different corporate cultures and a diverse fleet may make things difficult.

Set up in 1932, Air India is the country's flagship airline, serving more than 40 destinations worldwide.

Air India has suffered as the country has opened up its skies

Indian, which began operations in 1953 as Indian Airlines, is focused on the domestic market and has a turnover or around $ 1.4 billion, according to the company.

Air travel has been growing rapidly in India as income levels rise and long-established players such as Air India and Indian have been challenged by more recent entrants.

Four budget airlines and at least two privately owned carriers have posed a stiff competition to the two state run airlines, with their profits under pressure.

http://news.bbc.co.uk/2/hi/south_asia/6384881.stm

 

[Neo]

India's expansion continues, but for how long?
Posted February 14, 2007

NEW YORK -- The empirical evidence of India's enormous economic expansion in recent years--in particular the sharp run-up in stocks there--has proven an irresistible draw to some mutual fund investors. But those chasing the siren song should be aware that, as with any developing economy, there could be bruising stumbles.

"If you have a car speeding along and it hits a speed bump, the aftershock is going to be that much greater the faster the car goes. India is going to hit some speed bumps as it goes," said Andrew T. Foster, director of research at Matthews International Capital Management LLC, a San Francisco fund manager specializing in Asian investing.

The rise in stocks has stirred concerns that valuations have risen beyond where they should be and that the country's central bank will continue to raise interest rates at it tries to tamp down inflation.

On Tuesday, the country's central bank, the Reserve Bank of India, increased the proportion of deposits that commercial banks must hold in cash in order to help slow the economy.

"The Indian growth story is continuing to be reaffirmed," said Dhruva Raj Chatterji, a research analyst in Mumbai for fund-tracker Lipper Inc. While growth continues, other forces are building that could throw some cold water on the frenetic pace there.

"It has been a sustained bull run for the past three years because of which India is one of the most expensive markets in the world. Valuations are kind of the higher side," Chatterji said.

He questioned whether the market has overestimated how much Indian companies will continue to earn. Earnings growth has in recent years hovered near the breakneck pace of more than 20 percent.

Chatterji said the amount of money foreigners invested in the country slowed in January.

"Interest rates are on the rise in India. People are thinking about whether foreign fund flow will continue with the same vigor as it has in the past," he said.

Subodh Kumar, chief investment strategist for CIBC World Markets, contends investors should consider interest rates before investing in India.

Inflation hit 6.6 percent in late January--a two-year high. On Jan. 31, the Reserve Bank of India raised the repurchase rate, which is the rate at which it lends to commercial banks, by a quarter-point, to 7.5 percent.

"I think that the markets here in India realized kind of late that the central bank is looking at inflation and is still prepared to raise interest rates," Kumar said.

"A lot of the speculative activity that was in the Indian market is coming out of the market," Kumar said.

Still, funds for U.S. investors continue to show growth. The Matthews India Fund, for example, with assets of about $718 million, has shown a year-to-date return of 2.14 percent.

Chatterji is concerned stocks in India, and therefore the mutual funds that invest there, could face difficulty later in the year because the number of initial public offerings has increased sharply in the new year. The enthusiasm of investors looking to snag their share of the Indian market risks depleting how much money will be left for investment later, he said.

However, Chatterji is optimistic that even if a sizable correction occurs, stocks would prove resilient.

"Whenever there has been a correction in India there has been tremendous buying support," he said.

http://www.chicagotribune.com/busin...037feb14,0,520811.story?coll=chi-business-hed

 

[Neo]

India Logistics Industry: $125 Billion Goldmine

London, 21 February 2007 - India’s third-party logistics (3PL) market is all set to experience a period of explosive organic growth, going by independent market analyst Datamonitor’s (DTM.L) latest research. The report, “India Logistics Outlook 2007,” predicts high double-digit growth rates for both outsourced and contract logistics in India. With India’s gross domestic profit (GDP) growing at over 9% per year and the manufacturing sector enjoying double digit growth rates, the Indian logistics industry is at an inflection point, and is expected to reach a market size of over $125 billion in year 2010.

“Strong growth enablers exist in India today in the form of over $300 billion worth of infrastructure investments, phased introduction of value-added-tax (VAT), and development of organized retail and agri-processing industries”, say Praveen Ojha, Logistics analyst with Datamonitor and author of the study. “In addition, strong foreign direct investment inflows (FDI) in automotive, capital goods, electronics, retail, and telecom will lead to increased market opportunities for providers of 3PL in India.”

However, as a result of the under-developed trade and logistics infrastructure, the logistics cost of the Indian economy is over 13% of GDP, compared to less than 10% of GDP in almost the entire Western Europe and North America. “As leading manufacturers realign their global portfolios of manufacturing locations, India will have to work on such systemic inefficiencies, in order to attract and retain long-term real investments.”

Consumer markets to lead growth in outsourced logistics
3PL/outsourced logistics is the outsourcing of a company’s logistics operations to a specialised firm which provides multiple tactical logistics services for use by customers as opposed to the respective company having a business unit in-house to oversee its supply chain and transportation of goods.

With increased geographical distribution of incomes in India, the consumer markets are extending beyond the five metros of Mumbai, Delhi, Bangalore, Chennai and Hyderabad. However rather than being pre-emptive, the companies are only following with new distribution outlets. As such the increased competition across industry verticals is forcing firms to focus on product distribution, and logistics outsourcing is gaining further momentum with this.

According to Datamonitor, outsourced logistics, at just above one-quarter of the entire $90 billion Indian logistics market, is slated to grow at a compound annual growth rate (CAGR) of over 16% from 2007-10.

The fragmented industry structure: Opportunity for 3PL integrators
The Indian logistics industry is characterized by dominance of a disorganized market. Transporters with fleets smaller than five trucks account for over two-thirds of the total trucks owned and operated in India and make up 80% of revenues. The freight forwarding segment is also represented by thousands of small customs brokers and clearing & forwarding agents, who cater to local cargo requirements.

In order to reduce logistics costs and focus on core competencies, Indian companies across verticals are now increasingly seeking and using the services of third-party logistics service providers (3PLs).

Realizing the potential in the contract logistics market, 3PL service providers are expanding their basket of services as companies are now looking for more than just transportation of their products and raw materials. Trucking and courier companies are now leveraging their network to provide express distribution and warehousing. Similarly, freight forwarders are moving towards owning assets in the form of Container Freight Stations (CFS), Inland Container Depots (ICD) and container trains.

Furthermore, 3PLs are also increasing investments to become end-to-end integrated players. As per the investment plans of the leading 3PLs in India, the logistics industry’s capital expenditure is progressively increasing to almost match its revenue growth, a strong indicator of both 3PLs desiring to become integrated service providers and the industry enjoying investment-driven growth.

Infrastructure congestion: the key challenge
According to Datamonitor, the logistics industry in India is currently hampered due to poor infrastructure such as roads (over 70 % of freight transportation in India is via roads), communication, ports and complex regulatory structures.

The National Highways (NH) form only 2% of the entire road network in India, but handle over 40% of the national road freight traffic, putting enormous pressure on the highway infrastructure. Also, on an average a commercial vehicle in India runs at a speed of 20 miles per hour (mph) compared to over 60 mph in the mature logistics markets of Western Europe and the USA.

In addition, the twelve major ports of India handle volumes higher than their full capacity, resulting in pre-berthing delays and longer ship turn-around time compared to even the East Asian counterparts like China and South Korea.

Phased introduction of VAT – A supply chain boon
The amount of time spent in complying with inter state tax requirements and at transport check points affects the cost and competitiveness of both 3PL providers as well as their customers. VAT, which is expected to replace a plethora of state and central government taxes, is likely to enhance the efficiency of the logistics industry in India. Given the current thrust on infrastructure investments in India, the implementation of VAT is likely to boost the efficiency for these stakeholders by lowering transit times and the associated paper work.

Praveen Ojha concludes:
“With the collective economic interaction of growing per capita disposable incomes, fast growing manufacturing and organized retailing sectors, increasing external merchandise trade, infrastructure investments by the government and 3PL capex plans, both India’s logistics industry and the 3PL sector of this market are set to witness explosive growth in the next five years.”

http://www.pandct.com/media/shownews.asp?ID=13332

 

[Janbaz]

Argos in Indian franchise venture

The Argos retail name is to be taken to India through a franchise deal with two of the country's leading store chains.
Argos will license its brand and product catalogue for use in retail outlets in India, with the first due to open in Mumbai later this year.

Argos, which is part of the Home Retail Group, said the deal would give it a "foothold" in a fast-expanding market.

Several other British retailers including Mothercare have used the franchise model to enter India.

Growing market

Existing regulations prevent most foreign retailers from opening their own stores in India and franchising is seen as a cost-effective way for firms to build a presence there.

Argos is teaming up with Indian firms Shopper's Stop and Hypercity Retail India to launch the Hypercity Argos retail concept.

As well as providing its own catalogue, Argos will offer IT support and advice on developing sales through the internet.

Home Retail Group said it was excited by the opportunities in India but emphasised that its main focus remained on developing the Argos and Homebase businesses in Europe.

"The heads of terms with Shoppers Stop and Hypercity, both pioneers in the Indian retail market, gives Argos an initial foothold in what is a rapidly expanding market," said Terry Duddy, Home Retail Group's chief executive.

Shopper's Stop operates 22 department stores in 11 Indian cities while Hypercity Retail opened its first food and general merchandise store last year.

Many of the UK's top retailers are casting an eye over India, as its rapid economic growth and rising income levels boost consumer spending levels.

Tesco ended talks about a joint venture with Indian firm Bharti Enterprises late last year, while Mothercare has teamed up with Shoppers Stop to open 11 franchise outlets.

BBC News.
http://news.bbc.co.uk/2/hi/business/6389971.stm