Indian Economy - News & Updates - Archive

[ab041937]

EAC forecasts 7.9% growth

UNI

New Delhi, Aug 14: In an upbeat assessment of the economy, the Economic Advisory Council (EAC) of the Prime Minister, has forecast a 7.9 per cent growth for 2006-07, but said agriculture was a major area of concern.

The EAC, which is headed by Dr C Rangarajan, says the high growth in the economy in the current fiscal will emanate from 1.5 per cent growth of output in agriculture, 9.7 per cent in industry and 9.5 per cent in the services sector.

The sub-sectors driving growth in the recent years were manufacturing, construction, communication and financial and business services.

The forecast of a near 8.0 per cent rate of growth in 2006-07, follows three years (2003-2006) of 8.1 per cent growth. This will be the first time in history that the indian economy would be growing at 8 per cent for a continuous span of four years.

The EAC report has called for better infrastructure, which can be developed by more public and private investment in infrastructure, as a necessary condition for sustaining these high rates of growth.

The EAC has also drawn the government’s attention to the need for “reasonable rates of interest,” and for lower fiscal deficit, particularly revenue deficit.

The report says agriculture remains a major area of concern, partly because of its continued dependence on rainfall and partly because of stagnation of yields.

The EAC says there was need for a vigorous push for new technologies, particularly for rain-fed crops, their active dissemination through extension supported by inputs, credit and rural infrastructure.

Energy and other infrastructure pose the main constraint on acceleration of growth of manufacturing.

Despite rising oil prices, due to which inflation at home has gone up from 4.1 per cent last year to 5.5 per cent this year, the EAC believes global growth will be sustained and that there were no significant external constraints for the expansion of the Indian economy.

 

[MYSTIC]

Sir,

I posted it since its coming from a respectable source, the ADB.

Neo,
You can expect some mega projects from the center in the next couple of months.India had been facing funding problems in the past but now since the economy is booming more and more money is spent on public welfare.Voluntary corporate funding (where corporates become school sponsers )has started taking place in many cities.The main problem we face is faculty.The quality and qauntity of teachers needs to be improved.Health care is still a problem.I think we are long way away before we can provide healthcare facility to a population of a billion but we're trying none the less.If we succeed in what we plan to do than we are looking at a bright future for 1/5 of mankind :smile: .

Here's a comprehensive report of GS prediction on BRIC economy.

http://www2.goldmansachs.com/insight/research/reports/99.pdf

 

[Neo]

Generally agree with you Mystic, progress in India has been impressive but there's always room for improvement!
Thanks for the link!

 

[sigatoka]

Neo,

All this statistics is a whole lot of bull.

If only it helped the common man around the world.

I agree with Neo, ADB is a very respected source and a very fine institution. Seconldy it takes time for wealth to trickle down to the common man and also India is currently facing a massive bulge of young people entering the labour market which is why they economic growth figures are not feeding directly one for one into higher incomes.

However, you have a strong point as well Salim. A rising tide may be too slow. The BJP govt. being kicked out was because they had forgotten the plight of the poor and were only concentrating on economic growth. However, I am bitterly dissappointed that the Congress Party has not undertaken the massive public works projects I surely thought they would undertake to provide roads, waterworks and electricity to the villages. Mr. Singh is undesicive, he neither willing to smash the unionism of the govt. owned corporations (such as airports and public sector) nor is he moving fast enought to remove restriction on foreign investment and nor is he undertaking public projects to the degree required.

However Mr Salim, as a believer in democracy, have faith. A government that doesnt perform will be voted out. However, how long will it take, in the long run we are all dead?????

 

[sigatoka]

Neo,
You can expect some mega projects from the center in the next couple of months.

A nations progress doesnt occur with only mega projects, it is the small improvements by ordinary people when allowed to operate in markets that lead to prosperity.

 

[Owais]

'India benefits from fall in China's textile export to US'

Beijing: India is one of the major beneficiaries of US restrictions on Chinese textile exports during the first six months of the current year, the Communist giant's top planning body said while cautioning the industry to brace for even less growth in exports in the second half.

China's textile export to the United States in the first six months amounted to USD 8.23 billion, the report said.

The growth is 76 per cent lower from the same period of last year. It is the first time for China to see its textile export to the United States drop in recent years, it said.

Due to import restrictions, growth of China's textile export to the European Union also witnessed a decline as the total amount valued at USD 9.5 billion , up 10.3 per cent from the same period of last year.

The year-on-year growth is 46.2 per cent down.

While China's export of textile products declined, China's bordering countries such as Vietnam, Pakistan, Cambodia and India saw a sharp rise of their textile exports to the United States, the report said.

India's textile exports to the United States rose by over 18 per cent year on year, the NDRC noted.

Changes in the trade environment have greatly affected China's textile export and such a trend is expanding, the report noted.

 

[ab041937]

The Next Industrial Giant Is ... India?
By KEITH BRADSHER, New York Times
Published: August 31, 2006

PUNE, India — India's economic advancement no longer rests on telephone call centers and computer programmers.

Among villages with thatch-roofed huts and dirt roads on the outskirts of this city in central India, John Deere and LG Electronics have recently built modern factories turning out tractors and color television sets for sale in India and for export to the United States.

In Hazira, in northwestern India, where some residents still rely on camels to carry traders' goods, the Essar Group is making steel to be used for ventilation shafts in Philadelphia, high-rise structural beams in Chicago and car engine mountings in Detroit.

For decades, India had followed a route to economic development strikingly different from that of countries like Japan, South Korea or China. While its Asian rivals placed their bets on manufacturing and exports, India focused on its domestic economy and grew more slowly with an emphasis on services.

But all that is starting to change.

India's annual growth in manufacturing output, at 9 percent and accelerating, is close to catching growth in services, at 10 percent. Exports of manufactured goods to the United States are now rising faster in percentage terms than China's, although from a much smaller base. More than two-thirds of foreign investment in the last year has gone into manufacturing in India, not services.

"Saying we are a back office and China is a factory is a backhanded compliment," said Kamal Nath, India's minister of commerce and industry. "It's not really correct."

Indeed, in interviews at 18 Indian factories and other businesses in 10 cities and villages scattered across the length and breadth of the nation, the picture that emerges is of a country that is being driven by advances in manufacturing to a much brisker pace of economic growth.

A prime reason India is now developing into the world's next big industrial power is that a number of global manufacturers are already looking ahead to a serious demographic squeeze facing China. Because of China's "one child" policy, family sizes have been shrinking there since the 1980's, so fewer young people will be available soon for factory labor.

India is not expected to pass China in total population until 2030. But India will have more young workers aged 20 to 24 by 2013; the International Labor Organization predicts that by 2020, India will have 116 million workers in this age bracket to China's 94 million.

India's young population will also make it a huge and growing market for years to come, while the engineering skills and English skills of its educated elite will make it competitive across a wide range of industries.

So even though India remains a difficult place to do business, several multinationals have been placing big bets on India this year in hopes of taking advantage of this shifting global dynamic.

General Motors and Motorola are preparing to build plants in western and southern India. Posco of South Korea and Mittal Steel of the Netherlands have each announced plans to erect giant steel mills in eastern India, where Reliance of India will soon construct one of the world's largest coal-fired power plants.

They are finding India's labor force well suited to their goals. When LG set out to fill 458 assembly line jobs at its factory here last year at a starting wage of $90 a month, it required that each applicant have at least 15 years of education usually high school plus a technical college.

Seeking a young work force, the company decided that no more than 1 percent of the workers could have had any prior work experience. Despite the limitation, 55,000 young people met its criteria for interviews.

"In the villages there is little income," said Siddu Matheapattu, 24, in between applying sealant to refrigerator frames. "Here I can earn more."

By contrast, cities in export-oriented Guangdong province in southeastern China raised monthly minimum wages this summer by 18 percent, to $70 to $100 a month, after factories reported that they had 1 million more jobs than workers to fill them. Factories elsewhere in China face fewer labor shortages, but they also are being forced to raise wages.

As India has deregulated its economy, output has gradually accelerated to a growth rate of 8 percent a year, feeding a national euphoria and a few hopes of someday even beating China's annual growth of more than 10 percent.

Plenty of obstacles remain, however, notably India's weak infrastructure. China invests $7 on roads, ports, electricity and other backbones of a modern economy for every dollar spent by India and it shows. Ports here are struggling to handle rising exports, blackouts are frequent and dirt roads are common even in Bangalore, the center of the country's sophisticated computer programming industry.

Pervasive corruption has slowed many efforts to fix these problems. India's labor laws, little changed since they were enacted just after independence in 1947, also continue to discourage companies from hiring workers, by making it very difficult to lay off employees even if a company's fortunes sour or the economy slows.

Still, a new optimism prevails in India, bordering at times on euphoria.

"The Chinese are very good at copying things, but Indians believe in quality work, we believe in meeting pollution norms," said S.S. Pathania, the assistant general manager of the Hero Honda motorcycle factory in Gurgaon, 30 miles south of New Delhi. "I think India will pass China very soon."

An Unexpected Boom In Manufacturing

Sprawling across more than a square mile next to a gray tidal estuary, the scale of Essar Group's complex in Hazira is already impressive. Essar has its own port to bring in iron ore, its own large, gas-fired power plant for electricity. At the steel mill, giant buckets pour 150 tons of molten metal at a time to form slabs two yards wide and up to 10 yards long.

But the complex is just starting to grow. Essar is quintupling steel production and pushing forward a sevenfold increase in power generation, most of it for sale to a national grid desperately short of electricity.

Growth on that scale, especially in industries like steel and power but also in areas like car parts and household appliances, is what India has long lacked. Industrial production accounts for only a fifth of India's economic output, compared to two-fifths of China's. But this ratio is starting to rise in India as manufacturing, led by exports, grows faster than agriculture and even some service industries.

Until recently, legislation effectively barred companies with more than 100 people from competing in many industries. The laws were intended to protect tiny businesses in villages, often employing women and minorities; high tariffs were placed on imports as well.

But the result was hundreds of thousands of businesses too small to be competitive; India lags behind even impoverished Bangladesh next door in exports of garments, a big creator of jobs for China. The Indian government has responded by narrowing the list of protected industries to 326 categories of goods from 20,000 and has lowered tariffs.

Comparing factories in India to their competitors in China, many of the Indian factories are smaller but some appear more efficient.

India's stronger financial system demands higher interest rates than China's state-owned banks, making it costlier to hold the small mountains of components awaiting assembly that are often seen in Chinese factories. The Confederation of Indian Industry, a national trade group, has also been very successful in pushing companies to adopt the latest Japanese lean manufacturing techniques.

The drawback is that the nation's manufacturing boom, built on higher-quality goods made under more modern conditions than in China, is not likely to create as many factory jobs as India needs.

The Essar steel mill, for example, has been replacing old, labor-intensive equipment with more modern gear. "We were having it all done manually, but because the customers demand very high quality, we have to do it automatically," yelled Rajesh Pandita, an Essar manager, over the roar of a house-sized machine that was stretching a minivan-sized coil of steel back and forth through large rollers until it was little thicker than plastic kitchen wrap.

The Whirlpool factory in Pune uses machines, not people, to fold the steel exteriors of refrigerators. It has some of the highest productivity per worker of any Whirlpool factory in the world, with just 208 line workers producing up to 33,000 refrigerators a month.

Meanwhile, labor laws discourage flexibility. They still ban companies from allowing manufacturing workers to put in more than 54 hours of overtime in a three-month period even if the workers want to earn extra money. Firing workers is very difficult.

"Companies think twice, 10 times before they hire new people," said Sunil Kant Munjal, the chairman of the Hero Group, one of the world's largest manufacturers of inexpensive motorcycles.

Hero in Gurgaon, on the southern outskirts of New Delhi, and its archrival, Lifan Group in Chongqing, a city in western China, produce comparable motorcycles but the similarity ends there. Hero markets heavily to its domestic market, protected from foreign competition by high import tariffs, while Lifan emphasizes exports.

With scant ventilation, Lifan's factories are filled with diesel exhaust as workers test engines and ride finished bikes at breakneck speed out the doors, zigzagging past co-workers. Hero's factory in Gurgaon, where Honda holds a minority stake, has far better safety standards and excellent ventilation.

The Lifan factory pays less than $100 a month. The heavily unionized Hero factory pays $150 a month plus bonuses of up to $370 a month; nearly half the workers earn the top bonus, Mr. Pathania said.

Lifan's labor force is quiescent would-be organizers of independent labor unions face long jail terms or worse in China. Hero's workers staged a successful nonviolent protest last year to call for more contract workers to be eligible for the bonuses as well.

Overcoming Many Obstacles To Infrastructure Growth

But the biggest question mark hanging over the rise of manufacturing in India lies in whether the country has enough roads, ports and electricity generating plants to move huge quantities of goods and power the factories that make them.

Captain Abhay Srivastava, an operations manager at India's busiest port, was on duty on a recent afternoon when a phone call suddenly came in from the docks below. An enormous container ship from Qatar needed to slide 35 feet backward along the privately managed dock at the Nhava Sheva port near Mumbai to allow another large vessel to squeeze into the dock in front of it.

Captain Srivastava grabbed his white hard hat and dashed for the elevator. As soon as he reached the water's edge, a dozen laborers in orange jumpsuits began straining to arrange a cat's cradle of heavy, five-inch-thick ropes that would allow the ship to use its powerful winches to pull itself out of the way.

"They are efficient people; they don't speak a lot," said Captain Srivastava, who has visited most of the world's major ports either as a ship captain or for port training exercises. "You go to some places and they just stand around."

The efficiency of the Nhava Sheva port it approaches West Coast ports in the United States in the number of containers moved per hour shows that India is capable of producing world-class facilities.

But big as it is, Nhava Sheva is too small to handle the crush of traffic. John Deere tractors already wait in a container at the dock for one to four days before being loaded on a ship.

"If this pace of growth continues, we will see more congestion at the port," said Raj Kalathur, the managing director and chief executive of Deere's operations in India.

Similar worries prevail in Chennai, formerly Madras. "Another four or five years, we'll be choked," said M. Rafeeque Ahmed, the chairman of the Farida Group, a 9,000-employee shoe manufacturer in Chennai that needs the port for exports.

Infrastructure improvements are particularly important because manufacturing companies are buying more and more components from far-flung suppliers. Making sure all those parts arrive on time requires a reliable transportation system.

"Manufacturing is no longer done all under one roof," said Victor Fung, the chairman of Li & Fung Group, a large Hong Kong-based company that buys goods from factories across Asia for sale to retailers and wholesalers in the United States and Europe.

Indian officials are talking about expansion. Planning is under way for new wharves at Nhava Sheva, but the years-long task of construction has not yet started.

China has faced capacity problems, too. A surge in steel production in early 2004 overwhelmed Chinese bulk cargo ports. Inflation quintupled in a year, to 5.3 percent, as bottlenecks at ports, highways, railroads and elsewhere in the economy drove up companies' costs.

The Chinese response was swift and decisive. The pace of port investment nearly tripled in six months. Work crews labored around the clock to erect more cranes and expand wharves.

The Chinese economy grew at a breathtaking pace of 11.3 percent in the second quarter of this year, but consumer prices were just 1 percent higher in July than a year earlier.

By contrast, India is struggling with 8 percent inflation this summer as bottlenecks have appeared after three years of 8 percent growth.

Belatedly, India's roads and ports are improving. Just four years ago, Sona Koyo Steering Systems, an auto parts manufacturer, incurred hefty financing costs to keep a month's inventory on hand in case deliveries were delayed. Now the company's factory in Gurgaon makes six deliveries a day to a nearby Maruti car assembly plant; the eight-mile drive takes an hour or more because of constant traffic jams, but the deliveries get through.

"I'm not going to deny infrastructure is bad," said Surinder Kapur, Sona's chairman and managing director. "But a lot of our vendors are around us, a lot of our customers are close to us."

India is also starting to address chronic power shortages. But it is still a serious problem in northern India, where Mr. Kapur's steering systems factory is located. He receives electricity from the national grid just seven or eight hours a day. So the factory has three enormous diesel generators, one bigger than a typical Manhattan living room, operating at four times what an industrial user in the United States usually pays.

Despite such obstacles, India's manufacturing sector appears poised for further growth. In a country where the national symbol has shifted from government bureaucrats at aging desks to call center operators in cubicles, the next icon looks like it will be the laptop-toting engineer on a factory floor.

"The old philosophy was, 'I should work in an office, come in at 10 and leave at 4,'" said Nitin Kulkarni, 35, an engineer at the Hazira steel mill. But in recent years, he added, "there has been a revolution."

 

[ab041937]

India: Asia's emerging economic superpower--Part 1
By Tatsuo Ikenaga
The Sekai Nippo


15 years of economic liberalization

CHENNAI, India -- 1991 marked a historic turning point for India. In January that year, the Gulf War broke out, and in December the Soviet Union collapsed. The Gulf War triggered sharp hikes in the price of crude oil, depleting India’s foreign currency reserves. The demise of the Soviet Union, one of India’s largest trade partners, left the country on the verge of economic collapse.

India launched an economic liberalization program with the twin pillars of market liberalization and deregulation, separating itself from the socialist policies that had troubled its economy. China was already well into an effort to put aside Communist-style economic management in favor or reform and openness. Since then, India has achieved steady economic growth, and the rate of growth is rising.

Today, 15 years since that turning point, dramatic changes can be seen in the capital New Delhi and in India's commercial center Mumbai (previously known as Bombay), its IT hub Hyderabad, and Chennai (previously known as Madras), the industrial center of southern India. This article is the first of a 12-part series reporting from each of these cities.

[This series was originally published in the Japanese newspaper Sekai Nippo, and was translated into English by World Peace Herald.]

I visited the Apollo Hospital in Chennai, the largest private hospital in India that boasts state-of-the-art facilities. Vice chief director Uma welcomed me into her office equipped with a diagnosis bed. She joined Apollo Hospital as a doctor and was subsequently asked to join the administrative team. “Even now, when I am asked to diagnose a patient, I see the patient here and refer them to a specialist,” she says. This practice of an administrator working in the front line is rather unusual in India’s class-conscious society.

“Academically excellent Indians aim at becoming a medical doctor or a lawyer as the first choice," Dr. Rohit Barman of Mumbai’s Breach Candy Hospital explained.

"Indian students studying overseas tend to be concentrated in medical schools and law schools," Dr. Barman said.

"There are many Indian students in the United States who remain there and work as a medical doctor or a lawyer. In fact, about 20 percent of medical doctors who work at hospitals in the United States are Indians. The percentage reaches 40 percent in Great Britain.”

Indian doctors are successful in highly competitive markets and master rigid academic courses. They naturally excel in the international arena. Many study and obtain their medical licenses in other countries before returning to practice in India.

The quality of medical care in India is high. Hospitals in rural areas have many problems, but urban hospitals are equipped with high-quality medical equipment and devices, and many doctors possess a high degree of professional qualification. Patients come to these hospitals not only from throughout India but also from around the world.

Passage to the central medical hub of the world


“Some 1,400 international patients undergo medical treatments here every month,” says vice chief director Uma of Apollo.

I met Rameshni Wadhwa, a 49-year old patient from Hungary, at Apollo Hospital. In Hungary, he runs a company specializing in exterior building decoration. His hospital room is equipped with a computer connected at all times to the Internet. There is a kitchen where he can prepare simple meals and tea for himself. There is a shower and a fully furnished living room as well. Absent is the smell of disinfectant that is typical of many hospitals.

His room is almost equivalent to a 5-star hotel. Meals include vegetarian and non-vegetarian menus for Indians, as well as for Americans and Europeans.

“You can see refined care in services such as bed-making,” says Wadhwa.

He credits “the high level of medical care and affordable price of Apollo Hospital” as reasons for his decision to travel all the way from Hungary to India for his liver surgery. The cost of surgical operations is about one tenth of that in Europe and the United States.

Two years ago, a Japanese citizen underwent a successful operation in Chennai to cure near-sightedness. In Japan, the hospital has come to be known as “economical and safe.” That has created a tour boom in Japan to visit Chennai for medical care and sightseeing. Yoshimi Ishikawa, a prominent Japanese non-fiction writer published a magazine article about his experiences being treated in India to successfully cure a blood circulation disorder and rheumatism.

In Southeast Asia, competition in medical tourism has just started to attract foreign tourists. Singapore is the current front-runner, followed by Thailand and Malaysia. In South Asia, India is dominant in this field.

The promotion of medical tourism cannot be done by hospitals alone. The government’s support is indispensable.

India’s public health ministry grades the quality of service in medical facilities throughout India and assigns scores. Through the Internet and other public relations efforts, the government is promoting hospitals capable of providing high-quality care to the overseas market.

The government offers a one-year medical service visa as an incentive to international patients who come to India for medical care. The Indian government and private sector are collaborating to promote “internationally competitive” doctors and make India the medical service center for the world.

 

[ab041937]

India: Asia's emerging economic superpower--Part 2
By Tatsuo Ikenaga

India's expanding skyway


I flew to Hyderabad, the IT hub of southern India, by Air Deccan, the pioneer in India’s discount air-carrier market. Tickets are issued electronically, and Air Deccan’s bare-bones discount service provides no magazines, newspapers or food onboard -- not even a piece of candy.

Beverages are served in-flight, although for a fee. A can of Coke is 50 Indian rupees (about $1.00). This is about 2.5 times the market price. Some India states still prohibit alcohol, and beer or wine are not served.

With the expansion of a new middle-class, the tourism market is rapidly growing in India. Discount air travel especially, has witnessed a dramatic expansion. Deregulation of the airline industry opened the way for the emergence of many discount air carriers. Discount fares in turn stimulated an increase in the number of air travelers, which is growing by more than 20 percent a year.

The most notable is Jet Airways, India’s leading airline. The company was founded in 1991 when India’s economic reforms were initiated. It took off amid the country’s drastic shift from a socialist to a free market system, and is the fruit of India’s economic liberalization. It started operating domestic flights in 1993, and currently operates more than 280 flights on 48 routes. The number of passengers reaches more than 10 million per year. Its domestic share is 44 percent and surpasses Air India, the country’s flag carrier.

The company introduced various measures to improve customer service, including the establishment of 24-hour help desks, and succeeded in gaining new customers and expanding its market. Jet Airways’ success stimulated the improvement and streamlining of national carriers such as Air India, which had become complacent within a market monopoly. Its role of contributing to an increase in the international competitiveness of India’s airline industry as the whole is highly regarded.

Discount air carriers mushrooming in India


In the beginning of August, IndiGo Airlines started operation as India’s eighth private airline. The airline connects New Delhi with Bangalore and Karnataka state, among others. The think tank, Center for Asia Pacific Aviation, forecasts an increase in India’s air travelers from 23 million last year to more than 50 million a year by 2010.

There are challenges. One is that the airports in large metropolitan areas serving international traffic are already at full capacity. For these airports to increase slots, airport infrastructure renovation is necessary.

Discount air carriers are turning their attention to international routes as well. Jet Airways launched its Southeast Asia service last year, establishing Mumbai-Singapore and Chennai-Kuala Lumpur routes. The company wants to further expand its operations into Thailand and Japan. Air Sahara, the second-largest private carrier in India, is planning to launch Singapore and Malaysia routes.

South East Asia airlines has expanded its operations into China and is growing dramatically. It is now eager to expand its air routes to India, which are maintaining steady economic growth and experiencing increased air traffic demand.

In the forefront of the group looking at flights to India is Singapore. It is followed by Thailand and Malaysia, a pattern similar to the one in the medical service tourism boom.

Neighboring Sri Lanka is experiencing a rapidly growing air carrier market of its own, and is also putting efforts into India routes. Sri Lanka Airlines’ route connecting Colombo with Goa is the tenth Indian city in its route map.

“The Colombo-Chennai route is bringing in a lot of money, but passengers flying from Colombo to other Indian cities are also rapidly increasing.” Kimio Kanasugi, deputy director of Sri Lanka Airlines Tokyo office, said.

"The volume is expected to increase by 50 percent this year compared to last year,” he said.

 

[Neo]

Thursday, September 14, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\09\14\story_14-9-2006_pg5_12
India’s slow pace of economic reforms worries US investors

By Iftikhar Gilani

NEW DELHI: The United States on Wednesday said the slow pace of India’s economic reforms was worrying investors.

US Ambassador David C. Mulford told the third Indo-US Economic Summit here that there was a “pause” in India’s economic reform process and cautioned there could be “serious economic costs to any loss of momentum on the reform front.”

He further said Prime Minister Dr Manmohan Singh had expressed the hope for even higher than eight per cent growth per annum, but he has also indicated that higher growth requires continued reforms. “US firms have many unresolved legacy issues involving prior investments in India,” the US ambassador said, pointing out that the World Bank still ranked India 134 out of 175 countries for the difficulties of establishing or operating a business.

“Slow growth of FDI, on the other hand, bricks and mortar investments, reflected the continued investor concerns about governance issues and India’s reform process,” said Mr Mulford. He told an audience, which included captains of the Indian industry and commerce, that there is still a substantial body of capital waiting to be invested in India, “if the right conditions materialize.”

He said privatizations have stopped and political reality suggests that reforms of other key sectors and policies of central interest to investors will take longer than envisioned. However, Defence Minister Pranab Mukherjee, who was the chief guest, contested Mr Mulford’s view, saying: “The reforms were no stop-and-go, but a continuous process.”

Apparently referring to the difference of opinion between the ruling UPA and the Left Front, which is supporting the government from outside, he said: “There could be minor hitches in the process of reforms, but as you know only too well, democracy is about checks and balances.”

Elaborating, the minister said: “Decisions can be taken only after debate and due consideration. Hasty decision-making can have its own negative repercussions.”

Mr Mukherjee said the government is working to address issues relating to the economic reforms process.


http://www.dailytimes.com.pk/default.asp?page=2006\09\14\story_14-9-2006_pg5_12

 

[Neo]

Moving into 3rd generation mobile technology



By Anand Kumar
INDIA will finally, by next year, be moving into the 3G (third generation mobile technology) era, with the Telecommunications Regulatory Authority of India (TRAI), last week giving its recommendations to the government.

The TRAI, in its controversial recommendations, has suggested the auctioning of 3G spectrum to telecommunications companies, saying that the government could easily pick up a cool Rs14 billion as base price. The telecommunications industry regulator recommended a maximum base price of Rs800 million for allocation of 3G spectrum in the two profitable ‘A’ circles, of Mumbai and Delhi.

The suggested base price for circle ‘B’ – cities like Chennai and Kolkata – is Rs400 million, and for category ‘C’ circle, it is Rs150 million. Telecommunications operators will have to bid for additional spectrum that will be auctioned by the government. The base price alone will fetch the government about Rs14 billion.

There is an acute shortage of operating frequencies, as the defence services account for a significant chunk of the space. The government is thus in a position to auction off this scarce commodity to the highest bidders, as has happened in many countries, including in the US and Europe.

But India has had a bad experience with ‘auctioning,’ both of telecommunications and FM radio licences. When the telecommunications sector was opened up, private companies bid fancy prices, hoping to capture a major part of the market. But in the process consumers suffered, as talk time charges remained high – in the beginning it cost almost Rs20 for a minute’s conversation. Today, the average price is down to around Rs1 a minute, and mobile phone usage has flared.

Similarly, many players rushed in when FM radio licences were auctioned; later the industry negotiated a way out of a looming crisis, successfully pleading with the government for a revenue-share scheme. Likewise, in telecommunications, auctions have assumed a negative connotation.

One section of the telecommunications industry – the Cellular Operators Association of India (COAI), which represents the interests of GSM operators – has criticised the TRAI for once again reverting to the auction route.

According to T.V. Ramchandran, director-general, COAI, the high reserve price and the auction route would be harmful to the industry, and the average citizen would be deprived of access to 3G technology.

By imposing a high fee initially, the government would discourage 3G usage; instead, it should ensure that the technology becomes cheap and popular, which would result in higher revenue, both for operators and the government. The COAI also feels that the TRAI recommendations favour the CDMA mobile operators.

The association is also worried that the TRAI would ultimately promote 3G as a standalone service, requiring operators to go in for a separate service licence. It feels that the entire question had been resolved earlier, when it was agreed that 3G would be viewed as an extension of existing 2G services. The Unified Access Services Licence also allows them to offer 3G services, the telecom operators argue.

The Department of Telecommunications (DoT) has to now take a call on the TRAI recommendations. According to government sources, operators may have to pay a separate spectrum charge for operating 3G services, unlike in the past (for 2G and 2.5G services). This is because for 3G services, they will need a completely different band of spectrum

According to the TRAI, the government would have to allocate spectrum in the 450 MHz, 800 MHz and 2.1 GHz for 3G services. In each circle, operators will bid for blocks, and the highest bidder gets the frequency with the widest reach.

The present availability would ensure nearly half a dozen service providers in each circle, even after the auctioning of the spectrum. The TRAI has also recommended the setting up of a national frequency management board to handle the contentious aspect of allocating spectrum.

THE government expects 3G services to roll out by the second half of 2007. According to Dayanidhi Maran, the federal communications and information technology minister, 3G services would provide users access to broadband connectivity on their mobile phones, besides a wide range of other services, including tele-medicine and e-education.

3G services would also ensure wider coverage in rural areas, the minister feels. India has lagged behind other Asian countries, notably Japan and South Korea, in the roll-out of 3G services. Any further delay in the allocation of spectrum for 3G services would have hurt the country’s competitiveness.

India has emerged as the fastest growing cellular market in the world; in August, nearly six million new mobile phone subscribers were signed in, and for the first time new users in India exceeded those of China.

India currently has 165 million telephone subscribers (including over a 100 million cell phone users). According to Maran, there will be 250 million phone users in India by 2007, and 500 million by 2010. India has a tele-density of just 14.8; this is expected to go to 22 by next year, and 30 by 2010.

Though mobile phones are hugely popular in the cities, there is poor coverage in the rural areas. The government plans to rollout 2G services to cover all villages with a population of over 5,000, and by next year, it would cover all villages with a population of over 1,000.

The dramatic changes in the telecommunications sector have forced the government to dump its plans for a comprehensive telecom policy. The DoT has decided to tackle issues as they come up, by initiating policies. Thus, there is a policy on spectrum allocation, and there could be others on internet protocol television, etc.

WHILE the mobile phone industry has zoomed ahead in India, the country has a dismal track record in broadband connectivity. The government had set a target of nine million broadband subscribers by the end of 2007, but the figure is languishing at around 1.7 million.

Even though India features among the world’s top-five mobile telephony market, it is insignificant in the broadband area, where other Asian countries, including South Korea, Hong Kong, Singapore and Japan have overtaken it.

The government has been pushing state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) to roll-out their broadband connections. However, both the companies have failed to meet targets, though they have succeeded in hammering down the prices.

Determined not to be left behind in the broadband race, the federal government last fortnight decided to establish 100,000 common services centres (CSCs) covering 600,000 villages in the country. The objective is to bridge ‘the digital divide’ and provide a wide range of government services on an ‘anytime, anywhere’ basis.

The CSCs will be broadband-enabled (256 kbps connectivity) and offer government-to-citizen and business-to-customer services to the vast rural markets. They will offer high-quality and cost-effective video, voice and data content and services to consumers.

The project is expected to cost about Rs60 billion, and the federal and state governments will contribute about a fourth of it. The rest is to come from the private sector. The centres are also likely to generate about 100,000 direct jobs, and about a quarter million indirect ones.

Private sector companies, including international ones, are also planning to set up similar centres. Microsoft Corporation and Hughes Corporation, for instance, announced last week that they would set up 5,000, broadband-enabled kiosks in 200 small towns and rural areas across the country.

The kiosks would be run by franchisees, who would be provided adequate training by the software giant. It would enable people in rural areas to use technology for e-commerce, education and even for e-governance. The project is part of Microsoft’s ‘Project Saksham.’

 

[Neo]

India needs $320bn to boost creaking infrastructure

NEW DELHI, Oct 7: India’s Prime Minister Manmohan Singh said the country needs to spend $320 billion by 2012 to improve its creaking infrastructure, accelerate economic growth and tackle poverty.

“Our growth potential will be realised only if we can ensure that our infrastructure does not become a severe handicap,” Singh told a conference on infrastructure in New Delhi.

“The quality and capacity of our infrastructure is certainly a matter of concern to one and all,” the prime minister said.

Singh added substantial private sector investment would be needed to deal with India’s infrastructure “deficit”.

He said road, rail, air and water transport, electric power, telecommunications, water supply and irrigation needed investment of about $320 billion between 2007-12.

Singh singled out the country's power sector as one of the biggest economic trouble spots and asked India’s states to take immediate steps to make the sector financially viable.

He said high transmission and distribution losses accounted for almost 40 per cent of the electricity produced.

“No civilised society, nor a functional commercial entity, can sustain losses on such a scale,” he said.

He said a growth rate of 10 per cent could be achieved with sustained efforts to improve the reliability of power supplies, boost agriculture and manufacturing growth.

India’s economy grew by 8.4 per cent in the financial year to March 2006 and expanded by a better-than-expected 8.9 per cent in the first quarter of the current year.

Singh stressed the need for a faster and more inclusive growth process.

“If we have to make a decisive impact on poverty and provide productive employment for our young population, we must further accelerate the pace of growth to nine to 10 per cent.”

Economists say that country needs faster growth to significantly improve living standards in India where some 290 million out of the population of 1.1 billion live in poverty, according to the World Bank

http://www.dawn.com/2006/10/08/ebr7.htm

 

[Neo]

India's mystifying rise

There were many smiling Indian faces last week. Our economy again beat forecasts and grew 8.9% in the April-June quarter. India's economic rise bewilders Indians. No one quite understands why this noisy and chaotic democracy of a billion people has become one of the world's fastest growing economies.

This is the fourth year we are looking at around 8% growth, and this follows 22 years of very respectable 6% annual growth.

With 25 years of high growth per capita income gains have been huge: from $1,178 in 1980 to $3,051 in 2005 (in ppp). What puzzles everyone is that India is not following any of the proven paths to success.

Compared to the classic Asian strategy exporting labour-intensive, low-priced manufactured goods to the West India's economy is driven more by consumption than investment, domestic markets more than exports, services more than industry, and high-tech more than low-skilled manufacturing.

With consumption accounting for two thirds of GDP, ours is a people friendly model; hence, inequality has grown much less. Our Gini index is 33, compared to 41 for the United States, 45 for China, and 59 for Brazil. (In a perfectly equal society Gini is zero.)

Our domestic orientation has meant that our economy is far more insulated from global downturns, and is less volatile. More importantly, 30-40% of our GDP growth is due to rising productivity rather than mere increases in capital and labour.

Ironically, while high end, capital intensive manufacturing is succeeding, we have failed to create a broad-based industrial revolution based on low end, labour intensive manufacturing. Hence, we are not creating enough jobs. This is a real worry how will we move our vast army of people from the rural to urban areas?

 

[Goodperson]

Link dude?

 

[Goodperson]

Tatas are out to conquer the world
http://ia.rediff.com/money/2006/oct/06forbes.htm?q=bp&file=.htm

Chris Noon, Forbes | October 06, 2006

Think of India, steel and consolidation and only one name springs to mind--that of metal maharajah Lakshmi Mittal.

Yet the Rajasthan-born, Kolkata-educated industrialist is missing from this plot. Tata Steel, part of the sprawling Tata conglomerate whose interests include cars, telecommunications, software consulting, hotels and consumer goods, said Thursday it was considering a bid for Anglo-Dutch rival Corus, illustrating the pressure the steel industry feels to consolidate.

Tata stressed that a bid for Corus, which was formed in 1999 through the merger of British Steel and Hoogovens, was only one of the options it was considering and there was no certainty an approach would be forthcoming. Even so, investors loved it. The announcement sent shares at Corus up 12.52 per cent, to 458.5 pence ($8.61), in London.

When Tata's chairman, 68-year-old Ratan Tata, a Cornell-educated architect, succeeded his uncle J.R.D. Tata at the helm of the conglomerate 15 years ago, he set out to unite, refocus and modernise the company's 100 or so largely independent businesses. Aided by cash from its Tata Consultancy Services--the conglomerate's software unit--and the growth of India's economy, he has rebuilt the company's shareholdings in Tata Steel and increased its revenue sixfold.

Tata said a year ago that he was now looking at opportunities to invest in steel companies in developed countries, "but we are making sure that we have secure access to raw materials because I really believe that owners of iron ore are going to rule the industry. They will be the OPEC of the steel industry."

Back in June this year, it seemed as though Mittal and two billionaire Russians would swallow up the steel industry. One was Kremlin-endorsed Muscovite Alexei Mordashov and the other was his baby-faced compatriot, Roman Abramovich, a London-dwelling soccer fan with a big, byzantine asset portfolio. First Luxembourg-based steelmaker Arcelor announced a deal to buy Mordashov's Severstal as it tried to fend off a hostile takeover bid from rival Mittal Steel. Then Abramovich was said to be in talks to buy Corus.

Neither came to fruition. On June 25, Mittal Steel decided to merge with Arcelor, with the new company to be called Arcelor Mittal. The merger has been successfully approved by shareholders and directors of Arcelor, making the company the largest steelmaker in the world. Abramovich never made a move for Corus.

Corus, which is much larger than its potential suitor and employs more than 40,000 people, declined comment Thursday.