Indian Economy - News & Updates - Archive

[Neo]

India’s industrial output grows robustly

NEW DELHI: India’s industrial production grew faster than expected in March from a year earlier due to strong factory output, but analysts said slowing inflation may allow the central bank to hold interest rates steady for a while.

Industrial output in March rose an annual 12.9 per cent, data showed on Friday, above forecasts for a 10.4 percent rise, and analysts said that the economy looked set to meet a government estimate of 9.2 per cent growth for the fiscal year 2006/07.

Data also showed inflation, as measured by wholesale prices, fell to its lowest in 2007. The wholesale price index rose 5.66 per cent in the 12 months to April 28, easing towards the central bank’s fiscal year-end target of close to 5 per cent.

“Even though the industrial output for March is strong, with inflation coming off it will give more flexibility to the central bank to keep interest rates on hold,” said Rajeev Malik, economist at JP Morgan in Singapore.

The central bank has raised its main lending rate five times in less than a year to curb inflation and rein in high credit growth. The rate stands at 7.75 percent and the market has broadly been expecting another increase in the next few months.

Manufacturing production, which represents more than 75 per cent of industrial output, rose 14.1 per cent in March from a year earlier, compared with 12.3 per cent growth in February.

Industrial output in Asia’s fourth-largest economy has been growing strongly on the back of robust consumer demand and exports. In February it grew an annual 10.8 per cent.

Interest rate increases are starting to stem consumer spending, but companies’ order books continue to build and capital goods spending remains solid.

India releases gross domestic product data for the March quarter and the fiscal year to March 31 at the end of the month.

http://www.thenews.com.pk/daily_detail.asp?id=55440

 

[Bushroda]

Kingfisher Airlines: Soaring ambition
P R Sanjai / Mumbai May 13, 2007

Conventional wisdom can question some of the things that Vijay Mallya, whose liquor company UB controls Kingfisher Airlines, does. For instance, why is a two-year old domestic carrier, still three years away from international operations if it played by the book, buying A380, the world largest civilian aircraft?

So far, the double-decker aircraft, which can seat 853 in an all-economy configuration, has found buyers only among large international carriers like Singapore Airlines, and none among the busy US carriers.

Mallya does not bother to explain. “I do not want to keep my aeroplanes on the ground. Wait and you will see a unique product in the international sky,” said Mallya, waving a Kingfisher beer bottle on board the aircraft’s high-decibel flight from New Delhi to Mumbai, whose ambience resembled a Page 3 party. The trouble is that even the most conventional thinker cannot dismiss what Mallya says as hyperbole. He has earned the right to be taken seriously.

Launched 24 months ago, Kingfisher packed a surprise right at the beginning. Everyone thought it would join the crowd of low-cost carriers. But once out of its shell, the airline offered full service and no price concessions. Its swank new aircraft and a very efficient front office added to the appeal.Starting with a minuscule 0.07 per cent share of the market, Kingfisher soared to 7.7 per cent after 12 months and 10.6 per cent in April this year. At the same points in time, the market share of Jet Airways, the market leader and Mallya’s rival of choice, was 41.3 per cent, 33.2 per cent and 22.9 per cent.

Of course, it cannot be established that Jet’s loss is Kingfisher’s gain. Says a Jet executive: “The market has grown as more airlines have entered the scene. By dropping fares, Air Deccan (the pioneer in domestic low-far flying) has eaten into the market shares of all airlines. We have not lost any passenger to Kingfisher.”

From here on, Kingfisher’s flies into the most critical phase of its fledgling existence as it gears up to go beyond India’s borders. It has been waiting for a licence to fly to the US from the government, which says that a domestic carrier must fly for five years before being eligible to start international flights. To circumvent the clause, Mallya has set up a subsidiary in the US, Kingfisher International. However, it has yet to obtain all clearances.

Hopes arose last week when civil aviation minister Praful Patel said his ministry would grant permission to domestic airlines to fly international on a case-by-case basis.

One interpretation of it is that the five-year clause gets junked. Kingfisher plans to deploy A380s on non-stop India-US flights. Estimates say that will reduce the cost by 30 per cent.Adds Kingfisher executive vice-president Hitesh Patel, “We are very much on track with our Plan A – starting service from India to the US under the Indian flag.”

Things will not be easy in the dog-eat-dog world of international flying. “Mallya will have to secure various approvals, source engineering talent and pilots, and invest heavily in overseas stations,” say industry analysts.

Jet Airways has just revamped its international operations and set up a hub in Brussels for flying in Europe. Mallya though remains undaunted. “Kingfisher will be the biggest airline in India by 2010 not only in terms of market share, as others claim. In all the aspects, it will be the biggest. Wait and you will see,” he said, dismissing all related questions. Hyperbole? Like the man says, we will wait and see.

 

[Bushroda]

DaimlerChrysler building plant in Western India

NEW DELHI -- (AP) -- German automaker DaimlerChrysler began construction of a plant in western India Thursday so the company could meet growing demand for luxury cars in one of the world's fastest growing economies.

The plant near Pune, an automobile manufacturing hub, will be DaimlerChrysler's first fully owned production facility in the country.

Currently, the makers of Mercedes-Benz cars operate a manufacturing plant on lease from Indian automaker Tata Motors.

DaimlerChrysler is investing $67.5 million in the new plant that will have a capacity to produce 5,000 vehicles annually, the company said. It will initially employ 350 people.

Construction began after Vilas Rao Desmukh, the elected head of Maharashtra state, where the plant is located, inaugurated the project, according to the statement.

The first car from the new plant is expected to roll out in early 2009.

''As a company, we have enjoyed steady and profitable growth in India and we are looking forward to continue our success story here in our own premises,'' said Wilfried Aulbur, chief executive at the company's Indian subsidiary.

Rising middle-class incomes and the launch of new models have driven automobile sales in India, which are expected to nearly double to 2 million units by 2010.

Although small compact cars dominate Indian roads, high-end luxury cars are increasingly finding buyers among the newly rich in Asia's fourth-largest economy.

DaimlerChrysler in India sold 2,121 units of the Mercedes-Benz S-Class, E-Class and C-Class sedans in 2006, an increase of 11 percent from a year ago.

Rival car maker BMW plans to roll out at least 1,700 cars a year from its first assembly plant in southern India, which was inaugurated in March.

 

[Bushroda]

‘Second Tier’ City to Rise Fast Under India’s Urban Plan
By ANAND GIRIDHARADAS
Published: May 13, 2007

NAGPUR, India — A year ago, this relatively small, forgettable city in the heart of India did not have an air-conditioned cinema. In the sweltering heat of summer, the rich would fly one hour to Mumbai, India’s financial hub, to see a movie and stock up on Levi’s jeans, Domino’s Pizza and other big-city treats that they could not find at home.

But if the government has its way, Nagpur will become a destination city itself. In an experiment that is highly unusual for this most unplanned of countries, the government is doling out money to Nagpur and other “second tier” cities to help them modernize — fast.

The plan is to provide the kind of modern conveniences, and infrastructure, that will attract more international investors to India. In doing so, the government is following the lead of China, where the government has invested in infrastructure such as roads and airports, taking a build-it-and-they-will-come approach that has drawn foreign corporations helping to fuel the country’s boom.

India’s government is also hoping its plan will stop disasters in the making in its largest, teeming cities as more people move there in search of jobs and a more urban lifestyle.

“One hundred million people are moving to cities in the next 10 years, and it’s important that these 100 million are absorbed into second-tier cities instead of showing up in Delhi or Mumbai,” Montek Singh Ahluwalia, the Indian government’s chief economic planner, said by telephone.

Already, Nagpur, with an estimated population of about 2.5 million, is a changed city. So far, the government has allocated $280 million for projects and has paid for everything from lush parks to new roads. And investors — drawn by the hope of a boom — have built several malls and a multiplex cinema, complete with air-conditioning.

A renovated airport will become the cargo hub of India, with a terminal that will be 100 times larger than the existing one and will handle at least 100 jets at a time instead of the current five.

The government is planning an ecofriendly mass-transit system to absorb an expected surge in road traffic, years before many residents even own a car.

The government is also building a special economic zone with ready-to-use water, electricity and fiber optic cable, in the hope of attracting 100,000 technology jobs to a city long dominated by coal mining. It is providing tax breaks for companies who set up businesses there.

Since its independence from Britain in 1947, the city-building philosophy of India has been, to put it gently, laissez-faire. Except for the recently developed technology hubs of Bangalore and Hyderabad, India has not added cosmopolitan, globally connected metropolises to its old ones: Calcutta, Delhi, Madras and Mumbai.

And those cities have shown the strain as more people have poured in from the countryside in recent years.

In Mumbai, a majority of the more than 15 million residents live in slums, and a river of sewage passes through the middle of the city. Delhi is chronically short of clean drinking water and electricity.

So far, the government has pledged to spend $29 billion over seven years to upgrade 62 cities besides Nagpur. Grants are given only to cities that can show good fiscal controls and enact business-friendly policies like scaling back rent control.

No one knows if India has the stamina to make Nagpur a truly international hub, and then transform scores of other cities. But many experts say that the plan to remake smaller cities could be a key to India’s continued economic growth.

“Much of India’s future will undeniably be made in the second-tier cities,” said Ashutosh Varshney, a specialist on Indian political economy at the University of Michigan in Ann Arbor. The existing metropolises “will reach saturation points before long, or have already reached such points.”

The second-tier cities could address the needs of local and foreign corporations that have complained about soaring land prices and increasing wages in the country’s most modern cities.

Experts say the government plan could also provide a boost to home-grown businesses. More international airports, for instance, could help raise incomes for the country’s hundreds of millions of farmers by making it easier for their produce to reach export markets.

Nagpur has a head start on most of the other cities expected to receive government money. Because the government selected it as the air cargo hub for the country, skeptical investors have more hope that this obscure city will eventually rank with the busiest air centers in the world.

Today, the Nagpur airport is an airstrip. Visitors deplane and walk across the tarmac to enter the terminal. It takes 30 seconds to traverse the entire terminal from arrival gate to taxi stand.

The blueprints foreshadow radical change. Nagpur got its first international flight just 18 months ago, but it is already planning a second runway long enough for jets like the Airbus A380 superjumbo. A new terminal, already being built, is designed to accommodate 14 million passengers a year.

Next to the airport is a vast special economic zone, an enclave of relative economic freedom designed to attract investors. Boeing is already setting up a maintenance hub there and in an adjoining technology park. Indian companies that do outsourcing work for American and European companies like Satyam Computer Services and HCL Technologies are buying land.

Some worry that all the change — which has already caused real estate prices to soar in the city — is fueling a bubble economy that could burst. Alok Tiwari, the executive editor of The Hitawada, the local newspaper, said a boom cannot last unless more jobs are created, increasing buying power.

“We’ve got to create opportunity, not just take land and build a mall there,” he said.


Yet others say such development will eventually take on a life of its own, driving the economy by raising people’s expectations and willingness to work hard to afford the new luxuries appearing before their eyes.

Vishwas Chaknalwar, a developer, put it this way. “Once you wear Pyramid clothes,” he said, referring to the new Pyramid mall here, “you cannot wear anything else.”

 

[Bushroda]

India's 'madness' is worthy of attention
2007/5/12
By William Pesek

A quiet revolution is unfolding in India and it could say much about the future of Asia's fast-growing economies.

In New Delhi, Finance Minister Palaniappan Chidambaram is standing by as the rupee rises. It has gained almost 10 percent versus the U.S. dollar over the last 12 months, and 18 percent against the yen. To say that hasn't gone over well with India's business establishment would be a gross understatement.

Take Munish Saigal, director of foreign exchange at Ranbaxy Laboratories Ltd., India's largest drugmaker. He says the rupee's advance to a nine-year high against the dollar is "madness" and won't last.

"The rupee is massively overvalued and there needs to be some sanity to find out what the appropriate level is," Saigal told Bloomberg reporter Sam Nagarajan last month. Also last month, Ganesh K. Gupta, president of the Federation of Indian Export Organisations in Mumbai, said the rupee's appreciation "is a disaster for the export community."

Chidambaram seems to think otherwise, and India's 1.1 billion people will be better off in the long run for it. Ditto for the rest of Asia, if it were to follow India's lead.

Earlier in the year, Indian officials seemed to try their hand at halting the rupee's ascent. In January and February, traders buzzed about government efforts to sell the currency.

The finance minister no longer seems to be fighting the tide. Indian officials may realize that pumping up economic growth with a weak currency is counterproductive. It takes pressure off politicians to modernize economies and reduces the urgency for entrepreneurship in the private sector. It increases the risk of importing inflation amid high commodity prices.

Weak-currency policies give investors fewer incentives to move capital your way. Also, amassing hundreds of billions of dollars of U.S. Treasuries is an unproductive use of savings. That money could be put to better use building roads and power systems and paying for education and health care at home.

One of the best reminders of the futility of obsessing over currencies came from Paul O'Neill in December 2002, when he was U.S. President George W. Bush's Treasury secretary. O'Neill, a former Alcoa Inc. chairman, said good chief executives "don't live and die on exchange rates." In other words, companies bellyaching about currencies are just looking for state help.

It's not easy for executives in a developing nation to compete globally with U.S., European and Japanese peers. Yet relying less on a weak currency could raise India's corporate game to new heights. A key reason China lacks India's entrepreneurial spirit is that China's companies are, thanks to a weak yuan, focused on exporting goods cheaply -- not innovating and creating new ones.

Is India's currency tolerance spreading in Asia -- especially to North Asia? Well, certainly not to China or Japan, both of which work hard to keep their currencies weak. Yet there are glimmers of hope in South Korea.

Korean Finance Minister Kwon Okyu seems to be engaged in his own experiment of sorts with a stronger currency. The won isn't appreciating much versus the U.S. dollar. It has gained just 0.9 percent over the past 12 months. Against the Japanese yen, though, the won has risen almost 9 percent.

Kwon's tolerance for a stronger won has great significance to economists such as Nouriel Roubini, chairman of New York-based Roubini Global Economics LLC.

"Korea is an important example of a nation trying to get off the Bretton Woods II system," Roubini said May 4 at the Asian Development Bank's annual meeting in Kyoto.

In Kyoto, Roubini told me more about his concerns that Asia is setting the stage for another financial crisis, more of its own making than the last one.

"When you look back at this period years from now, we will say Asia learned the wrong lessons from 1997 and created another currency crisis," Roubini said.

The reference here is to the Bretton Woods II system that has emerged since 1997. After the Bretton Woods regime of pegging currencies to gold collapsed in 1971, many nations just pegged to the U.S. dollar. By the late 1990s, much of Asia couldn't maintain that arrangement and currencies plunged.

What followed was recognition of the wisdom of flexible exchange rates. As the 2000s began, though, governments under pressure to boost growth opted to help exporters with weak currencies. And many will argue the ends have justified the means. Asia excluding Japan will grow 7.6 percent in 2007, and 7.7 percent next year, the Asian Development Bank said.

Today's growth may come at a cost in the long run. "This new model is leading to excessive monetary and credit growth, asset bubbles in stock markets, housing markets and other financial markets that will eventually lead to a build-up of financial vulnerabilities," Roubini said. "That could trigger a financial crisis different from that of 1997, but that could be potentially as severe," he said.

That's why Korea's flirting with a stronger won may be an important harbinger of sobriety in North Asia. The real test will be whether the country allows the won to surge versus the dollar.

In the age of globalization, a strong currency is ultimately a sign of confidence in an economy's prospects. Let's hope India stays the course, and others in Asia follow its lead. That would be anything but madness.

 

[Neo]

India may buy 4-5 million tonnes wheat to build stocks

NEW DELHI (May 13 2007): India might import four to five million tonnes of wheat this year to build stocks to meet any sudden spurt in demand, Farm Minister Sharad Pawar said on Saturday. The country is looking to import wheat for the second year running with government purchases of domestic grain likely to fall short of its target figure.

The State Trading Corp has already tendered to import one million tonnes of wheat. The bidding deadline for the tender closes on May 21. "We may import four to five million tonnes of wheat this year to build stocks for emergencies," Pawar told reporters on the sidelines of a meeting on farm research.

"We have enough for this year but we want to build stocks." Pawar added as on April 1 government had stocks of 4.5 million tonnes of wheat and state agencies have since that date purchased 9.2 million tonnes of wheat from farmers.

The government needs 12 million tonnes of wheat annually for the public distribution system and welfare schemes for the poor. The Food Corp of India buys wheat from farmers on behalf of the government. It hopes to buy 12-13 million tonnes by June 1. It had hoped to buy 15 million tonnes.

Lower purchases of the grain in 2006 forced India to go in for expensive imports totalling 5.5 million tonnes. Pawar said it was difficult to say how much wheat would be procured this year. "We are having discussions with state governments on low procurement."

India has one wheat crop a year, mostly in its northern states, and output has been stagnating around 70 million tonnes annually while consumption has been growing. The farm ministry has forecast the wheat crop will rise to 73.3 million tonnes this year from 69.4 million in 2006.

http://www.brecorder.com/index.php?id=563022&currPageNo=2&query=&search=&term=&supDate=

 

[Neo]

SBI reports 75pc rise in quarterly income

MUMBAI: India’s largest lender State Bank of India on Saturday reported a 75 per cent rise in its quarterly income, beating expectations as strong loan growth and lower taxes boosted earnings.

SBI said it would venture into more profitable businesses like private equity, wealth and pension funds management in its efforts to catch up with smaller, but nimbler private sector rivals such as ICICI Bank, HDFC Bank.

“The corporate strategy and new business group has been created to focus on emerging opportunities,” SBI said in a statement.

Its Chairman OP Bhatt told reporters in Kolkata, “we are in advanced stages to enter areas like general insurance and an infrastructure fund. We will raise about a $1 billion by June.”

The state-run bank said net profit for the January-March quarter was Rs14.93 billion ($362 million), up from Rs8.53 billion reported a year earlier.

A Reuters poll of analysts had forecast a 22 per cent rise in net profit to Rs10.44 billion.

Full-year profit rose a modest 3.1 per cent to Rs45.41 billion due to additional provisions for taxes and loan losses, the statement said, adding loan loss provisions for the year rose nearly 10 times to Rs14.3 billion.

For the January-March quarter, the bank had improved its operational performance with net interest income jumping 22 per cent on year to Rs43.2 billion.

Earnings were also helped by a 2 per cent fall in taxes at Rs10.63 billion.

SBI’s pre-tax profit for the quarter rose 21 per cent to Rs39.68 billion.

Interest income of banks have been growing as companies have expanded and individuals bought homes and cars in an economy estimated to have grown 9.2 per cent in 2006-07.

The boom has however stoked inflation during the year, making the central bank tighten liquidity which led to a jump in deposit and lending rates, hurting banks’ profit margins.

The faster rise in deposit rates was reflected in the bank’s interest expenses, which surged 46 per cent during the quarter to Rs72.21 billion.

SBI’s Bhatt expects no let up in pressure on profit margins.

“This year we are expecting more pressure on net interest margins,” said Bhatt. “I don’t see any easing of pressure.”

Shares in SBI slid 20 per cent in the March quarter, faring worse than the 7.7 per cent drop in the banking sector index.

http://www.thenews.com.pk/daily_detail.asp?id=55602

 

[Bushroda]

An Indian summer for investors?
Post Online, UK

With a booming economy and a vast untapped market of middle-class clients needing insurance cover, many UK-based insurers are looking to bask in the sunshine industry of India's insurance sector. Rachel Gordon reports

There is plenty about India that appeals to the British. Food, of course, is one and Shilpa Shetty quickly won a big fan base after appearing on - and winning - Celebrity Big Brother 2007. The Indian insurance sector, and the investment opportunities it presents, is also hot stuff right now.

It seems there are constant references to the phenomenal success story that is the Indian economy, which is growing at some 9% a year. It is predicted the country will move from being a third world to first world country in a single generation. In contrast to the UK, where the population is ageing and insurance take-up is high, 60% of India's population is under 30 and the insurance market is practically untapped.

Various figures exist, but it is reported that 80% of the population do not have life cover, while the Indian non-life market is predicted to grow by 39% in the period 2005-2010.

Take-up is rising across the board to include both life and general insurance, but with such strong fundamentals, it is clear India has the potential to be a hugely attractive emerging market.

Until the year 2000, there was no scope for outsiders to participate in Indian insurance, with two main state-owned insurance companies - the Life Insurance Corporation of India and the General Insurance Corporation of India - covering the life and general insurance sectors. All that changed with the Insurance Regulatory and Development Authority Act 1999. This allowed the entry of foreign companies into the market, provided they held no more than a 26% investment and partnered with an Indian company. At the same time, an overall regulator was established - the Insurance Regulatory Development Authority.

Once the market opened up - albeit in a limited way - a wave of worldwide insurers and affiliated businesses headed east. Foreign companies currently account for 27% of the Indian market, including Allianz, Aviva and AIG.

Neeraj Tuli, who spent 15 years with insurance lawyers Kennedys, says he has no regrets about leaving London for India. He is now senior partner with Tuli and Co, which has offices in New Delhi and Mumbai. The firm is associated with Kennedys and like its UK counterpart specialises in insurance-related matters. He describes the insurance sector and indeed the economy as "buzzing".

For potential and existing investors, the key question is when the government will allow foreign companies to up their stakes in Indian insurance ventures from the current 26% to 49%. Mr Tuli explains that this will happen - but no one knows exactly when. It was initially mooted that this would take place from January 2007, but is now on the back burner. "It was announced in the finance minister's speech in the 2004 budget and had a great deal of support. However, there is a lot of other stuff going on and I think we will have to wait until after the next general election in 2009," he explains.

He points out support to raise current cap was not universal: "State-owned insurers have around 1.8 million employees, are massive and often inefficient organisations. They would not want to lose further market share and so have lobbied against the move, but I feel it is unstoppable."

Kavita Pandey, a consultant with the broker Aon, who manages their India desk from London, says pressure is growing: "Recently, the US Ambassador to India, David Mulford, urged the finance minister to raise the cap not just up to 49% but allow the foreign investors the controlling stake."

Positive impact

Indeed, Mr Tuli says the evidence of the positive impact of overseas insurers is clear to see: "Previously you had a market where there were only agents rather than brokers. We now have at least 20 firms that are overseas brokers. It was feared that many joint ventures would not work out between local companies and overseas insurers, but they generally have. The amount of business going on, combined with the huge middle class, its assets and demand for pensions and insurance makes India hugely attractive."

From practically no choice, Indians can now benefit from a wide choice of providers, advisers and distribution channels. Mr Tuli adds that a further benefit is in the pipeline: "The market is all price-driven because of the tariff system. This meant all products were basically the same. From next year, wordings will be set free, and so there will be far more variation and, in particular, brokers will be able to show their worth."

Ms Pandey says this move will mean a bigger role for brokers, but will also mean that longer-term margins will be thinner. Although, she adds: "We will see increased competition for product innovation, which is the ideal opportunity for the UK underwriters to offer tailor-made products and solutions in niche industries like energy, power, construction, banking, and the financial services industry. Product lines, which are still underdeveloped but have gained increasing importance, are health insurance, weather insurance and natural disaster coverage."

She says: "The total market penetration is still just over 3%, leaving huge untapped potential." Meanwhile, competition is bringing benefits all round and she adds: "State-owned companies have been adapting themselves to competition by streamlining their operations, placing better control on operating expenses, investing in IT and launching new products - particularly packages."

In 2003, Aon became the first broker to open in India, but another broker thriving in there is Howden. Chief executive officer Praveen Vashista joined just three years ago. His early career had been with the nationalised GIC, which he joined in 1983.

It is often said now that there is vast pool of highly qualified labour for the insurance sector and then it was no different - some 400,000 people applied for around 150 places. After subsequently working for Zurich, Mr Vashista decided to join Howden: "As in the UK, we specialise in liability insurance, but we have a much wider base and we are also looking at launching a personal-lines operation. In three years and from a standing start, we now have six offices."

He explains Howden is currently recruiting and has been able to attract a number of new staff with MBAs: "Insurance is seen as a sunshine industry. A lot may prefer the idea of investment banking and consultancy, but we can offer a lot of opportunities and demand for insurance is expected to surge."

Meanwhile, Andy Bragoli, Howden's managing director in the UK, says India is his firm's fastest-growing business: "Deregulation is the catalyst and as soon as it is permitted we would look to go up to 49% ownership. If you are in early, it gives you the advantage of grabbing market share."

Getting in on the act

Howden was already placing business on behalf of UK-based Indian companies using the London market, now that it is based locally it continues to use this, as well as insurers in Singapore. "It makes sense for British companies. Corporate governance is good on the whole and legislation has parallels with UK law. There are high standards of education and the enormous middle class creates a ready workforce. Most offices are in parks with excellent facilities, for example with gyms and restaurants. It makes for a good working environment and English is the language of business there," he says.

Loss adjusters are not prepared to be left out either. Anuj Puri has worked in Birmingham and is a founder of Puri Crawford in India, which has three offices. He says insurers can take a slightly tougher stance to paying claims than in the UK. "Things move a bit slower. You need to make sure you have the right documentation, which may be less detailed than in the UK, and prove what has happened," he explains. "Generally though, standards are high - it just takes a bit more time. And regulation is good - if anything, the market is too tightly controlled and many businesses would like to be more entrepreneurial - things are changing though and a different mindset is emerging. You only have to see the amount of business being done here to realise how well insurers are doing: it's a very decent market."

Everyone with an interest in the insurance sector in India mentions the youth and ambition of the workforce and their training is due to be increasingly handled by the Chartered Insurance Institute. There is already the Insurance Institute of India, which provides a range of training and professional qualifications, but the CII believes it can offer complementary study from soft skills to associateship.

Steve Jenkins, business development director for the CII, comments: "This is a new market for us, we opened our first office in the country, in Mumbai, in March. The catalyst was the growth of the offshoring market and we were asked to deliver professional development services largely to those working in call centres." The CII's clients include Aviva and it has also appointed a head of business development for the country in Sainesh Dar.

Mr Jenkins explains many Indians view training as critical: "There is an enormous hunger for self-development. If they join a call centre in a junior role, they will want to know how long it will take to become team leader. They want good technical ability and if they are told a particular course of study will take say 12 months, they will say their aim is to do it in six. Designations matter and they want to prove themselves to their families."

Companies that want a stake in the Indian insurance market need to take careful advice, however. They need to choose the firm they partner carefully - many have opted to work with those in the same sector, but this is not compulsory.

Among those advising on partnerships is Grant Thornton, which can assist with matchmaking. Ipe Jacob, senior partner in financial markets, says: "Distribution is developing fast whether it is brokers, the internet or bank assurance. Customers were not being particularly well served by a nationalised industry - it was overstaffed and unprofitable. British insurers who want to invest are making an error if they sit back and wait and see. The opportunities are there now and the minority stake will grow to 49% and, given time, it will go beyond this."

After the gold rush

His colleague Anuj Chande, head of Grant Thornton's Indian Group, comments: "The US, Japan and Germany have probably invested more in India, but those who are in at the start of the gold rush will gain most."

Lloyd's is also planning to increase its presence in India. Although the Chinese non-life market is four times as large as the Indian market, Lloyd's writes almost two-and-a-half times more business in India than in China. It has now set up a liaison office in India, which will be used as a base for improved access to the Indian insurance market, marketing and to educate potential clients about Lloyd's.

It is doing this in collaboration with KPMG in India and Mr Chande comments: "This is a good move as Lloyd's is a tremendous brand but has a high cost base, so it makes sense to focus on marketing locally and placing business from the UK."

There is unanimous agreement that India presents huge scope. Yet no matter how strong the fundamentals, there are no guarantees. There are signs that some call centres are struggling to retain staff and some insurers have pulled out of offshoring to return jobs to the UK. Some who visit say they are disturbed by the starkness of poverty - those in desperate need are on the pavements seconds away from the opulence of luxury hotels and prestige offices - and indeed by the centuries-old but iniquitous caste system.

Yet, business realism prevails and Ms Pandey concludes: "With more than 1.1 billion people, India is the second-largest single market and has the fourth-largest economy in the world. Its growth in the last decade has been incredibly rapid, most notably in computing and related high-tech areas. Yet poverty, malnutrition and environmental issues remain widespread, with more than 70% of the population still living in rural areas. India is a country not only of massive contrasts, but also of massive opportunity."

 

[Bushroda]

India Wakes Up to E-waste as Economy Booms
13/05/2007

NEW DELHI (AFP) - Environmentalists, alarmed by surging demand for consumer gadgets in India, are pushing manufacturers to tackle mounting piles of hazardous electronic waste.

India's 300-million strong middle class is grabbing gadgets as global competition pushes down costs of electronics which a decade ago were beyond the reach of many households.

"We're raising the red flag," said Vinuta Gopal, spokeswoman of the Indian chapter of environmental group Greenpeace International.

"India is producing semi-conductors, manufacturing components and the computer sector is seeing a meteoric rise," she said.

"Most of these products are made with hazardous chemicals... if the industry doesn't take responsibility and the government doesn't fulfil its leadership role... then e-waste will blow up on our faces," she said.

India, which annually spews 146,000 tonnes of e-waste, has no specific legislation but recently widened an eight-year-old anti-pollution law to handle the problem.

"E-waste is regulated under these rules," junior environment minister N.M. Meena told parliament earlier this month but added that an exercise had also begun to monitor electronic garbage.

"The Central Pollution Control Board has undertaken a study for preparation of a 'guideline-document' for the sound recycling of e-waste," he said.

But environmentalists called for stronger measures.

"Mere guidelines are not enough to tackle e-waste and what we need are clear-cut policies and rules on re-cycling, waste management infrastructure and investment," said Rajiv Agarwal, director of the Toxics Link environmental forum.

"The government is shying away from taking firm action because it does not want a framework of regulations for the IT industry," Agarwal told AFP.

Global consultancy firm Frost and Sullivan estimates India's electronics industry will grow by 30 percent annually to 2.5 billion dollars in 2010.

"The industry in India is buzzing with activity," said Sathyamurthy Sabarinath, a technology analyst at Frost and Sullivan.

The growth is propelled by burgeoning demand for telecom equipment as well as an astronomical demand for computers in India where 25 million people join the middle class every year.

The computer industry is worth seven billion dollars with 90 percent of the production meant for the domestic market, according to official estimates.

Frost and Sullivan warned the industry would need to work out methods to handle e-waste.

India's Manufacturers' Association for Information Technology (MAIT) said it was launching a project involving India, the European Union and Switzerland to "help, adapt and facilitate waste processing units" that would take up to five years to complete.

However, the states of Maharashtra and Karnataka, hub of India's IT industry, have already set up independent processing units to recycle hazardous wastes, said MAIT president Winnie Mehta.

"In Europe it was a consumer-driven movement but the challenge here is that guidelines are required to ensure that what goes inside is not hazardous as well as rules to determine the end of lifespans of products," Mehta said.

India's largest cities -- Bangalore, Chennai, Kolkata and Delhi -- alone generate 29,000 tonnes of e-waste annually, a chunk of which finds its way to smaller towns where it is cannibalised for anything of value, pollution control officials said.

"This secondary market feeds a hazardous recycling industry which is unregulated and impossible to tackle at this stage," said a senior official at the Central Pollution Control Board, the national pollution watchdog.

 

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Indian Sun could set tone for future of newspapers

With both News Corp and Associated eyeing the vibrant sub-continent, James Robinson looks at eastern promise lightening the gloom at home

Sunday May 13, 2007
The Observer


Indians who already watch Rupert Murdoch's Star TV could soon be consuming the Sun. The News Corp chairman has plans to launch his iconic tabloid in the world's second-most populous country. His joint venture with the aptly entitled Indian media group Sun TV shows he still knows how to launch papers as well as buy them.
Murdoch is not the first Western newspaper owner to spot India's potential. That plaudit goes to Independent proprietor Sir Tony O'Reilly, who has a long-established joint venture with JPL, publisher of Hindi paper Dainik Jagran

And earlier this year, Daily Mail owner Associated Newspapers announced an alliance with another newspaper combine, Delhi-based India Today group.
Like other Western companies who want to enter one of the world's largest emerging markets, English papers are attracted by a vibrant economy that is expanding at close to 10 per cent a year.

In that sense, newspaper groups are no different from other companies whose plans to tap into markets abroad have been given greater urgency by the realisation that their home market may be reaching maturity - or be, in the faintly sinister parlance of the City, 'ex-growth'. But some special factors make India particularly attractive for publishers.

English remains an important means of communication in a country where 24 different languages are each spoken by at least a million people each. There are already dozens of English-language titles, including the Times of India, the county's most respected paper. With a circulation of around 1.5 million, it is one of the largest 'quality' papers in the English-speaking world.

Just as importantly, a more educated population and rapidly improving literacy levels mean the market is growing rapidly. Magazine groups Conde Nast and Dennis Publishing, owner of Maxim, have also established footholds in India. Conde Nast's UK managing director is said to harbour huge hopes for the Indian Vogue and has spent a lot of time in the country over the past 12 months.

The World Association of Newspapers says the number of papers sold daily in India rose by 33 per cent between 2001 and 2005, while in China circulation jumped by 28 per cent between 2000 and 2004.

Deccan, India's second-biggest newspaper publisher by market value, said this month that according to financial news service Bloomberg, advertising rates in India will rise by 30 per cent in May. Earnings in the last three months of 2006 rose by 52 per cent. Profits at both New Delhi-based HT Media, the biggest publisher, and Kanpur-based Jagran, the largest producer of regional-language newspapers, more than doubled.

The seemingly inexorable decline of the newspaper in Europe and, more dramatically, in North America sometimes makes the industry sound doomed, regardless of its heavy online presence.

Overall, however, global newspaper sales are on the increase, a fact which is all too often ignored by gloomy commentators in the West, who need only look eastwards when optimism is in short supply at home.

A well-established middle class with massive disposable income makes India particularly fertile ground for a newspaper like the Daily Mail, which is adept at identifying readers' interests. Although its plans are a closely guarded secret, all the indications are that the mid-market tabloid will closely mirror the look, feel and content of its British parent, even if it does not go by the same name.

Associated has sent Terry Shuttleworth, a long-serving former Daily Mail night editor, to the country to work on the project, described as a mid-market English-language tabloid.

He will be joined by Eric Bailey, who was deputy editor at the Mail on Sunday. Shuttleworth took early retirement a few years ago after honing his skills on the production side at the company's flagship title. He came out of retirement to work part time for his former employer in Dublin last year, working three days a week as consultant editor on the Irish Daily Mail before its launch.

'Now Associated have given him two or three months in India at ever higher rates,' a former colleague jokes.

Less is known about Murdoch's plans for the Indian Sun. It may encounter more competition: the mid-market concept is less embedded in India, but the 'red-top' tabloid has been much copied.

Despite India's appeal, establishing a foothold in the country may have remained little more than an aspiration until recently, when the government decided to relax strict laws on foreign ownership of media assets. Overseas firms can now own 26 per cent of an Indian media company, and will be hoping those rules are eased still further. O'Reilly has proved particularly skilful at schmoozing politicians in Australia and South Africa, taking minority positions in home-grown groups and slowly exerting greater control.

He has a head start on Murdoch, but few would bet against the owner of the British Sun creating an Indian equivalent that could one day eclipse its progenitor.

 

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60,000 Indian IT professionals in US return home: Reports

New York, May 14: India's fast growing economy and leaping information technology sector is attracting home more and more Indian from the Silicon Valley and The Indus Entrepreneur Group (TIE) estimates that around 60,000 may have returned in recent years, a media report said today.

No region of the United States has been more affected by this trend than Silicon Valley. TIE had reported in 2003 that between 15,000 and 20,000 Indians have returned and charter member of the organization Vish Mishra told San Jose Mercury News that the trend had continued and about 40,000 more had gone back in the last four years.

Mishra, who is a senior venture partner with Clearstone Ventures, said the flow of investment capital to India also has expanded, much of IT from Silicon Valley VC firms.

Clearstone Venture partners now has an office in Mumbai, as do many other firms that either are based in or originated in Silicon Valley.

During the 12-month period that ended in August 2006, Mishra told the paper, VC firms invested 2 billion dollars in early and late-stage companies. The report quotes a study released earlier this year by Anna-lee Saxenian of the University of California-Berkeley and by Duke University, as saying Indians founded 15 per cent of all Silicon Valley start-ups.

The study also found that 53 per cent of the science and engineering workforce in the valley is foreign-born, and that one-quarter of immigrant-founded engineering and scientific companies set up in the United States during the past decade were by Indians.

These companies rang up 52 billion dollars in sales and created 450,000 jobs. No wonder, notes the paper, some business and policy leaders are sounding alarm bells about American competitiveness in general and Silicon Valley's future as a technology leader in particular.

The Mercury News says there isn't a single major information-technology company in the United States that hasn't set up operations in India.

It companies are attracted by low-cost, highly skilled workforce; 3.5 million white-collar us jobs, along with 151 billion dollars in wages, are expected to be outsourced by 2015, with India the top outsourcing destination, the paper says quoting a report by Forrester Research.

But these companies also see a market of potentially EPIC proportions, the paper says. Half of India's 1.2 billion people are younger than 25. That's 600 million people coming into their peak consuming years in an economy fueled primarily by exploding retail growth.

As Amar Babu of Intel India, where 15 per cent of the workforce is made up of Indians who returned from the United States, explained, "Intel views India as a critical research and development site. At the same time, India is a consumption market for it. A lot of future growth will come from these emerging markets".

 

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Oil drives core growth to 8.6%
TIMES NEWS NETWORK
[ SATURDAY, MAY 12, 2007 02:46:58 AM]

NEW DELHI: A turnaround in crude oil output and higher production by refineries pushed the growth of six infrastructure industries to 8.6% in 2006-07 against 6.2% in the previous fiscal. The six core infrastructure industries, comprising crude petroleum, petroleum refinery products, coal, electricity, cement and finished steel, have a combined weight of 26.7% in the index of industrial production (IIP).

According to provisional figures released on Friday, crude production, which had declined 5.3% in 2005-06, increased by 5.6% in FY07. Similarly, the output of refineries grew 12.6% in FY07 compared to 2.4% in 2005-06. While crude production has a weight of 4.17% in IIP, petroleum refinery products have a weight of 2%.

In March ’07, the core sector grew 10%, against 7.1% in March ’06. The acceleration in growth during the last month of 2006-07 was due to better performance by the steel sector, where production increased 15%. Besides, electricity grew at 8% and refinery throughput at 13.4%.

Growth in cement production, however, fell in March 2007 to 5.5% from 17% in the same period last year.During 2006-07, growth in cement production slowed to 9.1% from 12.4% in FY06. Though coal production was up 10% in March, the overall increase in the entire financial year was 5.9% against 6.6% in 2005-06.

Electricity sector grew 7.3% in 2006-07, against 5.1% in 2005-06. Import of power from Bhutan also contributed to the growth. Steel production grew at a marginally slower rate of 10.9% in FY07 against 11.2% in 2005-06.

 

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India our next global power
ANTHONY KEANE
May 14, 2007 02:15am

BRACE yourself China. Your neighbour India is positioning itself to become a major centre of global investment.

Adelaide financial planner Phil Eley has just returned from a study trip to India and says the country is becoming "the world's rent-a-brain supermarket", with 25 per cent of global research and development design money being spent there.

"It is emerging as a major economic power," said Mr Eley, managing director of Plan 4 Financial Services.

"Unlike all other western economies, they have got 1.3 billion people with 65 per cent aged under 35 and 50 per cent aged under 25. It's a democracy and is English speaking.

"They're ramping up their education and you have this growing mass of consumers who are all becoming their next middle and upper class.

"Housing ownership is low and the government provides a tax deduction for interest and principal."

Mr Eley travelled with financial planners, analysts and fund managers on the first of four trips he plans to take to the so-called BRIC countries - Brazil, Russia, India and China.

Mountains of investment funds are flowing into these emerging nations, which are experiencing strong but volatile growth.

"I wanted to get a better understanding about the markets where that money's going into, and also be better equipped to evaluate offers if they come up," Mr Eley said.

Some of the statistics he discovered are startling:

BY 2050 India is forecast to have a 15 per cent share of the world economy.

MOBILE phone customers in India are growing by six million each month, assisted by 1c telephone calls.

INDIAN companies are emerging as the largest steel and aluminium producers in the world.

BIG opportunities lie in the country's listed real estate sector, which currently has a market capitalisation below $12 million.

India's growth is illustrated by its reduced need for foreign aid. "From 1947 to 1991 India was the largest receiver of aid. Today it is a net provider of aid," Mr Eley said.

"India has had an average growth rate of 6 per cent for the last 26 years with only one negative period and under seven governments - so it is a robust economy."

 

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India fast emerging as a major power: IT expert
The Peninsula - 14/05/2007
(MENAFN - The Peninsula) DOHA

The claims that India is fast emerging as a major power in the Asian continent are not exaggerated; they are based on realistic economic indicators, according to Dr Vijay P Bhatkar, a renowned IT expert from the country.

Bhatkar is best known as the architect of the Param series of Supercomputers and for his contributions to bringing information and communication technology (ICT) to the masses through his Education to Home (ETH) initiative.

He was in Doha at the invitation of Samanvayam, an Indian socio-cultural organisation. Yesterday he delivered a lecture at a reception organised in his honour by the Institute of Engineers (India) Qatar Chapter, at the Birla Public School.

Talking to The Peninsula on the sidelines of the function, Bhatkar said, "India will continue its growth despite the myriad problems it has been facing. Poverty, illiteracy, corruption and poor infrastructural facilities- such issues will remain but the one trillion dollar economy of the country is going to scale further heights in the coming years."

"Even I was surprised by the way the IT industry has been growing in the country," he added.

Asked how ICT had helped improve the lives of the common people in the country, Bhatkar said, "That is what I am trying to do through the ETH initiative- bringing education to millions of homes in the country."

The IT and telecommunication sector have so far generated 2.5 million jobs in India and this is expected to grow in the coming years, he said.

The ETH initiative includes reducing the cost of computers, producing multi-language computer programmes and spreading education and literacy using ICT, said Bhatkar.

Electronic governance and fighting corruption and red-tapism are some other areas where ICT can prove specially beneficial to a large country like India.

"India is the only country in the world which was able to conduct elections using electronic means. This gives me hope about the future," Bhatkar said.

He said "brain drain" is no more an issue in India and it has been replaced by "brain gain" as thousands of Indian professionals are coming back to the country lured by the brightening job prospects. Youngsters are now going out of the country mainly for higher education.

 

[Bushroda]

GM makes its big push into car-hungry India
May 13, 2007
BY JEWEL GOPWANI
FREE PRESS BUSINESS WRITER

MUMBAI, India -- A tiny car has never meant so much to General Motors Corp.

Hitting dealerships in India this month is the Chevrolet Spark, a car that's smaller than the Chevy Aveo and important enough to draw GM Chief Executive Officer Rick Wagoner to the other side of the world for its launch last month.

The Spark is the reason GM expects to nearly double its sales in India this year.

It's the company's biggest stride in a race to win over drivers in the world's second-fastest growing economy, where new jobs and low interest rates have created generations of new car buyers.

GM and seven other automakers plan to invest nearly $4 billion in India. The investments would double the number of cars produced in the country to nearly 3 million in the next decade.

The country's passenger vehicle sales grew 27% to 1.4 million vehicles last year. Those sales are expected to grow to 2 million by 2010 and to 3 million by 2015.

India's car market is critical to GM as it continues to lose money in North America and duels with Toyota Motor Corp. to be the world's largest automaker.

With the Spark, GM meets the competition on size and price. The sticker price on a Spark starts at 309,000 rupees, or about $7,500. GM expects to sell as many as 2,500 a month and drive its market share from less than 2% last year to 10% by 2010.

"GM has made growth in India a priority," Wagoner said.

GM's investment

This month, GM makes its biggest effort to make up for lost time in India.

After 10 years of selling sedans and sport-utility vehicles there, it wasn't until last year that GM offered a vehicle that even approaches the size of what most Indian car buyers prefer.

GM started in March 2006 with the Chevy Aveo sedan, which is small by American standards but considered midsize in India. In December it launched the hatchback version. This month, GM delivers the Spark to its dealers.

"They're at least getting their product strategy right," said Mohit Arora, director of J.D. Power Asia Pacific.

GM expected to launch the Spark two years ago using an old Daewoo plant near Delhi after buying the bankrupt South Korean automaker's assets in 2002. But GM hit roadblocks on negotiations involving labor, customs and tax issues.

"It was not an intentional delay," said Rajeev Chaba, managing director of GM India. "We moved very fast once we were clear that we would not get the old plant."

GM's next move is to build a $300-million plant to make 140,000 vehicles a year by the end of 2008, bringing its capacity to 225,000 vehicles a year. GM plans to add 24 dealers for a total of 115 in India and 28 more service centers, for 122 in the country.

The Spark puts GM ahead of Volkswagen AG, Toyota and Honda Motor Co., all of which plan small cars for India. The model also heats up GM's rivalry with Ford Motor Co. in India. Last year, Ford doubled its sales to 42,060 vehicles in India. GM plans to do the same this year as it expects to increase sales from 35,823 last year to 66,000.

Now GM is gaining on India's market leaders, which have their own plans for growth.

Maruti Suzuki, controlled by Suzuki Motor Corp., has half of India's car market and three of the country's top five vehicles. Now building 800,000 cars a year, Maruti Suzuki is ramping up to build 1 million a year in two years.

Tata Motors, the country's third-largest automaker, is preparing to launch what promises to be the country's cheapest car. The $2,400 vehicle is targeted at scooter riders who want to move up to four wheels.

That's a solid strategy, said Ashvin Chotai, the London-based director of Asian automotive research at Global Insight.

A quarter of new car buyers, accounting for 300,000 car purchases, are upgrading from scooters, J.D. Power said. Last year, Indians bought 7.8 million two-wheelers, more than five times the number of cars sold.

"There's a huge potential there," Chotai said.

What customers want

When Jagjeet Singh Makkad decided to buy a new car, the 44-year-old husband and father of two picked a Hyundai Santro, a tiny four-seater that is easy to park.

But what put the Santro over the top for Makkad, who calls himself a sardarji -- a Sikh man who wears a turban -- was the car's raised roof, which is at least three inches taller than most of India's minicars.

Pointing to his maroon turban, Makkad said: "For a sardarji, it's very good height-wise."

When Makkad was looking for a small, yet tall, vehicle four years ago, GM didn't offer anything close.

But with the Spark, the automaker can tap into the buying power of India's growing middle class, which accounts for about 50 million people, or 5% of India's population, and is expected to grow to 583 million or 41% of the population by 2025, McKinsey & Co. reports.

Brand and reputation

GM is still an unknown to India's younger generations.

The company suffers, on a smaller scale, from brand recognition challenges similar to those it has in the United States. In India it offers Opel and Chevy vehicles.

"You go worldwide, Honda is Honda," said Mayank Merchant, executive director of the National Garage GM dealership in central Mumbai. "Sometimes people get confused. What is GM? What is Opel? What is Chevrolet?"

It doesn't help that rival Toyota, which is hardly even a player in the Indian market, enjoys a sterling reputation: Its plain-vanilla Camry is considered on par with the Mercedes-Benz E-class.

But GM is focusing its attention in India on Chevy, a once all-American brand that has gone global, scoring huge gains in China, Eastern Europe and other developing markets.

"Our challenge right now is that Chevy becomes the most aspiring brand," Chaba said. "We are moving in the right direction."

GM's global presence has helped it make inroads with older buyers.

Manorama Limdi chose a Chevy as her anniversary gift in December because her husband, Kakubhai, has high regard for the brand.

"My husband has used Chevrolet cars way back in the 1960s when he was in the U.S.A.," said Limdi, 68, whose husband practiced medicine on Staten Island, N.Y., almost 50 years ago. "It's a renowned make."