Indian Economy - News & Updates - Archive

[Bushroda]

Bharti to open retail stores early next year
Statesman News Service

NEW DELHI, June 9: Bharti Enterprises and its back-end partner Wal-Mart will open their retail outlets some time early next year with the legal formalities on branding and franchise being worked out. “Work is going on as per plan. By early next year, a clutch of stores would be opened,” Bharti Group chairman and CEO, Mr Sunil Mittal, who was recently in the USA, said. “You will see half-a-dozen coming up.”

The Bharti Group had announced in November last year plans to invest $2.5 billion in the retail venture, partnering the US major Wal-Mart. While Bharti would manage the front-end, Wal-Mart would provide back-end and logistics support.

Meanwhile, the two partners have started recruitment and are busy sorting out the legal issues. “Legal issues like brand and franchise arrangement may take some time. But we are going ahead as per the plan,” Mr Mittal said.

During his visit to the USA heading a CII delegation, Mr Mittal met Wal-Mart vice-chairman, Mr Mike Duke in Washington. Asked about the foreign direct investment (FDI) in retail as desired by the USA, the CII president said if large “big-box stores” could benefit farmers and the customers, the industry may convince the government and push for FDI, starting with a cap of around 26 per cent.

Currently, India does not permit FDI in multi-brand retail but allows 51 per cent in single brand retail and 100 per cent in cash and carry wholesale business. The existing policy also allows FDI through the franchise route.

The Bharti-Wal-Mart joint venture is being structured in consonance with the FDI policy.

Outsourcing

The outsourcing debate should not become an India debate, the CII delegation impressed upon US officials, senators and congressmen. “CII has allayed some of the fears and blunted some arguments against outsourcing,” Mr Mittal said in a briefing on the recently concluded CII mission to the USA. “We made a good case. But it will remain an election issue.”

The CII CEOs delegation raised three critical issues during the mission ~ outsourcing, based on the recent H1B visa debate; the Indo-US civil nuclear agreement; and the Doha Round.

The CII delegation impressed upon them how India was doing a remarkable job of providing the backbone to the US economy with the reverse outsourcing being currently witnessed.

Mr Mittal said that according to CII estimates, there would be a requirement of 17 million IT and knowledge professionals in the USA. This could be best served by India, he added. “In fact the Indian professionals are adding competitiveness to the US industry,” he felt. “This is a partnership for competitiveness.”

CII also highlighted that most of the US manufacturing industry had moved to China and was now feeding US consumption patterns without hurting the US economy or industry.

Agreeing that outsourcing would still be an election issue in the USA, Mr Mittal said there was a palpable fear of losing jobs and that there were clear undercurrents regarding this.

Stating that there was a recent trend of reverse outsourcing Mr Mittal gave the instance of IBM bagging a $1.1 billion order from Bharti. He said other telecom companies were also looking at outsourcing to the USA.

 

[Bushroda]

Israel Bourse Welcomes First Indian Bank
By Zach Helke Posted: 06/10/07 05:37
Diamonds.net, NY

RAPAPORT... Israel's diamond bourse welcomed its first Indian bank June 8 2007, when the State Bank of India (SBI) opened a branch in the bourse's Ramat Gan location.

The branch marks SBI's 84th overseas branch, with locations firmly fixed in the world's other diamond business centers, such as New York, Antwerp and Johannesburg.

"We have thirty years of experience in diamond financing and have offices in all the major centers associated with the trade. Tel Aviv completes the loop," SBI Chairman OP Bhatt, told the Press Trust of India.

Bhatt added that the bank will have a head start against others in the growing trade relations between the two countries. Trade has soared between the two nations, reaching $2.7 billion in the last year from humble beginnings at $200 million in 1992 when diplomatic relations were established between the two nations.

"This was a natural event waiting to happen," said India's Ambassador to Israel Arun Singh. "The remarkable growth in bilateral trade between the two countries has led to diversification of trade with significant growth in new sectors."

India's diamond merchants have long had a presence in Israel, many of whom came in the early 80's, even before official diplomatic ties were established with India. At present, some 30 diamond merchants are active in the Ramat Gan exchange, as well as India's Tata Consultancy Services (TCS) who compete for government contracts and employee many Israeli nationals.

"The opening of a branch by SBI here demonstrates the strength and stability of the Israeli economy. It also shows the important role Israel plays in the diamond trade," Israel Diamond Exchange president Avi Paz said.

 

[Bushroda]

India, China to keep mining on a roll: study
Livemint.com, Wall Street Journal

The Citigroup study says by 2030, the two countries will need the equivalent of 150% of the world’s current copper and nickel supply

Manila: Rapid economic growth in China and India will drive demand for minerals in both countries, which in turn will help sustain a mining boom in Southeast Asia, according to the findings of a report.

China could be the world’s second largest economy by 2030 and India the fourth largest, said a report by Citigroup Global Markets Asia Ltd, which was released at the seventh Asia Pacific Mining Conference in Manila on Thursday.

By 2050, China would be the world’s largest economy and India third, accounting together for perhaps 35% to 45% of the total global economic output, it said.

The two countries, the report added, had “been caught short” in their demand for mined commodities, particularly copper, nickel, zinc, iron ore and coking coal. By 2030, the two countries will need the equivalent of 150% of the world’s current copper and nickel supply.

This would mean “massive increases in profitability and capital inflow to the (mining) sector”, the Citigroup report said.

Mining companies in the Association of Southeast Asian Nations (Asean), had reacted by increasing production even faster than those outside the region. From 2001 to 2007, Asean countries with large mining sectors had seen mining output grow faster than other parts of the economy.

“Asean mining economies are expecting positive growth from their mining activities,” the report said.

At the same time, the report voiced a word of caution. “The global environment looks likely to remain robust, but Asean must be proactive to promote its own mining growth,” it warned, citing studies that show that mineral resources in the Philippines and Indonesia are deeply underutilized.

 

[Bushroda]

75 % foreign corporations in India making profits
Sunday, 06.10.2007, 10:48pm (GMT-7)

NEW YORK: An impressive 75 percent of foreign corporations with investments in India are making profits, according to 'The India Factor', a report released by Societe Generale Bank, one of the largest financial services group in Europe.

The report, which gives a comparative analysis of the opportunities and risks in China and India, was released at a well attended luncheon on June 4, in New York City, in the presence of India's Minister of State for Industries, Ashwani Kumar and a host of senior corporate executives.Detailing the strengths of the Indian economy, the Societe Generale report mentions the four straight years of 8 percent GDP growth that crossed the 9 percent barrier for the current financial year.

The report also talks about the solid macro fundamentals in high savings rate, diversified economy, FDI and portfolio investments; the purchasing power parity that reached $3,942 in 2006 (expected to go up to $4282 in 2007); and growth across the socio-economic spectrum with a nearly 300 million strong middle class and fastest growing number of High Net Worth Individuals in the world. India today has over 700,000 consumers with more than $100,000 in liquid wealth. The Report also showed how India was becoming globally competitive in many sectors: Auto components; Chemicals; IT services; Manufacturing; Pharma and Oil Refining etc. It also noted that with its expanding middle class and rising incomes, India was a consumption driven economy experiencing an infrastructural investment boom. Further, the report found that European corporations were strong in the construction, telecommunications, banking and consumer goods sectors. Keynote speaker on the occasion, Kumar drew attention to the strength of Indian democracy, which afforded political stability to the decision making process. He described the egalitarian philosophy which animates the economic reform program so that all stakeholders feel a sense of participation.

The minister particularly noted that in the last 22 years, the Indian economy has succeeded in pulling up 1 percent of the population, previously below the poverty line, every year. Describing the factors which led to 9.2 percent growth of the economy and more than 11 percent growth in the manufacturing sector last year and the potential for continued high rates of economic growth, the minister also spoke about the policies intended to address the infrastructure challenge, including the power sector.Institutional Investors meet.

The following day, Ashwani Kumar addressed a group of Institutional Investors at an interactive breakfast meeting, where he gave a presentation on the state of the Indian economy, highlighting its phenomenal growth cutting across various sectors.While outlining major policy initiatives such as the recently announced policy on Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR's), he emphasized the Indian government's commitment to continuing the process of economic reform.Kumar said that the resilience of India's democratic institutions had contributed to the economic growth of the country consistent with equality and freedom of its people.

Highlighting some of the success stories in India in fields such as real estate and manufacturing, he stressed that the qualitative distinction of India's success story was defined by the state's commitment to proactively intervene with a view to impacting positively on the living standards of the poor. The Minister's presentation was followed by a discussion with the bankers, fund managers and CEOs on the future growth potential of the Indian economy and the vast opportunities available to foreign investors.

The Minister informed that nearly 98 percent of the Indian economy was now open to foreign direct investment through the automatic route. He encouraged US companies to invest in major growth sectors such as infrastructure -- both physical and social -- which hold significant promise. He said that at least one-third of the estimated US$ 550 billion required to be invested in the infrastructure sector alone could come by way of Foreign Direct Investment & Foreign Institutional Investment. Speaking about the Indo-US Agreement on Civil Nuclear Cooperation, Kumar said that the Agreement was dictated by the need to access clean sources of energy for India's industrialization and economic growth. He felt that there was a need for deepening Indo-US economic engagement further. Business women's meetAt a breakfast meeting, June 7, with a group of leading American business women, the Minister for Industries emphasized the extraordinary growth of the Indian economy in the last few years.

He, however, admitted the country was facing challenges of both physical and social infrastructure. Underlining the government's efforts to improve both, he stated that there was a need for roughly $550 million to be pumped into physical infrastructure of which 1/3rd will come from foreign direct investments.Kumar said that India has been frequently accused of delayed decision making or "democracy deficit". However, this impression was not correct, he said. Various studies done in this regard have concluded that there is direct correlation between economic growth and democracy. Touching upon the on-going debate on climate change, Kumar pointed out that China and India should not be asked to assume responsibilities disproportionate to the damages done to the climate. He also emphasized the need to harmonize economic growth with the climate improvement. He urged entrepreneurs to look to India's strengths such as democracy, liberty, freedom, secularism and pluralism.

He also referred to the major policy initiatives such as the recently announced policy on Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR's). Responding to a question, Kumar said that the government was not going to artificially control the value of the rupee, though some steps would be taken to help exporters.

Touching briefly on the US-India agreement on civil nuclear cooperation, Kumar said that India was in dire need of power. Owing to this agreement, approximately 3500 mega watts of nuclear power would be generated by the year 2030 as against only 3000 mega watts generated in the last 60 years. He said that the increase in power would exponentially increase the GDP enabling India to surpass China and become the third largest economic power.

 

[Bushroda]

As FDI streams in, Indian firms now more confident buying foreign assets
Ruhi Tewari
Posted online: Tuesday, June 12, 2007 at 0000 hrs

new Delhi, June 11: The recently released World Bank report on globalization of corporate finance in developing countries has triggered a lot of excitement in the the country by pointing out that India has attracted a major chunk of the record $40.1 billion capital that has flowed into the region. This, feel commentators, is proof that India, with its much-improved domestic policies, has increased its ability to raise capital from the global markets. However, they have overlooked another important transformation.

This is the fact that the very concept of capital flows is no longer viewed by Indian business and economic entities as a one-way movement — namely inflows — as was the case in the bad old days of socialist economic policy. Today, India is also experiencing massive outflows of capital as our companies go out to distant parts of the globe in search of investment ventures. The Indian multinational Tata Group’s $12-billion acquisition of Anglo-Dutch steel company Corus earlier this year resulted in FDI outflows from our country to the UK exceeding inflows.

Other major outward investments from India include Aban Loyd’s $445 million investment in the Norway energy sector and state-run ONGC’s $410 million investment in Brazil for an energy stake. The largest overseas player in 2006 was State Bank of India (SBI), with a foreign investment of $1.18 billion, followed by Dr Reddy’s Labs with $777 million.

These large flows of capital to and from the country have, however, brought the subject of capital account convertibility (CAC) to the centre of the economic policy discourse. There are two major questions doing the rounds — one, is full capital account convertibility (CAC) required to reap the full benefits of capital flows? Two, is our economy ready for such a step?

The Tarapore Committee (1997) defines CAC as “the freedom to convert local financial assets into foreign financial assets and vice-versa at market-determined rates of exchange”. This basically implies complete mobility of capital across countries. Says CII director of financial services G Srivastava: “We have to address the larger macroeconomic question of whether our economy is ready for full CAC. Conditions like fiscal discipline, controlled inflation and sustainable growth must be fulfilled. India is certainly not ready to introduce full CAC.”

Opines FICCI economic advisor Anjan Roy: “We are expecting $30 billion worth of FDI this year. Even if there is a slight slowdown in the growth rate of capital flows, it will not harm the economy. High capital inflows are anyway exerting upward pressure on the exchange rate.”

 

[Bushroda]

India Poised To Win More Higher-Order Outsourcing
Ruth David, 06.11.07, 3:25 AM ET
FORBES, NY

MUMBAI - They may be under fire in the U.S. over visas, but India believes its tech companies are poised to capture a bigger slice of the global outsourcing market.

By 2010, the country will have 15% of the outsourcing market for higher-order knowledge processing work, such as research and data management, Commerce and Industry Minister Kamal Nath said Sunday in a speech at the 11th International Economic Forum at St. Petersburg, Russia.

Indian companies had 11% of the market for outsourcing contracts above $50 million in 2006, according to the National Association of Software Services Companies. India’s software and services exports crossed $31 billion in fiscal 2007.

But Indian tech companies, which draw the majority of revenues from the North American markets, have been in the news lately after two senators asked nine companies, including biggies like Wipro (nyse: WIT - news - people ) and Infosys (nasdaq: INFY - news - people ), for details on their U.S. workforces.

Their questions came amid charges that foreign firms’ use of the U.S. H1-B visa program has displaced American workers. (See: “ India On Offensive About Visas”).

In a statement last week, Nath denied the allegations. “Temporary movement of skilled professionals is an essential component of the global services economy and bears no relation to immigration issues,” he said.

The minister linked India’s cooperation on trade issues at the WTO to agreement on the services industry. “Services are an important component of the breakthrough in the current WTO negotiations and any move which vitiates the current progress will only frustrate the progress in bringing the round to a successful completion,” he said.

At the St. Petersburg conference, he waxed eloquent on India’s growing importance on the global stage. “What better example to cite the growing clout of emerging economies than India, which has recorded the fastest GDP growth in 18 years, with the economy growing 9.4% in 2006-07,” Nath said.

He said an estimated growth rate of 9% over the next five years starting in fiscal 2007-08, would need an investment rate of 35.1% of the country’s gross domestic product.

India’s high growth has been powered by the manufacturing sector, which grew 12.3% in fiscal 2006-07 as compared to 9.1% a year earlier. But Nath also spoke of investment opportunities in the farm and food-processing sector, which hasn’t grown at the scorching rates of some other sectors and has been identified as a priority area by the government.

He also invited investment in retail, where India doesn’t yet allow foreign players in the multibrand segment. Organized retailing in India is predicted to expand 37% in 2007 and 42% in 2008. At present, small corner stores account for the bulk of the market.

 

[Bushroda]

Indian farmers may lose healthy appetite for gold
Tessa Kruger, 11 June 2007
MoneyWeb, South Africa

Source of significant investment demand may disappear as Indian farmers move to cities and the country continues to industrialise.

A considerable source of investment-related demand for gold could disappear as millions of Indian farmers move to cities or join industrialisation in India.

The Fortis/VM Group said in a recent Yellow Book article a great gold market driver to watch in the short and longer term, is whether India’s rural poor continue to invest in gold during times of stress and transition, or if they will secure their income in alternative ways.

The rural poor in India still account for two thirds of annual gold purchases in the country, despite its emerging middle class.

But millions of Indian farmers are expected to move to urban centres over the long-term as they seek greater wealth and their farms disappear in the midst of industrialisation.

The Indian government is looking at policies to move India’s 200m subsistence farmers into manufacturing to address their exposure to unsustainable land practices and to ensure that rural populations contribute to India’s extraordinary economic growth.

Small scale farming in the country is also under threat from the vast debt burdens of small farmers – a symptom of a wider breakdown in agriculture due to a decline of public investment in agriculture, among other factors.

This anticipated shift away from small-scale farming into larger-scale agricultural development and increasing urbanisation could have a considerable impact on India’s gold demand.

Small-scale farmers have traditionally used spare cash to invest in small pieces of jewellery, as they favour gold above paper assets in times of economic and political uncertainty.

But gold - as the most esteemed medium of exchange for the country’s rural communities – will come under increasing pressure as India’s land use and tenancy changes over the next decade.

Significant amounts of small pieces of gold investment jewellery are likely to re-enter the market as farmers disperse thereof to fund a new start in larger towns and cities.

This trend would be influenced by factors such as the levels of government compensation for land, existing debt burdens and cost of relocation and the accuracy of titling of land deeds.

A counter possibility is that the loss of one measure of wealth in rural India, land, may lead to a concentration in the other, gold.

However, a lack of clarity on the rate and nature of savings in India does complicate the picture. Household savings and the number of banks in the country have increased and physical gold ownership plays a slightly different savings role as a result.

A third possibility is that these farmers “make it” in an urban environment and start demanding gold for adornment as they fully participate in India’s booming economy.

“Although it is clear that middle class Indians will increasingly have a number of luxury items to choose to spend their money on, gold is likely to remain a high priority.”

Changes in gold demand will depend on whether India’s rural poor will continue to invest in gold.

But if the move away from traditional patterns of employment and income for subsistence farmers reduce the tiny amounts currently available for investment, the possibility emerges that this source of investment-related demand for gold will stop.

 

[Bushroda]

Indian cities draw investors in
Press release from: Assetz
Published date: 06-11-2007 01:38 PM

(openPR) - The Indian property market is going from strength to strength according to the latest reports. Some investors have recently begun ploughing money into the country as they take advantage of cheap property prices and favourable exchange rates. The Indian tourist ministry has also been heavily promoting the many different holiday options that the country offers.

In a campaign that last year cost £8 million, the ministry of tourism has been advising overseas holidaymakers to come and experience 'Incredible India'. A spokesman said the government "is putting greater emphasis on development of infrastructure at important tourist destinations and to promote and publicise various tourism products of India within the country and abroad".

It seems that the campaigning has paid dividends, as tourist numbers have increased by around 45 per cent in the past two years. India is a huge landmass and conditions vary widely in different parts of the country. It is possible to take a ski trip to the north or a beach holiday in the south. There are jungles galore inland, allowing for safaris and wildlife-themed holidays, with visits to the habitat of the native Bengal tiger particularly popular.

The cities are also experiencing strong property price growth and demand is expected to continue at high levels for at least the next 12 months, according to the chairman of the National Housing Bank (NHB). The NHB is a regulatory body for housing finance companies in India.

According to statistics collected by the body, property prices in some of the bigger cities - like Mumbai, Delhi and Bangalore - have risen by between 30 and 40 per cent in the past year. The NHB attributes this to lack of land and housing stock supply (as much as 3.1 million units under, by government estimates), coupled with a strong economy that has seen wages rise and some sections of the populace become increasingly affluent. "Demand for housing will remain strong," a spokesman said.

With this in mind, construction companies have gone into overdrive. Real estate is being built all over the Indian peninsula, including a huge development - described as a "mega housing project" by its developers - at Mohali. British investors that buy in India can be assured of getting a lot of property for their money and the present climate suggests a bright future for Indian investment.

The Indian property market is going from strength to strength according to the latest reports. Some investors have recently begun ploughing money into the country as they take advantage of cheap property prices and favourable exchange rates. The Indian tourist ministry has also been heavily promoting the many different holiday options that the country offers.

 

[Bushroda]

‘Indian tech majors will be in global top 10 by 2010’
Posted online: Monday, June 11, 2007 at 0000 hours IST

His predictions have often hit the bull’s eye. IDC chief research officer, John Gantz was among the first few to deflate the hype around artificial intelligence in 80s. Next, he proclaimed there would be no major dislocation from Y2K. Today, he is busy allaying fears about a global tech slowdown. Chief architect of IDC’s Global Internet Commerce Market Model, IT Economic Impact Model, and PC Software Piracy research, he is responsible for IDC’s worldwide demand-side research, global market models, and research quality control and standards. In a chat with Pragati Verma, he shares the latest IDC predictions for the global IT industry for 2008 and beyond and their likely impact on India. Excerpts.

You are one of the very few analysts predicting a growth in global IT spending. What makes you so bullish?

We have not yet seen indications that we are headed for a downturn in global IT spending. The best indicator for overall technology spending has been the rate of growth in PC shipments. Historically, PC investment is a strong indicator of IT spending sentiment—the two previous IT market downturns, in 1992 and 2001, were preceded by a sharp drop-off in PC sales. So, if there was any downturn in worldwide PC shipments during the first quarter of 2007, it would have represented a major cause for alarm and concern with regard to prospects for overall IT spending in the remaining months of this year.

We now need to see how much of a turning point the first quarter will represent, in either a positive or negative direction. The answer depends largely on your view of the US and global economy, and where macroeconomic indicators are pointing for the next twelve months. The downside scenario holds that worldwide PC sales were artificially and temporarily inflated last quarter, partly by consumer demand, which is already softening in the face of realestate price declines and energy cost increases. The upside scenario, however, takes a view based on the relative stability experienced so far in Q1.

If the upside scenario holds true, and the outlook for 2008 remains robust, increased confidence should translate into increased business investment in the second half of this year. If the downside scenario occurs, however, then firms will move quickly to delay and postpone IT projects in the second and third quarters as they seek to insulate themselves through rapid cost-control policies. We have already said that the IT market will expand in the range of 6-7% during 2007.

What does this mean for Indian software companies? Do you expect Indian companies to continue making inroads into bigger deals and hence on the global tech map?

India has already made a big impact on the global tech outsourcing space. I am confident that at least one Indian IT company will be in global top 10 by 2010. Indian software industry has built exceptional brand equity in the global markets by delivering quality software at reasonable costs. Indian companies now need to build a set of strong differentiators in the global markets. Competition could come only from Eastern Europe especially for Western Europe. Latin America is not so much of a threat. India has a clear quality advantage and I would think that India is easily five years ahead of any competitor.

The key issues for the Indian IT export market will lie less in overall worldwide IT market growth and more in the internal dynamics around IT outsourcing, Indian labour supply, and competition from other regions.

Indian domestic market has also picked up momentum recently? How do you see that shaping up?

Today, the Indian market is one of the fastest growing, along with Russia, China and Brazil. And there is a huge room to grow further. India accounts for 2% of world’s GDP and 1% of world’s IT spend.

Which are the hottest technologies invading corporates today? Do you see a wave of disruptive innovation?

We are entering a peak period of innovation and disruption. IT initiatives will involve converging constituencies. Prominent technologies seen in corporate space will include blades; grid; green computing; web apps; SaaS; web 2.0; VoIP; IP Networking; triple play; video security; Location/GPS presence; social networks; and virtual worlds.

Which are the biggest tech challenges keeping CTOs and CIOs up at night?

When I speak to some of the CIOs, they sound quite negative, and are not too open about this. It reminds me of how the IT departments did not like adopting technologies such as Wi-Fi and VoIP earlier. However, these technologies are all prevailing in the market today. I think embracing some of the Web 2.0 applications like instant messaging and wikis will be popular. CIOs should realise that wireless LANs, VOIP, instant messaging, user generated videos and content and desktop search are inevitable technologies. And it would not make sense to resist these.

 

[Bushroda]

India's DLF set to raise $2.4bn
BBC NEWS

Indian property developer DLF is set to raise $2.4bn by floating its shares on the Indian stock market, the largest flotation in the country to date.

The property firm - the largest in terms of the area is has developed - is offering 175 million shares for 500 to 550 rupees each on the Sensex.

Indian property prices have soared, as demand for land for homes and offices rises due to the growing economy.

The previous share record in India had been Cairn Energy's $1.4bn flotation.

Strong demand

"DLF is the best way to get exposure to Indian real estate, given its size, quality and credentials" said broker Edelweiss Securities before the listing started.

The institutional buyer section of the listing was fully subscribed within an hour of the launch, according to the firm.

Subscription to take part in the listing will run until Thursday.

Property prices in India have risen strongly, although recent interest rate increases have had a slight cooling effect on the sector.

 

[Bushroda]

India targets 35 African countries for investment
By DAVID MALINGHA DOYA
The EastAfrican

India is looking for investment opportunities in 35 African countries including Kenya, Uganda, Tanzania and Rwanda. The areas it is targeting include information and communication technology, renewable energy, agro-processing and pharmacy.

Ephraim Kamuntu, Uganda’s State Minister for Trade and Industry, says an Indian trade delegation will meet potential partners from East Africa and other countries in the region in Kampala between June 27 and 30.

He said, “We expect participants, under their associations, to come for the meetings with ready-to-sell proposals because these people are not coming to gather information but to discuss real business.”

Three meetings have already been held in India. Meetings held in 2005 discussed 281 projects worth $11.6 billion and of which, projects worth $312 million are already being implemented.

The Export Import (Exim) Bank of India is channelling money through regional and national development banks to local entrepreneurs in long-term loans.

The rreasoning behind this is to raise the financial muscle of local entrepreneurs so that they can negotiate at parity with potential business partners from India.

Dr Margaret Kigozi, executive director of the Uganda Investment Authority (UIA), said her organisation and the ministry wanted sectors to include small and medium enterprises, transport, aquaculture, agroprocessing and construction infrastructure.

The business conclave is part of the India-Africa partnership, a programme which seeks to guarantee the supply of agricultural products and natural resources for the Asian country’s rapidly growing economy.

Through joint ventures with local partners, India pledges to pass on skills and cash investments in the agricultural sector, financial services, ICT, banking and insurance.

However, countries in the region will have to deal with problems of inadequate long-term capital and the energy shortage.

Governments such as Uganda’s will need to convince potential local partners that there will be no favouritism in forging these partnerships as the country is home to many citizens of Asian origin – some of whom are the leading business personalities in Uganda.

“It is obvious that they consulted some of the Indians who are already operating here, but when it comes to investing, all Ugandans — including those of Asian origin — will all be treated equally,” said Mr Kamuntu.

The question of favouritism, which usually raises emotions among local traders when it comes to foreign investment will be put to the test when the Indian delegation arrives.

Sources say EXIM Bank will channel funds for these partnerships, partly to remedy the problem of inadequate long-term finance .

The bank has already extended lines of credit worth $5 million each to the East African Development Bank and the PTA Bank while negotiations with the Uganda Development Bank Ltd for a similar facility are going on.

In 2006, Uganda imported goods worth $90.92 million and exported goods worth only $2.81 million to India. Between January 2006 and March this year, India had registered 109 projects whose planned investment was about $230 million and projected to create 9,608 jobs.

Uganda Investment Authority said the meeting will be held just before two similar meetings in Mozambique for the Southern Africa region and in Ouadogou, Cote d’lvoire, for the West African region.

The Confederation of Indian Industry, in conjunction with the Indian government and EXIM Bank of India are organising the meetings.

 

[Bushroda]

India’s Ispat subsidiary plans to invest $2.9bn in Bangladesh
Web posted at: 6/12/2007 23:52:28
Source ::: AFP

DHAKA • A subsidiary of Indian steel firm Ispat Industries yesterday signed a deal with Bangladesh to invest $2.9bn in the country’s fast-growing economy, officials said.

The “non-binding and non-committal” memorandum of understanding was the biggest deal signed by Bangladesh’s military-backed government since polls were cancelled and an emergency was imposed in January.

Under the deal, Ispat Industries subsidiary Global Oil and Energy Company would conduct a feasibility study and begin negotiations with the government on specific projects, the government’s Board of Investment chief Nazrul Islam said.

Possible investments included $300m in coal mines, $500m in power plants, $100m in oil and gas exploration, $1.5bn in petro-chemicals and $500m for a liquefied natural gas plant, a government statement said.

Ispat chief executive Vinod Mittal, a relative of British steel magnate Lakshmi Mittal, and Islam signed the agreement in the presence of senior government officials at a city hotel, a statement said.

Bangladesh signed a similar three-billion-dollar agreement with India’s Tata Group in 2004. But despite years of negotiations, both sides have yet to reach a final agreement.

The impoverished South Asian nation, home to 144 million people, has been one of the world’s fastest-growing economies in recent years, expanding an average five per cent since the early 1990s and forecast to expand 6.53 per cent in the year ending June.

 

[Bushroda]

Indian Industrial Output Rises 13.6 Pct in April
By RAJESH MAHAPATRA 06.12.07, 7:31 AM ET
FORBES, NY

India's industrial output rose a stronger-than-expected 13.6 percent in April from a year ago, the government said Tuesday, thanks to robust manufacturing.

But the numbers heightened concerns that the Indian economy might be overheating, growing faster than the pace that can be sustained. It also fueled fears that the central bank may further increase lending rates and take steps to restrain money supply growth to cool the economy.

While the April growth was slower than the 14.5 percent rise in March, it was stronger than the 11 percent expansion forecast by economists polled by Dow Jones Newswires.

The April data showed manufacturing expanded 15.1 percent in April, while electricity generation grew 8.7 percent from a year ago. Mining output rose 3.4 percent.

"This is yet another impressively strong Indian release, but the question is will it prove too strong for comfort," said Robert Prior-Wandesforde, an HSBC (nyse: HBC - news - people ) economist based in Singapore.

Indian Finance Minister P. Chidambaram said the government was concerned over excessive growth in some sectors "where there are signs of what you will call overheating."

Chidambaram didn't name the sectors, but he has previously warned banks against lending too much to real estate, which experts believe is drawing a lot of speculative money that may leave behind an asset bubble.

India's central bank has repeatedly increased interest rates since December in a bid to discourage lending and slow growth. The broader economy has grown 9 percent annually in the past two years, but the brisk expansion has also come with rising inflation.

The increases in interest rates have affected car and motorcycle sales and production of such goods as refrigerators and television sets for which demand is often linked to easy finance. But there has been little impact on machine goods, construction material and the real estate.

Moreover, exports have been buoyant as Indian producers increasingly penetrate new markets abroad.

"One can still make the case that real monetary conditions remain loose in the country and that is perhaps why the signs of slowdown in the economy remain few and far between," said Prior-Wandesforde at HSBC.

Prices of government bonds fell as the data on industrial output led traders to speculate on another round of monetary tightening by the central bank.

 

[Bushroda]

Is India's Economy Overheating?
Carl T. Delfeld, Jun 12th, 2007

Fears that India's economy, stock market and the exchange-traded fund (INP) that tracks it are overheated led its central bank to ramp up interest rates.

Since January 2006 the Reserve Bank of India [RBI] has raised its overnight lending rate by one and a half percentage points, to 7.75% and the rupee, in turn, has jumped 10% in value versus the US dollar during the past four months alone.

But rather than slowing down, India's economy is speeding up. An article in the Economist states that JPMorgan estimates that growth in the three months to March accelerated to a seasonally adjusted annual rate of 11.4%. Yet, despite rapid growth, wholesale-price inflation fell to 5.1% in mid-May, down from 6.7% in January. Still the signs of an overheated economy are everywhere. A sharp increase in house prices, credit growth of 28% over the past 12 months, 15%-plus average rises in wages for skilled workers, record industrial capacity utilisation rates, and 41% more imports in April than a year ago.

Plus, consumer prices still appear to be rising at an annual 8% clip which likely means that more aggressive rate hikes are on the way. The trick is to slow growth down a bit without triggering a sharp decrease in economic activity - easier said than done and what in the US is often referred to as a soft landing.

The higher rupee has helped boost returns for investors in the India ETF but valuations may be getting a bit toppy. Still you must admire the underlying growth and momentum of the Indian economy. Will higher interest rates and a stronger currency blunt this mojo?

 

[Bushroda]

Education, Technology and the Future of India
Bill Gates, CXOToday.com
Mumbai, Jun 12, 2007

For me and anyone else who is passionate about using technology to help create opportunities for people, trends in India today are tremendously exciting and encouraging.

As everyone knows, the nation has become a global leader in information technology and other high-tech fields such as pharmaceuticals, telecommunications, and telecom-based business services. These sectors have contributed to the economy's rapid growth since 2003, which has lifted many millions of people out of poverty. Continued growth could alleviate suffering and expand opportunities for millions more. One day, we may look back on India's progress during this decade as one of the great humanitarian achievements of our time.

Equally exhilarating is how India's rise may influence the global community. The world will be a safer place if other nations can learn from the achievements of what is not only the largest democracy, but also one of the most pluralistic cultures. The Prime Minister, Dr Manmohan Singh, has said it well: India's success will renew humanity's faith in liberal democracy, in the rule of law, in free and open societies. The entire world has a big stake in India's future.

The Power of Indian Skills and Talent

It seems to me that the India miracle, if you will, demonstrates the wisdom of sustained investment in the primary asset of any modern economy: people. During the nearly 60 years since independence, India's investments in human development have reduced hunger, increased literacy, and improved healthy conditions. Education investments have produced world-class scientists, engineers, and technicians. They, in turn, have fuelled the growth of Indian technology companies and attracted many global technology leaders, including Microsoft.

People have been the key to Microsoft's success in India, and our experience may be illustrative. We entered the country 17 years ago, working closely with the government, IT industry, academia, and the local developer community. Over the years, the people of Microsoft India have had end-to-end responsibility for the development of many Microsoft technologies. They have made important contributions to many other products, including Windows Vista and the 2007 Microsoft Office system.

We currently employ more than 4,000 people across 6 business units in Delhi, Bangalore, Mumbai, Hyderabad, Kolkata, Pune and Chennai, and we continue to expand our presence. Outside the United States, Microsoft's India Development Centre is our second largest product development facility. Two years ago, we opened Microsoft Research India, where scientists and engineers work to advance the frontiers of knowledge in computer science and related fields, often in collaboration with India's academic community. These teams have demonstrated India's great capacity for innovation by filing for 100 patents during the past two years. Other India units play major roles in our worldwide customer support, consulting services and management of our internal information systems.

Beyond our direct presence, Microsoft also contributes to India's growth through the thousands of local partners, large firms and small, that develop and sell products and services based on our software platform. This year, 35 Indian companies qualified for the Forbes 2000 list of the world's biggest corporate giants. Among them were four valued Microsoft partners: Tata Consultancy, Infosys Technologies, Wipro and Satyam Computer Services. Microsoft is extremely proud to be a part of the economic transformation that these and other highly successful Indian companies have helped bring about.

Sustaining Growth, Broadening the Opportunity

How can India best sustain its rapid growth and broaden opportunity for all its people? Much has been written about the need for sharply increased investments in highways, airports, power plants and other infrastructure. Economists also point to a need for regulatory reforms and better public services provided more transparently. These are important challenges.

Also, from my perspective, investments in human capital should continue to be a high priority, especially efforts to further alleviate hunger, reduce illiteracy and improve public health.

Threats to health such as HIV/AIDS, for example, could upset much of India s recent progress. The estimate is that less than one per cent of adults are infected, but because of India's large population, the number is among the highest in the world.

Education at every level remains crucial for continued growth. Output of college and university graduates is impressive in absolute terms, and has been a great source of economic strength, but India cannot afford to become complacent. The nation now faces an acute shortage of skilled workers, as Infosys and other employers have warned recently. Education spending as a percentage of GDP lags far behind that of countries such as South Korea and Taiwan. Yet, one could argue that India needs a skilled and educated workforce even more than the so-called Asian Tigers do. They accelerated their development through manufacturing, primarily, while India's focus on services and technology makes its workforce skills especially critical.

As many others have said and as the government has recognized in its budget plans, India urgently needs to build more primary and secondary schools, improve teaching and ensure that more children attend school, especially in rural areas. Higher education needs to be expanded and upgraded. Top-tier institutions are overrun with applicants, while skill levels among graduates of some other colleges do not meet world standards or the needs of employers. By one estimate, 25% of all new engineering graduates lack the skills to be employable in the IT industry, despite its dire need for workers.

Microsoft is committed to helping improve Indian education. Over the past several years, we have been engaged in many collaborative efforts, mainly focused on advancing the instructional uses of technology and expanding access to computers and computer skills. For example, our Project Shish currently works with more than 10 state governments, bringing computer skills training to more than 120,000 teachers so far. We have helped enhance learning opportunities available to students in slum and rural schools through support for Digital Study Hall, a project that records and distributes DVDs of classes led by India's best grassroots teachers. And to help overcome a scarcity of classroom computers, Microsoft Research India has developed Windows Multipoint, a technology that enables several students to work on a single PC.

In higher education, our efforts have included the Developer Platform Evangelism Academy, which has provided professional development to more than 1,000 IT and engineering faculty members at 51 Indian colleges. To help recent engineering graduates transition from school to careers, we recently began working with the Indian government and industry on an online employability portal. It will enable graduates to assess their skills, complete appropriate training and connect with prospective employers.

Technology and India's Future

Besides being an important tool in education and a growth sector of the Indian economy, information technology can aid social and economic development in many ways. Wide deployment of computers, software and telecommunications helps boost productivity and reduce transaction costs in many sectors, strengthening economic growth. Computers, mobile devices and software can help expand the quality and availability of health care and other public services, as well as education.

A lack of access to technology, on the other hand, can hinder development. More than 30 years after the invention of one of the most versatile and empowering technologies of our time, the personal computer is readily available to only 1 billion of the world's more than 6 billion people. Microsoft's founding vision of a computer on every desk and in every home is a reality for the roughly 1 billion people living near the top of the global economic pyramid. But the digital revolution has yet to spread very far in many rural areas, impoverished communities and developing countries, including India.

Disparities in technology access are troubling, for as the global economy is increasingly computerized and moves online, social and economic development becomes even more difficult in the places and for the people left behind, on the less fortunate side of the digital divide. This is a problem that Microsoft and others in the information technology industry have been working to address.

Microsoft's ultimate goal is to bring the benefits of technology to every person. Toward that end, we have set our sights on an ambitious milestone: With governments and other partners, we aim to deliver the power of information technology to 1 billion more people worldwide by the year 2015. We are expanding several technology training and assistance programs.

And we recently introduced the low-cost Microsoft Student Innovation Suite of software products, including versions of windows, Microsoft Office, Learning Essentials and Microsoft Math. Although we invested many millions of dollars to develop these products, the suite will be available tom students for about Rs.127, through government programmes in India and many other developing countries as part of targeted programmes that provide PCs to disadvantaged students.

We are taking these and other steps because, as industry leaders and simply as human beings, we believe that all 6 billion people who share this planet deserve a chance to realize their full potential. We are especially excited to be working toward realizing this vision in India, where progress on many fronts is already well underway.