Indian Economy - News & Updates - Archive

[Neo]

Japan plans exorbitant investment in India ​

TOKYO: Japan is planning to invest billions of dollars in India through private funds and government loans to improve infrastructure in the rapidly growing economy, an official said on Friday.

Details will be announced when Japan’s Economy, Trade and Industry Minister Akira Amari visits New Delhi and Mumbai from June 30 through July 4, an official at his ministry said.

He will be joined by more than a dozen executives of big Japanese companies, led by Osamu Suzuki, chairman of Suzuki Motor Corp., a top player in India’s burgeoning auto market.

“The investment plan is part of India’s own project of constructing infrastructure so the precise figure for Japanese investment depends on India,” the official said on condition of anonymity. “But it will total in the billions of dollars.”

Japan has been trying to build closer political relations with India, in part to counter frequent rifts with China, but Japan’s trade with China far surpasses its investment in South Asia.

The investment plan follows up a general agreement signed in December between Japanese Prime Minister Shinzo Abe and his Indian counterpart Manmohan Singh on working together on a “Delhi-Mumbai Industrial Corridor.”

The corridor plan would build a high-speed rail network between India’s two largest cities and develop sea ports on the west coast, with infrastructure built along the route.

Singh said in October that India needed to spend 320 billion dollars by 2012 to improve its creaking infrastructure in order to accelerate economic growth and tackle poverty.

During his stay in India, Amari will meet Singh and also Indian Commerce Minister Kamal Nath to discuss deadlocked global trade talks and negotiations on a free trade deal between New Delhi and Tokyo.

http://www.thenews.com.pk/daily_detail.asp?id=61549

 

[Neo]

Auto demand boosts CNG prospects in India​

MUMBAI, June 22: Indian energy firms are stepping up spending on compressed natural gas (CNG) infrastructure to meet soaring demand from vehicle makers, but poor facilities may hamper gas adoption in the near term, analysts say.

India ranks fifth in the world for vehicles running on CNG, which is half the price of petrol or diesel.

But CNG is offered at only about one per cent of India's 35,000 retail outlets, in sharp contrast to neighbouring Pakistan where CNG is widely used and on offer at nearly 1,400 gas stations.

However, its demand along with piped gas in households is forecast to more than treble to 7 per cent of total gas demand in the next five years, according to KPMG.

India's third-largest car maker Tata Motors Ltd. has introduced a CNG model and even luxury car maker DaimlerChrysler is looking to get into the segment.

“The actual problem right now is that CNG availability is restricted to cities,” said Dilip Chenoy, director general of the Society of Indian Automobile Manufacturers. “But as the spread of CNG infrastructure increases, perhaps the shift to CNG variant vehicles will be imminent,” he said.

Leading energy firms are pouring money into gas distribution across India with state-run gas transporters GAIL (India) Ltd. and top private firm Reliance Industries Ltd pledging nearly $7 billion each to set up gas infrastructure, including city gas distribution projects such as CNG outlets.

Smaller gas transporters such as UK-based BG Group's Gujarat Gas Co. Ltd, Indraprastha Gas Ltd, Mahanagar Gas Ltd and Adani Energy Ltd have also lined up multi-million dollar investment to sell natural gas across India.

But this infrastructure may take up to five years to be operational and as a result CNG penetration is slow to catch on.

“We have to accept that availability of natural gas is localised right now and is a bit of a problem,” said Bhashit Dholakia, general manager at Adani Energy. “But things will improve once new pipelines are set up and projects by companies like Reliance start taking shape.”

India, Asia's third-largest oil consumer, imports 70 per cent of its oil and is encouraging use of natural gas to lower pollution and cut its import bill as the booming economy boosts energy demand among its 1.1 billion people.

KPMG expects at least 30 cities to embrace CNG, which costs half the price petrol and diesel, compared to a handful of large cities and smaller towns in a few states at present.

The fuel is mainly used by public transport services such as three-wheeled auto rickshaws, taxis and buses, after environmental laws were introduced in recent years.

India produces 95 million standard cubic metres of gas per day (mmscmd), which the government expects to rise to more than 190 mmscmd by 2009 after a series of gas finds off the east coast come on stream.

Goldman Sachs estimates the share of natural gas in India's coal-dominated energy basket will double to 18 per cent by 2015 -- still less than Pakistan where natural gas is more than 50 per cent of the energy basket.

“We expect this will mainly come at the expense of oil, the share of which is likely to fall to 25pc from 30 per cent during the same period,” Goldman said.

Analysts say CNG fuels 2-3 percent of all cars sold now but they see this segment as the fastest-growing in terms of fuel options in India's rapidly expanding vehicle industry. Only eight in every 1,000 Indians currently own car.—Reuters

http://www.dawn.com/2007/06/23/ebr19.htm

 

[Neo]

Worries about Indian rupee getting stronger​

By Anand Kumar

INDIA’S strong economy, with gross domestic product (GDP) having expanded by 9.4 per cent in the year ended March 31, 2007, foreign exchange reserves overflowing at nearly $210 billion and inflation well under control should have pleased government leaders, central bankers and economists.

But the rising strength of the rupee against the dollar has set alarm bells ringing at the headquarters of the Reserve Bank of India (RBI), the country’s central bank, here, and also at the Union Ministry of Commerce in Delhi. Exporters are warning the government of a disastrous performance this year, if the rupee is allowed to head northwards.

The Indian currency has been gaining strength on the back of ceaseless inflow of foreign exchange. For the year ended March 31, foreign direct investment (FDI) nearly tripled to $15.7 billion. Commerce Minister Kamal Nath expects FDI to double this year to $30 billion.

Indian companies are on a fund-raising spree abroad to finance their domestic expansion and even their overseas acquisitions. ICICI Bank is raising a record $4.3 billion, both in India and abroad, to fund its activities. Real estate giant DLF’s recent initial public offering (IPO) was over-subscribed by 3.5 times, and the company hopes to raise record sums.

Foreign institutional investors (FIIs) have been pouring funds into the country, wanting to subscribe to the IPOs. The RBI, meanwhile, is fighting a losing battle against the rupee, which continues its northwards march.

Last month, the rupee broke a nine-year record, peaking at 40.28 against the dollar. Last week, it closed at around 40.7. The currency has gained by 8.5 per cent so far this year, and there are no signs of a slowdown. Analysts are predicting the rupee would break the 40 barrier, even heading to 39 over the next few weeks.

Exporters are crying hoarse, while importers are merrily acquiring consumer goods. This has widened the trade gap to a record $7 billion. The commerce ministry has set a target of $160 billion for merchandise exports in the current fiscal (2007-08) and $200 billion for the next fiscal. For the year ended March 31, 2007, India’s exports touched $125 billion.

But with the strong Indian currency, exporters are worried that the targets would be missed. They have been petitioning the government for further incentives, and Commerce Minister Nath has already recommended a series of breaks for exporters. The finance ministry has yet to give the final clearance.

The commerce ministry wants to introduce a scheme that would refund taxes and levies to industries that have no import obligations to offset the gains of the rupee. Nath has sought Prime Minister Manmohan Singh’s intervention.

The textile and apparels sector has been the worst hit by the rupee’s gains. Textile exports have slipped by nearly 6.5 per cent over the past few months, and are declining sharply.

For the first time in several decades, India’s textile exports to the US have recorded negative growth in value terms. Though India’s apparel exports to the US rose by 7.5 per cent during the first three months of 2007, in terms of value it declined by nearly half a per cent. The last six months has seen a sharp 40 per cent deceleration in textile exports.

For the year ended March 31, 2007, apparel exports declined by 2.1 per cent, as against gains of nine per cent in the previous fiscal, and 27 per cent in 2005. India’s bigger rival, China, saw textile exports to the US soar by 31 per cent in value terms. The currencies of other major textile exporters have also remained weak, boosting their exports: Pakistan’s currency fell by 1.3 per cent (against the US dollar), Sri Lanka’s by 5.5 per cent, and Indonesia’s by 2.3 per cent. Consequently, their textile exports have seen gains in volume terms.

Textile and garment exporters’ bodies have sought far-reaching benefits from the government. The Confederation of Indian Textile Industry has urged the government to intervene in the matter and to help exporters. A delegation of textile and garment exporters, organised by the Federation of Indian Exporters Organisation, last week told the government to reimburse transaction costs and local taxes, and to reduce interest rates to offset the adverse impact of the appreciation of the rupee.

According to a spokesman of the Textile Export Promotion Council, the concessions being sought by the industry are WTO compatible, and other exporting countries would have no grounds to oppose them.

Textile and garment exporters have had to go in for a drastic revision in their export targets from $50 billion to $25 billion, for the year 2012. Similarly, exports are unlikely to meet the target of $11 billion in the current fiscal, and may end up at $9 billion. Nearly two million workers are likely to lose their jobs because of the setback in exports caused by a hardening rupee.

Vijay Agarwal, chairman, Apparel Export Promotion Council, points out that apparels exports growth has slowed down dramatically, and will be pegged at under-eight per cent in the current fiscal, as against 30 per cent growth seen last year. Many exporters will have to shut shop, he has warned the government.

Ironically, while Indian textile and garment exporters are in the doldrums, international brands are bullish about the domestic market here. All the top international labels are aggressively expanding their market share in India, opening new retail outlets and tying up with local partners.

International brands are expanding their presence in India thanks to the buoyant economy and the phenomenal growth in compensation in several industries including IT, ITES, healthcare, hotels and tourism, aviation, automobiles and entertainment. The booming services sector, especially in cities like Mumbai, Bangalore, Delhi, Chennai, Hyderabad and Pune, has resulted in hundreds of thousands of young Indians splurging on branded clothes.

The Indian government has also liberalised rules relating to FDI in the retailing sector, enabling international brands to set up exclusive showrooms for single brands. Foreign brands are now either setting up exclusive outlets, or opting for the franchising route. Brands like Armani, Benetton, De Witte Lietaer, Esprit, Jockey, Marzotto, and Vincenzo Zucchi have opted for collaboration with local partners, while Benetton, Lacoste, Levi Strauss, Mango and Marks & Spencers have gone the franchise way.

Earlier this month, Hyderabad got its first Crocodile Store at the Hi-Tech City. According to P. Sundararajan, managing director, Crocodile Products Pvt Ltd, the last six months have seen a 30 per cent top-line growth for the company.

Bangalore, the IT hub of India, has also seen dozens of international brands setting up outlets, catering to the booming consumer market. NEXT, Guess, The Body Shop, MAC, Mango, Springfield, Boss, Mont Blanc, Esprit, Marks and Spencer, Kipling, Kappa, and Bossini are among the international fashion brands that have set up shop in the city in recent months.

Scores of new shopping malls are also being built at a frenzied pace in Bangalore to meet the growing demand from international fashion brands for retail space. According to analysts, Bangalore has overtaken even Mumbai and Delhi in terms of new international brands that are opening showrooms.

But Indian textile companies are also acquiring firms abroad. Flush with funds, many have been aggressively scouting for companies, both in Europe and the US. Welspun has bought Christy of the UK, GHCL has acquired Roseby’s of the UK and Dan River of the US, Malwa Industries has bought Emmetre of Italy and Third Dimension of Jordan, while Alok Industries has acquired the UK’s Hamsard.

http://www.dawn.com/2007/06/25/ebr11.htm

 

[Neo]

India doling out aid to boost quality tea output ​

GUWAHATI, India: India on Monday began distributing $1.2 billion in aid to help tea planters facing a decade-long slump in tea prices caused by stiff competition in the global market. The package, first announced last May, aims to boost India’s production of high-quality tea to increase exports and fend off challenges from new tea-growing countries.

“More than 50 per cent of the total project money would be utilised for replanting and rejuvenating almost all the 800 tea plantations in Assam,” said junior commerce minister Jairam Ramesh in Assam’s main city Guwahati.

The minister on Monday handed out Rs480 million to 82 tea estates in the northeastern state the heart of the country’s tea industry which grew more than half the 955 million kilograms (2.1 billion pounds) India produced in 2006.

The country’s $1.5 billion tea industry has been in crisis since 1998, with prices and exports dropping because of a glut in the world market, forcing 70 of Assam’s 800-plus tea gardens to close down.

http://www.thenews.com.pk/daily_detail.asp?id=61919

 

[Neo]

India market boom makes analysts scarce, costly ​

MUMBAI: Indian fund managers and brokerages face a severe shortage of analysts as talent is snapped up by big-spending foreign firms lured by a four-year bull run in the local stock market.

International financial firms are paying analysts twice as much as their domestic peers, people in the industry say, with smaller brokerages worst hit as they are squeezed by higher wage bills and falling commissions as Internet broking grows.

“Foreign players come with a huge capital and a capacity to sustain losses for three to five years,” said Nirmal Jain of India Infoline, a financial services firm. Global houses such as Morgan Stanley, Lehman Brothers, Goldman Sachs and Credit Suisse have been ramping up operations in India, while others like German insurer Allianz have said they may launch asset management services in India.

Last month, J P Morgan hired equity analysts away from Citigroup and local brokerages Kotak Securities and Stratcap Securities. Local brokerages are forced to pay top dollar to fight back. India Infoline last month paid Rs440 million ($10.8 million), nearly twice its January-March quarterly profits, in joining bonuses for four senior executives from CLSA.

Salaries for analysts with up to 10 years experience have nearly trebled in the last three to five years, said Vasudeo Joshi, head of institutional equities at Man Financial. But that has not deterred foreign firms, for whom Indian analysts are relatively cheap as their salaries are below international levels.

Fund managers in India, on the other hand, are paid almost as much as their counterparts in Hong Kong. Salaries of Indian bankers and fund managers have been on the rise for several years but the rate began accelerating last year. Experienced analysts in India now earn Rs2-4 million ($50,000-$100,000) a year, twice as much as they earned three years ago, but only a fraction of the compensation packages for senior analysts at major brokerage houses in Hong Kong, who make $400,000 to more than $1 million in some cases.

At the entry level, annual salaries in India have doubled to between 300,000 and 500,000 rupees in three years but are still far below Hong Kong, where the total compensation can be as much as $150,000-$175,000, industry players say.

Demand for analysts has soared in step with the stock market boom, which saw India’s main index rise 73 per cent in 2003, 13 percent in 2004, 42 per cent in 2005 and nearly 47 per cent in 2006. It is up 5 per cent so far this year.

“For the requirement of five people in the research industry, the availability is only two people,” said a senior analyst, who resigned as head of institutional equities at a brokerage to join another company last month.

India had just 302 active chartered financial analysts as of May 1, according to the CFA Institute. “Everyone is looking for ready-made talent. There is very little fresh talent in the market today, so we have to make do with the available stock,” said K Sudarshan of EMA Partners, a placement agency.

The skills shortage is felt beyond the financial sector, even though India churns out 3 million university graduates a year. Software industry body NASSCOM says members face a shortage of qualified staff, pushing up wages by 10-15 per cent a year.

Deepak Jasani of HDFC Securities says that to deal with the skills shortage, brokerages are offering higher salaries and employing fresh graduates and training them. Some analysts say plum jobs are available only for sector specialists and some brokers complain analysts often fail to provide quality research to justify their cost.

“The industry is quite volatile, it is a high-risk, high-reward game. In good times you will get much higher salary and higher compensation, but when the times turn bad you may find it difficult to sustain your job as well,” Infoline’s Jain said.

Analysts say smaller brokerages are also challenged by Internet broking, which accounts for 12 per cent of market volumes but is likely to rise to a quarter in three years. “Wage inflation is on the rise but the commission rates are falling, so booking profitability for the second-tier and third-tier brokers is under pressure,” said Man Financial’s Joshi.

Commissions for trades over the Internet are much lower than traditional broking and competition is rising as many big firms are entering this market, brokers say. “Internet broking has doubled each year since the last few years while the market has been growing at 20 per cent. The impact of it is seen but will be felt much more as it begins to gather momentum now,” Jain said.

http://www.thenews.com.pk/daily_detail.asp?id=61913

 

[Neo]

Saudi-Indian trade crosses $9.87 billion​

RIYADH, June 26: Bilateral trade between India and Saudi Arabia crossed $9.87 billion in 2006.

Highlighting the growing strategic and economic relations between the kingdom and India, the Indian consul-general in Jeddah, Ausaf Sayeed, said: “India is the sixth biggest investor in Saudi Arabia with investments, totaling $1.2 billion, compared to $250 million just three years ago.”

Indian economic offensive seems to be finally paying off. “Indian companies, such as Wipro, Satyam Computers, TCIL Saudi Co Ltd, TCS, Tata Motors and L&T have started their projects in the kingdom. Likewise, Saudi companies have started 49 projects in India and another 50 have been approved,” he emphasised.

Around 3.7 million Indian nationals live today in the six GCC countries and send home about $8 billion annually. More than 1.5 million Indians are employed in Saudi Arabia alone.

http://www.dawn.com/2007/06/27/ebr9.htm

 

[joey]

Go Japan!! They are one of our our closest friends in thought level these days, the delhi-mumbai trade corridor will be funded by them which will itself cost over billions of dollar which will pump huge trade turnover well over hundreds of bn $'s, a Delhi-Mumbai fast corridor is unthinkable what it can do...

 

[Bushroda]

India's strong rupee
Jun 27th 2007
From the Economist Intelligence Unit ViewsWire

An enviable problem to have

The Indian rupee has appreciated by nearly 10% since late 2006, posing an acute dilemma for Indian policymakers. In some ways, the present strength of the currency, which is now hovering just above the symbolic Rs40:US$1 mark, is an enviable problem. It suggests that the country's attractiveness to foreign investors is increasing and signals optimism about the Indian economy more generally. However, the concerns of exporters, who are part of India's economic resurgence, are rising as their goods become more and more expensive for overseas buyers.

The recent strengthening of the rupee is a dramatic departure from past trends. The currency depreciated steadily for a decade after being floated in 1993, dropping from an average annual rate of Rs31.37:US$1 in the 1993/94 fiscal year (April-March) to Rs48.40:US$1 in 2002/03 (an average annual depreciation of nearly 5%). Between 2003/04 and 2005/06, however, the rupee appreciated against the dollar by 3% on average a year—although there was considerable two-way movement of the rupee from month to month. The trend of steady month-on-month appreciation began in September 2006 and has been continuous since then. The average rupee-US dollar rate in May 2007 was the lowest since 1999/2000.

Although the rupee-US dollar exchange rate has the greatest impact on the Indian economy and business sector, the rupee has also appreciated against other currencies. In January-May 2007, the rupee's value in terms of pounds, euros and yen rose by 8%, 6.9% and 11.2%, respectively. During 2005/06, 86% of Indian exports and 89% of imports were invoiced in US dollars, according to the Reserve Bank of India (RBI, the central bank). The euro was a distant second, with shares of 8% in exports and 7% in imports.

Explaining the rupee's appreciation

The main reason for the rupee's appreciation since late 2006 has been a flood of foreign-exchange inflows, especially US dollars. The surge of capital and other inflows into India has taken a variety of forms, ranging from foreign direct investment (FDI) to remittances sent home by Indian expatriates. In each case, the flow seems unlikely to slacken. The main impact of these various types of flows is as follows:

* FDI. India's stellar economic growth has created a large domestic market that offers promising opportunities for foreign companies. Moreover, the country's rising competitiveness in many sectors has made it an attractive export base. These factors have boosted FDI; in 2006/07 FDI amounted to around US$16bn, almost three times the previous year's figure. More than half of these inflows arrived in the final four months of the fiscal year (December 2006-March 2007).

* External commercial borrowings (ECBs). Indian companies have borrowed enormous amounts of money overseas to finance investments and acquisitions at home and abroad. This borrowed money has returned to India, boosting capital inflows. India's balance-of-payments data (available to December 2006) reveal that inflows through external commercial borrowings (ECBs) amounted to an enormous US$12.1bn during April-December 2006, a year-on-year jump of 33%. The flood of borrowed money is likely to grow in 2007. In the first three months of the year, Indian companies notified the RBI of plans to raise nearly US$10bn in overseas debt.

* Foreign portfolio inflows. India's booming stockmarket embodies the confidence of investors in the country's corporate sector. Foreign portfolio inflows have played a key role in fuelling this boom. Between 2003/04 and 2006/07, the net annual inflow of funds by foreign institutional investors (FIIs) averaged US$8.1bn. Trends during the first five months of 2007 indicate that this flood is continuing, with net FII inflows amounting to US$4.6bn. Another major source of portfolio capital inflows has been overseas equity issues of Indian companies via global depositary receipts (GDRs) and American depositary receipts (ADRs). Inflows from GDRs and ADRs amounted to US$3.8bn in 2006/07, a year-on-year increase of 48%.

* Investments and remittances. Indians settled in other countries have also been a major source of capital inflows, with many non-resident Indians (NRIs) investing large amounts in special bank accounts. While NRIs' emotional connection to their country of origin is part of the explanation for this, the attractive interest rates offered on such deposits also provide a powerful incentive. In 2006/07 NRI deposits amounted to US$3.8bn, a 35% increase over the previous year; the outstanding value of NRI deposits as of end-March 2007 was US$39.5bn. Another large source of foreign-exchange inflows has been remittances from the huge number of Indians working overseas temporarily. Such remittances amounted to a colossal US$19.6bn in April-December 2006, a 15% year-on-year increase.

Export risks

Buoyant export growth has also built up India's foreign-exchange holdings. IT and business-process outsourcing (BPO) exports have expanded at an especially robust pace, with exports of software services reaching US$21.8bn in April-December 2006 (a year-on-year increase of 31%). However, the rupee's appreciation is alarming exporters, as it makes their products more expensive in overseas markets and erodes their international competitiveness.

The RBI's deputy governor, Rakesh Mohan, recently referred to the effects of the rupee's appreciation as a case of "Dutch disease". The term refers to episodes where large inflows of foreign exchange—usually as a result of the discovery of natural resources or massive foreign investment—leads to appreciation of the currency, undermining a country's traditional export industries. ("Dutch disease" originally referred to the adverse impact of the discovery of natural-gas deposits in the Netherlands on that country's manufacturing exports.)

There is already evidence in India of an export downturn in a number of sub-sectors. In the apparel sector—one of India's major export industries--the strong currency has eaten into the value of exports to the US, which declined by 3.5% year on year in January-April 2007. During the same period, apparel exports to the US by China, India's most important competitor, rose by 57%. Moreover, for India the decline marks the reversal of a positive trend—apparel exports to the US rose at an average rate of 21% a year after import quotas were phased out at the beginning of 2005.

Policy dilemma

Indian policymakers face a difficult dilemma. On the one hand, the rupee's appreciation has benefited the economy by making imports cheaper. This is no small benefit--containing inflation has been high on the policy agenda during the past year, as the annual inflation rate (as measured by the point-to-point change in wholesale prices) rose to 6.1% in January 2007, compared with 4.2% a year ago. The inflation rate has subsequently moderated. This may offer the RBI some comfort in its battle against inflation, but the bank's new, stricter inflation target (4.5-5% in 2007/08, down from 5-5.5% in 2006/07) suggests that there will be one more increase in interest rates by the end of 2007.

On the other hand, for both economic and political reasons, policymakers cannot afford to ignore the problems of exporters. Although exports account for a relatively small share of the economy, India's rapid export growth in recent years has been an important catalyst of economic growth. Given the limited extent to which the RBI can intervene in the foreign-exchange market in the face of large and sustained capital inflows, policymakers can only stem rupee appreciation substantially by easing limits on domestic firms' overseas investments or restricting inflows--for instance, through further controls on ECBs. The RBI has already taken tentative steps in this direction, making it more difficult for Indian firms to borrow in foreign currency and eliminating the exemption from ECB limits previously enjoyed by real-estate firms.

In confronting this dilemma, government policymakers are undoubtedly hoping that there will be no need for a major intervention. However, the problem is unlikely to disappear soon. The Economist Intelligence Unit forecasts an average annual exchange rate of Rs41.3:US$1 in 2007 (a 13.5% real appreciation year on year) and Rs40:US$1 in 2008 (6%).

 

[Bushroda]

Indian stocks seen gaining into 2008
Wed Jun 27, 2007 11:49 AM BST
By Himangshu Watts, Reuters, UK

MUMBAI (Reuters) - Indian stocks are expected to rise another 5 percent by the end of the year, extending a four-year bull run, though at a much slower pace than in the previous two years, a Reuters poll showed on Tuesday.

Analysts expect banks and telecoms to drive the gains, while automakers lag behind as higher interest rates slow consumption in Asia's third-largest economy.

The Bombay Stock Exchange's main 30-share index <.BSESN> is expected to rise to 15,250 points by the end of 2007, for a 10.6 percent full-year gain, the median forecast of 14 India-based and European analysts showed.

It is expected to rise to 16,000 points by mid-2008 from Monday's close of 14,487.72.

The Indian economy has grown an average 8.6 percent over the past four years, powered by rising corporate profits and attracting strong capital inflows that have boosted shares.

The main index gained 73 percent in 2003, 13 percent in 2004, 42 percent in 2005 and 47 percent in 2006. It is up 5 percent so far in 2007.

Analysts say rising inflation, which hit a two-year high of 6.7 percent in January, and five interest rate increases in the past year have muted market sentiment in 2007.

 

[Neo]

Happy Feet, where have you been??
Good to have you back!

 

[Bushroda]

US financial giant CIT eyes Indian market to tap loan demand
FORBES, NY
06.26.07, 7:56 AM ET

BANGALORE (Thomson Financial) - CIT Group Inc, the US financial company with 80 billion dollars in managed assets, said it plans to enter the Indian market to tap booming demand for commercial and consumer loans.

'India is one of the places we are talking about doing our core business in, after China,' said Michael Baresich, executive vice president of the Fortune 500 company. 'The dimensions of our business in India are under consideration.'

'We like the scale of the Indian market,' Baresich told reporters in Bangalore, where CIT awarded its first information-technology outsourcing contract to Mindtree Consulting, a mid-sized IT company.

CIT wants to join global financial giants such as Citigroup (nyse: C - news - people ), HSBC (nyse: HBC - news - people ) and Deutsche Bank (nyse: DB - news - people ) in tapping expanding demand for corporate and consumer finance in a nation of 1.1 billion people as economic growth accelerates.

Indian companies are borrowing more to invest in new production facilities and meet growing domestic demand for homes, cars, computers and other consumer durables being stoked in part by the easy availability of loans.

The economy grew 9.4 percent in the year to March, while bank loans expanded 29 percent.

'Certainly India is of great importance,' Baresich told a press conference.

The partnership with Mindtree, forged after CIT whittled down a list of more than 100 IT companies, is a beachhead for something bigger for the finance company in the world's second-fastest growing economy.

Mindtree will have 75 professionals, expected to grow to 100, dedicated to doing work for CIT in handling computer systems dealing with finance and sales from its sprawling Bangalore campus.

'This contract makes us feel more well-regarded,' Mindtree Chairman Ashok Soota said. 'We see this as a partnership that will be developing and going ahead.'

 

[Bushroda]

Mumbai's sky-high apartment prices
Financial Mirror, Cyprus
27/06/2007

Mumbai, India’s financial capital is one of the most expensive places in the world to buy a condominium unit, according to a Global Property Guide survey.

Apartments in South Mumbai cost around US$9,000 to US$10,200 per square metre. “Such stellar prices can only be found in the world’s leading cities,” says Yasmin Rahman, yields and valuation analyst at the Global Property Guide.

Property prices in other cities in India are significantly cheaper than in Mumbai. In New Delhi, the administrative capital, used apartments cost around US$2,000 to US$3,000 per sq. m. In Bangalore, India’s Silicon Valley, prices are around US$950 to US$2,000 per sq. m.

These prices are exceptionally high for a country with a GDP per person of only US$770 in 2006. Even for highly paid call centre agents with annual income of around US$3,000 to US$4,500, these condominiums are still unaffordable.

Remarkable growth

Residential property prices in India have been rising remarkably during the past years, boosted by the IT industry's expansion and by rapid economic growth. IT and IT enabled services (ITES) firms have gobbled up new property offerings in several cities. There has also been a continuing move toward suburban business districts (SBD) in Mumbai, Delhi, Bangalore and Chennai.

Indian cities are have struggled to accommodate the influx of people from rural areas. Public infrastructure such as roads, bridges and trains are filled to the brim. Congestion and traffic jams are part of business-as-usual environment.

Demand for quality accommodation of expatriates and “mass affluent” individuals outstrips supply. The government is encouraging the development of new residential complexes with world class amenities and facilities.

Low yields because of rent control

India’s rental market is still hindered by socialist laws protecting tenants. Although these laws are slowly being replaced by more market oriented laws, the rental market's full potential has yet to be realized.

Ironically, these rent control laws help create a housing shortage which pushes up prices. Monthly rents in Mumbai are expensive at US$8,000 to US$10,000. Nonetheless, yields are low, at 3 to 4.7%.

In Delhi, the maximum annual rent is capped at 10% of the cost of construction and the market price of the land. However, the cost of construction and the price of land are both based on historical values and not the current market valuation. So the older your property, the smaller the rent you can charge.

Newer and smaller units in New Delhi fetch on average up to 8.4% rental yields yearly. But generally, yields are low to moderate in Delhi, at 4% to 5.8%.

Bangalore’s more laxly-regulated rental market has higher annual yields at 7% to 10%.

Urban housing problems

In a separate study, the Global Property Guide finds that high transactions costs and restrictive rental markets are conducive to the creation of urban slums. Roundtrip transaction costs for property purchases in India are moderate to high, ranging from 7.5% to 17% of property value, depending upon the city.

Registering property transactions in India is slow and cumbersome as many properties lack clear titles. Property valuation is not standardized. Such problems encourage the under-provision of housing and the growth of slums.

In 2001 about 55.5% of India’s urban population lived in slum areas. The number of slum dwellers in India exceeds 158 million, more than the population of the UK and Germany combined. Dharavi, Asia’s largest urban slum area with more than a million people, is located right next to Mumbai’s prime business districts, the Bandra-Kurla Complex.

As the Indian economy continues to rapidly expand, its cities will continue to attract investors, expatriates and migrants. The development of India’s real estate and rentals industry would greatly benefit from further liberalization of property ownership laws.

 

[Bushroda]

Happy Feet, where have you been??
Good to have you back!

Thanx Neo, Just took time off to do some DIY stuff.
How are the thing here?

 

[Bushroda]

Thai Leader Looks for India Investments
FORBES, NY
By ASHOK SHARMA 06.26.07, 6:29 AM ET

Thailand's prime minister on Tuesday launched a weeklong tour of major Indian cities by prominent Thai investors to look into new business opportunities.

"I do hope our business people will fully utilize this roadshow to further strengthen our partnership," Prime Minister Surayud Chulanont said at a meeting with India's top business leaders.

He asked India to play a major role in promoting information technology in Asia. Thailand would, in particular, welcome the Indian investment in information technology and pharmaceuticals, Surayud said.

"Our cooperation has developed in both bilateral and multilateral fora in all sectors, including trade, investment, security, transport, science and technology, energy, technical cooperation and culture," he said.

Surayud said the two-way trade in 2006 rose to nearly US$3.4 billion (euro2.53 billion) from US$2 billion (euro1.6 billion) in 2004. It appears likely that a target of US$4 billion (euro2.97 billion) will be achieved, he said.

He also said that India and Thailand were on track to establishing a free trade agreement covering merchandise trade by 2010.

Thailand accounted for nearly US$830 million (euro616.6 million) of approved foreign direct investment in India in food processing, hotel and tourism, construction and electrical equipment, telecommunications, trading and transportation, he said.

India's economy is growing at more than 8 percent annually. Thailand expects an annual growth of 4-4.5 percent in 2007.

Surayud will meet with India's Prime Minister Manmohan Singh later Tuesday. He arrived in New Delhi on Monday and was scheduled to return home on Wednesday.

 

[Neo]

Well I tried to keep the thread alive while you were away. Malay isn't posting much lately.