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Gas from ONGC's KG basin to flow from 2012
Shweta Rajpal Kohli
Tuesday, July 24, 2007 (New Delhi):

Oil and gas major ONGC had serious differences with the upstream regulator over the authenticity of its KG basin finds.

More than six months after ONGC announced its KG basin deep sea gas find, India's largest exploration firm finally has some idea of how much gas lies below the waters of its KG basin block.

ONGC plans to produce 12 mmscmd gas from KG 98/2 block and the gas is expected to start flowing from 2012. Total reserves right now stand at 2 tcf as against earlier reports of 20 tcf.

The numbers for ONGC's KG find may seem quite disappointing given earlier estimates of around 20 tcf and when we compare them to Reliance's mega find in the same area.

Reliance's estimates range between 35-50 tcf but ONGC's management insists it is being a bit conservative given strict disclosure norms and hopes that the actual number will be much higher.

"We never said 20-21 tcf, Director General of Hydro Carbons has approved 2 tcf and we will stick to that for now," said R S Sharma, Chief Managing Director of ONGC.

Infrastructure sharing

But the good news is that the differences with the upstream regulator over its gas find seem to be over. The company plans to wrap up the appraisal process by next month and submit the development plan next year.

And going ahead it may even join hands with rival Reliance Industries to share infrastructure in KG basin. For now ONGC has managed to rope in gas transmission company GAIL for marketing and transportation and to set up pipeline infrastructure for its new finds.

"With ONGC's finds in KG Basin and Mahanadi we are hoping to develop infrastructure with them," said U D Choubey, Chief Managing Director, GAIL.

But even as more and more finds are all set to alter the demand and supply scenario in the years to come. The big question that still remains unanswered is the price that the producers will get for this gas.
 
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GE Positions Itself To Profit From India's Freight Network Expansion
Ruth David, 07.24.07, 6:18 PM ET
FORBES, NY

General Electric subsidiary GE Equipment Services has entered the Indian rail market by picking up a 15% stake in domestic freight car manufacturer Titagarh Wagons. The global giant is looking to target lucrative demand from Indian Railways as it opens up to private contractors.

Indian Railways has around 230,000 freight cars now and will require 330,000 by 2010, said GE Equipment Services President Dhananjay Nalawade. “This is where our partnership with Titagarh Wagons would come in handy,” he told reporters in New Delhi.

Neither company has divulged the cost of the acquisition. The General Electric (nyse: GE - news - people ) subsidiary will foray into producing railcars and setting up maintenance facilities in partnership with Titagarh Wagons, which is based in Calcutta, India. The Indian company, which started in 1998, manufactures freight cars, Bailey bridges--a kind of prefabricated truss bridge--and mining equipment, and its clients include the defense ministry.

GE plans to make significant investments in India in the next few years. “GE is looking at investing around $8 billion in India by 2010, a majority of which would be pumped in[to] infrastructure,” said Nalawade. Faced with constant criticism over poor infrastructure, the government has estimated it will need around $350 billion in the next five years to ramp up power and improve roads, airports and ports.

Apart from GE, international companies like Toshiba (other-otc: TOSBF - news - people ) and Bombadier (other-otc: BDRAF - news - people ) are eyeing the Indian market as the government directs capital spending toward rail networks, particularly freight corridors and urban subway systems.

The state-run Indian Railways, which runs more than 11,000 trains every day, is estimated to need nearly $15 billion for modernizing its existing fleet and for new additions. The railway ministry is using public- private partnerships with to raise the funds and supply the expertise needed to expand capacity.
 
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Retailers find growth in rural India

One chain that has moved into the vast farmlands offers such items as groceries, fuel and agricultural advice.

By Shankhadeep Choudhury, Times Staff Writer
Los Angeles Times
July 24, 2007

LATHI DHANAURA, INDIA — Lush green fields all around. The distant roar of tractors. The gurgle of piped-in irrigation water. And in the middle of this pastoral setting: an imposing store selling a variety to products including cosmetics fertilizers, seeds and toys.

"I don't need to go to the nearest town anymore," said 60-year-old Ranjit Singh, a local farmer who has been a regular at this rural department store for the last three years. "All my household stuff — grocery, agricultural commodities, my mobile phone and even the fuel for my tractor — is acquired here."

Welcome to rural India, the newest area to feel the retail boom this nation is witnessing.

The store, Hariyali Kisaan Bazaar, is capitalizing on a demographic reality here in the world's second-most populous country. Despite India's reputation abroad as a high-tech powerhouse and call-center magnet, more than two-thirds of its 1 billion people still live in the countryside, scattered among 627,000 villages.

Vast numbers of these residents of India's hinterlands remain mired in desperate poverty, subsistence farmers whose lifestyles are little changed from those of generations past.

But alongside them is a growing segment of rural dwellers of increasing means and spending power. Agriculture accounts for 27% of India's gross domestic product and 67% of the country's jobs. A study by the National Council for Applied Economic Research estimated that the Indian countryside had as many households of middle income and above as urban areas and twice as many households of lower-middle income.

That makes the countryside an appealing market for retailers willing to cater to agriculture-oriented customers and cope with India's often-dismal infrastructure.

DCM Shriram Consolidated Ltd., a conglomerate with 40 years of experience in the Indian agricultural sector and annual revenue of $625 million, launched its chain of Hariyali Kisaan Bazaar outlets in June 2002. There are now 70 stores dotting the states of Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan, Andhra Pradesh, Uttarakhand and here in Haryana.

The stores tailor their inventories to the needs of local farmers, selling clothes, footwear, animal feed, irrigation equipment and even insurance.

The stores also use the promise of better quality control to win over customers who have often been unsure of the reliability and quality of goods and services sold by less scrupulous shops. Shoddy and adulterated goods are a problem in India's countryside.

"We used to buy petrol from shopkeepers locally … never a gas station. Very often, they mixed kerosene with the petrol," said Pramod Kumar, a 33-year-old farmer here in Lathi Dhanaura, a village in Haryana about 100 miles north of New Delhi. At the HKB store, Kumar added, "we get quality items at the best prices."

Suresh Kumar (no relation to Pramod), 25, who grows sugarcane, grams and lentils, said that in the markets of the nearest township, Ladwa, he and his fellow farmers from about 120 surrounding villages were often forced to buy whatever fertilizer was available.

"We did not even have the choice of buying the brand of agricultural inputs we wanted," Suresh Kumar said. "Moreover, bills or receipts were never issued."

Each HKB store usually operates in a catchment area of about 60,000 to 80,000 acres of farmland with about 15,000 to 20,000 households, said Vikram Shriram, DCM's vice chairman and managing director.

"HKB is unique as it embodies some of the key focus areas for India's rural development: investment in rural infrastructure, improving farmers' productivity and profitability, providing urban amenities to rural areas, aggregation of farm produce, access to information and use of information technology," Shriram said.

Many analysts say Indian farmers have been hampered by a lack of objective and timely advice on best agricultural practices, resulting in far lower yields from their fields than they might otherwise achieve.

At the Lathi Dhanaura HKB store, Jhabar Mal Yadav heads a team of three agronomists who provide 24/7 technological support to farmers.

"One of us usually stays at the store, while the other two venture out to the fields, delivering agri-advice to the farmers and ensuring adoption of modern practices," said Yadav, 34, who holds a doctorate in agriculture. "Through village-level meetings and crop seminars right at the fields, we tell agriculturalists which varieties of sugarcane and [rice] paddy to plant."

Agriculture and rural India have also beckoned Amway India, a wholly owned subsidiary of Ada, Mich.-based Amway Corp., one of the largest direct-selling companies in the world.

Amway India, established in 1995, began commercial operations in May 1998 and has emerged as the largest direct-selling, "fast-moving consumer goods" company in India.

In 2001, the company introduced APSA-80, its only product for the rural market, a solution mixed with pesticides to enhance their effectiveness. Rajat Banerji, a spokesman for Amway India, said the solution commanded a market of more than $5 million in India and, besides its agricultural application, had been used in other interesting ways, such as lessening the dew on the field during the 2006 ICC Champions Trophy cricket matches in Mohali, Punjab.

To boost sales, Amway India began a program in which a sales van fully equipped with a generator, projectors, a digital screen, a public address system and display materials runs through villages on schedules and routes decided in consultation with local Amway representatives.
 
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Give these two the big push
Vinayak Chatterjee / New Delhi July 16, 2007

Mumbai as an IFC and the Delhi-Mumbai industrial corridor both deserve to be aggressively implemented by the UPA government.

The NDA government will always be remembered in infrastructure circles for the epochal National Highway Development Programme (NHDP). The present UPA government can certainly be credited with some good schemes — pushing PPP, forex for infrastructure, the creation of the Indian Infrastructure Finance Co Ltd, viability gap funding, airport modernisation, Bharat Nirman, JNURM, ultra-mega power projects, and even SEZs. These, however, have not quite fired the public imagination as the NHDP and the associated rural roads programme did.

In this context, two new-age projects that have the requisite impact, and if properly ‘pushed’, can garner accolades for the UPA dispensation are Mumbai as an IFC and the Delhi-Mumbai industrial corridor.

Mumbai as an IFC

This proposition has been presented very forcefully and professionally by the ministry of finance in an elaborate report. The finance minister himself has strongly endorsed the idea at a well-attended gathering in Mumbai this summer. Fundamentally, the idea is for Mumbai to replicate a London, New York or Singapore, which are at present the only ‘global’ finance centres; and provide competition to other aspirants like Shanghai, Dubai, Paris, Frankfurt and Tokyo.

There are five infrastructure challenges before the UPA Government in pursuing this path-breaking opportunity. They are:

- With its two financial centres being located in the Bandra-Kurla complex and Nariman Point/Fort in south Mumbai, intra-city drive times have become particularly critical. The linkages to the upcoming visionary SEZ in the immediate hinterland also needs to be factored in.

- A host of PPP solutions, based on user charges, need to be rapidly rolled out in order to alleviate infrastructure constraints such as transport, power, water, sewage, drainage, railway stations and so on.

- The city’s administrative structure would have to be revamped. In China, the four largest cities have been given provincial status, much like Delhi. The central policy focus needs to be on the empowerment of the city government to take economic and service delivery decisions, as envisaged in the 74th amendment.

- Financial allocations for the city made by the central and state governments have to be realigned to reflect the public revenues they generate and the city’s legitimate needs for infrastructure maintenance as well as planned urban growth and development.

One suggestion floating around is turning Mumbai into a Special Administrative Region like Hong Kong. Such a ‘one country, two systems’ mechanism similar to the arrangement Hong Kong has with China would release a burst of energy — administrative, financial and political.

Master Card Inc’s recent survey findings put Mumbai at the tenth place in terms of the volume of ‘financial’ flows, ahead of Shanghai, Hong Kong, Sydney, Singapore and Zurich. Ernst and Young’s Global IPO Report 2006 puts India’s (read Mumbai’s) IPO market as the world’s eighth largest. With these two shots-in-the arm for IFC proponents, a Hong Kong type solution is well worth considering.

Delhi-Mumbai Industrial Corridor (DMIC)

Originally mooted by the Japanese as a high-speed “bullet-train type” dedicated passenger route, it was then transformed by the Planning Commission, PMO and the railways into a freight corridor for three reasons:

- A high-speed passenger corridor would be seen as elitist;

- Higher axle-loads on freight trains would necessitate fresh sections of track and the strengthening/revamping of bridges, culverts and tunnels. It was better to do this afresh for freight and leave passenger trains to consequently increase speeds on existing tracks vacated by slower freight trains;

- The acquisition of rolling-stock and freight train operations on a PPP basis was seen to be financially and administratively less burdensome than for the passenger.

The Japanese were not particularly pleased, but nevertheless, the high-speed passenger corridor became a dedicated freight corridor. All this was happening as the SEZ frenzy was at its peak, and all concerned saw the great land value potential alongside the freight corridor. Surely enough, proposals flew in thick and fast to develop all kinds of economic clusters and connectivities across the freight corridor and lo and behold, the dedicated freight corridor morphed into an “industrial corridor”! Holy water was sprinkled on this idea when the Prime Ministers of Japan and India met in Tokyo in December, 2006 and a collaborative MoU was signed.

Japanese interest in this project is at an all-time high. India’s department of industrial policy and promotion is enthusiastically preparing concept papers for a $90 billion ($50 billion till a few weeks ago) investment programme. The initial concept note was presented by Kamal Nath to the Japanese Trade Minister Akira Amari in New Delhi on July 2, 2007. The project would be launched in January, 2008 and completed in the next eight years. It is expected to mark another glorious chapter of Indo-Japanese collaboration after Maruti and the Delhi Metro, and would be the highlight of Japanese Prime Minister Shinzo Abe’s visit to India in August, 2007.

History has shown that mega-infrastructure projects in India (or for that matter, elsewhere in the world) require a combination of strong political championing, unique structural solutions and visionary professional leadership to make them happen.

Five issues that are common to both the above-mentioned projects are:

- The availability of ‘soft’ long-term capital of about 30 years’ duration. This is normally available only under overseas development assistance schemes like World Bank, ADB or JBIC.

- Buy-in from a multiplicity of stakeholders like state governments, local communities, NGOs, central government authorities, railways, ULBs and the like. These are best harmonised by creating an empowered ‘authority’ under an Act of Parliament. This would be in keeping with the spirit of similar enactments for SEZs, NHAI, electricity and so on.

- The institutionalising of non-partisan, visionary, professional leadership and management, much akin to E Sreedharan’s in Delhi Metro.

- Continuing political support with some clearly identified cheerleaders. The signs are that P Chidambaram and Kamal Nath are warming up to the task for IFC and DMIC, respectively, but the enabling legislation should be designed to outlive the initial political champions.

- Putting on the ground complex administrative frameworks consisting of a web of steering committees, empowered authorities, holding companies, land banking entities and a slew of connected SPVs.

Will the UPA government choose to move ahead purposefully? Watch this space.
 
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India Tata Motors Buys Jaguar,Land Rover -TV
CNNMoney.com
July 26, 2007: 05:27 AM EST

NEW DELHI -(Dow Jones)- India's Tata Motors Ltd. (500570.BY) has acquired Jaguar and Land Rover, Indian news channel CNBC-TV18 reported Thursday, citing unnamed sources.

A Tata Motors executive however declined comment when contacted by Dow Jones Newswires.

"Tata Motors does not have any comments to make. Tata Motors does not comment on mergers and acquisitions," said Debasis Ray, head of corporate communications.

Ford Motor Co. (F), which owns the two brands, also said the report was inaccurate and that it was still evaluating options.:what: :what: :what:

Tata Motors, which makes buses, trucks and passenger cars, is India's largest commercial vehicle maker by sales.

Last month, Ford hired advisors to help sell Jaguar and Land Rover, both part of its Premier Automotive Group (PAG), in a move expected to reap as much as $8 billion, according to some estimates.
 
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Tata Motors starts JV with Fiat subsidiary
Ajoy K Das
Wednesday, July 25, 2007 23:28 IST

KOLKATA: Even as it aims to scoop up British marquee brands like Jaguar and Land Rover, Tata Motors has started working on a joint venture with Iveco of the Fiat Group for a manufacturing base for commercial vehicles in Russia.

Currently, both Tata Motors and Iveco have separate commercial bases in the form of distribution arrangements in Russia.

The Russian venture is also likely to be the future manufacturing and distribution platform for Tata Motors’ ‘World Truck’ that is slated to be unveiled in mid-2008 and is currently in the design stage at R&D facilities of Tata Motors and Tata Daewoo Commercial Vehicle Limited (TDCV), Korea.

The joint venture plan comes in wake of a memorandum of agreement signed between Tata Motors and Iveco, earlier this year and part of the overall collaboration agreement with the Fiat Group in domains of engineering, manufacturing, sourcing, distribution of products.

Highly placed sources in Tata Motors said that a Steering Committee had been set up soon after the signing of the Memorandum of Understanding (MoU) with Iveco to prepare a “feasibility of co-operation” both in the short and long term.

This committee, after detailed analysis of various global markets, particularly in emerging countries, had zeroed in on Russia.

Tata Motors and Iveco have expertise in the Russian market that could be leveraged to set up a manufacturing base. A ‘definitive agreement’ between the two companies will precede before work on the Russian joint venture gets underway, sources said.

A Tata Motors spokesperson said that the company had no comments on the issue at this point of time.

Though these are early days and the contours of the joint venture are yet to be etched, officials said that Tata Motors could be looking to a 50:50 partnership with Iveco for its Russian venture.

Tata Motors and Fiat Auto have already announced the formation of an industrial joint venture in India for manufacture of passenger cars, engines and transmission for domestic and global markets. The Tatas are also distributors of Fiat branded cars in India.

Both Tata Motors and Iveco have the entire range of light, medium and heavy commercial vehicles, as also Daewoo branded commercial vehicles in their portfolio.

However, according to the tentative plans, medium and heavy commercial vehicles will be the focus for the Russian manufacturing base, at least in the initial entry point.
 
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Renault-Bajaj to drive $3K car
27 Jul, 2007, 0200 hrs IST,
Nandini Sen Gupta, TNN

NEW DELHI: French carmaker Renault is close to tying up with two-wheeler major Bajaj Auto for a brand new global platform that would make the $3,000 car. According to sources in the industry, an announcement is due next week regarding the joint development of a platform for both light passenger vehicles and goods carriers. When contacted, Bajaj Auto MD Rajiv Bajaj refused to comment.

Sources said a top-level Renault team was in India last week to discuss the proposed partnership. The alliance will set up the new platform at a new site (not the Chennai plant that Renault is jointly developing with M&M and Nissan, nor Bajaj’s Chakan or Akurdi plants in Pune). The cars and goods carriers made would be sold in India as well as abroad.

While there had been speculation that both Nissan and Renault would partner with an Indian company for the $3,000 car, Bajaj’s alliance would only be with Renault. ET had reported about Renault initiating talks with Bajaj Auto on July 13. Renault went for a new partner for the $3,000 car after its current Indian ally Mahindra & Mahindra indicated that it was not interested in the project.

M&M reportedly did not see it as its core competence as its long-term strategy is to be a global player in the SUV segment. It also felt that a sub-Rs 2-lakh car would not bring in the kind of margins that would justify the size of the investment. M&M vice-chairman Anand Mahindra could not be contacted.

According to international media, Renault officially indicated its plans for an alliance with Bajaj Auto on Thursday. A Renault spokeswoman was quoted as saying: “We have had contacts with Bajaj Auto and that was about the $3,000 car, but we are still in a phase of making up our mind.”

The French company apparently zeroed in on the Pune-based two-wheeler major after holding talks with it over a range of light commercial vehicles. M&M already has a commercial vehicle tie-up with American company ITEC and, therefore, was not an option for Renault.

Currently, Renault has two separate joint ventures in India with M&M. One is Mahindra Renault, a largely marketing company, which is selling Renault’s low-cost sedan, Logan, in India. The second is a three-way venture among Renault, Nissan and M&M, which is putting up a greenfield plant in Chennai. Renault is also putting up a power train plant in India, as a 100% subsidiary.

Bajaj Auto has already announced its foray into the light commercial vehicle market, with a product that would compete with Tata Motors’ successful Ace light truck. And like Tata — which has just launched Magic and Winger, two passenger vehicle versions of Ace — Bajaj is planning to chalk out a passenger vehicle concept, to be showcased at the Auto Expo next January.
 
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India’s future – out of the back office and into the shop window
In the last of our series, The Empire Strikes Back, looks to the next decade as corporate India takes its brands, and its skills, into the West

Ashling O’Connor
THE TIMES
27 July 2007

Five years ago, anyone suggesting that The Times of India, the world’s largest circulation English-language newspaper, could buy the Financial Times, arguably the world’s most prestigious business paper, would have been laughed out of the room.

This month, despite the Indian media group’s insistence that it is focused solely on a booming domestic market, the rumour was taken very seriously in private equity circles.

“Confidence is an enormous thing,” said Toby Greenbury, co-head of the India practice at Mishcon de Reya and a director of the Indo-British Partnership. “Some businesses in India are growing very fast and they are using the money to become international companies.”

Above everything, they believe the global stage is their “rightful” place, according to Sonjoy Chatterjee, ICICI bank’s UK chief executive. “Corporate India is really thinking big,” he said. “It has seen what is available globally and is no longer nervous.”

Tata Motors, India’s largest car-maker, is believed to be lining up a bid for Land Rover, exemplifying the ambitions of corporate India. Inherently conservative after years of socialist containment, Indian companies are developing a propensity for risk. They are profitable, underleveraged and being offered access to debt by international banks, which are convinced of their long-term worth.

They are no longer content being commodity players; they want the premium end too. If the first step in globalisation was for cost-conscious Western brand owners to move their production east, the next stage appears to involve in-sourcing the outsourcer.

You don’t get more English than Wimbledon but this year there was a hidden Indian influence in SW19: the famous green and purple towels so treasured by men’s champion Roger Federer that he gives them to friends as Christmas presents.

Few outside the textiles industry noticed last year’s £15 million acquisition by Welspun, India’s largest exporter of terry towels, of Christy, the 150-year-old brand beloved of Queen Victoria and a former pillar of the Courtaulds Group.

But the deal underlined a growing confidence among Indian suppliers to put themselves in the global shop window after years of being the back-office boys.

Welspun is using Christy – the largest terry towel supplier to Marks & Spencer, John Lewis, Bloomingdale’s and Debenhams – to gain access to new markets.

Christy, now an Indian subsidiary, is relocating its sole UK manufacturing facility from the North West of England to northwestern India. Welspun’s mill in Anjar, Gujarat, with capacity to make 5.6 million towels a year at a quarter of the cost of the developed world, will be fully operational by September.

With the death of Britain’s textiles industry long declared, it is an inevitable shift and is indicative of India’s new position in the world order.

“Many British people still think India’s a place for low-cost labour and call centres but the Indians own call centres in the UK now,” Peter Luff, the Tory MP for Mid-Worcestershire and chairman of the Trade and Industry Select Committee, said.

The next five to ten years will only see corporate India gaining in confidence. British companies will attract more interest from Indian groups hoping to apply their back-end scale and access to Asian markets to a world-famous brand with access to Western markets. “Indian companies already have the manufacturing facilities but they need the front and the visibility,” said Ramesh Ahuja, chief executive of SBI Capital Markets, the State Bank of India’s corporate finance arm in London. “That’s why Tata bought Tetley. Because they thought they could add value. And there’s no stopping this for the simple reason that there are a lot of synergies between Indian companies and UK companies.”

There are significant hurdles ahead, though, not least a danger that India could start believing its own hype.

Tata Consultancy Services, India’s biggest IT services company, is still only 5 per cent of the size of IBM, the world leader. ICICI bank, India’s largest commercial bank with a market capitalisation of $25 billion (£12.1 billion), is only one tenth the size of Citibank. China has five banks in the top 50 global list while India has none.

“In almost all cases, Indian businesses have a long way to go to challenge the global majors,” said Alan Rosling, the Tata director responsible for the Indian group’s international strategy. “Western and Japanese companies enjoy advantages beyond scale, including superior brands, technologies and competences, and forward-thinking multinationals are turning to India to exploit the same cost and people advantages that underpin the competitive challenge of Indian companies.”

Turning Bombay into a global financial centre so it can interact properly with London and facilitate trade flows is another huge challenge. The pace of reform by India’s central bank is slow.

Meanwhile, Bombay is losing out to other emerging financial centres such as Dubai, and some Indian banks abroad continue to be focused solely on the $30 billion global remittance market, rather than becoming serious corporate financers.

“All the Indian banks have operations in London but [corporate financing] has been the preserve of foreign banks with the large balance sheets offshore. It is hard for players out of India,” said Naina Lal Kidwai, chief executive of HSBC India.

Immigration concerns in the wake of the failed UK terror attacks, for which three of the suspects include Indian nationals, may also slow India’s march on Britain. Students, in particular, may find it more difficult to get visas in the coming months. It will not, however, be a deal-breaker.

“The debate will die down because you will just not have enough skilled people [in the UK]. The estimate is that by 2020 the developed world will fall short of 40 million people of working age,” said Sunil Kant Munjal, chairman of Hero Corporate Services, an arm of India’s $3.2 billion Hero Group.
 
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Incredible India website goes commercial
Press Trust Of India / New Delhi July 26, 2007

The tourism ministry’s Incredible India website today acquired a business dimension with the launch of an e-commerce platform that will allow firms to conduct a host of travel-related activities.

The platform, developed jointly by the ministry along with EVIIVO, a tourism e-commerce company, is accessible on the main site www.Incredibleindia.Org and will facilitate small and medium industries to conduct a host of travel related business activities, mainly booking of accommodation at the destinations.

Terming the e-commerce platform as “one of the most effective way of access to the tourism products,” Tourism and Culture Minister Ambika Soni said the platform “will strengthen our visibility on the internet”.

Launching the e-commerce platform, Soni said the website had proved to be “singularly the most effective way” to increase tourist inflow — from 3.9 million to 4.43 million from year 2005 to 2006.

“At this pace, I am sure we will be able to meet our 10 million arrivals mark in 2010 when Commonwealth Games will be held,” Soni said.

She said apart from the SME (small and medium enterprises) the business portal is expected to “substantially benefit” the medical tourism in the country.
 
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Indian stock market crashes by over 500 points

Mumbai, July 27: Indian stock markets crashed Friday and led a key index to shed more than 500 points, taking cues from weak global markets and large-scale selling in heavyweight stocks.

The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) witnessed its sharpest fall since April 2, with the barometer index dropping 541.74 points, or 3.43 percent, to close the day at 15,234.57 points.

At this level, the index is at its lowest since July 12. It had shed 4.7 percent on April 2.

The index opened weak at 15,487.76 points Friday, down 288.55 points from the previous day's close at 15,776.31 points. Soon after, it touched the day's high of 15,495.51 points.

By noon, however, it fell to the day's low of 15,159.68 points and settled at the current level after wild fluctuations. The mood was gauged by the fact that as many as 27 out of 30 shares that go into the Sensex basket ended in the red.

"After the bull run we have seen for the past few weeks, a correction was bound to happen. This drop cannot be taken as something negative. It was a correction, triggered by global developments," said an analyst with a brokerage here.

"The decline in the global markets and the prediction of higher inflation rates on the domestic front have affected the investors' sentiments which has led to the selling pressure," said PHD Chamber president Sanjay Bhatia.

Possibly, the higher interest rates have begun to have a negative impact on the corporate earnings, which may have affected the investors' perceptions, he said, adding that the fall Friday was a technical correction.

In a similar vein, Venugopal N. Dhoot, president of the Associated Chambers of Commerce and Industry (Assocham) advised the investors not to panic, wince the Indian economy fundamentals were strong.

"This is a temporary phase and stock market would give the corrective evaluation of the state of the economy."

The three Sensex shares that bucked the trend were ITC, up 3.12 percent at Rs.171.80, Ranbaxy Laboratories, up 0.40 percent at Rs.374.90, and Ambuja Cement, up 0.28 percent at Rs.125.05.

Tata Steel, on the other hand, led the losers, down 7.37 percent at Rs.651.60, followed by Reliance Communications, down 5.65 percent at Rs.537.35, and Bharat Heavy Electricals, down 5.40 percent at Rs.1,660.40.

Housing Development Finance Corp, Hindalco, Larsen and Toubro, Reliance Energy, Satyam Computers, Oil and Natural Gas Corp and HDFC Bank were also among those shares that shed ground Friday.

--- IANS
 
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Currency Conundrum: Is the Strong Rupee Good or Bad for India?
Knowledge@Wharton
Published: July 26, 2007

History has been unkind to Canute. The 10th century king of England was so tired of his fawning courtiers that he took them to the shore and commanded the waves to roll back. It was to be a demonstration of the limitation of his powers. But Canute in popular perception is the man who tried to turn the tide and failed.

Today, India's finance minister P. Chidambaram and Y.V. Reddy, the governor of the Reserve Bank of India (RBI), India's central bank, face Canute's predicament. In the public mind, they seem to be trying to reverse an inexorable inflow of dollars and its consequence -- an appreciating currency. Once traded at 47 or 48, the rupee now hovers at 40 to the dollar. Observers call it the fastest appreciation of the Indian currency in three decades.

Is the rising rupee good or bad for India? What impact will it have on the global competitiveness of Indian firms? Should the RBI or the Finance ministry intervene? Responding to these questions and more, experts at Wharton and elsewhere say that the rupee's rise is the result of India's growing ability to attract global capital. While this creates problems for some companies that earn most of their revenues in dollars -- including IT giants such as Wipro, Infosys and TCS -- it also creates opportunities for Indian firms by making it less expensive for them to acquire overseas assets. In addition, a strong rupee is good for the Indian consumer. It would be unwise for the government to intervene to force down the rupee's value, they note.

What's Driving the Rise?

Dollars are pouring into India. Net investments by foreign institutional investors (FIIs) were $10.16 billion during January-June 2007. This is more than the $8 billion recorded in the whole of 2006. July has beaten all records with an inflow of $5.81 billion (so far). The FIIs are chasing Indian stocks and taking the markets to what many feel are levels of irrational exuberance. The bellwether Bombay Stock Exchange (BSE) Sensitive Index (Sensex) was 15,732 on July 23 against 12,455 on April 2. (Incidentally, that day's low -- the Sensex plunged 617 points during the day -- was caused by the RBI's attempts to control the rupee.)

The foreign direct investment (FDI) numbers are equally impressive. In 2006-07, FDI inflows touched $19.53 billion, a 153% increase over the previous year. (This figure includes private equity and also $3.5 billion in reinvested earnings.) The government is looking at a target of $30 billion in 2007-08. Foreign exchange reserves stood at $214.84 billion on July 6. This is a far cry from $5.8 billion in the dire days of March 1991, when India had to pledge its gold to stave off a default crisis.

External commercial borrowings of Corporate India were $12.1 billion in April-December 2006, an increase of 33%. Remittances from Indian workers abroad -- principally in the Gulf -- rose 15% to $19.6 billion in the same period. And non-resident Indian (NRI) deposits, attracted by better interest rates, were also up 35% in 2006-07 to touch $3.8 billion. These foreign exchange inflows have pushed the exchange rate to around Rs 40 to the dollar. The rupee has risen nearly 10% against the dollar this year. It has appreciated more than 14% from a low of 47.04 in July 2006.

Painful Squeeze

Wharton finance professor Jeremy Siegel notes (in his podcast) that a rising currency can cause distress. "This is painful. It's been the strongest appreciation of the rupee in over 30 years as I look back at some of the data," he says. CEOs of IT companies would agree with that assessment. Speaking at a press conference at Wipro's Bangalore headquarters on July 19, chairman Azim Premji complained about the "strong headwinds faced by us in the form of the appreciating rupee." Wipro reckons that its operating margins were lower by 2.4% in the first quarter because of the currency appreciation. Most IT companies -- the poster-boys of India's economic liberalization -- are in the same boat; they have been unable to meet their forecasted quarterly earnings. Their shares have been beaten down on the bourses, even as the markets are hitting new peaks.

Infosys chief mentor N.R. Narayana Murthy notes, "It (the rupee rise) is a macro-economic issue. I am not worried about factors which are out of my control." Others aren't taking it as easy. "A rising rupee can have a large impact on Indian exports and it could erode our competitiveness in the global market," IT firm Satyam founder and chairman B. Ramalinga Raju told The Economic Times recently. "Countries such as China are continuously suppressing the value of their currencies. So they may have an edge over us.... The government should intervene to bail out exporters who have been hit by the strengthening rupee." (The Indian government has announced a $3.5 billion package to provide relief to exporters in several sectors. But that has been deemed by many as insufficient.)

Jagmohan Singh Raju, a professor of marketing at Wharton, points out that smaller firms, including those "that rely on the U.S. market are clearly hurting. Companies such as Infosys and Wipro are feeling the impact, [but] smaller companies -- garment exporters and auto-part suppliers -- are hurting even more. Many of them banked on the dollar appreciating routinely after signing a contract. Now it is the other way around. I think these companies will be affected more than IT companies."

The Confederation of Indian Industry (CII) says that the worst hit are the textile and leather sectors. While individual exporters and companies have their woes, some complain of damage at a macro-level. A survey by the Federation of Indian Chambers of Commerce & Industry (FICCI) says sectors such as automobiles, consumer durables, food and food processing, gems and jewelry, textiles, handicrafts, and metal and metal products will be particularly impacted. "While the market should determine the exchange rate in the long run, sharp fluctuations in the short term create problems of adjustment for domestic industry," says FICCI president Y.K. Modi. The most affected, he says, is the small and medium enterprises (SME) sector.

Government's Role

When companies and industry organizations complain about such issues, the veiled -- and sometimes not-so-veiled -- argument is that the government should step in to provide support. Should it?

"My feeling is no, they should not intervene," says Siegel in his podcast. "My historical studies showed that a lot of the 1997 crisis was because currencies did not appreciate. That was during the era of fixed exchange rates in Thailand, Taiwan, Indonesia and the Philippines. And by not letting them appreciate, they actually attracted more capital. By letting it appreciate, people are a little bit more cautious because it looks a little more expensive now. And all of the capital that came in -- they couldn't deploy it favorably, and the result was over-consumption, deficits and then finally devaluation."

"I think it is best not to interfere," agrees Wharton's Raju. "Some correction should take place by the end of next year as U.S. expenditures outside decrease." Raju adds that in the short run, "A case can be made to support the very small exporters. But the right way is to allow the rupees to flow out. Let Indians invest in the U.S. -- not just companies, but also individuals. Some recent steps are in the right direction. More can be done."

Montek Singh Ahluwalia, deputy chairman of India's Planning Commission and one of the principal architects of the country's economic reforms, believes that the Reserve Bank and Finance ministry face a difficult set of choices. In an interview in his New Delhi office, he told India Knowledge@Wharton that, "This is a balancing act that the Reserve Bank and the Finance ministry have to play. It is a reflection mainly of the trilemma that economists face; you can only have two out of three things. If you want to have a stable currency, an independent monetary policy and capital account convertibility, you can't have all three. You have to give up one."

According to Ahluwalia, "The positive feeling about the Indian economy is bringing in a lot of capital. The only way you can absorb this capital is to let the exchange rate appreciate." He recognizes that "many people feel the appreciation has gone beyond what is reasonable. But this is a balancing act. What else can the Reserve Bank do? It can intervene to stabilize the nominal exchange rate, and that will generate some liquidity. It can stabilize the liquidity, but that will impact the exchange rate. Whatever it does, there will be some problem. What the Economic Advisory Council has said is that it can do these three things, and it should do a little bit of each."

In an effort to force down the rupee's value, under normal circumstances, the RBI would have bought dollars from the market. This releases rupees which the RBI then tries to mop up by issuing debt instruments. But the RBI has bought some 28.4 billion in dollars between January and May 2007 and it has to draw the line somewhere.

The sloshing liquidity leads to inflation, which is not politically palatable either. Indeed, the RBI sees controlling inflation as its prime mandate. As measured by the wholesale price index, inflation has come down to around 4.3% now, against 6.7% in January. But analysts warn that the trend may reverse soon.

The RBI has pulled out all the weapons in its armory. It has raised benchmark interest rates seven times since October 2005. It has sought to suck liquidity out of the system by increasing the cash reserve ratio (CRR), the amount banks have to keep with the central bank. Explains S.S. Tarapore, former deputy governor of the RBI and the man who has prepared two roadmaps for the full convertibility of the rupee: "While, until recently, the RBI has been intervening in the foreign exchange market buying dollars, the resultant release of domestic liquidity has required the authorities to issue bonds under the Market Stabilization Scheme (MSS), absorb liquidity under the Liquidity Adjustment Facility (LAF) through the reverse repo facility (surplus liquidity in the market is placed with the RBI at a rate of interest of 6%) and to increase the CRR. All this has costs. But these measures have increased interest rates in India and stimulated even larger capital flows."

Economists and India's money mangers are divided on the virtues of a strong rupee and what the RBI should be doing about it. "I have always argued that we should not intervene much on ups and downs of exchange rates. Let market forces determine that," Satish C. Jha, economist and member of the Prime Minister's economic advisory council, told The Economic Times recently. "We can't forget that the rupee has remained undervalued for quite some time. I feel it will get stronger and will hover around 38 in the next two years. We have seen a strong inflow of foreign capital into the market. How can we expect the rupee to depreciate?"

The rupee will stay strong, says analyst Jamal Mecklai. Speaking to exporters at a seminar on "How to deal with the new improved rupee," held in Mumbai recently, he said this was a period of churn. Big export houses, he added, had weathered the storm because of their professionalism. The small companies should similarly get their act together.

"It is obvious -- from the recent paroxysm in inflation followed by the trauma in the forex market -- that control processes have run their course and, appearances notwithstanding, the Indian economy is being run largely by the free flow of capital," wrote Mecklai in Business Standard. "The increasingly aggressive bleating we are hearing about the strength of the rupee is clearly coming from sources that don't recognize this."

How Should Companies Respond?

"Exports are about job creation, not dollar creation," says Ajit Ranade, chief economist of the Aditya Birla Group. "Unlike earlier, we are not starved of dollars." Ranade says you cannot compare the situation in India with that prevailing in, say, the U.S. The so-called free markets in India are not free and allowing market forces full play has atypical outcomes. "Look at our export-import basket," he says. "Our three principal imports are crude, gems and jewelry, and capital goods. Crude prices are still administered. And gems and jewelry and capital goods do not affect inflation. It would be different in the U.S. But, in the Indian context, a stronger rupee does not mean lower inflation.

"Now look at our exports. Leave IT and software aside for the moment. Some 65% of our exports come from the SME segment. There are 15 million workers in this sector. The SMEs have profit margins of barely 5-10%. If the rupee rises, as it has, their entire profit gets wiped out."

If inflation is unpalatable, the scale of job losses that could take place in the SME sector is even more so. "Total exports are about 20-21% of GDP," points out Ranade. "The entire agricultural sector is less than that."

Wharton professors have words of advice for companies that feel stretched by the rising rupee. Krishna Ramaswami, a professor of finance, points out that Indian companies may not be affected much "if their international competitors' currencies have also appreciated, though he admits that they "may lose some share of their sales in the U.S. market and have their margins squeezed if not." He recommends that these companies could "hedge their currency exposure if they do not already."

Raju of Wharton's marketing department agrees. His advice to Indian firms that are feeling pinched by the rupee: "Do not rely on the U.S. market too much. Get more business in Europe. The euro and the British pound are appreciating with regard to the Indian rupee." Raju believes that just as some companies are hurt by the strong rupee, others benefit from it. "Airlines benefit. It is now cheaper for Indians to travel to the U.S. This is also a great time for Indian companies to buy equipment and technology products from the U.S. Companies that buy components from the U.S. are in good shape. It is a lot cheaper for an Indian PC manufacturer to buy an Intel chip or a Motorola phone. Mobile phone operators benefit from the strong rupee."

Management professor Saikat Chaudhuri recommends that companies would do well to stop complaining and take advantage of the rupee's rise to drive through essential changes. "I don't understand the cribbing," he says. "As the Indian economy grows, the rupee will grow stronger. You can't get the benefits of globalization without feeling the other effects. My view is that there should be a renewed imperative for IT firms to go for high-end work across all industries." Chaudhuri adds that the stronger rupee should make it easier for IT firms to set up operations abroad. "That would be a good trend. Also, resource utilization will have to become better."

As for manufacturers, one thing could make things easier for them, Chaudhuri points out. "Right now, costs are high because of weak infrastructure. As India's infrastructure improves, those costs will come down. As freight corridors are built and airports are finished, that will help the manufacturers absorb the downside of the appreciating rupee." He also believes that the strong rupee could help companies drive through some strategic deals. "The strong rupee is good for Indian companies seeking to make acquisitions abroad. When your deals are worth billions, it makes a difference. We all like it when our money is worth more."

According to Siegel, "It is painful for the exporters, but look at the other side of the coin -- the consumers. A strong currency is good for a country; it's not bad for a country. They shouldn't just be beholden to the exporters. They should listen to the consumers, who are going to gain undoubtedly because of the strong currency."
 
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Govt to support India Inc's global quest
27 Jul, 2007, 2103 hrs IST, PTI

NEW DELHI: Finance Minister P Chidambaram on Friday asked Indian industry to go global and assured that the government will help them in raising capital for acquiring businesses abroad.

"We must look beyond 9 per cent growth, which is possible only through inorganic way," he told captains of the Indian industry at the NDTV Profit business leadership awards here.

International Monetary Fund has revised upward its forecast for the growth of Indian economy to nine per cent and various other agencies were also estimating between 8.5-9.0 per cent GDP expansion, he added.

Chidambaram said while companies must grow organically in the domestic market, they would have to go out and buy businesses abroad for expanding.

"We all felt delighted when Tatas acquired Corus and all the major Indian companies should make efforts to become among the top five global brands," he said.

"If you (companies) want money or capital, the government will support in raising the required funds," he added.

The finance minister said Indians were already working with top global companies in advertising, public relations and many other sectors and it was time to realise that Indian industry will have to become globally competitive.
 
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Recruiting agents to help in skills upgrade scheme for emigrants
New Delhi, July 27, 2007
27/7/2007

The Indian government will rope in recruiting agents to help identify trades and skill gaps in which potential emigrant workers can be imparted training before they move abroad for employment.

The Ministry of Overseas Indian Affairs (MOIA), in association with the Ministry of Micro, Small and Medium Enterprises (MMSME), will be rolling out a countrywide skills upgrade programme, tentatively from September 1.

The two ministries have decided to select five reputed recruiting agents from the eight Protector of Emigrants (PoE) offices.

"They will be involved in the training programme and will help in identifying trades, skill gaps and requirement of skills by foreign employers besides sourcing of trainees," an MOIA official told IANS.

The government has also identified six institutes where the potential emigrants would be sent for training - the Central Tool Room, Ludhiana; the Institute for Design of Electrical Measuring Instruments, Mumbai; the Central Institute of Tool Design, Hyderabad; the Electronics Service & Training Centre, Nainital; the Central Institute of Hand Tools, Jalandhar; and the Tool Room & Training Centre, Guwahati.

Among the various occupations identified in which the workers will be imparted training are machinist, turner, fitter, tool and die maker, fibre optics technician, electrician (household appliances), electrician (industrial applications) and plumber.

Quality system and metrology, basic pneumatics and hydraulics, welding technology and motor winding and repair are also on the list, according to the MOIA official.

"Moreover, the PoE offices in Delhi and Chandigrah will also identify more trades and these will be added to the list," he said.

The duration of the various courses will vary from 15 days to three months. Each programme will also include an orientation and personality development course.

The MOIA and the MMSME had earlier this month signed a memorandum of understanding (MoU), according to which the MOIA will fund the training programme and the MMSME will implement it through its training centres across the country.

The initiative is aimed at enhancing the image and perception of Indian workers abroad and equip them to be more competitive in an international working environment and promote greater job opportunities for Indian workers.

There are over five million Indian workers abroad with 90 per cent of them based in the Gulf countries and Malaysia. In 2006 alone, over 675,000 Indian workers went abroad with emigration clearances.

They contribute significantly to Indian economy by way of remittances.

However, in recent times, competition from countries like Bangladesh, Nepal, Pakistan, Sri Lanka, Indonesia and the Philippines has resulted in low wages and exploitation of workers.

It was in this context that the MOIA decided to intervene and help Indian workers move up the value chain through this skills upgrade programme.
 
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Best Engineers are joining IT, says Infosys
ibnlive.com
Published on Friday , July 27, 2007 at 21:09 in Business section

New Delhi: Infosys—the IT bellwether that tops the list of the 'best employers' in the country has admitted that the software industry does eats away a major chunk of the ‘creamiest’ lot of engineering graduates, churned out by top-notch institutes of the country like the IITs.

S Gopalakrishnan, CEO, Infosys Technologies does agree, to some extent, with the perception that the IT industry sucks up most of the engineering talent in India.

"The IT sector continues to be the preferred option for engineering graduates because the whole area of computers is seen as a sunrise sector. The sector that has got a lot of global opportunities for the students. So, it will continue to be the preferred sector (for engineering graduates),” he was quoted by PTI.

Gopalakrishnan said that Indian economy needs more engineers and that the intake should be increased.

“Over time, we have to re-look at increasing the number of engineering graduates coming out so that requirements of all sectors can be met. Today, that's not happening. That's why there is a skewed trend towards IT,” he said.

On the issue growing wage inequality between IT professionals and others, Gopalakrishnan, said as more and more industry segments are becoming global, the gap between salaries of IT professionals and others is reducing.

"Look at retail, telecom and manufacturing companies. As they become more and more global, actually they compete very well with IT companies in terms of compensation," he said.

The rupee appreciation "is an issue of supply and demand," Balakrishnan said. "The Indian economy is growing at 8% and attracting lots of capital, both debt and equity; there's a lot more money flowing in than out," he said.

For Balakrishnan, whose firm got more than 60% of its revenue from US companies paying in dollars, the trend requires some complicated and aggressive hedging.

Gopalakrishnan, has warned the Indian IT industry, already facing issues like wage inflation, high attrition rates and a strong rupee, that it cannot afford to sit on its laurels as global competition is on the rise. "We (Indian IT industry) cannot rest on our success to date," Gopalakrishnan told PTI in Bangalore.

"It's all about what we are doing today, how we are going to compete tomorrow, which is going to decide your future. So, it's being relevant, continuously evolving and changing to meet the market requirements." Gopalakrishnan does not buy the argument that the Indian IT sector may witness slowdown after growing at a scorching pace in the recent years.

"The market opportunity is there for companies to grow. Business is there for companies to grow. Nasscom continues to project that the sector would grow at 25-30% in the foreseeable future. So, I think the opportunity to grow continues to be there."Given the size of the Indian IT industry today, it is in a much better position to meet the expectations, he said.

"Top tier (Indian IT) companies are much larger today. They have a global brand, global exposure, they have strong leadership, large employee pool....they are in a much better position.

"To stay ahead of the race, Gopalakrishnan said, the Indian IT industry needs to further enhance its value proposition, service offerings and its portfolio to meet market demand and what the customers are looking for as well as respond to changes which are happening in (market) environment and technology."We have to make sure that we address the talent needs of the industry. Definitely, we need to address the issue of an appreciating rupee," he said.
 
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Inflation rises to 4.41%
27 Jul 2007, 1249 hrs IST,PTI

NEW DELHI: Wholesale prices-based inflation rate increased to 4.41 per cent for the week ended July 14 from 4.27 per cent the previous week mainly on higher prices of fruits and vegetables, ragi, wheat, jowar, condiments and spices.

The inflation numbers are still within the five per cent annual target of the Reserve Bank, which is due to review the monetary policy on July 31.

The annual rate of inflation was 4.62 per cent in the corresponding week last year.

Among the primary articles, prices of vegetables rose sharply by 7 per cent during the week, while those of cereals rose by 0.9 per cent.

In the non-food articles category, prices of fibre rose by 2.2 per cent.

Among manufactured products, rates of rice and bran oil rose by 3 per cent each, while imported edible oil, groundnut oil, cotton seed oil and oil cakes became costlier by one percentage point.

However, the prices of sugar, jaggery and gingelly oil declined by one per cent. Also, prices of fish-marine and urad declined by two per cent and one per cent respectively.
 
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