Indian Economy - News & Updates - Archive

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Tourist arrivals peak at 5 million in 2007
13 Jan, 2008, 0143 hrs IST,Raja Awasthi, TNN

NEW DELHI: It could never have been better than this for the travel and tourism industry. In 2007 the tourist arrivals have touched 5 million as against 4.45 million in the same period last year. According to ministry of tourism (MOT) Foreign exchange earnings from this sector also showed a growth of 33% more at $12 billion as against $9 billion registered for the corresponding period in 2006.

According to a senior MOT official:” The tourism sector is one of the fastest growing sector. The reason for such a growth is that marketing of our campaigns have been direct and very much fouussed. Better connectivity has also helped in a larger way. In fact effort should be made to take advantage of the awe and curiosity India inspired among people all over the world with its ancient and diversified culture, world heritage sites and the great variety offered to visitors.”

The industry’s growth could be gauged from the fact that the forex earnings from tourism has shown a phenomenal growth of 14.6% in one year —from $5.73 billion in 2005 to $ 9 billion in 2006.Though the foreign tourist arrival has recorded a double-digit growth, domestic travel is the backbone of Indian tourism industry, with 460 million Indians traveling last year.

The shortage of rooms in major metro cities is adversely affecting the flow of tourists to the metros as well as to other destinations. The accommodation constraints in Delhi will have serious implications on the arrangements for the 2010 Commonwealth Games. It is estimated there will be a requirement of about 40,000 to 50,000 rooms in the budget category for the tourists visiting Delhi and surrounding areas during the games.

Says Rajji Rai vice president Travel Agent Association of India (TAAI):”It appears that in three to five years India will be number three economy in the world. The tourism sector has shown much faster growth as compared to other sectors. Now there is a need to push the tourism sector and 2010 Common Wealth games should bring in the required infrastructure to the country.”

 

[solid snake]

Lack of english is the only reason why there isn't any major migration happening into Japan considering that people are willing to migrate even to Australia with an economy 1/7th the size of Japan.

People migrate to Australia because it has a very high standard of living. Higher than the US and Japan.

 

[Neo]

IMF warns India over capital controls​

WASHINGTON, Feb 4: The IMF warned rapidly growing India Monday against using capital controls to curb swelling financial investment inflows.

The Securities and Exchange Board of India tightened offshore investment norms last year to help stem a tide of foreign money that has driven the rupee to near decade highs against the dollar.

Large capital inflows are exacerbating tensions in the monetary policy framework among exchange rate management, monetary independence, and financial openness, the IMF said in an annual review of Asia's fourth-largest economy.

Resolving these tensions will require an evolution of monetary policy, further exchange rate flexibility, and deeper and broader capital markets,said the Washington-based International Monetary Fund warned.

Capital controls, it warned, could “dampen investment, raise doubts about the government's commitment to fuller capital account convertibility, and pose questions about the exit strategy from new controls. Capital inflows reached a record $45 billion in the fiscal year ending March 2007 and continue accelerating, putting upward pressure on the Indian rupee currency.

The rupee gained 12.3 per cent against the dollar last year, as funds abroad snapped up local shares and bonds amid buoyant economic growth.

The rapid currency appreciation raised concerns about competitiveness and prompted the authorities to intervene in the foreign exchange market.

The IMF suggested strengthened monetary operations and communications along with greater exchange rate flexibility as “a better way” to increase monetary policy effectiveness and deal with uncertainty in global financial markets.

The Fund also called for “broader and deeper” financial markets to channel capital to its most productive use, accommodate higher exchange rate volatility, and support financial stability.

In a bid to limit any inflationary impact of the capital inflows, the IMF proposed tightening the country's fiscal policy.

India's economy expanded by a higher than expected 9.6 per cent in the last fiscal year, the fastest pace since 1989 and second only to China, according to Indian data released last week.

India's dream run of strong growth and macroeconomic stability is a tribute to its sound macroeconomic policies and past structural reforms, the IMF said. — AFP

IMF warns India over capital controls -DAWN - Business; February 05, 2008

 

[Bushroda]

Tata Motors Thinks Big With Its Nano
By Heide B. Malhotra
Epoch Times Washington D.C. Staff
Feb 06, 2008

WASHINGTON—With a population of 1.1 billion, an expanding economy, and a rapidly growing middle class, India seems to be the perfect market to introduce an inexpensive automobile.

With much media coverage, Indian automaker Tata Motors Ltd. rolled out the Tata Nano at the New Delhi Auto Expo 2008. The Nano will become the world's cheapest and smallest car with a sticker price of around $2,500, which is more than $1,000 less than the next cheapest car, the Maruti 800. Tata said that the model will be sold only in India for the first few years, and shipments to emerging markets such as China, South America, and Africa may follow soon after.

Tata's competitors quickly jumped into the fray. Baja Auto Ltd.—considered to be the second largest motorcycle producer in India—announced that it will build its own small car in partnership with Renault S.A. and Nissan Motor Co. in about three to four years. Ford Motor Co., with an investment of $500 million, also promised a small car in India within two years.

Tata Motors is a member of the Tata Group, the largest conglomerate in India. The group consists of 98 companies that operate in seven business sectors, including information systems and communication, professional services, consumer products, metal products, chemicals, and energy. Tata Steel Co. Ltd. and Tata Motors are the largest companies within the group.

Keeping Costs Down

The Nano is meant to replace rickshaws, motorcycles, and scooters, according to remarks by Ratan Tata, Tata Group Chairman, in a report published on the Tata Motors Web site.

The company projects to build and sell at least 1 million cars a year. To achieve this goal without investing billions of dollars, Tata looked for an unconventional way of building the car. It hit upon a concept from the insurance industry, where outside contractors are "trained and certified" to build the Nano. The independent contractors receive the technology and the know-how—similar to franchising—but must bear all costs, including building and maintaining the manufacturing facility.

"We looked at a new kind of distributed manufacturing, creating a low-cost, low-break-even point manufacturing unit that we design and give to entrepreneurs who might like to establish a manufacturing facility," said Tata. Cheapest Car Comes With a Price

The Indian media hasn't bought into the cheap price of the Nano yet. "In fact, the figure is an introductory offer excluding taxes and local duties; on the road, the car will actually cost between $3,310 to $3,819," claimed Dinesh Mohan, a transportation expert and professor of biomedical engineering at the Indian Institute of Technology in New Delhi. His speech appeared in the Asia Times article titled, "India's 'Cheapest Car' Comes at a Cost."

To consumers looking for a cheap car that can be easily parked, the Nano might seem like a godsend, and the downsides may be overlooked. The car is made of relatively low-grade aluminum, has a small dashboard, no airbags, no anti-lock braking system, no spare tire, and the engine is situated in the back of the car behind the passengers. With the engine in the rear, there is little protection during a front-end collision.

Safety and Environmental Concerns?

While there are many benefits to owning the Nano, it may be the least safe car in the world, according to InfoDB Mag, an online-based Indian magazine. Considering urban India's nightmarish traffic and driving patterns, accidents could be fatal.

This car "already fails the current Western emission and safety standards and will soon fail Indian standards too as India adopts the 'Euro-IV' emission norms," said Mohan. The Euro-IV, which will come into effect in 2010, sets limits on the amount of pollutants emitted by automobiles. For now, the Nano meets current Indian regulatory requirements and exceeds Indian emission requirements.

Currently, India's infrastructure is underdeveloped, and few funds have been earmarked toward building and improving roads. There is little room for additional vehicles on India's already overcrowded and congested road system, according to a recent University of Pennsylvania study.

Global Ambitions

The Tata Group has been on an acquisition spree since 2000, buying up 39 companies in the process, according to its Web site. In 2000, Tata bought beverage company Tetley Group Ltd. of the United Kingdom. Over the years, Tata has acquired companies in many countries across different industries.

In addition to becoming a recognized global player, Tata's rapid expansion allows it to take greater risks, understand different market conditions, and improve living conditions for people in third-world countries.

"India has people with skills. And it has people with considerable intellectual capabilities who have been leaving India because the opportunities were not there. We have to create these opportunities," said Ratan Tata in a 2005 interview with McKinsey & Co.

Struggling U.S. automaker Ford Motor Co., is divesting Jaguar Cars Ltd. and Land Rover Group Ltd. Analysts believe the brands can fetch around $2 billion, and Ford is currently in exclusive negotiations with Tata Motors. The potential acquisition allows Tata to gain valuable insight into the latest manufacturing, marketing, and quality control processes.

"We do not know whether it is Ratan Tata's personal ambition that is driving the [Jaguar and Land Rover acquisition] or whether it is a strategy that has been thought out for the good of the company," said Nandan Chakraborty, head of research at Enam Financial, in a recent Knowledge at Wharton interview.

At this point however, there are more questions than answers. How many Nanos can Tata sell? Will the luxurious marques of Jaguar and Land Rover be affected as a result of Indian ownership? Regardless, the emergence of Tata as a global industrial heavyweight may finally signal the arrival of India as an economic superpower.

 

[Bushroda]

Shifting the balance
Chinese and Indian capitalism

Jan 24th 2008
The Economist, UK

FIVE years ago, Tarun Khanna, an Indian-born professor at Harvard Business School, grabbed attention with an article in Foreign Policy magazine speculating that India might eventually overtake China. Co-written with Yasheng Huang, a Chinese-American scholar at the Massachusetts Institute of Technology, the article argued that India's economic model offers more freedom to entrepreneurs which could help the country outpace its fellow Asian giant in the longer term.

From a macroeconomic viewpoint, this argument was rather implausible, except in the extremely long term, for China's economy is already three times the size of India's. At the corporate level, though, it made more sense: as its recent unveiling of the world's cheapest car showed, companies such as Tata Motors promise to make the global grade rather faster than their Chinese counterparts.

With his new book Mr Khanna has returned to the topic of entrepreneurship in Asia's emerging giants. But he has dropped the idea of India outpacing China and replaced it with thoughts about the potential for co-operation between the two countries. Their social and economic systems are vastly different, as he shows in admirably detailed but chatty studies of companies and cities in both places. But they have strengths that could be complementary, he thinks, and he argues that foreign multinationals need to start thinking about the countries together rather than separately.

Unfortunately, the book's enthusiasm for Sino-Indian co-operation is rather unconvincing. Trade between the two countries is rising fast, as Mr Khanna points out, but from a very low base: it is only a tenth as large as trade between China and Japan, and a fifth as large as that between China and South Korea. Chinese companies want to learn about Indian software and outsourcing, just as Indian companies want to learn about Chinese manufacturing prowess. But then companies in both countries are also eagerly studying practices and skills in Europe, America and Japan too: there is nothing particularly special about the flow of people and ideas between India and China.

Politics, too, plays a part. Mr Khanna makes much of the opening of a border crossing high in the Himalayas to trade in 2006, for the first time since the Sino-Indian border war of 1962. Yet that crossing does not connect any of the large areas that are still disputed between the two countries, and only a few categories of goods may be traded through the reopened area. Relations between China and India have indeed been getting warmer in recent years, but the pair still harbour strong and understandable suspicions about one another: they are natural rivals, whether in Asia as a whole or in the countries squeezed between them, as the book's excellent section on Myanmar demonstrates.

Nevertheless, although the book's overall thesis feels as implausible as that of Mr Khanna's 2003 Foreign Policy article, “Billions of Entrepreneurs” remains well worth reading. The eye of this business-school professor for interesting stories is sharp and he offers illuminating explanations of why India and China work in the ways that they do.

 

[Bushroda]

Boon for job seekers
Daily News, Sri Lanka
06 Feb 2008

Prospective Lankan overseas job seekers are in luck's way as India has opened its employment market to Sri Lankans. It is offering Dubai type salaries to the would be recruits.

Faced with an acute shortage of skilled labour, our giant neighbour is increasingly turning to Sri Lankans to fill the void. This certainly is a recognition of Sri Lankan skills and workmanship in the employment market.

It is also a repudiation of the oft repeated claim that Sri Lanka is a merely an exporter of housemaids to the Middle East. Our men and women have come a long way since those early days of the Middle East job boom.

Recently even upmarket destinations such as California have asked for Lankan nurses to fill the shortage in the State's hospitals. It is hoped that India's invitation would open the floodgates for Lankan job seekers similar to the early Middle East job boom.

The employment avenues opened for Lankans in India come even amidst job restrictions placed on Indians in the Middle East due to the dominance of Indians in the Middle Eastern job market - which goes to show the regard the recognition shown by India for Sri Lankan skills.

We ran a story in our inside pages on Tuesday quoting a proprietor of a local Foreign recruiting agency saying that he has been receiving inquiries from South India for engineers and even unskilled workers. He also says a garment factory in Tirupur had asked for unskilled workers while a construction company in Bangalore has asked for Lankan engineers.

According to him the mounting demands of a booming Indian economy has resulted in a shortfall in skilled manpower and India is increasingly turning towards Sri Lanka to off set the crisis. This certainly is a welcome development and would obviate the need for Lankans clamouring for Middle East jobs, if as reported the salary scales would be matched by India.

The proximity factor too would lure more Sri Lankans to avail themselves of the opportunities offered in the vast Indian labour market. The close links between the two countries would also remove any fears and misgivings among prospective female recruits which they may otherwise entertain with regard to Middle East countries.

In addition the close cultural ties between the two SAARC neighbours too would be an added impetus for Lankans turning towards India.

According to the report the Government has reported an eight per cent increase in Foreign employment over the past year. But the new vacancies in the Middle East have mostly been in the skilled sector. With restrictions imposed on Indian labour in the Middle East there are vast openings in the Middle East job market for Lankans.

This means that Lankans will have to acquire skills if they are to exploit the new opportunities. There is a huge demand for jobs in engineering, accountancy, hospitality and construction sectors. India which is among our largest foreign investors would no doubt wish to see economic prosperity in her Southern neighbour and would be only too willing to help her in whatever possible way.

The opening of employment avenues to Sri Lankans should therefore be viewed in a positive frame and as an opportunity to be cherished.

The Government on its part should undertake speedy measures to tap this potential to the fullest. Another encouraging development is that India has become one of the biggest investors in Sri Lanka.

The upcoming SAARC summit where President Mahinda Rajapaksa would be conferred the Chairmanship of the regional body should be made use of to promote this aspect on a firm footing. Such mutual agreements between the two neighbours would ensure that the economic benefits too would accrue to our common interests and help further strengthen ties between the two countries.

The new development would also go a long way to allay ingrained suspicions between Sri Lankans towards its giant neighbour and help build bridges that would go beyond the economic realm.

The Government should wake up to the prospect of the potential of the new avenue opened by India for the economic empowerment of Sri Lankans and take every possible measure to bring this to fruition.

 

[Bushroda]

Hardware boom: PC sales up 11%
6 Feb 2008, 0021 hrs IST,TNN

NEW DELHI: A rising rupee and slowdown in US economy may have affected sentiments in the Indian software sector, but the mood in the hardware sector is upbeat. What's adding to their smile is a rise in the overall PC sales, which shot up 11% to cross 32.8 lakh in the first half of 2007-08. What's more, its projected to cross 72.5 lakh units by end of 2007-08.

Interestingly, while sales of desktop PCs have gone up marginally, it is expected to reach 55.5 lakh units by 2008-end. But it's notebook category that's really pushing the market. Sales grew at 59% to cross 6.8 lakh units in first half of 2007-08. These are some of the findings of a MAIT (Manufacturers' Association for Information Technology) study on the IT hardware industry.

The bi-annual industry performance review reveals most PC consumption now is being driven by the household sector. In fact, consumption in the business sector declined by almost 17% while that of the household sector went up by 72%. So far, businesses had accounted for 62% desktop sales.

"The slowing down of business category consumption could be because this may not be their buying cycle or no new vertical of business may have emerged. However, sectors like telecom, ITeS, education, continue to remain buoyant. And as e-governance programmes get finalised, sales may pick-up," says Vinnie Mehta, executive director, MAIT.

The report shows larger businesses which contribute 55% of PC market share, saw a decline in sales by 31%. The SMB section grew from 4% to 16%. This is one of the reason why overall sales in desktop PCs moved southwards. Also, sale of MNC brands improved by 33% while Indian brands declined 24% and assembled ones went down 10%.

Most of the consumption has come from the smaller cities as they now account for two-thirds or around 66% of the market.

The printer market has not been so buoyant. While 6.8 lakh units were sold, there was a 10% decline in sales due to poor offtake in enterprise market. Internet penetration in the top 22 cities was 48% among businesses and 18% among households.

Business segment now accounts for 32% of active Internet entities while household account for 68%.

 

[Bushroda]

Employment increases in unorganised sector
5 Feb, 2008, 2204 hrs IST, PTI

MUMBAI: The population below poverty line has come down with the rise in workers in unorganised sector, a report submitted by National Commission for Enterprises in the Unorganised Sector said.

In January 2005, the total employment in Indian economy was 457 million, of which the unorganised sector accounted for 395 million, or 86 per cent of total workers, the report submitted by the committee headed by MP Arjun Sen Gupta said.

The total employment increased from 397 million to 457 million between 1999-2000 and 2004-2005. The Commission has estimated that in the organised sector, employment increased by 8.5 million while in the unorganised sector it increased by 8.6 million.

The increased employment in unorganised sector has brought down the percentage of population below poverty line, increasing informalisation of employment in the formal sector, indicated the report.

The report also mentioned about socio-economic plight of workers from unorganised sectors.

Low level of education and poor access to land denies workers access to good jobs in organised sectors.

Commission also found that 40 to 50 per cent of men and 81 to 87 per cent of women workers get wages below the standard minimum wages.

Maharashtra government has organised a workshop at Pune on February 8 based on this report.

"Action programme suggested by the report will be discussed by the state planning board, trade unions and social activists", Executive Chairman of Planning Board Ratnakar Mahajan said.

 

[Bushroda]

IMF Cautions India On Further Capital Restrictions
Ruth David,
02.05.08, 5:45 AM ET

MUMBAI - The International Monetary Fund has cautioned India against tightening capital restrictions to deal with a surge of foreign inflows into the country that is fueling inflation.

The rupee appreciated around 12% against the dollar last year as overseas investors pumped money into the capital markets, optimistic about India’s economic potential and industrial growth. That created difficulties for Indian exporters in sectors ranging from software services to ready-made garments.

“Some restrictions on capital inflows have recently been introduced, primarily on corporate borrowing. International experience suggests that these restrictions are unlikely to have much impact on capital inflows because investors and borrowers find ways to evade them,” the IMF said. The new curbs "raise concerns about the potential impact on financing for infrastructure projects, which tend to require the longer-term financing that may be more readily available from foreign lenders."

In October, the nation’s market regulator, the Securities and Exchange Board of India, tightened overseas investment rules to help stem foreign inflows. (See: “ Indian Crackdown Likely To Hurt Hedge Funds”) And, last month, the central bank, the Reserve Bank of India, asked lenders to review their high foreign currency exposure.

Though capital inflows are supplying much-needed financing to Indian companies and banks, they come at a considerable price. "India is facing the policy challenges of the 'impossible trinity': when there is free movement of capital, it is impossible to both target the exchange rate and maintain an independent monetary policy," the IMF observed in its annual country review.

India has for long had capital controls on the rupee, but policymakers have promised to ease them gradually. The IMF pointed out that while the Reserve Bank of India allowed exchange rate flexibility last year, it also intervened heavily in the foreign exchange market, causing reserves to rise by nearly $100 billion to about $275 billion. The bank "has also actively withdrawn liquidity from the system."

Inflation is a key concern for Indian lawmakers. The IMF said, "inflation risks are to the upside due to rising international food and fuel prices, ample domestic liquidity, tight capacity utilizations, and rising skill premia." It projected that wholesale prices would increase between 3.5% and 4% in the near term. Wholesale inflation quickened to a five-month high of 3.93% for the week ended Jan. 19.

The "temporary space provided by existing controls should be used to prepare for a more open capital account," the IMF emphasized. It called for increased exchange rate flexibility as a way to increase the effectiveness of India’s monetary policy. It urged the "broadening and deepening" of the country’s financial markets so that capital can readily be deployed most productively.

The IMF projected that India’s economy will grow at 8.75% for the fiscal year ending in March 2008. Policymakers within the country expect that number to come in at 9%, compared to 9.4% last year.

The fund also stressed that India needs to engage in fiscal tighening and implement structural reforms to sustain the high growth rates of around 8.5% it has averaged in the past four years.

 

[Bushroda]

Dream a dreamless dream
Builders blame the government and the government blames the builders. But ordinary folk can only look at enticing billboards and luxurious ads and wonder if their dream of owning a modest house will ever come true. Surely, this is one possibility that can never happen

Akash Bisht
Delhi

Rohit Handa's eyes lit up when he saw world's cheapest car, Nano, at the recently held Auto Expo 2008 in New Delhi. His dream of owning a car and house no longer looked like a dream. An engineer with the Municipal Corporation of Delhi for more than 15 years, Rohit has been saving money all this while to fulfil his dream of owning a car and a house. He has decided to buy the car when it will be available. After fixing an appointment with a real estate broker, he told the broker about his need of a decent apartment in the range of Rs 30-35 lakh in Delhi. “This broker just looked with pity, laughed and said it is impossible to get a two-bedroom apartment in this range. He told me that to own such a house I would need at least Rs 60-80 lakhs. My hopes were dashed to smithereens. I just couldn't imagine that for a two bedroom apartment I would have to pay this much,” says Handa. “And from where can I get this much money.”

This middle-class engineer is not the only one who is feeling the heat of rapidly shooting real estate prices. He, like thousands of others, has been running from pillar to post in search of affordable houses, but in vain. Owning a house in Delhi or any other metro has become an impossibility for the so-called rising, upwardly mobile classes. “Even if I decide to go for a loan of Rs 60 lakh, me and my wife will have to part away with 60 per cent of our salary every month on EMIs and I just can't afford that. So the only option left is to live in a rented house and shift to some other smaller town after our retirement,” rues Handa.

Vikram Ahuja, owner of Ahuja Realty in Saket, says, "A lot of people come to me and enquire about flats in the range of Rs 30-40 lakh and I have to tell them that there are no flats available in Delhi at such rates. Forget about Delhi, no such flats are available in Gurgaon as well." This story is not confined only to Delhi. Several other metros (see box) have also witnessed a quantum leap in real estate prices of late. Housing has become a nightmarish phenomenon for urban residents with modest salaries.

While several new small townships are mushrooming near 'Tier-I Cities' (Delhi, Bangalore, Mumbai etc), they lack infrastructure. The ones which do, they come with a hefty price tag. Many speculators have invested money in real estate and have blocked houses which they sell after the prices shoot up. “More than 50 per cent of houses and flats in Dwarka and NCR region are being used for speculative purposes. Delhi still has genuine buyers and sellers but I cant predict the future as a lot of NRI’s and rich businessmen from India and abroad are eyeing Delhi as their next destination. If these 50 per cent houses are released the prices of property will definetely fall,” informs Harpreet Singh of Property Vertical in New Delhi.

Hence, the only option available for burgeoning middle and lower income groups is to move to 'Tier-2 and Tier-3 Cities' (smaller towns like Pune, Chandigarh, Lucknow, Nagpur, etc), which have lesser job and career options.

Sarabjeet Kaur is a school teacher and a single mother and has been living in a one-room flat for past nine years. She says,“I have been saving money for two reasons: primarily for my daughters’ marriage and secondly to buy a house where I can spend my old age.” When she enquired about flats in Delhi, she got a shock of her life. No flat in Delhi or even NCR costed below Rs 50 lakhs and hence she decided to dump the idea and is uncertain about her old-age.

The Indian economy is witnessing a nine per cent growth which is evident with the Sensex soaring to new heights, rising per capita income and capital being pumped into the economy by foreign investors in different sectors. This has led to a housing bubble, especially in the cities where prices have been rising every other day. “A two-bedroom apartment that would cost around Rs 30 lakh five years ago is going for Rs 80-90 lakh today,” says Rakesh Ranjan of Perfect Homes, a real estate agency. Land prices have gone up from 30 to 100 per cent in the past one year and real state stocks have risen by an astounding 2,000 per cent.

Kumar Gera, Chairman, Confederation of Real Estate Developers Association of India (CREDAI), said, “Though the real estate sector in the country is growing at a fast rate, it is not benefiting everyone. The sum total of direct and indirect taxes, duties and levies, amounts to a significant figure, almost in excess of 25 per cent, for a housing unit that has a pan India average cost of Rs 2,700 per sq ft. It negates the impact of this boom and widens the gap between what one can afford and what is available. Which is why, there is an urgent need to find ways to reduce these costs in order to deflate the price of the end product.”

The ASSOCHAM, in its recent report, stated that in 2007, real estate ended with a growth rate of 35-38 per cent. Merrill Lynch has predicted that the Indian realty sector is poised to grow from $12 billion in 2005 to $90 billion by 2015. This has fuelled the speculations: will this rapid growth balance itself out, or is it a bubble which will inevitably burst?

“I won't say it's a bubble, but yes, a lot of builders are focusing on luxury apartments. There is a huge demand and supply gap which in the future might lead to a fall in prices. Every builder wants to build luxury homes while no one's really looking towards building affordable houses for the rising middle class. These kind of homes have huge potential in the future but builders shy away from such projects as they do not offer huge incentives,” says Nainesh K Shah, Executive Director, Everest Developers.

Excess supply of luxury homes in Delhi and especially NCR region has left most middle-class families in despair. “Whenever I go and ask for a descent apartment, brokers show me luxury apar-tments and I am fed up of telling them that since I can’t afford them, I can’t buy them. Their answer is that they have only such flats and for low-cost flats I should go to smaller cities,” says Rajinder Singh, a retired postmaster. He has lost hope and says that he just doesn’t have the courage to do house searching anymore. He now prefers to stay in a rented house.

With rapid urbanisation, one of the biggest challenges the government will be facing would be providing affordable housing to people who don't have huge incomes, especially the low middle class and the poor. According to National Urban Housing and Habitat Policy 2007, India's urban population in 2001 was 286.1 million — 27.8 per cent of the total population. Over the past five decades, the annual growth rate of urban population ranged between 2.7 to 3.8 per cent. During the past decade of 1991-2001, the urban population of India increased at an annual growth rate of 2.7 per cent — 0.4 per cent lower than that registered during the preceding decade.

The process of urbanisation is marked by increasing concentration in larger cities. In 2001, 68.7 per cent of the total urban population was living in Tier-I Cities (with population of over 1,00,000). The share of medium and small towns in the total population stood at 21.9 per cent and 9.4 per cent respectively. However, the urban population is expected to become 576 million in 2030 from the current 328 million.

Kumari Selja, Minister of State, Housing and Poverty Alleviation, in a recent conference organised by CREDAI in Delhi said, “The urban housing backlog with increased urbanisation in India assumes alarming proportions, especially for the Economically Weaker Sections (EWS) and Low-Income Groups (LIG), which constitute more than 99 per cent share of total housing shortage of 24.71 million in urban areas. This magnitude of backlog is evident by the fact that 21 per cent of our total urban population live in slums or slum-like conditions, while 35 per cent of the households live in one-room tenements.”

The National Sample Survey Organisation (NSSO) (61st round) reports that urban poor have grown by 4.4 million between 1993-94 and 2004-05. It is, therefore, of vital importance that a new carefully caliberated National Urban Housing and Habitat Policy finds ways and means of providing 'Affordable Housing to All' with special emphasis on the EWS and LIG sectors.

Most builders at the CREDAI conference felt that affordable housing is possible only with the support of state and central governments. They said that the housing problem would be the biggest problem in next five years and the only way to address it is that the government must incentivise builders and give tax rebates, as high as 40 per cent of the total cost. Amit Bagaria, CEO of Asipac Group, a pioneer in low-cost housing, complains, “The government should sanction a

particular plan in 30 days and it should have a single window clearance instead of a prolonged and byzantine process. In Bangalore, it takes 33 months for a project to get clearance; by the time it gets the okay, land prices shoot up. Thus a builder is forced to make luxury apartments instead of affordable houses.”

Most builders agree that the only way affordable housing can be built is with public-private participation. They argue that for low cost housing they will have to be innovative and use low-cost construction material that is as good as any other material. As Gera puts it, “Affordable housing can be made by setting up 'special residential zones (SRZs)' with various exemptions, as in the case of SEZs. These SRZs should have small residential units below 60-70 sq. mtrs that can make large-scale affordable housing for the masses.”

“When a common man buys a house it costs him more than his hand and leg and he believes in God and good luck before investing his hard earned money. We need to have licensed brokers and more transparency to eliminate this suspicion. Anybody and everybody shouldn't be allowed to join the profession as I know of many crooks who have become brokers to earn extra bucks and fool innocent people. They are neither civil engineer nor do they possess any knowledge of land laws,” said Deepak Parekh, Executive Chairman, HDFC.

There have been numerous conferences and debates on affordable housing, but nothing concrete is happening on the ground. Builders blame the government and the government blames the builders; but ordinary folk can only look at the huge, enticing billboards and luxurious advertisements in newspapers and wonder if their dream of owning a modest house will ever come true. By all evidence available, it seems a case of possibility which can never happen.

 

[Bushroda]

Rising rupee reflects strong economy: IMF
Arun Kumar,
Indo-Asian News Service
Washington, February 05, 2008
12:07 IST(5/2/2008)

The International Monetary Fund (IMF) views the rising rupee as reflecting the strength in the Indian economy, amongst the world's fastest growing economies with one of the highest rates of productivity growth in the region.

"The basic question one has to ask is: why is it that the rupee is appreciating?" a senior IMF official said Monday in a conference call on India's bilateral annual consultations.

"We look at the rupee in what's called real effective terms, which is adjusted for the difference in inflation between India and its partner countries, and that's up seven to eight percent over the last year or so, which is a significant figure," he said.

"It has very excellent prospects in terms of growth, a very strong corporate sector. It's shown a significant degree of resilience."

However, IMF has one concern over Reserve Bank of India's (RBI) policy response.

The RBI "intervention is basically aimed at smoothing adjustment in the exchange rate. That is, India maintains a managed float regime", Charles Kramer, division chief in the Asia and Pacific department, noted.

"One concern with the intervention is its cost. When the RBI intervenes or when central banks intervene, generally, they accumulate foreign exchange assets. Carrying those assets has a cost.

"While the cost isn't very high right now, eventually the cost could increase. In an environment where the authorities are trying to make progress in making space on the fiscal side, that could be undesirable," he said.

On the issue of capital inflows, Kalpana Kochar, senior advisor and mission chief for India in the Asia and Pacific department, said India was not unique in facing capital inflows, but it was something that they are having difficulty coping with. "The fact is that India has been enjoying large capital inflows, which we believe to be at least partly the result of the fact that there's a strong growth story in India and investors are looking to take advantage of this, of the returns that they see coming from India," she said.

Another part is due to interest rate differentials between India and the rest of the world - certainly the advanced countries. In any event, capital inflows are large, Kochar noted.

IMF had discussed with India whether or not there were any adjustments to the policy framework that would allow them to cope better with this situation while recognising that it is, in fact, a challenging situation.

It had also discussed ways in which the financial sector could be strengthened to prepare better for these larger capital inflows, "of which we believe much of it is here to stay, reflecting the strength of India's economy", she said.

Asked how critical the problem was, Kochar said: "India is plugged into the world trade system, but India's exports have been diversified both in terms of goods as well as markets with far less reliance on the US than for many other countries.

"On service exports, for which of course the biggest destination is in fact the US, we don't have a whole lot of strong evidence but we do believe that the impact could go either way," she said.

"If, in fact, US corporates are looking to cut costs, it could be that they outsource more, and so India could benefit from that. If not, you could see a bit of a slowing in service exports. So, overall, on the spectrum of countries that are likely to be affected by this crisis, India is probably a bit further down. It is just our views on given the structure of India's economy and its exports and financial markets, at this point, we don't anticipate having huge effects," Kochar said.

 

[Bushroda]

The new Indian market
iAfrica.com, South Africa
Tue, 05 Feb 2008

Golf is among the fastest growing sports in India and the movers and shakers of the Asian and European Tours see huge potential to cash in.

This week, the country becomes the 37th destination visited by the European Tour, which has spread its wings to co-sanction the Indian Masters with the Asian Tour.

It is the richest golf event ever staged in the emerging economic powerhouse at $2.5-million, and heralds a month that will see three tournaments in a country that hosted just one last year.

While China has been the target market over the past few years, India is seen as the new frontier.

With local golfers tasting success overseas — sparking a surge in interest at the same time that incomes are rising — the European and Asian Tours considered it the right moment to dive in.

"The growth of the Indian economy has coincided with the emergence of golf as a major sport in the country," European Tour chief executive George O'Grady said when he announced the tournament.

"We are always keen to expand our tournament portfolio into new territories and we believe that the Indian Masters offers huge potential on that front.

"Thanks to Indian pioneers such as Jeev Milkha Singh and Arjun Atwal, along with Jyoti Randhawa and Shiv Kapur, professional golf in India has taken a massive step forward over the past decade."

The Asian Tour has a much longer history with India, and chief executive Kyi Hla Han told AFP it was thrilling to see how fast it was developing.

"It is exciting to see golf in India booming the way that it is now," he said.

"To have three major international events in February on the Asian Tour schedule is certainly a strong signal that the game in the sub-continent has come of age.

"Corporate India sees the value of golf sponsorship with the successes of players" like Singh, Atwal, Gaurav Ghei, Kapur and Randhawa, he added.

Indian golf has come a long way since amateur Biloo Sethi's Indian Open win in 1965 which remained the country's lone success in its home event till 1991 when caddie-turned-pro Ali Sher wrested the title.

But the game remains an expensive hobby. It is cheaper to buy cricket bats and balls than a golf set which costs around 7000 rupees ($155) at a minimum.

Despite this, the rise of Indian professionals abroad has inspired youngsters to believe there is life beyond cricket.

Cricket legend Kapil Dev, who is now a keen golfer, believes India is capable of producing world-class players to breathe more life into the sport.

"I feel this is one more sport where Indians are capable of achieving world-class standards," the former India cricket captain said.

"Our boys are already playing some of the biggest events in the world and it is only a matter of time before they bring more trophies."

JJ Singh, president of the Indian Golf Union, called this week's Indian Masters "an historic event".

"The event is a result of the growing status of the game of golf in India, augmented by the Indian performances across the golfing globe," he said.

"Indian golf will surely get a boost when the best talent from over seven continents will be on display and also will showcase the infrastructural development needed to host an event of this stature."

 

[Bushroda]

India's 10 fastest growing cities
Rediff
February 06, 2008

A lot has been said about India's robust economic growth with economists predicting a bright future for the country. But few know of the booming Indian cities that are adding to the nation's growth. So which are the country's fastest growing cities?

1. SURAT
Growth rate: 11.5%

Surat is Gujarat's second largest city with a population of 4 million. It is the fastest growing Indian city in terms of economic prosperity. The city has registered an annualised GDP growth rate of 11.5 per cent over the past seven fiscal years, according to the data compiled by economic research firm Indicus Analytics.

Known for its thriving diamond and textile industry, Surat is situated on the banks of the Tapti river. More than 90 per cent of world's diamonds are cut and polished here.

These two industries have largely contributed to the city's growth as the economic powerhouse of India. Though often affected by floods and earthquakes, the city has always come out on top.

Improved infrastructure has been key to Surat's rapid rise. A number of elevated roads and flyovers have facilitated the thriving diamond and textile business of the city. The city's Varachcha flyover is claimed to be India's longest. Surat with its low unemployment rates, high job rates and one of the highest per capita small business credit is the top destination for jobs and business. It is said that if you want to make money, Surat is the place to be in.

2. BANGALORE
Growth rate: 10.3%

What was knows as the Pensioners' Paradise 10 years back, has grown 10-fold today and a study reveals that the rupee millionaire club in Karnataka's capital is the most crowded in India. Bangalore also boasts of having the largest number of households with an annual income of Rs 10 lakhs (Rs 1 million) or more.

With an estimated population of 6.5 million, Bangalore is one of India's most populous cities.

How has this city which was more famous for its gardens and laidback lifestyle changed so much in character? The two reasons that come to every Bangalorean's mind are: the advent of the IT industry, and subsequently the boom in real estate prices.

Unlike other cities in India, Bangalore's main activity is information technology and information technology-enabled services. Being the leading contributor to India's IT industry, the city is often referred to as the Silicon Valley of India. Software majors Infosys and Wipro being headquartered in the city, Bangalore contributed 33 per cent of India's Rs 144,214 crore ($ 32 billion) IT exports in 2006-07.

Businesses involving large corporates that are either multinational companies or Indian firms dealing with or catering to MNCs employ a very large workforce in Bangalore. And although the city's infrastructure has been unable to keep pace with the rapid growth of the city, Bangalore still remains one of India's boom towns.

3. AHMEDABAD
Growth rate: 10.1%

The Ahmedabad region, including Gandhinagar, of Gujarat is the largest inland industrial centre in western India and has been an important base of commerce, trade and industry. With a population of 56 lakh (5.6 million) Ahmedabad has seen great prosperity because of its proximity to Surat and its access to the hinterland of Gujarat.

Though dusty roads and bungalows used to dot the city once, Ahmedabad is now witnessing a major construction boom and an increase in population. In recent years, the city has seen a significant rise in information technology and scientific industries.

Apart from these, chemicals and pharmaceutical industries contribute to the state's economic growth, with two of the biggest pharmaceutical companies of India -- Zydus Cadila and Torrent Pharmaceuticals being based here.
Ahmedabad also forms the corporate headquarter of the Nirma group of industries and Adani group. Of late, many foreign companies have set up their units here. Among them, Bosch Rexroth of Germany, Stork and Rollepaal of Netherlands deserve special mention.

4. MUMBAI
Growth rate: 8.5%

The commercial capital of India is one of the world's top ten trade centres. The city contributes 25 per cent of industrial output and 70 per cent of capital transactions to India's economy.

The city accounts for about 1 per cent of the total population in India but has a per capita income which is almost three times that of India. Mumbai accounts for 14 per cent of India's income tax collections and 37 per cent of the corporate tax collections in the country.

The city is the berth of significant financial institutions like the Reserve Bank of India, Bombay Stock Exchange and the National Stock Exchange of India.

One of the largest special economic zones in India is being set up in Navi Mumbai, to be spread over an area of around 50 square kilometers.

Numerous corporates and multinational companies have their headquarters in the city that attracts migrants from all over India. The city offers countless employment opportunities and is known for its interesting and high standard of living.

The city, with a population of 19 million, is also known as the Indian seat of entertainment as it is the home to the Hindi film industry, the largest in the world.

Most of the city's inhabitants rely on public transport to commute. Transport systems in Mumbai include the Mumbai suburban railway, also known as the lifeline of Mumbai, BEST buses, taxis and auto rickshaws.

5. NEW DELHI
Growth rate: 8.4%

Though it can't rival Mumbai in terms of contribution to the growth of the Indian economy, the capital of India, is no pushover.

Delhi's, (including its nine districts and adjoining Noida, Ghaziabad, Faridabad and Gurgaon) total GDP stood at Rs 1,60,739 crore (Rs 1,607.39 billion). It contributes 4.94 per cent to all-India GDP.

Connaught Place, one of northern India's largest financial centres, is located in the heart of Delhi.

Being an important commercial centre in South Asia, Delhi has a per capita income of Rs 53,976, which is more than double the national average.

Delhi's key service industries, backed by as strong and well laid out infrastructure, include IT, telecommunications, hotels, banking, media and tourism. In recent times, Delhi's manufacturing industry has grown considerably and consumer goods industries have established manufacturing units and headquarters in and around the capital.

Construction, power, telecommunications, health and community services, and real estate form the backbone of Delhi's economy. The capital's retail industry is one of the fastest growing industries in India.

Public transport in Delhi consists of buses, auto rickshaws, taxis, suburban railways and metro rail.

 

[Bushroda]

6. HYDERABAD
Growth rate: 7.8%

Hyderabad, the financial capital of Andhra Pradesh, is also known as the city of pearls. With an estimated population of 7 million, the city is the biggest contributor to Andhra Pradesh's gross domestic product, state tax and excise revenues.

As per 2006 statistics, the per capita income of Andhra Pradesh was at Rs 25,625 (less than Rs 200 of national average). The city, which used to be primarily a service city, is now the seat of many businesses, including trade, transport, commerce, storage, communication and lately IT.

Like Bangalore, Hyderabad too has witnessed a real estate boom in recent times, mainly because of the growth of IT and retail business in the city.

Major pharmaceutical companies like Dr Reddy's Laboratories, Matrix Laboratories, Aurobindo Pharma Limited and Vimta Labs are located here.

Hyderabad has also made considerable progress in the field of bio-technology through initiatives like Genome Valley and Nanotechnology Park. For the advancement of infrastructure in the city, the Andhra Pradesh government is building a skyscraper business district at Manchirevula.

7. PUNE
Growth rate: 7.4%

The growth of this major industrial city, located roughly 150 km east of Mumbai, has become the topic of discussion these days.

Starting from automobile majors like Tata Motors, DaimlerChrysler, Pune will soon house units of global biggies like General Motors, Volkswagen, Fiat, et cetera. A number of important engineering goods industries like Cummins Engines Co Ltd and Bharat Forge Ltd, electronic goods companies like LG, Whirlpool, food companies like Frito Lay and Coca Cola are also located here.

Of late, Pune's software industry has grown by leaps and bounds. IT parks like Rajiv Gandhi IT Park at Hinjewadi, Magarpatta Cybercity, MIDC Software Technology Park at Talawade, Marisoft IT Park at Kalyani Nagar are seats of technology that the city can boast of. To meet the demands of this explosive economic growth in Pune, the state of Maharashtra is planning a 1,000 MW power plant to exclusively cater to the need of Pune. MIDC is the lead agency for the project.

8. BARDHAMAN
Growth rate: 6.6%

Situated nearly 100 km north-west of Kolkata, Bardhaman is the headquarter of the district of the same name. With nearly 58 per cent of the population earning their livelihood from agriculture, Bardhaman has earned the name of 'granary of West Bengal'.

Rice grown in the area is supplied to various parts of India and also exported to the neighbouring countries. Though predominantly an agricultural area, Bardhaman also houses a number of industries backed mainly by rich mineral sources available in the area and also imported from the neighbouring Indian states of Bihar, Orissa and Assam.

The industrial belt of Bardhaman has mainly developed embracing the Asansol and Durgapur sub-division. Two most prominent industrial units of the area are Durgapur Steel Plant and Durgapur Alloy Steel Plant.

Other industries that thrive in the area include coal-based industries, chemicals and power plants. The Damodar Valley Project has gone a long away in meeting the irrigational need of the region. Indian Iron and Steel Industry (IISCO) forms the economic backbone of Asansol area. It is the oldest pig iron and iron casting unit in India. Chittranjan Locomotive, a government undertaking, supplies locomotive parts all over India. Several cottage industries have also developed in the area that support the area's rural economy.

9. KOLKATA
Growth rate: 6.3%

Often termed fondly as the cultural headquarter of India, the capital of West Bengal has a population of 5 million.

Like its many other metropolitan cousins, Kolkata suffered from economic stagnation in post-independence India. However, since 2000, the city has witnessed an economic rejuvenation, thanks to the development of IT industry in Rajarhat in Greater Kolkata. The city's IT sector is growing at 70 per cent yearly -- twice that of the national average.

The city has seen a surge of investments in the housing infrastructure sector. Several new projects have come up in recent times.

Some reputed companies are headquartered here. Of them, Bata India, ITC Limited, Birla Corporation, Domodar Valley Corporation deserve special mention. Opening of the Nathu La in Sikkim as a trade route has put Kolkata in an advantageous position. Like other metropolitan cities of India, Kolkata continues to struggle with problems like poverty, pollution and traffic congestion.

10. CHENNAI
Growth rate: 6.2%

The capital of Tamil Nadu, the fourth largest metropolitan city in India, has an estimated population of 7.5 million.

The economy of the city is supported by industries like automobile, technology, hardware manufacturing, and healthcare. According to a recent report in The Hindu, economists have predicted that Chennai's per capita income would increase from $468 in 2000 to $1149 in 2015 and $17,366 in 2050.

The city houses India's major automobile companies and happens to be India's second-largest exporter of information technology and information-technology-enabled services, behind Bangalore.

Buses, trains, and auto rickshaws are the most common form of transport within the city. To counter traffic congestion, the state government of Tamil Nadu is building a number of flyovers at important intersections.

 

[Neo]

Doha deal gives only modest gains to India​

GENEVA: India’s output would grow by only an additional one half of a percent under a successful Doha round deal to open up world trade, according to a study by the Carnegie Endowment for International Peace published on Tuesday.

However this would be better than the potential gains from the most favourable bilateral trade agreements under consideration, the study said. “A Doha agreement along the lines of the study’s simulation would be positive, albeit quite modest, for India,” it said.

Economic simulations by the US think-tank suggest a deal would boost domestic production in the world’s second most populous country by only $4.5 billion, or 0.52 percent, the study said.

Exports would increase by $2.4 billion or 3.8 percent, with the strongest gains seen in apparel, textiles, leather and footwear, it said. Imports would rise by $2.2 billion or 2.9 percent. India’s vibrant industry and flourishing services sector mean it is well placed to benefit from any trade deal. The economy, Asia’s third largest, is expected to grow by 8.75 percent in the year ending in March, the IMF said on Monday.

But with almost two thirds of India’s 1.1 billion people living in rural areas and over half working in agriculture, India is vulnerable to fluctuations in food prices.

The study warns that the potential gains from a deal could be wiped out by falls in the price of agricultural commodities, if India binds its agricultural tariffs under the deal at levels preventing it from offsetting global price shocks. A 50 percent fall in the world rice price would have a negative impact on India’s real income as large as the positive impact of the entire Doha deal, with poorest households suffering most, the study said.

“These results suggest that the Indian government’s concern over the potential negative effects of a Doha agreement on poverty and rural development is well founded,” it said. Trade ministers plan to meet at the World Trade Organisation (WTO) in Geneva in March or April to agree the outlines of a Doha deal, including the size of tariff and subsidy cuts.
The chairman of the agriculture negotiations at the WTO, New Zealand ambassador Crawford Falconer, is due to issue a revised negotiating text this week. Trade diplomats expect that to leave the size of tariff and subsidy cuts open, but to focus on issues such as the extent to which rich and poor countries can shield sensitive products from price fluctuations and import surges, and how they do that.

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