Indian Economy - News & Updates - Archive

[Bushroda]

China and India are heading for the top of the world but along the way the climb will become treacherous
Their runaway growth stories will take some unwanted twists, but the moral for the rest of us remains how we can learn to raise our own game

By Hamish McRae
Independent, UK
13 January 2008

Thanks to the Olympics, this is the year of China, but the week arguably belonged to India, with the launch of the Tata "one lakh car". Yet this – and the environmental issue raised by India moving to mass motoring pushes it to the forefront – does make one wonder about the sustainability of the great run of growth in both China and India. We know there will be bumps ahead for both countries – events that for a while derail their expansions – but what we cannot know is their timing or their scale.

Thinking about this, it seemed this would be a good time to revisit the the modelling work done by Goldman Sachs on the likely growth of Brazil, Russia, India and China – the "Brics". We have become so mesmerised by the growth of China and India that we find it quite hard to accept things might go wrong. Intellectually we can accept it but in immediate practical terms we can't see how it might happen. (In Russia and Brazil the story is a little different and the potential bumps are easier to envisage.)

The view that double-digit or near double-digit growth is normal has been reinforced by events. Since the original Bric report, both China and India have actually grown faster than initially projected, leading to modifications in the data. In the later versions, China passes the US to become the world's largest economy in the 2030s rather than the 2040s. You can see the projections for 2050 in the chart: China way ahead of the US and India snapping at its heels.

If that were indeed to happen, the world would feel utterly different from today – as different as the present world feels from the colonial era of a century ago. You might say 2050 is a long way off but even the 2025 projections show China's economy close to that of the US in size, and 17 years in the future is the same distance forward as John Major's premiership is in the past.

These are projections; they are not forecasts. But they are very useful in that they give us a yardstick against which we can calibrate our own judgements. We are forced to give specific reasons why this sort of general outcome might not happen.

The most obvious one is the environment. Put simply, are there enough energy resources and raw materials in the world to support a Chinese economy that is bigger than the US, allowing too for further US growth, and an Indian economy that is not far behind? There are other subsidiary questions. For example, is China following a more dangerous path than India? That India should be developing a genuine economy car, bridging the gap between the present mini-car and the motorcycle, could be taken to suggest it will follow a more sustainable route than China, where large and medium-sized cars dominate.

The starting point for any analysis is that the price mechanism is a powerful force for change. Take the use of oil. If the price stays close to or above $100 a barrel, that will force the whole world, not just China and India, to find ways of economising on its use. Where there are substitutes, these will be employed instead. Where there are not, for example in aviation, the world will adapt to the higher prices by travelling less. The legitimate criticism of China seems to be that it has gone for an old industrial model, with very heavy investment in infrastructure, rather than seeking to build a more lightweight economy. It has done that partly because of a lack of imagination but also because it has priced energy too low. India has chosen a different path and under-invested in infrastructure – an error it now has to correct. But ultimately its economic system may prove more durable.

The next point seems to me to concern education. On paper China has done better than India in that it has higher literacy rates and literacy is the key to economic development. However, Chinese education has flaws, particularly in the way it teaches people to pass exams rather than be creative. To oversimplify grossly, India has a grave problem now at primary and early secondary level, whereas China may increasingly have a problem at tertiary level. But I think that in both countries there is a growing awareness of education as a key competitive issue in the years ahead.

Social conflict? Anyone who spends some time in China or India (or indeed Russia and Brazil) will have observed the huge disparities in income, and we know this causes tensions. The question is whether, over the next 30 years, these will be so great as to demolish their economic growth. It would be tragic if the present performance of China and India, which is lifting tens of millions of people out of poverty every year, were derailed by social dissent. Maybe the growth path is sufficiently embedded as to ensure the momentum is maintained, but I don't think we can be completely confident of that. At least the authorities in both countries are aware and concerned but whether the centre holds is not certain. My instinct, for what it is worth, is that the social tensions can be contained for a while yet and that economic success will eventually defuse the ticking bombs. Let's hope I am right.

A further point here is that success in the Brics has a knock-on effect. The laggards find themselves asking: "If China can grow like this, why can't we? What are we doing wrong?"

As this message seeps out around the world, expect more and more countries with uneven performance records to take a hard look at themselves. Expect countries as diverse as Nigeria, Indonesia and Vietnam to raise their game. The Goldman Sachs team dubbed the new Brics the "Next 11". They are a pretty disparate group, linked only by the fact that they have reasonably large populations and seem likely to improve their economic performance over the next generation. But there are signs that several of them are increasingly aware of their potential and what is needed to unlock it.

And we will learn too. If there is one message from the Tata car, it is that we in the West will also need to lift our game. That, I suggest, is no bad thing.

 

[Bushroda]

Indian economy to grow 9.1 pct in 2008-09 - CMIE
Mon Jan 14, 2008 12:50pm IST

MUMBAI (Reuters) - India's economy is expected to expand by 9.1 percent in the next fiscal year beginning April, fuelled by robust investments and buoyant consumer spending, an independent think-tank said on Monday.

"With fresh investment proposals continuing to pour in, we expect the current economic growth to be sustained in the near future," the Centre for Monitoring Indian Economy (CMIE) said in its monthly review.

CMIE expects the economy to grow by 9.1 percent in 2007/08 too, higher than the central bank's forecast of 8.5 percent.

The economy has grown an average of 8.6 percent in the last four fiscal years.

CMIE estimated investments to the tune of 26 trillion rupees were currently under implementation.

"While these investments would generate demand for capital goods and construction industry in the near term, their eventual commissioning would ensure sustained growth in the medium-term," it said.

CMIE said its growth prediction for the next fiscal year was dependent on adequate monsoon rains and a slight fall in interest rates in the early months of 2008.

The think-tank said it expected wholesale prices inflation to remain stable in coming months and sees it at 3.5 percent by the end of March 2008, way below the central bank's target of 5 percent.

Annual wholesale price index at December 29, 2007, rose 3.50 percent.

CMIE said it does not expect any spike in prices of any of the manufactured prices, which could help bringing down inflation.

 

[Bushroda]

India's new claim to fame
Jorge Heine,
National Post, Canada
Monday, January 14, 2008

In the West China is now considered "the world's factory" and India "the world's service centre." This may soon change. Success in India's IT and telecommunications industry and the outsourcing of call centres to India from North America has played to perceptions that India's wealth can be traced to an emerging service economy. Yet India has been on the march economically for years, and not simply on the basis of IT.

Both in the 1980s and 1990s India grew at a very healthy clip of slightly under 6% a year, while lately it has climbed to 9%. This could not be done on the basis of the IT industry alone. Truth is, India also has a strong manufacturing sector, in which the automotive industry, with sales of US$34-billion, accounts for 5% of GDP and provides 13 million direct and indirect jobs. In auto parts and components India has already become a global player, supplying many of the world's leading producers. And it is now in automobiles that India is staking its claim to fame with the recent launch of the Nano, Tata Motors' "people's car."

At a price of US$2,500 dollars (100,000 rupees, i.e. "one lakh," the Indian expression for that amount), the Nano is half the price of its nearest competitor and the cheapest car on the world market. It comes with a 632 cc engine, options such as four doors, five seats, and can reach speeds of 100 km/h.

One and a half million cars were sold in India in 2007, of which one million were manufactured domestically. Yet, what is at stake is also the market of the developing world as a whole. Tata Motors thinks it will be able to sell up to a million Nanos per year a few years down the road -- in Africa, Asia and Latin America. This should not be surprising. In Chile right now, the most affordable car on the market is another Indian car, the Maruti Suzuki.

If growth in India until now has meant switching from the bicycle to the ubiquitous scooter or more high-powered motorbikes, the arrival of the Nano will allow millions of Indians to drive their own cars. In a country in which car penetration is still minimal, this has curiously led to a big hue and cry as to what this will do to the environment. Some have even gone so far as to say that Tata Motors should have put its engineering skills into building better and more efficient trains and buses, rather than into non-environment-friendly cars.

Tata Motors already builds many buses. But to ask a car company to build trains instead is like asking Ava Gardner to be a bit more like Florence Nightingale -- somewhat beside the point.

The true significance of the Nano, lauded as feat of "Gandhian (meaning stripped-down) engineering," is that it reflects one of the best, yet least heralded virtues of Indian industry -- its ability to expand the market "downward" to the popular sectors hitherto excluded from the forces of supply and demand. Much as European and North American industry markets appeal to the upper-income sectors in developing societies, Indian companies, schooled in the hard business of making do in a low-income environment, do just the opposite.

In that sense, the launch of the Nano reaches way beyond the automotive industry. It signals that India's rise is not limited to call centres, but is built on a foundation of industrial ingenuity that many poorer people in the world will soon witness firsthand on their nations' street and in their own driveways. - Jorge Heine is a distinguished fellow at the Centre for International Governance Innovation (CIGI). He served as Chile's ambassador to India from 2003 to 2007.

 

[Bushroda]

IT at the heart of India's development
By REUBEN SCHWARZ
The Dominion Post, New Zealand
Monday, 14 January 2008

BOOMTIMES: The phenomenal growth of India IT industry is just beginning.

One of the pillars of modern India, and one the country is relying on to complete its transformation from an economic backwater to a global superpower, is its IT industry.

From humble beginnings the industry has grown beyond what anyone imagined 20 years ago. It is currently worth about US$47 billion, or about 5.4 per cent of India's gross domestic product, and is still growing at about 30 per cent per year. It employs 1.6 million people directly, and many more indirectly.

Its phenomenal growth has led India to take IT to heart as a national industry, and everyday Indians have a real sense of pride now that its large tech companies are rivalling the established IT giants like IBM. This is proof to them that India can play and win on the global stage.

India's first IT company was Tata Consultancy Services (TCS), which sprang into life in 1968 as an offshoot of the giant Tata group. The industry was virtually nonexistent until the 1980s, when India's low labour costs and many fluent English speakers made it an attractive place to set up call centres and perform routine software development.

The seeds were planted then, but the growth of the Indian IT industry really began to skyrocket in the past 10 years on the back of Y2K and the first Internet boom.

The country's IT exports grew eight-fold in seven years – from US$4 billion in 2000 to US$32 billion in 2007 – while the size of its workforce has increased tenfold. It added 300,000 new employees in the past year alone.

In this period TCS's revenues have doubled every two years and it now makes more than US$4.3 billion each year, with close to US$1 billion in after-tax profit, with a market capitalisation of US$26 billion, making it one of the biggest IT firms in the world. It has more than 100,000 employees, one third of these being hired in the past year.

Satyam, another Indian IT giant, took 17 years to make US$1 billion in annual revenues, but only two years after that to reach US$2 billion. It should hit US$3 billion this year, one year later, while hiring another 10,000 to 12,000 more staff to add to its 56,000 employees. Revenue growth sits at about 45 per cent annually.

It is tempting in the West to end the story of India's IT boom there, but it's really just getting started. Both TCS and Satyam expect revenue growth to continue at the pace set by recent years for the short-term. The industry hopes to hit US$60 billion in exports by 2010, but there is every sign it will get there early.

According to Nasscom, India's national IT industry group, about 20 per cent of the world's estimated total IT spend of US$1 trillion is outsourced. About 45 per cent of this is sent offshore, and about 80 per cent of this offshored work goes to India. India's IT firms say there is still room for revenue growth in traditional outsourcing fields, but there are a lot of other IT tasks Indian companies are keen to do as well. The falling price of bandwidth makes this more and more attractive.

TCS is increasingly doing remote management of customers' infrastructure, for example managing 30,000 computers worldwide for German business software giant SAP, handling almost everything from India. "Other than plugging in a desktop, you can pretty much do everything from far away," says Pankaj Baliga, TCS's vice-president.

Today's Indian firms aren't just "body-shopping" organisations, content with call centre work, routine software development and IT support contracts, though there is still a good deal of that.

Firms like TCS and Satyam are now going after high level consulting deals – and winning them.

The consulting market in Western countries like New Zealand, long the domain of well paid locals either self-employed or belonging to multinationals, looks set to be increasingly outsourced to Indian companies using a mix of Indian and non-Indian staff, based both in India and on-site.

Only about 3.5 per cent of TCS's US$30 billion in annual revenues is currently from this sort of high- level consulting work, but the company expects it to grow to as much as 10 per cent within a few years.

"We're no longer just filling RFPs," says Virender Aggarwal, director of Satyam's operations in Asia Pacific, Africa, India and the Middle East. "More and more companies are expecting us to do high- end work. Now they're asking us where they need to go."

Another emerging revenue stream is knowledge process outsourcing, Mr Baliga says. This sees Western firms giving data from financial systems or clinical drug trials to Indian IT firms for analysis. They analyse it more cheaply and then send the results back.

Other Indian firms are filing and researching patents for Western firms at about one-third the cost.

The knowledge process outsourcing market is estimated to be worth about US$2.5 billion each year, and some pundits predict it will quadruple within five years.

"There's going to be a lot of work that today we are not even visualising that will have to be outsourced," Mr Baliga says.

Many companies also see huge growth ahead for the outsourcing of engineering services, such as the design, modelling, and testing of airplanes and cars.

Companies like Tata and Larsen and Toubro (India's biggest construction and engineering firm) have access to both the IT and engineering skills, which they say gives them an edge over the competition.

Indian IT firms are no longer the poor cousins of IBM and Accenture, using a low-wage economy to pick up the low-value scraps.

Companies like TCS, which operates in 45 countries with 67 nationalities on staff, are multinational IT firms that see themselves as the equals of any Western ones, that just happen to be based on the subcontinent.

As this new breed of multinational moves further up the value chain, existing IT giants will have to adapt and compete, or risk being overhauled.

* Reuben Schwarz travelled to India as the recipient of the NZTE Qantas Media Award.

 

[Bushroda]

Two Giants Try to Learn to Share Asia

Harish Tyagi/European Pressphoto Agency
Prime Minister Manmohan Singh of India played host to the premier of Greece last week before leaving himself for China.

By JIM YARDLEY and SOMINI SENGUPTA
New York Times
January 13, 2008

BEIJING — Prime Minister Manmohan Singh of India will arrive in Beijing on Sunday for a three-day visit to China, with each country eager to increase bilateral trade, promote mutual friendship and offer reassurances that Asia is big enough to accommodate the ambitions of both rising powers.

Mr. Singh is visiting China for the first time as prime minister, when his government also has drawn closer to Japan and the United States. But Indian officials insist that India is not a proxy for American interests and is not plotting to form alliances to counter China’s rise. India also wants Chinese cooperation on nuclear issues and managing the unrest in Pakistan.

“I have made it clear to the Chinese leadership that India is not part of any so-called contain China effort,” Mr. Singh said last week, the Press Trust of India news agency reported.

China sees the trip as the latest proof of its maturing relationship with India after decades of hostility and mistrust rooted in a brief border war in 1962. Neither side is expecting significant progress on lingering disputes, especially over their contested Himalayan border. But Chinese leaders consider warmer relations critical for avoiding the kind of regional instability that could threaten economic growth.

“The most important thing for the two countries is to create a favorable environment, a peaceful environment for development in the long term,” said Sun Shihai, a South Asia specialist at the Chinese Academy of Social Sciences. “So both sides are trying to make their policies more pragmatic toward each other.”

China and India are the world’s fastest-growing major economies, though China is easily the more dominant. Its annual trade with India remains only fraction of its trade with Europe, Japan and the United States. But China-India trade is growing rapidly. When President Hu Jintao of China visited India in 2006, the countries pledged to double trade to $40 billion by 2010 — a goal they nearly reached last year and are likely to surpass this year.
Both sides are expected to continue the trade push this week. Mr. Singh is bringing a large business delegation and is keen to correct a trade imbalance tipping in China’s favor.

Mr. Singh will spend his entire trip in Beijing and is scheduled to address China’s leading government research institute. He will be honored at a private dinner given by Prime Minister Wen Jiabao and will meet with Mr. Hu.

“China attaches great importance to Prime Minister Singh’s visit and hopes to deepen the traditional friendship between the two countries,” said Jiang Yu, a spokeswoman for the Chinese Foreign Ministry.

In New Delhi, senior Indian officials lowered expectations for any breakthroughs. They said the agenda was loaded with items based on old grievances and new challenges.

The border dispute includes competing land claims over the Indian state of Arunachal Pradesh. But a senior Indian official said Mr. Singh expected little progress because China is never inclined to use high-level visits to negotiate details. Officials in New Delhi offered a measured response to reports that China was rapidly building infrastructure near the disputed border.

“As of now, we are comfortable with our relations with China,” Shiv Shankar Menon, the Indian foreign secretary, said Friday. “We are both successful in maintaining peace and tranquillity along the border.”

Water is a growing bilateral concern, and the countries have established a joint committee to study the flow of rivers that originate in Tibet and flow into the Indian hills and plains. On issues of energy security, terrorism and climate change, the Indians see a confluence of interests, if not identical objectives.

Pakistan, India’s old rival and China’s equally old ally, is also on the agenda because both sides are concerned about political turmoil across that country.

“Both of us want this entire area to be peaceful and stable so we can get on with our lives, whether it’s China’s periphery or our periphery,” a senior Indian official who was not authorized to speak on matters of strategic delicacy said last week,

One of India’s biggest concerns is whether China will, even reluctantly, support India’s bid to buy nuclear technology. The Bush administration has opened that door, but the request is subject to approval by the International Atomic Energy Agency and the Nuclear Suppliers Group. The Indian official said he did not expect China to actively block India’s ambitions. “I’m not saying they’re happy with it, not at all,” the official said. “They won’t be the ones to stand up.”

Meanwhile, China is expected to push India to further open itself to Chinese investment and business interests. China’s telecommunications giant, Huawei, has hit snags in India, while China has complained about Indian laws devised to protect domestic industries from competition.

Economic competition is inevitable as India is rapidly expanding its manufacturing base — China’s strength — while China is trying to move its economy toward the service and high-tech industries at the center of India’s economic expansion. China’s rising military capacity has alarmed Washington, which entered into a strategic dialogue with Japan and Australia in 2002. Proposals that India join that group of Pacific Rim democracies instantly attracted concern in Beijing.

Last week, Mr. Singh told reporters in New Delhi that those proposals “never got going.” Last year, India and China had joint military exercises for the first time. Michael J. Green, former director of Asian affairs at the National Security Council, said the United States was not discouraging warmer relations between India and China, but noted that tensions remained. He said China was quietly trying to oppose the United States-India nuclear deal and objected to including India on the United Nations Security Council. “Beneath the surface, the Indians are very strategically wary of China,” said Mr. Green, who teaches at Georgetown University.

China and India are increasingly playing roles in what have been each other’s backyards. New Delhi has been courting Southeast Asian countries like Vietnam and Singapore, just as China’s role is growing in Bangladesh and Sri Lanka.

Han Hua, an associate professor of international studies at Peking University in Beijing, said those underlying tensions were why China and India wanted to establish a broader spirit of cooperation to carry the relationship beyond specific grievances. She said the countries want to defy an old Chinese proverb, which holds that two tigers cannot share the same mountain.

“The two countries want to show the world that they can get along,” she said.

Jim Yardley reported from Beijing, and Somini Sengupta from New Delhi.

 

[Bushroda]

'IN' WITH INDIA
With Bobby Jindal at the helm, Louisiana hopes to gain an opening into the breakneck Indian economy.

By Robert Travis Scott
Sunday, January 13, 2008

NEW DELHI -- As luck would have it, the first Indian-American to be elected governor in the United States will be inaugurated in Baton Rouge at the same time India is celebrating the major holiday Makar Sankrant, a Jan. 14 harvest festival representing a fresh start and the ascent of the sun in the celestial sphere.

While Bobby Jindal might not be paying much attention to his parents' home country and its traditions on the day he takes the oath of office, image-conscious India surely will have an eye on him, the highest-ranking political figure of Indian heritage in America. And that could be an advantage for Louisiana.

Led by an innovative breed of entrepreneurs and a loosening of government controls on business, the second-most-populated nation in the world is lurching into the global economy with new resources of capital, skilled labor and technology. Like never before in its history, India is home to a growing number of companies with the means to expand their operations and trade around the world.

"India is the next China," said Louisiana economic development secretary Mike Olivier, who met recently with an Indian trade delegation. With Jindal as governor, Olivier said, Louisiana "will have every red carpet open. . . . It's going to open up doors in a short period of time."

In the past 20 years, Louisiana has often sat on the sidelines while massive foreign investments have poured into other Southeastern states. Tennessee, Kentucky, the Carolinas, Alabama and Mississippi recruited big manufacturing facilities, including trophy auto plants from Japanese, German and Korean companies. Last year, a major German steel company opted for Alabama over Louisiana for one of the largest U.S. plant investments of the decade.

India has endured painful and exhilarating changes in its economic structure during the past 17 years to reach its current new age of increasing prosperity. These changes are leading to greater opportunities for Indian investment and trade.

"The possibilities in the United States are tremendous," said Vijay Kalantri, a leading Indian trade entrepreneur who has visited New Orleans twice. Kalantri said New Orleans' port is impressive and that he and others are circulating the good word in India.

Wooing a steel company

Robert Landry, director of marketing for the Port of New Orleans, said India has been a trading partner for about 10 years, mostly with imported steel, but the port recently has seen the shipment of more Indian manufactured goods.

Eventually, more Indian companies and products in the United States could lead to investments in new facilities and new jobs.

Olivier said he got Jindal, in his role as congressman, to sign a recruitment letter to a major Indian steel company that was considering plant locations in several states. Jindal Steel, which is of no relation to the governor-elect, is one of the few Indian companies with major manufacturing facilities in the United States. It has two plants in Texas.

"We're always looking for an opportunity, if feasible," said V. Gujral, vice chairman and chief executive of New Delhi-based Jindal Steel & Power Limited, one of several Jindal Steel subsidiaries.

The company plans to spend $12 billion for expansions in the next five years, he said, and is "open to possibilities."

A democracy with a vibrant free press and English as a major language, India has much in common with the United States. But as a nation with a socialist past, historical ties to Russia and tenuous economic relations with the West, it has a long way to go before becoming a close friend of America.

With 1.1 billion people, India is the fourth-largest economy in the world. It and China are expanding so fast economically that they are in a league of their own for domestic product growth rates. A recent headline in India's Business Standard bemoaned a pace of quarterly growth that had slowed to 8.9 percent, three times faster than that of the United States.

Slow progress

India is both a rich and a poor country, with large classes of wealthy and educated middle-class families and a staggering number of people living in poverty. On Indian television on a recent evening, an advertisement for diamond jewelry was followed immediately by an ad for a charity working to improve living standards in desperately poor villages.

The country has an abundance of natural resources, agricultural goods and small and large industries, but it also has a shortage of good roads, health care, power plants and schools.

"India is headed in the right direction, but slowly," said V.K. Topa, adviser to the secretary-general of the Federation of Indian Chambers of Commerce and Industry in New Delhi. The phenomenal growth has affected a large cross-section of the population but has trickled down too gradually to the poor and the villages, he said.

When India won its independence from the British in 1947, the private sector was cash-poor and the country relied on the public sector to create an industrial base. Government jobs became important sources of power and patronage in a system that dominated for 45 years. "It will take a long, long time for it to be shed off," Topa said.

A turning point was 1991, when India's fiscal deficit and low foreign cash reserves sunk it nearly into bankruptcy. Guided by then-Finance Minister Manmohan Singh, the government liberalized its crippling regulatory structure and currency exchange, cut red tape and changed the tax system to create a better business environment. The economy blossomed, the Indian stock market bulled upward, and Singh is now prime minister.

Sharing technology

A future turning point will be the decisions made in India and the United States about relations between the two countries, particularly about agreements to open the exchange of high-technology, weaponry and nuclear power expertise. Few Americans are preoccupied with the pending nuclear power treaty that would lift technology trade restrictions and allow close cooperation between the U.S. and Indian business and science communities. But educated Indians are closely following the regular front-page news of the treaty's progress, which is coursing through international regulatory channels.

That is because stronger relations could create a historic Indian shift from East to West, checking China's growing power and affecting regional stability and even the war against terrorism. After World War II, the Soviet Union supported the newly created nation of India by assisting it with weapons, nuclear power plants and trade. Over time, the public perception was that Russia was a good ally and the United States was not.

"So the Russians, they've been supporting us, giving us maybe lousy stuff, wrong stuff, low technology. But they're a friend," Topa said. It is a trust issue with billions of dollars in deals at stake.

For example, India is facing major decisions about defense purchases, including a multirole aircraft. If India chose a U.S.-made plane and then at some point decided to demonstrate another atomic explosion with its nuclear arsenal, would the United States halt the transfer of military equipment or supplies as a sign of disapproval? These are issues of real concern in India, Topa said.

Through their diplomatic efforts, Presidents Clinton and Bush have improved India's perception of the United States, Topa said. As a congressman, Jindal joined a diplomatic mission to India two years ago that helped lay the groundwork for a later visit by Bush to discuss the nuclear treaty.

Easing business rules

In recent years the Indian government has continued to peel off restrictions on corporate international activities, and so growing Indian companies started looking overseas for opportunities. Their impact is being felt in several ways on the international scene: traditional acquisitions of companies or plants; increased trade; building new plants abroad; and providing an incredible variety of outsourcing services made possible through modern phone and Internet links.

"These last three years . . . Indian companies have started looking outbound," said Vijay Iyer, a partner in international tax for Ernst & Young's affiliate in India. "The last three years have been a boom period."

Among the examples, India's Tata conglomerate has purchased Tetley and Eight O'Clock Coffee and a Ritz-Carlton hotel.

One of the keys, Iyer said, is that Indian companies are able to put together financing packages drawing on capital resources from around the world, a type of deal that was rare for them even just a few years ago.

A recent Ernst & Young report says investments and acquisitions will increase as Indian companies "increasingly pitch for larger assets overseas." A logical destination is the United States, the world's biggest, most tested consumer market.

"It is the place to be," Iyer said. "If you are looking at expanding, you have to look at the U.S."

Indian businesses are globalizing at a time of new trends in Indian-American affairs. The brain drain from India is not as dramatic as it was during the days when Jindal's parents left their home country nearly 40 years ago for career opportunities in Louisiana.

Under the old scenario, highly educated people would leave India and for the most part end business relations with their old country, as the Jindals did. Nowadays, with better business links between the nations, an Indian businessperson or engineer who goes to the United States is more likely to keep contact with Indian companies and more likely to return home, Iyer said.

Paving way for business

At the same time, Indian-Americans are becoming deeply integrated as individuals and as a community in the United States, which is building a gateway for business relations. Indian-Americans have the highest median income of any group in the United States according to ethnicity or country of origin, including Caucasians. They hold high-ranking positions in business and academia across America, such as PepsiCo Chief Executive Indra Nooyi.

Bobby Jindal's rise to a top elected office is the ultimate expression of America's acceptance of Indian-Americans.

"India was greatly proud that one of its sons made it to that level," said Ron Somers, president of the U.S.-India Business Council. "This whole new generation that Bobby represents is the beginning of a wonderful force in the democratic process."

Topa said the Indian-American community is a significant factor in improving Indian views of the United States.

That community, he said, "has now come of age of some meaning, so the Bobby Jindals of the world today have more meaning." Journalists are more prepared now to write about Jindal's impact on Indian relations, evidence of the change.

"Five years ago you wouldn't be wanting to write about him in the same manner," Topa said. "All that put together is creating a scenario so that India-U.S. relations can move forward. But it needs a lot more patience and a lot more building blocks."

Landry, the port's marketing director, said Jindal brings a global perspective to the economic development table, and in the end, when it comes down to getting deals for the state, his general approach to business will be more important than his roots.

"His ethnic background might play well in India, but his business perspective is going to be what's most important," Landry said. "It's a great entrée, but in the end it comes down to the bottom line."

Gene Schreiber, managing director of the World Trade Center of New Orleans, said Jindal's inauguration will be positive because it puts Louisiana on the map for Indian business.

"It creates awareness -- and awareness is the first step," he said.

 

[Bushroda]

World class fits for new India school
Northwestern among foreign partners of MBA program

By Laurie Goering
Chicago Tribune
January 13, 2008

HYDERABAD, India - When Aarti Kothari decided she needed a top-quality MBA to further her career, her choices at first weren't encouraging.

In a country suffering a dramatic shortage of placements for college students, the nation's best business school, the Indian Institute of Management, had more than a hundred applicants for each seat. Lesser programs, strapped for resources, offered degrees of questionable value. Going overseas was an option but only if she could find the nearly $100,000 it would take to pay for a leading U.S. business school degree.

So Kothari, a 26-year-old New Delhi journalist and economics graduate, was thrilled to win a spot at the Indian School of Business, a venture backed by Northwestern University's Kellogg School of Management, the Wharton School at the University of Pennsylvania, the London Business School and McKinsey & Co., a management consulting group.

Today she and 424 other Indian students study for their master's in business administration under visiting professors from Kellogg and other top business schools at a state-of-the-art facility in this booming southern Indian city that is home to many technology ventures. Such foreign-supported campuses, many believe, may be one answer to an educational crisis that threatens to hold back India's ambitions to become a world economic power.

The Indian School of Business "is definitely not an Indian school," said Kothari, strolling past sleek classrooms full of students giving PowerPoint presentations. "I'm studying in world-class infrastructure with world-class professors."

India, with its booming service economy but lagging higher-education system, has one of the biggest gaps in the world between the number of skilled college graduates needed to fill jobs and the nation's ability to produce them. That threatens to put the brakes on the country's economic growth, now running at nearly 9 percent a year.

Helping to fill gap

The country's National Knowledge Commission says only about 7 percent of Indians age 18 to 24 enter college, half the average for Asia. To double enrollment, it says, India needs 1,500 new universities by 2015, something the country will be hard-pressed to achieve, particularly with a nationwide shortage of high-quality faculty.

The country's laws effectively prohibit foreign colleges from setting up campuses to fill the gap. But dozens of universities from the U.S., Europe and elsewhere are finding creative ways to get a foothold in a market that offers both enormous demand and, potentially, enormous profits in terms of tuition and number of students.

"It's very, very important to us," said Dipak Jain, Kellogg's dean, who played a key role in setting up the Indian School of Business and who travels there regularly to teach. "There are lots of eligible students all over the world, and not everyone can come to us. If the students can't come to us, we need to go where the students are."

In most cases, foreign colleges looking for a start in India have partnered with existing higher-education institutions, offering help with curriculum development and staff training or setting up exchange programs.

The Indian School of Business follows a slightly different model. Set up as a new Indian-owned and -managed school, it takes capital funding from Indian businesses and relies on a core group of 24 Indian professors supplemented by visiting faculty from top business schools abroad.

Each year, 8 to 10 professors from Kellogg make the trip to Hyderabad, spending three to six weeks each, and Kellogg faculty of Indian descent also serve as three of the institute's seven "area leaders," overseeing operations as well as entrepreneurship and accounting programs, said M. Rammohan Rao, dean of the institute.

"The quality of education is very high. Basically they're getting the same quality" as students at Kellogg, Jain said.

A key difference, however, is that for $40,000 -- the cost of the one-year program, including food and housing on the sprawling 250-acre campus -- students get no formal degree, just a certificate. That is widely recognized by Indian industries looking for workers but not by India's government when it hires civil servants.

Getting around law

By law, only schools or institutes affiliated with Indian universities can offer degree programs. But schools that affiliate must, like their partners, comply with complex affirmative-action laws that set aside many seats for lower castes and other classes of Indians.

"We don't want to give degrees and come under too many restrictions," Rao said.

Foreign education institutions looking to step into India's education gap face other hurdles, including opposition from professors at Indian universities who fear the defection of their best students and faculty.

McKinsey estimates that a quarter of India's engineers and 15 percent of its finance graduates are qualified to work in multinational companies, a legacy of what Prime Minister Manmohan Singh calls a "dysfunctional" education system mired in shortages, red tape and corruption.

"Foreign universities come for profit, not to fulfill the social agenda," warned Vijender Sharma, a Delhi University researcher on Indian higher education. "If they don't get a profit, they move away. That's the rule of foreign direct investment."

Others, however, argue that inviting in foreign colleges may be the only means of improving India's ailing higher-education system to meet the demand of both students and employers.

India's Commerce Ministry last year called for opening up the country's higher-education system to foreign investment.

India's restrictions on foreign higher-education institutes are aimed in large part at weeding out the legions of fly-by-night operators. India today has 1,800 MBA programs, Rao said, but only 30 or 40 that offer any sort of high-quality training.

If India manages to revamp its rules to allow foreign universities to set up satellite campuses, students will have more choices, though many may still find a high-quality "foreign" education beyond their means, skeptics warn.

U.S. universities say they are eagerly awaiting that opening.

"Northwestern is thinking of creating something in India," Jain said. "I am sure lots of people would like to do something if the regulatory environment existed."

 

[Bushroda]

The people's car with a market of 1.8m
It may not meet Western standards, but with the arrival of the Tata Nano, India's motor industry has come of age.

By Richard Orange in Delhi
Published: 13 January 2008

Girish Wagh blinks and recoils slightly as he is guided by a smiling PR man back to his chair to face the heaving, bellowing mass of the Indian press.

The man who led the design of the world's cheapest car, the Tata Nano, is obviously not used to the spotlight. But today he is getting the kind of attention India usually lavishes on its Bollywood film stars.

Ratan Tata may have dreamt up India's first people's car, but it was Wagh and his team of 500 engineers who made it happen. As he leaves the conference, he is followed by a stampede of journalists so unruly that burly bodyguards are called in to rescue him.

The Tata Nano's launch on Thursday marked the day that India's skills in "frugal engineering" – once represented by clunky, garishly painted Tata trucks, antiquated Ambassador taxi cabs and Mahindra jeeps – finally came of age.

Mr Wagh and his team have designed a car at a fraction of the cost of anything the best minds in Japan, Detroit, Korea and China have achieved. The Rs100,000 (£1,300) price is about half that of both the Maruti 800, the cheapest car on Indian roads, and the Chery QQ, China's cheapest model.

Nobody really believed they could do it. And when Mr Tata confirmed on Thursday morning that "a promise is a promise" and the Tata Nano would indeed be on sale for "one lakh only, VAT and transport being extra", a gasp went up from the 1000-strong audience.

For the first time, a car has been placed in the same price bracket as a flat-screen TV, a London commuter's season ticket, or an upmarket mountain bike. Time will tell whether it will become an icon like previous "people's cars", the Volkswagen Beetle, the Citroë* 2CV and the Mini. But with its bulbous front bonnet, hooped roof arch and small tubeless wheels, it has enough character to be in with a chance.

Indeed, the Nano is arguably the most significant new car launch in a quarter of a century. Even Mr Tata – a self-confessed shy man – was up front about the significance of his brainchild. Arriving on stage to the theme from 2001: A Space Odyssey (Richard Strauss's Also Sprach Zarathustra), he compared it to the Wright Brothers' first flight, the 1969 moon-landing and the world's first super-computer.

A better comparison, though, is the Model T Ford and the VW Beetle – cars that transformed the motor industry by bringing car ownership to a new class of people. Research from PricewaterhouseCoopers suggests that by halving the cost of India's entry-level vehicle, Tata could create 1.8 million new car buyers, doubling the size of the market.

The excitement in India was clear on Friday morning. Every motorcycle rider stopped in Delhi already knew the Nano's name, and was interested in buying one.

Satish Kumar, a 42-year-old father of two, said: "Indian people are very, very happy with this one lakh car. For my next car, I will buy this Tata. All the Indian villages and cities will buy this Tata. They will see that one motorcycle costs 70,000 rupees and takes two people, and a car costs one lakh and can take four."

Abishek Singh, 33, who was driving a TVS motorcycle, said: "Today I have a plan to go to the Auto Expo and have a look. I'm proud of Tata – they've committed to something and they've been true to their promise. Because he [Ratan Tata] is from India, I'm proud of him."

All the signs, then, are that there will be little spare capacity at the West Bengal factory where Tata will be operating from October this year. It is designed to produce 200,000 cars a year, and can be upgraded to produce 350,000.

So how did Tata do it? Ratan Tata said the company had not scrimped on quality to bring the cost down: "Many said this dream couldn't be achieved – some scoffed at what we would produce. Let me assure you that the car we have designed will meet all the safety requirements of a modern car, and have a lower pollution level than even a two-wheeler."

He added: "We shrunk the package of the car – we used less steel, we used less material, we had a smaller engine."

The car has been stripped of all unnecessary parts – there is just one side mirror, one windscreen wiper, and no air conditioning, power steering, airbag or central locking.

In fact, Tata's claim that it hasn't made cuts around emissions and safety is a stretch. The door panel in the standard model lacks a bar to protect drivers from a sideways collision, as Mr Tata admitted. The car would fail international tests even if airbags were fitted.

And its carbon emissions – at around 120g/km – are double what you would expect from a two-wheeler. Moreover, the car released this year will meet only India's emissions norms – which, according to Vivek Chattodadhya at Delhi's Centre for Science and Technology, are 10 years behind Europe's.

The view from the streets of south Delhi, however, is that none of this matters. "This is a very nice and comfortable vehicle," says Mr Kumar when the safety failings are raised. As for the lack of air conditioning, he pointed out that "India's cars are already 70 per cent not AC".

Ratan Tata is right to boast that the Nano is far safer than two-wheelers, which have double the fatality rate of cars. As for the potential increase in congestion and pollution, he asks: "Should the masses be denied the right to have an individual form of transport?"

The launch of the Model T Ford and VW Beetle did more than change the industry; they turned their creators into global automotive giants. Ford, Volkswagon and Renault, along with India's Bajaj, will all now follow with their own ultra-budget cars.

But the Nano puts Tata years ahead. It also proves that – for a certain type of low-cost engineering, at least – Indian manufacturers can outdo anyone else in the world.

Tata is filing for 34 new patents on the back of the Nano. The best example is its 623cc rear-mounted engine. Made of lightweight aluminium, it is the first two-cylinder engine with a single balance shaft to be used in a car. It relies on a fuel injection system designed by Germany's Bosch to eliminate the "pfut-pfut" of normal two-cylinder engines. Its small size and positioning free up space in the car, keeping weight to a minimum and making it possible to reach a speed of 65mph despite the engine's tiny 33bhp.

Dr Arun Jaura, head of product development at Tata's rival Mahindra, argues that India's engineers think innovatively because they cut their teeth when the country was an impoverished and closed economy in the 1980s and early 1990s. "Indian engineers didn't have billions of dollars at their disposal," he says. "If you have so many resources, you tend to be laid back and not think differently. Indians do think very differently; it's our backbone and our DNA."

And many Indian automotive engineers, Dr Jaura included, had successful careers in Detroit before they were lured home.

Indian car manufacturers may have roared into the consciousness of consumers in the US and UK with the launch of the Nano. But we are set to hear more from them before the end of this year – and not just because of Tata's likely acquisition of the Land Rover and Jaguar brands.

Mahindra plans to launch its Mahindra Scorpio SUV in the UK in June at a bargain price of £13,000, and will enter the US next year. Tata has confirmed it is in talks with distributors about launching its new-look Indica in the UK at the end of this year, with the Nano perhaps following in about three years' time.

Just as Girish Wagh on Thursday emerged blinking after 30 months buried in Tata's development centres, so it may be time for India's car companies to come out on the world stage.

 

[Neo]

India eyes more trade, investment with China​

BEIJING: Indian Prime Minister Manmohan Singh pushed China on Monday to address their bilateral trade imbalance, as the world’s two fastest-growing economies seek to put aside a lingering border dispute and deepen economic ties.

Singh said both sides wanted to work towards creating an environment for greater economic interaction, calling for a “roadmap” for trade that would factor in “complementarities and competitive strengths”.

“This has to include creating a level playing field by addressing such issues as non-tariff barriers, IPR (intellectual property rights) protection and market-related exchange rates,” Singh told business officials.

All countries had to compete in a global market, he said, adding that “such competition is not inconsistent with cooperation, nor is it adversarial”.

Singh meets his Chinese counterpart, Wen Jiabao, later on Monday for formal talks, following a private dinner between the two on Sunday night.

Bilateral trade in 2007 rose 56 percent from a year earlier to $38.6 billion, according to China’s Commerce Ministry.

But Indian Trade Minister Kamal Nath, accompanying the prime minister, drove home his country’s unhappiness that the trade balance was increasingly skewed in China’s favour.

Nath, who held talks talks with Chinese Commerce Minister Chen Deming, said he had called on Beijing to lower barriers on imports of fruits and vegetables from India. He had also voiced the hope that China would approve a proposal from India’s Jet Airways Ltd to fly from Mumbai to San Francisco via Shanghai.

Nath also raised the issue of China’s taking years to register pharmaceuticals as a typical non-tariff barrier hindering India’s exports.

China, for its part, complains of barriers to direct investment on the Indian side but, in a statement on the Commerce Ministry’s Web site, encouraged Chinese companies to increase imports from India and said that over time their two-way trade would become more balanced.

Distrust: Singh began his visit on Sunday on a friendly note with visits to sites for the 2008 Olympics, which Beijing will host in August, including the Olympic Project Exhibition Centre, which displays models of the main venues.

Beyond trade, China and India also face common challenges on issues such as climate change and energy security.

But the neighbours must also break down historic wariness over China’s traditional friendship with Indian archrival Pakistan, and a decades-long border dispute that flared into war in 1962.

Analysts say Singh’s visit is unlikely to bring any breakthrough on the border dispute, which centres on China’s claims to much of India’s northeastern state of Arunachal Pradesh. Beijing says the land is rightly part of Tibet.

“The Tibet issue is at the core of the India-China divide, and without Beijing beginning a process of reconciliation in Tibet, there is little prospect of Sino-Indian differences being bridged,” Khedroob Thondup, a member of the India-based Tibet government-in-exile, wrote in e-mail to Reuters.

“...Beijing values its claims on additional Indian territories as vital leverage to keep India under pressure.” reuters

Daily Times - Leading News Resource of Pakistan

 

[Neo]

SBI to raise $4.3 billion in rights issue​

MUMBAI: State Bank of India (SBI) will raise 167.36 billion rupees ($4.3 billion) through a rights share issue, the government-run bank said in a statement on Monday.

SBI, India’s biggest bank, will issue one share for every five shares held, it said. The issue will be priced at 1,590 each. Shares of SBI were up 1.3 percent at 2,468.20 rupees in a weak Mumbai market. reuters

Daily Times - Leading News Resource of Pakistan

 

[Neo]

India may sell $10 billion stake in BSNL​

NEW DELHI: India may sell about 10 percent of fully state-owned telecoms provider Bharat Sanchar Nigam Ltd, the telecoms minister and a company official said on Monday, in what could be one of India’s largest ever IPOs.

BSNL is India’s top ranked telecoms firm by subscriber numbers, but in mobile services lags Bharti Airtel Ltd, Reliance Communications Ltd and Vodafone-controlled Vodafone Essar.

“It is being considered. We have to discuss that in the department,” Minister Andimuthu Raja told reporters when asked about when any offer might be launched. BSNL’s director of finance said the company could sell 10 percent of the government’s holding for $10 billion.

“We value the company at $100 billion,” S.D. Saxena said, adding the proposed issue could be hit the market in about a year’s time. Reliance Power is hoping to raise $3 billion in an initial public offer this week, which would be a record for India.

Analysts would not give a valuation for BSNL but said it has infrastructure and assets across India apart from offering fixed-line, mobile and long-distance telecoms services.

“We haven’t yet valued their passive infrastructure, which should be huge. They have been talking about an IPO for some time,” said a telecoms analyst with a local brokerage, who did not want to be named.

Harit Shah, who covers the sector at analysts Angel Broking, said: “It will be definitely good for the markets as there are very few quality telecom stocks available right now. And it could be one of the biggest IPOs of the time.”

BSNL mainly operates on the dominant GSM platform nationwide. During the 2006/07 financial year, its revenues were at 397.15 billion rupees ($10.1 billion) and its net profit stood at 78 billion rupees. The market values Bharti at about $46 billion, while Reliance Communications is valued at about $41 billion.

India’s mobile market is the fastest growing in the world with 8 million new subscribers signing up a month recently, lured by some of the cheapest call rates anywhere. reuters

Daily Times - Leading News Resource of Pakistan

 

[Neo]

GM must expand in India to compete with Tata​

DETROIT: General Motors Corp. must expand its operations in India if it is to compete in emerging markets, GM chairman Rick Wagoner said Monday.

While it is still too early to tell how consumers will respond to Tata Motor’s $2,500 Nano, it is clear that there is strong demand for low-cost vehicles, Wagoner told reporters on the sidelines of the Detroit auto show. “To some extent it’s what content you’re willing to take off and what the consumer wants too,” he said. Lower cost vehicles have failed in the United States because consumers there are unwilling to accept the trade-offs in terms of styling. Quality and strict regulations will block the introduction of truly low-cost vehicles in established markets like the US, Europe and Japan, he said.

“But who are we to tell Indians and Chinese (consumers) that they’ve got to buy 10,000 dollar cars as their first cars rather than something that’s a lot better than a two wheeler even if it doesn’t have air bags,” he said.

GM already has a number of lower-cost vehicles it produces for emerging markets, including a car in China that sells for about 3,500 dollars. afp

Daily Times - Leading News Resource of Pakistan

 

[Neo]

India must tackle oil, infrastructure woes: WB ​

Wednesday, January 16, 2008

NEW DELHI: India needs to alleviate infrastructure constraints if it wants to sustain economic growth of 9 per cent and should let the impact of record oil prices feed through to the economy, a senior World Bank official said.

Shanta Devarajan, South Asia Chief Economist at the World Bank, said India must tighten spending to cut its fiscal deficit. The bank estimates India grew at 9 per cent in the year ended December 2007 and expects it to slow to 8.4 per cent in 2008.

“India is facing severe infrastructure constraints and those have to be addressed. The economy has been doing well despite the difficulties of high oil prices and infrastructure constraints,” he told Reuters in an interview late on Monday.

“Obviously, I would say it could do even better if those constraints were relaxed. Nine per cent growth is achievable but it won’t be easy.”India’s economy grew 9.4 per cent in the fiscal year ended March 2007, the fastest pace in 18 years, and the central bank expects growth to moderate to 8.5 per cent in 2007/08.

The Planning Commission has projected average annual growth of 9 per cent between 2007/08 and 2011/12. Policy makers say India will need investment of about $500 billion to upgrade infrastructure in the world’s second-most populous country to meet the growth target.

High oil prices, which recently touched a record $100 a barrel in global markets, were a threat to the Indian economy, but this could be managed, Devarajan said. “Indian policy makers have shown how to manage these constraints as a way of minimising the impact,” he said.

India must tackle oil, infrastructure woes: WB

 

[Flintlock]

Reshma Patil, Hindustan Times
Email Author
Mumbai, January 17, 2008
First Published: 00:38 IST(17/1/2008)
Last Updated: 04:01 IST(17/1/2008)
Global eye on start-up converting garbage into fuel

T Raghavendra Rao, director, Sustainable Technologies and Environmental Projects (STEPS) filed for a global patent last year for his technique of converting waste — think plastic, sewage, slaughterhouse waste, hospital waste, petroleum byproducts — into liquid fuel and gas. And it’s easy on the environment, for the process does not emit heat-trapping gases that contribute to global warming.

Rao, a former oil industry expert, thinks ‘waste is wonderful, it’s a resource.’

“Mumbai’s waste generated daily should be recycled daily too,’’ Rao emphasised. “We aim to come to the market with a globally acceptable system to recycle plastic, electronic and organic waste in 24 hours.’’

The technology is winning rave reviews.

“We would like to see this powerful innovation commercialised around the world, not just Texas,’’ James Vance, business development manager of the global commercialisation group, IC2 Institute, told HT from the University of Texas. “We believe it should be able to convert most, and perhaps all types of hydrocarbon-based waste to fuel.”

Vance added that IC2, which provides innovators from emerging economies commercialisation expertise, has received more interest in this technology than any innovation it has examined.

The technology yields 1.1 litres of fuel from one kilo of plastic bags, and 1.2 litres fuel from one kilo of polyethylene sacks used for packaging, all at a cost of Rs 11-12 per litre. One kilo of plastic coating on wires yields 600 ml of fuel.

Mumbai’s municipal corporation does aim to earn carbon credits from capping the Gorai dump and generating electricity from its methane emissions. But at Rao’s plant in Vasai, on Mumbai’s northern fringe, his staff is testing a quicker method.

Plastic is converted into vapour and passed through cartridges containing a catalyst or a chemical to breakdown the molecules into liquid fuel and gas. The plant is self-energised, on gas generated from the waste conversion process.
HindustanTimes-Print
© Copyright 2007 Hindustan Times

 

[Neo]

India to grow 8.5% in 2008-09: econ panel chief ​

NEW DELHI: India’s economy is likely to grow 8.5 percent in the fiscal year from April, the chief of the prime minister’s economic panel said, but the government should moderate taxes to spur demand for consumer durables.

Asia’s third-largest economy has expanded at an average of 8.6 percent over the past four years, and is poised for another year at a similar pace in 2007/08.

“We discussed the likely trends for the economy. It will grow around 8.5 percent in the next year but there are some pressure points, like the manufacturing sector,” C. Rangarajan, chairman of the Economic Advisory Council, told reporters after meeting the finance minister. “We said there could be some adjustment in indirect taxes to stimulate growth in consumer durables,” he said on Wednesday.

Consumer durables output — ranging from television sets to motorbikes — fell an annual 4.1 percent in November, compared with a 10.1 percent growth in the same month a year earlier as a spate of interest rate increases ate into demand. India grew 9.4 percent in the 2006/07 fiscal year, its strongest in 18 years, and second only to China among major economies.

But annual growth dipped to 8.9 percent in the September quarter, falling below 9 percent for the first time in three quarters, as industrial output slowed due to monetary tightening measures designed to trim inflation.

Policy makers are confident of maintaining growth momentum despite a surge in the value of the rupee against the dollar, higher interest rates and record global crude oil prices. The ruling communist-backed federal coalition will present the budget for 2008/09 at the end of February. Rangarajan said his panel had asked the finance minister not to lower personal tax rates, but there could be some room for increases in exemption limits.

“On direct taxes, we should keep tax rates stable but there could be some adjustment in slabs,” he said. Hopes for a cut in personal taxes rose after Finance Minister Palaniappan Chidambaram said that there could be “a case for moderation” of rates if voluntary compliance increased.

India’s personal tax collections jumped 50 percent to 2.05 trillion rupees ($52 billion) between April and December from the year before, while corporate tax collections expanded 40 percent.

Top economists cautioned Chidambaram last week that finances were likely to come under pressure, especially with a pay rise for over 3 million government workers looming. A pay panel is expected to submit its report in April. reuters

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